    [Senate Hearing 106-888]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 106-888

     DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT AND
            INDEPENDENT AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2001

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

                                    HEARINGS

                                    before a

                              SUBCOMMITTEE OF THE

                COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE

                           ONE HUNDRED SIXTH CONGRESS

                                 SECOND SESSION

                                       on

                               H.R. 4635 and 5482

     AN ACT MAKING APPROPRIATIONS FOR THE DEPARTMENTS OF VETERANS AFFAIRS
    AND HOUSING AND URBAN DEVELOPMENT, AND FOR SUNDRY INDEPENDENT AGENCIES,
      BOARDS, COMMISSIONS, CORPORATIONS, AND OFFICES FOR THE FISCAL YEAR
               ENDING SEPTEMBER 30, 2001, AND FOR OTHER PURPOSES

                                   __________

          Chemical Safety and Hazard Investigation Board
          Corporation for National and Community Service
          Department of Housing and Urban Development
          Department of the Treasury
          Department of Veterans Affairs
          Environmental Protection Agency
          Federal Emergency Management Agency
          National Aeronautics and Space Administration
          National Science Board
          National Science Foundation
          Nondepartmental witnesses
          Office of Science and Technology Policy

                                   __________

             Printed for the use of the Committee on Appropriations

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

                                     ______

                        U.S. GOVERNMENT PRINTING OFFICE
    62-813 cc                   WASHINGTON : 2001

    _______________________________________________________________________
                For sale by the U.S. Government Printing Office
    Superintendent of Documents, Congressional Sales Office, Washington, DC
                                     20402

                          COMMITTEE ON APPROPRIATIONS

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

               Subcommittee on VA, HUD, and Independent Agencies

                    CHRISTOPHER S. BOND, Missouri, Chairman
    CONRAD BURNS, Montana                BARBARA A. MIKULSKI, Maryland
    RICHARD C. SHELBY, Alabama           PATRICK J. LEAHY, Vermont
    LARRY CRAIG, Idaho                   FRANK R. LAUTENBERG, New Jersey
    KAY BAILEY HUTCHISON, Texas          TOM HARKIN, Iowa
    JON KYL, Arizona                     ROBERT C. BYRD, West Virginia
                                           (ex officio)

                               Professional Staff

                                  Jon Kamarck
                              Carolyn E. Apostolou
                                    Cheh Kim
                            Paul Carliner (Minority)

                             Administrative Support

                                 Joseph Norrell
                             Liz Blevins (Minority)

                                C O N T E N T S

                                  ----------

                            Thursday, March 1, 2000

                                                                       Page

    Federal Emergency Management Agency..............................     1

                            Thursday, March 23, 2000

    Environmental Protection Agency..................................    41

                            Thursday, March 30, 2000

    Department of Housing and Urban Development......................   243

                            Thursday, April 6, 2000

    Department of Veterans Affairs...................................   589

                            Thursday, April 12, 2000

    Corporation for National and Community Service...................   663
    Chemical Safety and Hazard Investigation Board...................   715
    Department of the Treasury: Community Development Financial
      Institution....................................................   745

                            Thursday, April 13, 2000

    National Aeronautics and Space Administration....................   761

                             Thursday, May 4, 2000

    National Science Foundation......................................   873
    Office of Science and Technology Policy..........................   873
    National Science Board...........................................   873

        Material Submitted by Agencies Not Appearing For Formal Hearings

    Independent Agencies:
        Department of Health and Human Services......................   923
        Department of Defense--Civil: Department of the Army,
          Cemeterial Expenses........................................   928
        General Services Administration..............................   930
        Selective Service System.....................................   931
        Executive Office of the President: Council on Environmental
          Quality....................................................   936
        Neighborhood Reinvestment Corporation........................   944
        U.S. Consumer Product Safety Commission......................   949
        American Battle Monuments Commission.........................   952
    Nondepartmental witnesses:
        Department of Veterans Affairs...............................   957
        Environmental Protection Agency..............................   984
        Department of Housing and Urban Development..................  1044
        Federal Emergency Management Agency..........................  1087
        National Science Foundation..................................  1094
        National Aeronautics and Space Administration................  1115
        Department of Health and Human Services......................  1128
        Corporation for National and Community Service...............  1130
        Community Development Financial Institution..................  1132
        Miscellaneous................................................  1136

     DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT AND
            INDEPENDENT AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2001

                                  ----------

                            WEDNESDAY, MARCH 1, 2000

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 9:36 a.m., in room SD-138, Dirksen
    Senate Office Building, Christopher S. Bond (chairman)
    presiding.
        Present: Senators Bond, Stevens, Mikulski, and Lautenberg.

                      FEDERAL EMERGENCY MANAGEMENT AGENCY

    STATEMENT OF HON. JAMES LEE WITT, DIRECTOR
    ACCOMPANIED BY GARY JOHNSON, CHIEF FINANCIAL OFFICER

                OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

        Senator Bond. Good morning. The subcommittee will come to
    order. This is the first hearing of the VA-HUD subcommittee for
    the fiscal year 2001 budget. This morning we will hear
    testimony on the fiscal year 2001 budget request for the
    Federal Emergency Management Agency.
        We welcome FEMA Director James Lee Witt and Gary Johnson,
    FEMA's Chief Financial Officer. Director Witt, we are very
    pleased that you brought your wife Lea-Ellen along today. We
    welcome her and really appreciate all the sacrifices and the
    dedicated effort she has made as you have conducted your duties
    at FEMA.
        Mrs. Witt, I know the very active role that you have played
    in many of the Nation's disasters, helping out after the
    Northridge earthquake, the Oklahoma City bombing, and the
    tornado-related disaster in Oklahoma last year. As one who has
    visited an awful lot of disaster sites in my prior incarnation
    as a governor, I know how difficult and challenging it is to
    stay on the ground and help the people who are most in need,
    and your work and your role has been an inspiration to all of
    us. As a result, we will try not to be too rough on the
    Director today.
        The President's budget proposal for the VA-HUD subcommittee
    totals about $84 billion in budget authority, an increase of
    almost $6 billion above the current year. While it appears that
    the caps imposed by the 1997 Budget Act would impose cuts that
    are too draconian and we must revisit the numbers, I warn all
    the agencies involved, do not pop any corks on any bottles yet.
        There is a very strong commitment, which I share, to
    maintaining budget discipline, preserving the social security
    surplus for social security reform, and also taking care of
    absolutely essential items that we cannot control, which are
    going to increase, things like VA medical care and things like
    section 8.
        FEMA's budget request totals $971 million in on-budget
    funds, an increase of $98 million over the current year, and an
    additional $2.6 billion in disaster relief contingency funds.
    That is a sizable increase which I fear we will find it
    difficult to accommodate.
        FEMA proposes some new programs and some significant
    programmatic increases. Included in the budget is a new $25
    million grant program for equipment for firefighters in
    distressed or needy communities. We have seen little detail on
    the program and I have to tell you we are concerned about
    initiating a new program under the tight budget constraints
    that we face.
        FEMA is also requesting almost $24 million to begin the
    process of relocating its headquarters. This is an initiative
    that is aimed at improving security and enhancing FEMA's
    capacity to conduct disaster operations. I need to understand
    the costs better and the needs associated with the request.
        In addition, the budget calls for an increase of $30
    million for the emergency food and shelter program, 27 percent
    over fiscal year 2000. While the program seems to be
    functioning effectively and meeting a tremendous need for food
    and shelter, an increase of this magnitude again will be
    difficult to accommodate.
        With respect to the disaster relief fund, it appears there
    is plenty of money currently in the FEMA bank to manage
    disaster costs for the rest of this year so long as we do not
    have any truly catastrophic events this year. Including
    contingency funds, FEMA estimates approximately $2.4 billion
    currently unobligated in the disaster relief fund. While there
    have been some really awful disasters this year, such as the
    tornadoes in Georgia and the avalanches in Alaska, the scale of
    disaster activity has been far less than usual so far this
    year, and we can only hope and pray that our luck holds for the
    rest of the year.
        FEMA's budget proposes two new set-asides within the
    disaster relief fund which would set new precedents of using
    the fund for other activities: $50 million for the repetitive
    loss initiative aimed at eliminating those properties with
    significant repeat claims posing the biggest drain on the flood
    insurance fund; and $30 million for the flood map modernization
    fund to update and digitize FEMA flood maps, in addition to a
    new fee proposal projected to generate about $100 million in
    revenues next year.
        While I would certainly acknowledge the need for funding in
    both of these areas, there are strong concerns first about
    earmarking disaster relief funds for activities not
    specifically authorized in the Stafford Act.
        In addition to these fiscal year 2001 budget proposals, the
    administration has proposed a fiscal year 2000 supplemental
    request of $77 million for additional buyouts in Hurricane
    Floyd-affected States. These funds would be in addition to the
    $215 million provided already for buyouts in Hurricane Floyd
    States. Again, I express my concern and skepticism about the
    proposal since as we understand it none of the $215 million has
    been allocated to date and there does not seem to be any basis
    as far as we can tell for requesting another $77 million.
        We have asked the Inspector General and the IG has been
    looking at estimates of eligible properties for buyouts, and
    preliminary information that we have received is that eligible
    properties will be just a small percentage of the original
    estimate and that buying out eligible properties in Hurricane
    Floyd States likely will cost less than the $215 million
    already appropriated. In addition, much of North Carolina's
    projected costs appear inflated and inconsistent with the
    historic costs of buyouts in other States.
        Also, I am worried that this program is not authorized. As
    we have discussed before, there has been no debate on what the
    appropriate Federal role should be in buyouts of substantially
    damaged properties, and I am not confident yet that a system
    has been set up to ensure that the most needy individuals and
    the most at-risk properties will be assisted. I will have a
    number of questions on that later on.
        Turning to Stafford Act issues, I continue to have problems
    about the escalation of disaster relief costs. I was cast in
    the unfamiliar role of a skunk at a garden party a few weeks
    ago when the Environment and Public Works Committee marked up
    S. 1691, the disaster mitigation bill. There were many feel-
    good thoughts and lots of talk about how we need to spend more
    money, and I would assure you that I understand investing in
    certain projects could lessen future disaster losses. It is a
    good policy which I support.
        I really fail to see the attention and commitment needed to
    tightening up the Stafford Act to provide better accountability
    and to assure that we are spending money only where it is most
    needed. Our guess is at this point that the bill in its current
    form would increase the cost of the disaster relief funds
    without providing savings in the near term and, as you and I
    know, in our part of the world, Mr. Director, as they say, that
    dog won't hunt.
        As you know, the Inspector General made recommendations to
    improve the bill which would result in savings. I will be
    looking to amend the bill when it gets to the floor to improve
    the integrity and accountability of the disaster relief fund
    and to underscore the Stafford Act principle that Federal
    disaster aid is to be reserved for those events which exceed
    State and local capacity.
        If the bill does not result in near-term cost savings or at
    least no net cost to the disaster relief fund, I would not be
    able to support it and would urge my colleagues not to as well.
        Mr. Director, you have done much administratively to clean
    up disaster relief programs over the past several years. I
    congratulate and commend you on your recent efforts to develop
    a public buildings insurance rule. It is tremendously important
    to improve accountability for disaster costs and I urge you to
    stay on course to do all you can to finalize the rule before
    the end of the year.
        But as we both know, there is only so much that can be done
    without changes in the law. We have an opportunity to legislate
    some much-needed improvements to the Stafford Act and implement
    some of the recommendations made over the years by the GAO and
    the IG. We look forward to your continued help and cooperation
    in those efforts.
        Turning to another critical issue, we continue to worry
    about the intergovernmental antiterrorism/counterterrorism
    program. There does not appear to be a strategic approach
    administration-wide on this issue, and the roles of FEMA, DOD,
    and the Department of Justice remain confusing, at least to me
    and I am afraid to a lot of other people as well.
        We are, I think justly, committing tremendous resources in
    this area. A total of about $10 billion in the current year is
    being expended, up from $6.5 billion in fiscal year 1998, and I
    know there are additional increases sought for fiscal year
    2001.
        According to September 1999 GAO testimony:

        ``A government-wide strategy that includes a defined end-
    state and priorities is needed, along with soundly established
    program requirements based on assessments of the threat and
    risk of terrorist attack. In addition, a comprehensive
    inventory of existing Federal, State, and local capabilities
    that could be leveraged or built upon is warranted before
    adding or expanding Federal response assets. Without these
    fundamental program elements, there can be little or no
    assurance that the Nation is focusing its investments in the
    right programs and in the right amounts and that programs are
    efficiently and effectively designed and implemented.''

        As you well know, Senators Stevens, Mikulski, Byrd and I
    last year asked the GAO to conduct some additional work on this
    issue, with special attention to first responder training
    issues and a look at how other countries organize their
    antiterrorism efforts. We are anticipating some results from
    the GAO by the end of April.
        While FEMA has only a small piece of the intergovernmental
    antiterrorism effort, it is a very important one. FEMA has
    strong ties to State emergency responders and the first
    responder community which will be a critical link in this
    program, which I think will warrant FEMA playing a very
    important lead role.
        Director Witt, I am very pleased to learn that you brought
    in our old friend John Magaw to head up FEMA's antiterrorism
    efforts, but I am really worried that the program seems to have
    been downgraded at the Department of Justice and the new DOJ
    National Domestic Preparedness Office seems to us to be
    floundering. We would like your advice on how to improve this
    program to ensure we are investing our resources in the best
    possible way.
        That concludes my opening statement. Senator Mikulski, are
    you ready?

                    STATEMENT OF SENATOR BARBARA A. MIKULSKI

        Senator Mikulski. I sure am. I was listening to every word.
    Just we are going so many places today.
        Senator Bond. Yes, it is one of those days.
        Senator Mikulski. Good morning, Mr. Chairman.
        Senator Bond. Good morning.
        Senator Mikulski. First of all, I want to welcome our FEMA
    Director James Lee Witt and his Chief Financial Officer Gary
    Johnson and the entire FEMA staff. Mr. Witt, you are the
    longest serving Director in FEMA history, and this morning
    marks the eighth time that you have come before this
    subcommittee to discuss your budget request. I would like to
    thank you for your service to the Nation because I truly
    believe under your leadership FEMA has reformed itself and went
    through a transition from a cold war agency with an often
    confusing domestic policy to where we are now.
        But we know behind every great man is a surprised mother-
    in-law. I really got that joke from Connie Morella.
        But I really want to--I think, one, not only your
    management ability, but the way that you responded to America's
    disasters, that being on the scene, to be able to work with the
    governor, the local FEMA directors. So we are very grateful.
    You truly were the 911 for America's disaster relief.
        But in all sincerity, all those times when you had to leave
    home, be away, often during holidays, for extensive periods of
    times, we know that you had the support of a loving family. So
    on behalf of the Senate, I would like to thank Lea-Ellen Witt
    for her service to the Nation, because had it not been for her
    support I do not think you would have been able to support the
    United States of America in its time of need. So I would really
    like to give you a round of applause.
        I would hope that as we go through this appropriations we
    would look at how to institutionalize the reforms that have
    been made on a bipartisan basis working with you and President
    Bill Clinton. When you came--well, actually, after Hurricane
    Andrew when FEMA's response was so disastrous and our President
    George Bush sent in Andrew Carr, his Secretary of
    Transportation, because of his skilled management ability, I
    said to Bill Clinton when he was running: You know, I do not
    ask for promises, but I am going to ask for one; I need a good
    FEMA director; we need to reform FEMA and we need to focus on
    the three R's. We need to make sure that the Federal Government
    in every State is ready, the readiness training; that we need
    to be able to respond when a disaster hits; and also we need to
    rehabilitate.
        There have been lessons learned in all of those areas, and
    I hope that we are now on the path of truly institutionalizing
    those reforms. We have gone from rehab to really pre-disaster
    mitigation. We want to do prevention, and I am going to commend
    you for that role.
        I know Senator Bond has concerns about how this is being
    implemented, and I share some of those concerns. So what we
    really need to do is make sure that we have very clear
    guidelines and even, if necessary, regulations on how we can do
    the prevention without creating a whole new program that ends
    up squandering resources. We need clear lines to be able to do
    that.
        The other I would hope that is also part of this, we take a
    look at the antiterrorism. I am concerned that the hard work--I
    am concerned that the hard work of FEMA and other Federal
    agencies may be squandered because of the absence of a
    coordinated Federal response program. I do not want to go into
    this here in this type of forum, but I believe we have too much
    talk, too much money being thrown around, and no clear lines of
    command and clear roles, command, control, and clear agency
    authority.
        Our first responders in an event of any type of attack on
    the United States will be both FEMA and our local fire
    department and our ER's. So I want to be sure that we have
    this, and we look forward to working with you.
        I understand you have brought out of retirement John Magaw,
    the former Director of the Secret Service and ATF. I think this
    is great. I think this heartens you, too, Senator Bond, that we
    really have a plan. I think HHS has been inept in the way it
    has planned for terrorism. We have left a lot at the FBI, we
    have given you things, and then there is HHS. They are going to
    get real cranky when I say this, but they are wandering in the
    wilderness with no clear triggers about what goes into
    operation at one standpoint. So maybe we could get them,
    everybody between the same white lines.
        We also want to look at the emergency food and shelter
    grants. I know in my own home State it has meant a lot to poor
    people, many of whom have been facing horrendous situations.
    The new economy has not been a good economy for everybody. So
    we look forward to hearing more about this $30 million increase
    and where to do it.
        So what we are looking for is if we put the right money in
    the right place, but also institutionalize our reforms, because
    we are the only one-stop shop on FEMA. It is scattered through
    a lot of committees and so on. So we are your one-stop shop.
    But you have been our one-stop shop in disaster relief.
        So we look forward to your testimony and always look
    forward to working with you, and in whatever you choose to do
    in what lies ahead I say, God bless and godspeed to both you
    and Lea-Ellen.
        Thank you.
        Senator Bond. Thank you very much, Senator Mikulski. As
    always, you are very candid and on point with your comments.
        We are pleased to be joined by Senator Stevens.
        Senator Stevens. He was here first.
        Senator Bond. All right. Actually, I was going to go back
    and forth. But at the chairman's direction, it is now my
    pleasure to call on Senator Lautenberg.

                    STATEMENT OF SENATOR FRANK R. LAUTENBERG

        Senator Lautenberg. Thanks, Mr. Chairman.
        Mr. Witt, it is a pleasure to see you in a non-disaster
    environment.
        Senator Bond. The best way.
        Senator Lautenberg. As I listen to the compliments given
    from my colleagues here, I thought that maybe you needed a song
    that ``disasters become you.'' But I did not really think that
    that would be appropriate.
        But I do want to say, Senator Mikulski noted your length of
    service here, and excellent service. I think it is fair to say
    that each one of us at this table has seen you in a
    circumstance that is not the most pleasant. But nevertheless
    you have been, as we say, Johnny on the spot. You have been
    there, you have gotten there quickly, you have handled yourself
    wonderfully in the public eye, as well as doing your level best
    to alleviate the problems and the suffering that people have
    endured as a result of natural disasters.
        So I am delighted to see you here today and hear the
    comments of my colleagues on both sides of the political aisle
    who share an admiration for the agency and yourself as well.
        You and I are now in the next graduating class out of here,
    and I am sure that you feel, as I do, satisfied that you have
    had an opportunity to do something significant and also with
    some nostalgia about leaving to go on to more peaceful lives,
    each of us.
        We were last together under very unfortunate circumstances.
    Last September, Hurricane Floyd had cut a swath through my
    State and the heavy rainfall caused rivers, namely the Passaic
    and the Green Brook, to overflow, resulting in millions of
    dollars of devastation. We flew over Bound Brook in a
    helicopter, I remember, and viewed the devastation along the
    Green Brook. We toured the Borough of Lodi together, and
    witnessed the breakdown of our telephone system for several
    days, which was very difficult.
        We visited with some of the besieged families and you
    pledged the full resources of FEMA to assist my constituents. I
    am pleased that in your budget request you ask for funds to
    complete the buyouts of homeowners in flood plains who want to
    relocate to higher ground.
        I noted also in your comments that you view that prevention
    ought to be a significant part of the FEMA agenda. I just got
    back from a trip to Antarctica and the South Pole, and I am
    concerned about what the future may bring us in terms of
    weather disturbances. The ice melt is something that I think is
    alarming. We are still doing a lot of research before coming up
    with specific conclusions, but the fact is that we know from
    the early signs in this year that we might be seeing some very
    turbulent weather around the country.
        So as I look at you and your agency, I can think of few
    that have such a direct face to face relationship with the
    public.
        I would hope, colleagues, that along the way that
    communities and States will rethink their policies on building
    permits, on engaging people in debates about allowing them to
    build in places that bring tragedy with them. I think it is
    important that an agency like FEMA, where there is so much
    experience, is a significant part of that interface.
        People who are flooded out are desperate and need to
    rebuild their lives. I had an incident in New Jersey where I
    went to a flooded area and met a woman whose husband was in the
    hospital, four kids, disaster all over the place. We entered on
    the second floor, which was filled with debris from the
    flooding.
        She had just taken out flood insurance weeks earlier. A
    year later I met her, and I asked her where she moved. Oh, she
    said, we rebuilt in the same place. So I said: Why would you do
    that? She said: Because we could not find anything else for the
    price that we were able to pay. What we did is we put in a 16-
    foot foundation, so now our first floor is where our second
    floor used to be; and it is a few steps up, but it is something
    that we can afford.
        So it is not simply just a question of covering people with
    insurance and saying go ahead and find a different place.
        So I say that you have done an outstanding job for New
    Jersey and for the country, and we need to make sure that you
    have the means to continue to do the job when disaster strikes.
    My State just experienced another tragedy. As you may know, on
    January 19 there was a terrible fire in a principal university
    in our State, Seton Hall University in South Orange, New
    Jersey. This fire killed 3 freshmen and injured 54 students, 2
    firefighters, and 2 police officers.
        The dormitory was equipped with smoke detectors, but was
    not required to have a fire sprinkler system. Since FEMA
    oversees the U.S. Fire Administration--and we are pleased to
    see that they sort of have been resurrected--the agency that is
    charged with working to reduce life and economic loss due to
    fire, at the appropriate time in this hearing I would like to
    ask you a few questions about the Fire Administration's role in
    helping our learning institutions ensure that student housing
    is safe.
        I thank you, Mr. Chairman, and look forward to hearing from
    the Director.
        Senator Bond. Thank you very much, Senator Lautenberg.
        Chairman Stevens.

                        STATEMENT OF SENATOR TED STEVENS

        Senator Stevens. Well, thank you very much.
        Mr. Witt, James Lee if I can get personal, and Lea-Ellen,
    it is nice to see you here. I do not like the sounds that I
    have just heard, though, that indicate that people are ready to
    see you leave. I am working on a bill now that converts your
    office to one of those that is a 15-year term. No, I am
    serious. I think disasters are coming our way so often,
    experience is necessary and we ought to arrange something that
    gives you a little bit of financial incentive to stay another 7
    years and get this thing really put together right.
        You know, I am not sure the committee knows, our friendship
    started when you came up to the Miller's Reach fire. People who
    live in the wilderness were able to get some assistance to live
    in town, but they wanted to live in their own places and
    rebuild them themselves, and with common sense you modified
    those regulations and they actually rebuilt their own houses
    and saved the Government money and had the lifestyle they
    wanted.
        And we had the Kenai River flood, and now we have had I
    think the worst avalanches that our State has ever seen in one
    year, a train wreck. My own little town was isolated for
    several days, shut off from food and fuel and transportation.
    We are the most disaster-prone State in the country. Most
    people do not realize that.
        But you have probably visited our State more than you want.
    But the one time you wanted to come up and go fishing with us,
    you got there and you had a disaster somewhere else and had to
    leave. We have still got the latchkey out there for you and
    Lea-Ellen whenever you want to come back and finish that
    fishing trip.
        But I am really serious. I think you are getting to the
    point where you are modifying some of these things so that we
    are into prevention rather than disaster relief, disaster
    repair, and what Senator Lautenberg has mentioned about
    protecting the flood plain. I think that the provisions that
    allow people--that we are going to deal with, to allow people
    to sell their homes and move out of the flood plain, make a lot
    of sense. I hope that you will not mind if I try to put that
    into avalanche country, too. You know, there is no lesson in
    the second avalanche any more than the second flood. I do think
    that we have got to get sensible about moving some of these
    areas out of the disaster zones.
        What you have done I think is given us the ability, I hope,
    in the future to limit some of the cost to the taxpayers by
    virtue of prudence and preparation for disasters.
        I want to talk to you some more about trying to build into
    some of the public facilities the ability to take care of
    persons that are suffering from disasters. When we look at the
    civil air fleet, we pay those who operate the civil airlines to
    put in modifications that would be required if we ever have to
    use them for troop carriers, the civil air reserve fleet.
        There is no reason why we cannot find some way to pay some
    of these people to modify their church basements or their
    school basements or their schools so that they can take care of
    these people that come in, instead of having them live the way
    they do when they have to seek refuge from a disaster, to have
    some areas in every part of the country prepared for that.
        I really believe that you are on the right course, and on a
    bipartisan basis we ought to not only thank you, but sort of
    say, what do you need to stay around a little longer, because I
    think you have got a good team and there are some things that
    we have to do to make changes that your experience would tell
    us whether they are right or wrong.
        I do not remember us going against your advice, James Lee,
    and that is a real significant achievement. I also appreciate
    the fact you have been totally bipartisan in your operation.
    Disasters should not have any political consideration at all,
    and you have carried through in just an absolute way. I have
    followed you around the country in many places, as you know, to
    see how we have recovered from some of these disasters.
        We had the country's worst disaster, I think, in recent
    history in the 1964 earthquake. You were not around there then
    and we had a tough time, but the laws have changed a lot since
    then and I think that we may need to round them out a little
    bit more to make sure that you have the flexibility of dealing
    with these things so that you can save money and prevent having
    to pay the same family twice for recovering from the same type
    of disaster. We ought to have some incentives to avoid that.
        But I am really serious. I am here to tell you that I think
    Alaskans, as all other residents of this country, are indebted
    to you and your wife for you have done. You have been a team
    and you have got a good team around you. I too applaud you for
    getting back into Government service the former head of the
    Secret Service, and there is others out there.
        I think we ought to give you the opportunity to waive some
    of the provisions of the retirement law and give some of those
    people that do have a lot of experience to get on board,
    because if we are right, if we are right in our predictions
    that we are going to be subject to some of these attacks from
    some of these chemical and biological weapons in the future,
    yours is the agency, along with the National Guard, that is
    going to face the brunt of those and I think we ought to be
    prepared.
        So I do thank you.
        Senator Lautenberg. I second the motion, Mr. Chairman.
        Senator Stevens. I think we ought to find some way to do
    this, and I will have to talk to you privately. Lea-Ellen may
    have another plan in mind for you, so we will have to tread
    lightly here.
        But the concept of having something that goes beyond,
    someone that goes beyond the possible end of an administration
    and really is in a position to put in motion long-term
    solutions to these disaster problems I think is one we have to
    explore very thoroughly in this Congress.
        Thank you, Mr. Chairman.
        Senator Lautenberg. With that, you do not have to say
    anything, Mr. Witt.
        Senator Bond. Thank you, Mr. Chairman.
        That is a real set-up. You really want to go ahead and say
    anything, or do you just want to quit with that?
        We were supposed to have a vote at 10 o'clock, but, knowing
    that things never work exactly as they are scheduled, we will
    continue now and invite you to give your testimony.

                          STATEMENT OF JAMES LEE WITT

        Mr. Witt. Thank you, Mr. Chairman, Senator Mikulski,
    Senator Lautenberg. Thank you for your accolades and your
    comments and your support. I want to thank the members of this
    subcommittee for the support that you have given FEMA's
    programs and for all the time that the members and the staff
    have provided in reviewing our programs. With your continued
    assistance in the fiscal year 2001 budget, we hope to
    institutionalize many of the things that we have been working
    so hard on to this point.
        This morning I am accompanied by many of the senior
    officials from FEMA including, of course, Gary Johnson, who is
    sitting to my right. Gary deserves much of the credit for
    putting FEMA's financial house in order. His hard work and
    dedication, and the hard work of his staff have truly
    straightened FEMA's financial records out.
        Last year, for the very first time at FEMA, the fiscal year
    1998 consolidated financial statements were given a clean bill.
    Just yesterday I was pleased to find out that the IG gave us an
    unqualified opinion on the 1999 financial statements as well.
    We will provide this accountability report to you.
        I also want to take the opportunity to present to you John
    Magaw and thank him publicly for coming into FEMA and taking on
    the challenges of the antiterrorism program. He is a great man.
    He has got a tremendous challenge before him, but I know he is
    capable of meeting that challenge. He is well respected
    throughout the country by law enforcement, the fire services,
    and the other Federal agencies. We are very pleased to have
    him.
        Senator Bond. Mr. Director, excuse me. We have had our
    summons. We want you to continue. Senator Mikulski will stay
    here and I will be back as quickly as I can. We will see if I
    can do the running through the airport thing. If you do not
    mind, I have reviewed and will continue to review your
    statement. Excuse me.
        Mr. Witt. Thank you.
        As many of you here know, today most likely could be my
    very last budget appearance before you--but after what Senator
    Stevens said, I do not know.
        I do want to reflect back very briefly on my career at FEMA
    and what FEMA should strive for in the future, I keep coming
    back to the principle of responsibility. Today I hope we can
    talk about responsibility, not only responsibility in the
    fiscal year 2001 budget, but far beyond that.
        I want to tell you how important this budget is for FEMA's
    future and for the future of our partners, the States, the
    local governments, and fire services, and all those people out
    there that are our partners that continue to serve communities
    on the front line.
        The fiscal year 2001 budget and other related legislative
    initiatives continue to move down the path of success. I ask
    your support during this next year as we try to
    institutionalize reforms that underscore responsibility. Before
    leaving today, I also want to thank the subcommittee staff
    members that have worked so diligently with us and have been
    very committed to doing the best that we can for the country
    and for the agency. We do not always agree on everything, but I
    think in the end there have always been good and positive
    outcomes.
        So I want to thank Carrie, Jonathan, and Paul for their
    very dedicated work with Mike Malone and the Congressional
    Affairs staff.
        I also thank Senator Mikulski for the guidance she has
    given me over the last 7 years. We are here to answer your
    questions and would be happy to start any time you are ready.
        [The statement follows:]

                      PREPARED STATEMENT OF JAMES L. WITT

        Good Morning Mr. Chairman, Senator Mikulski, and other Members of
    the Subcommittee. I appreciate the opportunity to appear before the
    Subcommittee today to present our budget proposal for fiscal year 2001.
        I want to thank the Members of the Subcommittee for their support
    of FEMA's programs and for all the time that the Members and staff have
    provided in reviewing our programs. Without your guidance, leadership
    and assistance, FEMA would not have been able to accomplish all that we
    have these past seven years. With your continued assistance on the
    fiscal year 2001 budget, we should be able to institutionalize many of
    the things that we have been working on to this point.
        This morning I am accompanied by many Senior officials from FEMA.
    FEMA is made up of people who entered public service to help others. At
    FEMA, we have the privilege of working in an agency whose daily work,
    whose enduring mission, is exactly that: helping others. Whether the
    moment is the aftermath of disaster--as a family finds a home
    destroyed--or the beginning of opportunity--as a community joins
    Project Impact--we make a difference in people's lives. When people
    praise FEMA, I say a great deal of the praise is due to the hard-
    working, dedicated staff.
        Sitting next to me is Gary Johnson, FEMA's Chief Financial Officer,
    who deserves much of the credit for putting FEMA's financial house in
    order. Gary is an excellent example of the selflessness and dedication
    that FEMA employees possess. When I arrived at FEMA, the financial
    records were not in the best possible shape, to say the least. Although
    I don't think Gary sought out the CFO's position, he was willing, as a
    good public servant, to take on this assignment and give it his best
    effort. Through his hard work and dedication, and the hard work of his
    staff, FEMA's books have been straightened out and last year, for the
    first time ever, we had financial statements that were given a clean
    bill of health by the Inspector General. These improvements are
    tangible. They have given you and your staff a clearer picture of FEMA
    spending priorities and the historical financial records that support
    these positions. These are measurable accomplishments of which we can
    all be very proud.
        I'd also like to take the opportunity to introduce a person who is
    a relatively new face at FEMA but certainly not a new name to you. We
    are excited to have had John Magaw, former Director of both the United
    States Secret Service and the Bureau of Alcohol, Tobacco and Firearms,
    join the FEMA staff. As a well-known and respected official in the law
    enforcement community, John is going to help us with our interagency
    coordination of terrorism-related efforts. We are pleased to have him
    with us today as well.
        As many here today know, this very likely may be my last Senate
    Appropriations Subcommittee hearing as Director of FEMA. We've come a
    long way together. Twenty years ago, President Carter signed an
    Executive Order creating FEMA. He recently told me that FEMA has
    finally become the agency that he envisioned twenty years ago.
        Despite this recent success, it has not always been smooth sailing.
    Seven years ago, some people wanted to abolish FEMA. Today, with the
    help of President Clinton, Vice President Gore, you and our other
    friends in Congress, our dedicated staff, and our partners at the State
    and local levels, we have become a model of government success. The
    renewal of FEMA is studied in universities, emulated in other
    agencies--imitated and admired literally across the globe.
        Seven years ago, many of our customers were unhappy and our
    partners were frustrated. Today, our customer satisfaction ratings have
    climbed steadily to impressive heights. Our partners are reaching out
    to us--and we are reaching out to them--in a nationwide network of
    people working to strengthen America.
        Seven years ago, communities across the nation were locked in a
    deadly cycle--caught by disasters unprepared, too often rebuilding
    where they were almost certain to be struck again.
        Today, Project Impact has placed mitigation and prevention at the
    center of emergency management in the United States. We have saved
    lives--enhanced communities--and prevented needless pain. We came this
    far together by being responsible--responsible to our customers,
    partners and taxpayers.
        As I reflect on my career at FEMA and think about what FEMA should
    strive for in the future, I keep coming back to this principle of
    responsibility. Today, I want to talk with you about responsibility--
    not only responsibility in fiscal year 2001, but far beyond.
        I believe that we have four key responsibilities that we must
    address in fiscal year 2001 to ensure that we are well positioned for
    the future.
      --It is our responsibility to ensure that the impacts of future
            disasters are minimized as much as possible.
      --It is our responsibility to ensure that wherever possible, people
            are moved out of harm's way.
      --It is our responsibility to protect people who respond to disasters
            and events.
      --It is our responsibility to ensure that people have the resources
            necessary to address emergency management needs and issues.

                          MITIGATION RESPONSIBILITIES
        First, FEMA's fiscal year 2001 budget proposals are aimed at
    further institutionalizing our responsibilities associated with
    disaster mitigation. We know natural disasters are going to continue to
    occur. We also have learned, through mitigation success stories, that
    steps can be taken to mitigate the impacts of future disasters.
        In this area, we need to continue programs that encourage
    individuals, communities and States to take responsibility for
    mitigation. Our Project Impact initiative, now entering its 4th year,
    has made significant progress in getting individuals to be responsible
    for protecting themselves. With very little seed money to get
    communities started, local citizens have taken significant steps to
    mitigate against the impacts of future disasters.
        In addition to continuing to fund this program, we are very
    encouraged by the Senate's efforts to move forward with Stafford Act
    amendments which would permanently authorize a pre-disaster mitigation
    fund. It is my hope that the Congress' actions would institutionalize
    the pre-disaster mitigation concept which will save thousands of lives
    by encouraging people to responsibly prepare for disasters.

                          PROTECTION RESPONSIBILITIES
        We also have a responsibility to ensure that wherever possible,
    people are out of harm's way. You made a significant investment in this
    area when you approved $215 million that could be used to protect
    people who are most vulnerable to future floods like those associated
    with Hurricane Floyd. Despite this sizable investment in Hurricane
    Floyd-declared States, we've got a long way to go to responsibly
    address the needs of people who are at risk of flooding.
        We know that needs still remain in North Carolina, New Jersey and
    other Floyd-declared States. That is why the President proposed an
    additional $77 million for buyouts of homes that could flood again.
        But I don't feel that it is responsible to only respond to victims
    after a flood. We already know that there are many people who are
    vulnerable to flooding beyond the Floyd-declared States. That is why
    the fiscal year 2001 budget contains an initiative that would allow us
    to buyout many of the properties that have had two or more claims on
    the National Flood Insurance Fund.
        You may ask why such a significant investment on the Federal
    Government's part is a responsible course of action. First, I believe
    that protecting the most vulnerable people and properties is certainly
    a responsible course of action for us to undertake. Second, an
    investment now will recoup significant savings to the Federal
    Government in the future if we can avoid future disasters from
    occurring. Finally, when we buyout properties, we ask the States and
    local communities to take responsibility as well. The States must be
    involved in providing the non-Federal share and in helping prioritize
    where the scarce resources will be deployed. Local communities also
    frequently have to provide assistance with the non-Federal share and we
    require them to permanently deed restrict any properties that are
    bought out. That way, communities take responsibility for keeping
    future development out of floodplains.
        In addition to providing the funding, we hope that this Congress
    will give FEMA ongoing authority to buyout properties at risk of
    repetitive flooding. This authority is necessary to further
    institutionalize our responsibility to help people at risk of flooding.
        We also need to protect people from the risks of fires. America's
    fire death rate is one of the highest per capita in the industrialized
    world. Fire kills more than 4,000 people and injures more than 25,000
    people each year.
        We will soon be completing the renewal of the United States Fire
    Administration. Twenty-five years ago, the USFA was created in the
    aftermath of a report called ``America Burning.'' That landmark study
    found America was losing too much and suffering too terribly from fires
    that could be prevented. We have commissioned an updated ``America
    Burning'' study, and we will complete it this year. We will
    reinvigorate USFA, strengthening its roles in training, research and
    public education. We want to once again make the USFA an engine of
    innovation in fire prevention technology. We're working to prepare the
    National Fire Academy to be a leader in the 21st Century.
        Other individuals at risk include the working poor, the elderly and
    the people in the roughest circumstances who are helped by the
    Emergency Food and Shelter Program. During fiscal year 2000 you
    acknowledged our responsibility to these individuals by providing
    increased funding for this program. However, despite the funding
    increase, significant shortfalls remain and thousands more meals and
    nights of shelter are needed to help those at-risk individuals.
        The proposed increase of $30 million brings the program up to $140
    million. Our partners in this program--the Salvation Army, Catholic
    Charities USA, the American Red Cross, the National Council of
    Churches, the Council of Jewish Federations and the United Way of
    America--have joined with us to be careful stewards of these funds. The
    Local Boards that administer these supplemental funds in 2,500
    communities are models of local decision-making and local
    responsibility. And it is important to remember that the millions of
    extra meals and nights of shelter that come from this program are all
    delivered with an administrative expense share of just under 3 percent.

                    RESPONSIBILITIES TO EMERGENCY RESPONDERS
        We also have a responsibility to train and protect the people who
    must respond to disasters and events. For fiscal year 2001, we are
    requesting funding for several initiatives that will help us protect
    emergency responders.
        Despite our technological advancements and the nation's collective
    wealth, firefighters in the United States' frequently fight fires
    without the benefit of the most advanced equipment available. To help
    address this problem, the President's budget proposes a new $25 million
    pilot grant program that would provide funding to fire departments
    serving needy and distressed communities. We know that a
    disproportionate share of firefighter deaths and injuries occur in
    communities that can not afford to provide the most up-to-date
    firefighter life and safety equipment. This grant program would be a
    way to help protect those individuals who are willing to risk their
    lives for the members of their communities.
        We also are responsible for protecting people from terrorist acts.
    Because emergency responders are likely to be the first officials to
    respond to an act of terrorism, it is essential that they receive
    proper training. In addition to continuing already-existing terrorism
    training opportunities, the President's budget proposes an additional
    $3.9 million to further train six Urban Search and Rescue teams so that
    they will be prepared to respond to biological, chemical or nuclear
    events.
        Finally, I feel strongly that we have a responsibility to provide
    FEMA employees with a headquarters facility that is safe, secure and
    that allows staff to respond to disasters that occur throughout the
    United States. The fiscal year 2001 budget contains a request for $23.6
    million to relocate FEMA's headquarters facility from the current
    location to another location in the Washington, DC area. The current
    facility does not meet Level 4 security standards and it is limited in
    its flexibility. We need to upgrade our emergency operations center and
    the current building keeps us from optimizing our capabilities.

                           RESOURCE RESPONSIBILITIES
        Finally, we have a responsibility to give people the resources
    necessary to continue to address emergency management needs and issues.
        Last year, you allowed us to streamline the method by which grants
    are provided to our State partners. Instead of multiple grants that
    required separate administrative overhead, we worked with you and your
    staff to create an Emergency Management Performance Grant Program which
    reduced State grants to a single funding stream. Initial reports from
    our State partners indicate their support for continuing this grant
    mechanism. We believe that reducing the red tape for both FEMA and our
    State partners allows us to spend more time focusing our efforts on
    disaster response and mitigation.
        For several years running, we have all agreed that there is a
    significant need to modernize FEMA's flood maps. The fiscal year 2001
    budget contains two different proposals for funding the first year of
    our seven-year Map Modernization plan. Modernizing the current map
    inventory and creating new maps for unmapped communities will provide
    invaluable tools for emergency managers, floodplain managers, lenders,
    insurance agents and FEMA employees. Bringing the map inventories up-
    to-date will even reduce the number of cases in which Congressional
    offices are asked to get involved. Clearly this program would be a
    responsible investment that would pay dividends for the future.
        The fiscal year 2001 budget also requests an increase for Salaries
    and Expenses. As I mentioned earlier, FEMA has a very hard working
    staff that is fully committed to helping others. It is our
    responsibility to ensure that the FEMA staff has the resources and
    facilities necessary to serve the American public. Without a safe and
    secure work environment, staff resources will be hampered. Without an
    up-to-date emergency operations capability, we will be limited in our
    response to disasters as they occur across the country.
        I want to conclude by telling you how important this budget is for
    FEMA's future and for the future of all Americans.
        I've been fortunate in my career. I've met interesting people and
    traveled to fascinating places. I've had the privilege to serve a great
    President who is also a great friend. Together with a dedicated
    Congress and committed staff, we have been able to strengthen FEMA's
    programs and response capabilities.
        Despite all of our work, the real measure of our success won't be
    realized for many more years. If ten years from now, all States and
    local governments take full responsibility for properly insuring or
    protecting their buildings, our efforts were successful. If twenty
    years from now we are working even harder to protect our emergency
    management responders, we created a lasting legacy. If thirty years
    from now, all citizens, States and local governments have taken steps
    to mitigate against the effects of future disasters, we will have
    succeeded in institutionalizing responsibility.
        The fiscal year 2001 budget and other related legislative
    initiatives continue to move us down this path to success. I ask your
    support during this next year as we try to institutionalize
    responsibility.
        Before leaving today, I also want to say ``thank you'' to the
    Subcommittee staff members with whom we have had the privilege of
    working. From working with your Subcommittee staff everyday, I'm sure
    you know the level of professionalism and commitment to public service
    that they bring to their work each day. FEMA has benefited greatly from
    their knowledge and expertise. So to Carrie Apostolou, Jon Kamarck,
    Paul Carliner and other Subcommittee staff with whom we have worked
    these past seven years, ``thank you.''
        Thank you for the opportunity to appear before this Subcommittee
    and I am happy to answer any questions you may have.
    [GRAPHIC] [TIFF OMITTED] T05MA01.001

        Senator Mikulski [presiding]. Well, I think that this is a
    very good time perhaps for us to recess until we can go vote
    and then return.
        Mr. Witt. Sure.
        Senator Mikulski. So we thank you for your testimony. The
    committee is going to stand in recess subject to the return of
    either Senator Bond or myself. Before we do leave, I also
    wanted to acknowledge, because in my eagerness to talk about
    antiterrorism we did not talk about the U.S. Fire
    Administration in Emmitsburg, something that I am very
    preoccupied with, and also the implementation of the Blue
    Ribbon Commission. I think they are a very valued resource and
    we need to make highest and best use of what we have. So we
    look forward to continued conversation.
        Thank you. This committee stands in recess until the return
    of Senator Bond or myself.

                              REQUEST FOR BUYOUTS

        Senator Bond [presiding]. The hearing will reconvene. I
    thank our witnesses and guests for their indulgence.
        Mr. Director, I will, as I said, review your full statement
    and I would like to ask a number of questions, a few things
    that are very important.
        First on the buyouts, the $77 million request, the
    Inspector General has suggested that only 2,200 properties in
    North Carolina would likely qualify for buyouts and the likely
    cost would be less than $140 million, excluding the State costs
    here. I would like to know what the basis was for the request
    and whether the Inspector General's information was available
    at the time of the request, whether it was considered. Would
    you comment on that?
        Mr. Witt. Sure. I believe that work by the Inspector
    General's office is ongoing. They developed an estimate--a
    preliminary estimate--and should be finishing that up soon. I
    think the important thing is to look at the information
    prepared by our inspectors and verifications of houses
    destroyed.
        I am not saying all 3,144 homes that were destroyed were in
    the flood plain, but most of them were. Also, there were 7,469
    owner-occupied homes just in North Carolina that had 2 to 5
    feet of water in them, and 1,278 that had more than 5 feet of
    water in them. So I think it is important that the IG working
    with mitigation staff--identify and verify the structures
    substantially damaged and destroyed within the 100-year
    floodplain. Without that verification I cannot tell you, Mr.
    Chairman, whether the funds will be enough or not.
        At the present time we have given you figures that we felt
    are appropriate.

                          BUYOUTS AFTER HURRICANE FRAN

        Senator Bond. Well, obviously we are going to continue to
    work with you on this.
        I was disturbed by an AP article earlier this month that
    indicated that there were some buyouts of upscale homes and
    perhaps second homes, vacation homes, that did not really meet
    the cost-benefit test. I wonder if FEMA has looked into this
    and what is being done to ensure that the at-risk properties,
    the needy individuals, are the ones who are given priority.
    Excuse me. It was Hurricane Fran.
        Mr. Witt. Yes, I saw that article as well. We are very
    cautious about what we target for buyout. The most important
    and critical thing is if the property is within the 100-year
    flood plain and it is substantially damaged, it needs to be
    bought out. I have not seen too many of the houses in the
    $400,000 range bought out at all. There may have been one or
    two in cases that I am not aware of, but we are very careful
    and we do look at these very closely and will continue to.
        One thing I want to add, Mr. Chairman. When I was talking
    with your staff, the Inspector General's office, the State of
    North Carolina, other States and our mitigation directorate, we
    are going to prepared a monthly report that lists the
    properties for which offers have been made, the amount of that
    offer, the pre-disaster value of that property, and the cost-
    benefit ratio of anticipated savings.
        We are going to require that every month so we can make
    sure that we are targeting the right properties, that the
    offers are accurate, and that there is a cost savings. We are
    going to do that monthly because we know the importance of
    this.

                        PROPERTIES WITH FLOOD INSURANCE

        Senator Bond. I trust you are looking at the number of
    properties where they have had flood insurance, and it would
    seem to me that priority should be given to those people who
    are willing to help themselves. I would also appreciate your
    comments on the statement you made last year about the agency's
    support for requiring homeowners who do not accept a buyout to
    pay actuarial rates in the flood insurance program. Is that
    still your position?
        Mr. Witt. Yes, sir. I took a few arrows on that position,
    in some cases, but I feel very strongly about this. I feel that
    it is important that the responsibility reside at the local
    level and with individuals as well. We are responsible to meet
    their needs and requirements if there is a disaster, beyond
    their means. We have gone back and looked at the Federal
    insurance administration's data and see that 10,000 properties
    repetitive loss properties of which 1,300 have had two or more
    claims resulting in costs that exceed the value of the
    property.
        It does not make sense to continue spending $200 million
    annually in repetitive flood losses. Legislation has been
    introduced to address this and we are hoping that it will pass.
        The insurance that has been paid out so far just in North
    Carolina is $139 million on flood insurance claims. It probably
    will come close to $200 million in flood insurance claims. I
    addressed this with Eric Tolbert, the State mitigation director
    of North Carolina, to ensure that they are tracking with our
    staff the properties that had flood insurance and making sure
    that, if that insured property is substantially damaged and
    within the 100-year floodplain, that the insurance is offset by
    the buyout amount.

                        PUBLIC BUILDINGS INSURANCE RULE

        Senator Bond. Good.
        Another aspect of insurance. As I indicated, I commend you
    on your work on the public buildings insurance rule. I have
    joined you in being the designated javelin catcher on that one.
    Nothing like having a specialty on the track team.
        When do you expect to have a final rule? What is the
    estimate for how much this can save us? And what other problems
    do you see, and are you confident that you have addressed the
    procedural problems that the GAO identified in the development
    of the rule?
        Mr. Witt. I think we have addressed the GAO problems in
    developing the rule. I think the advanced notice of the rule
    allowed 45 days for comments, the published rule 60 days, and
    then 90 days for a final rule.
        I found out an interesting fact regarding my home county,
    Yell County, Arkansas, which is a very poor county. I called my
    son, who is the county judge there, our son, and I said:
    ``Jimmy, are you buying insurance on your public buildings?''
    Two courthouses, two county libraries, two county hospitals,
    two county jails, and a general detention center. He said:
    ``Why, yes, dad; we pay $44,000 a year for insurance on our
    public buildings.''
        I received a letter from the California delegation--every
    member of the delegation signed it--opposing this. I talked to
    an insurance broker in California. It was interesting to learn
    that the requirements, the insurance on public buildings
    requirements that we are going forward with, it is interesting
    that 51 of 58 counties will already meet those requirements.
    Also, 1,500 communities in Texas will meet those requirements.
    One hundred and fifteen cities in the West will meet those
    requirements by being in this pool.
        What my concern is, if we do not do something then all
    those counties and cities in the East, in the South----
        Senator Bond. They are going to say why bother, yes; save
    $44,000.
        Mr. Witt. I think it is important that local governments
    and State governments have a pool from which to buy the
    insurance. If a lot of the communities are already meeting that
    requirement we should go on with it.
        Senator Bond. That sounds good to me.
        Senator Mikulski, thank you for joining us. Do you have
    some questions?

              REFORMS AND PRIORITIES AT THE NATIONAL FIRE ACADEMY

        Senator Mikulski. Yes, I do, Mr. Chairman. And I know our
    staffs will be cooperating.
        Mr. Witt, my very first question really goes to the Fire
    Academy at Emmitsburg, which I believe is a national resource,
    but really had not been utilized to its full capacity, and
    there are a variety of--it was tattered in some ways. The Blue
    Ribbon Commission said that there were three areas that needed
    to be improved: leadership, resource management, and
    communication.
        Could you share with us or perhaps even have your person
    heading the Academy speak to really what are truly the reforms
    going on at the academy; number two, what do you see are your
    priorities for the Fire Academy, particularly in education and
    training? Senator Lautenberg gave one. Fires are up in my
    State. Could we hear yours, and what resources you need?
        Mr. Witt. Senator Mikulski, I think we are moving in the
    right direction for the USFA, in the sense that the blue ribbon
    panel that I asked to serve as a panel included every national
    fire association in America. These organizations came together,
    met, developed 34 requirements that they felt were important to
    be implemented at the USFA and the Fire Academy. To date, we
    have implemented 17 of the recommendations.
        One of those was to recommission ``America Burning.'' It is
    25 years old. It needs to be brought up to date to reflect
    today's threats. Hopefully that will be completed in May. Also,
    we found that by reorganizing part of the Emmitsburg Fire
    Academy and putting in place a chief operating officer to
    facilitate the communications between our Fire Administrator,
    our advocate now for our policies and our programs for the
    firefighters, the academy has made a huge difference. Hopefully
    the rest of the reorganization will be completed by June.
        Senator Mikulski. Excuse me. What is being completed in
    June, the reorganization?
        Mr. Witt. Yes, and I am very pleased with what has been
    done so far. Some of the panel's recommendations such as the
    distant learning are very important. We have so many
    firefighters across the country that cannot afford to come to
    Emmitsburg, that we need to take the training to them.
        You and I know there are over 53,000 fire injuries a year,
    there is an average of 100 firefighter deaths a year.
    Firefighting continues to be the most dangerous profession that
    we have in this country, and we are going to have to do more to
    reduce injuries and save lives for our firefighters. It is very
    important.
        Senator Mikulski. Well, we want to hear more about that.
    You are recommissioning ``America Burning''?
        Mr. Witt. Yes.
        Senator Mikulski. When does that start and when does that
    end?
        Mr. Witt. It has already started and should be completed in
    May.
        Senator Mikulski. May of this year?
        Mr. Witt. Yes, ma'am.
        Senator Mikulski. So then we will have a blueprint and a
    reorganization.
        Mr. Witt. Yes, ma'am.

                    REFORMS AT FEMA IN THE LAST SEVEN YEARS

        Senator Mikulski. Well, let us continue that further, but
    really there are more fires and more different kinds of fires,
    and because of the gallantry and efficiency of our local fire
    departments I believe America has gotten complacent. Therefore
    we need to be able to support them, not only with best
    technology and best training, but also we need to do, I think,
    public awareness. We look forward to those recommendations.
        Let me go on to another topic that is very important to me,
    which is the institutionalizing of the reforms made at FEMA
    under your direction. Could you identify what we are doing in
    this appropriation to institutionalize those reforms? In the
    short time we have available, could you give us the highlights
    that you want to be sure that you have left as pillars for
    either you to continue to stand on or a new director to be able
    to stand on?
        Mr. Witt. I think it is very important that the repetitive
    loss legislation gets passed and also that we look at the flood
    mapping issue in this country. The inventory of flood maps is
    in very serious condition. Looking at the repetitive flood
    losses and the flood mapping programs is critical if we are
    going to cut disaster costs. My goal is to strive to do that,
    because I know that dollars are so precious and so tight.
        I believe that responsibility is important for locals and
    States and ourselves. By doing the things that we are doing
    now, we will, I hope, institutionalize responsibility for the
    future. The Stafford Act amendments, the repetitive loss
    legislation, and the flood insurance proposals are critical. We
    are working with OMB to try to get some agreements with them on
    other proposed legislation, particularly for the subsidized
    rates for secondary vacation homes. A lot of this has to be
    cleaned up.
        If it is, then I think we will be in good shape going into
    the future by cutting costs and saving lives.
        Senator Mikulski. Well, I thank you, Mr. Witt. I have other
    questions I will submit for the record. Conversations were
    amplified both with you and Mr. Magaw. Mr. Magaw, we really
    welcome you back and it is nice to see you again, because I
    think our conversations on terrorism are left for another
    forum.
        Is Mr. Burris here from the Firefighting Academy?
        Mr. Witt. Ken could not be here today. Ken Burris is the
    former fire chief of Marietta, Georgia. He has over 20 years of
    service, and is very, very talented. We are very fortunate to
    have him.
        Senator Mikulski. We are looking forward to meeting him the
    next time we are in Emmitsburg, so thank you.
        Mr. Chairman, I will submit other questions for the record.
        Senator Bond. Thank you very much, Senator Mikulski. We
    will of course hold the record open for questions, and I will
    have quite a few to submit myself. Thank you very much for your
    participation.
        Senator Lautenberg.
        Senator Mikulski. And I am going to excuse myself to go to
    the elementary and secondary markup.
        Senator Bond. We will understand. Thank you.

                    SPRINKLER SYSTEMS IN COLLEGE FACILITIES

        Senator Lautenberg. Mr. Chairman, I will be brief.
        I just have a couple of questions that I would like to ask
    you. They relate to the terrible accident at Seton Hall which I
    mentioned. Director Witt, what we find is that it is difficult
    to get accurate data about the extent to which all student
    housing is equipped with life-saving sprinkler systems. I note
    that there was a forum on college fire safety and they said
    that only--the report said that only 27 percent of the student
    housing had fire sprinkler systems.
        It would be useful to get full information about this and
    be able to send copies to the various educational institutions.
    Could the Fire Administration undertake a study of that for us?
    That would be very helpful. And if the study included
    recommendations on the best way to encourage academic
    institutions to install fire sprinkler systems, all of the
    institutions, the facilities that are on the campuses, if we
    could do that. And I would like to work with you to begin such
    a study and hopefully be finished before at least I--I have a
    specific ticket to leave town. It seems that yours maybe
    rejected. I have not had that kind of groundswell. You had a
    groundswell of three persons here; that is pretty good.
        Also, the Fire Administration produced a report on college
    fire safety that recommended the establishment of an
    information clearinghouse. I think that the Fire Administration
    would be an appropriate place for that as well. Would you
    agree?
        Mr. Witt. Yes, sir.

                        PUBLIC AWARENESS OF FIRE DANGERS

        Senator Lautenberg. The Fire Administration's report
    specifically cited a link between fires and the consumption of
    alcohol. The report recommended that by associating fire safety
    with alcohol consumption it may be possible to reduce some of
    these fire losses. Young people will be capricious and
    sometimes engage in things that look like they are fun and they
    are fun until something happens.
        I have been a strong advocate of establishing a nationwide
    advertising campaign against underaged alcohol consumption. I
    wrote the law to raise the drinking age to 21. Could we get
    some help in getting a view from your people or getting a
    communications outlet through your department to see if we can
    just raise a caution there? I think it would be a good idea,
    because the consequence--we know what the consequence is of
    drinking and driving, but we are not certain that people are
    aware of the consequence of excessive horseplay and so forth as
    a result of drinking that might lead to fire disasters on the
    campus.
        If we can find anything about cause and effect there, that
    would also be helpful.
        Mr. Witt. Our U.S. Fire Administrator, Ms. Carrye Brown, is
    with us today and I know that she has been working very, very
    hard on establishing a public awareness program. Also, we have
    developed videos and pamphlets that have been shared with the
    universities to help address some of the fire-related and
    alcohol-related fire deaths.
        But, I think a study at the universities, particularly of
    the sprinkler systems, is absolutely critical. We know that
    across the country there are so many universities that are at
    risk for all-hazards. Under our disaster-resistant universities
    concept--the University of Berkeley is doing a study on this,
    and we will share that with you--we are looking at how
    universities can be better prepared before something happens. I
    think it will help save lives and save dollars in the future.
    So we will be happy to share that with you when it is
    completed.
        Senator Lautenberg. Thank you.
        Thanks, Mr. Chairman.
        Senator Bond. Thank you very much, Senator Lautenberg.
        Director Witt, we have a number of documents and
    information here from the GAO and their testimony a month ago
    and the May 1996 report. I think that everybody has that. I
    would like to make a copy of the February 15 letter from the
    Deputy Inspector General to our committee part of the record as
    we discuss S. 1691.
        [The information follows:]

        As requested, following are the issues that we discussed during our
    meeting on February 7, 2000, concerning Senate amendments to the
    Stafford Act (S. 1691).
        Overall, the amendments have many positive features that we
    wholeheartedly endorse, such as the cost estimation procedures, the
    conditions for assistance for private nonprofit facilities, and the
    emphasis on mitigation. Our concerns are not so much with what the
    amendments include, but rather with what they exclude. The amendments
    do not go far enough, in our opinion, to control the Federal cost of
    disaster assistance and to ensure coordination between FEMA's various
    disaster preparedness, mitigation, and relief programs. Specifically:
        Under Section 203, PREDISASTER HAZARD MITIGATION, the amendments do
    not make any reference to FEMA's Emergency Management Performance Grant
    (EMPG) Program. Yet the EMPG Program is the Agency's primary mechanism
    through which non-disaster funds are made available to States for
    mitigation planning and pre-disaster mitigation initiatives. Language
    should be added to this section that recognizes the EMPG program and
    its relationship to the technical and financial assistance envisioned
    under this section. Also, this section could be strengthened by (1)
    providing restrictions or parameters on the type of projects that this
    program will support, (2) defining what constitutes an ``effective
    public-private natural disaster hazard mitigation partnership,'' and
    (3) describing how FEMA will deliver technical assistance to State and
    local communities, i.e., with FEMA staff, contracts, or grants.
        Under Section 204, NATURAL DISASTER MITIGATION ZONES, add specific
    language that would address local community compliance with the
    National Flood Insurance Program's substantial damage rule. The
    substantial damage rule holds communities responsible for ensuring that
    mitigation action takes place whenever the cost of restoring a damaged
    structure to its pre-damaged condition is 50 percent or more of its
    market value. A legislative mandate, coupled with appropriate sanctions
    such as increased cost share or reduced assistance for communities that
    do not adequately enforce the substantial damage rule, would contribute
    significantly to increased compliance, resulting in more effective
    mitigation measures to reduce repetitive losses.
        Under Section 204, NATURAL DISASTER MITIGATION ZONES, curtail the
    availability of assistance in specified coastal areas. Because of
    FEMA's disaster recovery and flood insurance programs, the Federal
    government has been criticized for its apparent public policy of
    encouraging development in high risk coastal areas. The Stafford Act
    Amendments provide a unique opportunity, in our opinion, to specify
    disincentives for development in those areas. For example, provisions
    could be included in the amendments that eliminate flood insurance rate
    subsidies for secondary homes in coastal areas.
        Under Section 204(a)(3)(C), AVAILABILITY TO THE PUBLIC, stipulate
    that maps and services shall be made available to the public for a
    nominal fee to be established each year by the Director. These revenues
    would be invested in the Fund.
        Under Section 404, HAZARD MITIGATION, add language that provides
    statutory guidance for property acquisition and relocation assistance,
    such as:
      --funding limitations
      --eligibility criteria
      --cost/benefit requirements
      --prohibition on rebuilding in a special flood hazard areas
      --basis for amount to be paid to homeowner
      --priority ranking system that ties in with eligibility criteria
      --post buyout assessment of effectiveness
        We believe the need for explicit statutory requirements for the
    buyout program is important because of its enormity (expenditures
    approaching $1 billion) and the emphasis that has been placed on
    buyouts as an essential mitigation tool.
        Under Section 404, HAZARD MITIGATION, either eliminate or reduce
    the 15 percent (20 percent under the amended version) that is set aside
    under this section for hazard mitigation measures. Under the current
    funding mechanism, the program has variable and unpredictable funding
    levels. Also, it does not ensure that public funds are being spent on
    the most pressing national priorities, nor does it ensure that public
    funds are being awarded to State or local governments that are
    genuinely committed to reducing damages from future disasters and
    supporting ongoing non-Federal hazard mitigation measures. Instead, we
    proposed that Congress should consider establishing under Section 203,
    PREDISASTER HAZARD MITIGATION, a discretionary grant program. The
    program would be funded through an annual appropriation that gives FEMA
    the discretion to determine, through a competitive process, which
    applicants are best suited to address the requirements and priorities
    of the Nation's pre-disaster hazard mitigation goals and objectives.
        Under Section 406(c), LARGE IN-LIEU CONTRIBUTIONS, add language
    specifying that, to qualify for large in-lieu contributions, the cost
    to repair a public facility must exceed 75 percent of the pre-disaster
    value of the property. Currently, FEMA authorizes the construction of a
    new facility whenever the damages exceed 50 percent of the pre-disaster
    value of the property. The 75 percent threshold is more in line with
    national insurance standards for replacement of damaged facilities.
    Repairing a facility would be more cost effective than constructing a
    new one.
        Under Section 406(e), ELIGIBLE COST, clarify the current language
    that stipulates eligible public assistance costs should be estimated in
    conformity with current applicable codes. It should be made clear that
    codes in effect at the time of the disaster are controlling.
        Under Section 408, TEMPORARY HOUSING ASSISTANCE, require disaster
    victims who need home repairs in lieu of other types of temporary
    housing to seek loan assistance from the Small Business Administration
    before receiving grant assistance from FEMA. Home repairs would not be
    delayed since SBA processing time has been reduced to about 7-12 days
    for home loans. According to FEMA estimates, this would result in
    annual cost savings of about $109 million.
        Under Section 411, INDIVIDUAL AND FAMILY GRANT PROGRAMS, authorize
    FEMA, in consultation and coordination with the State, to provide
    direct financial assistance to individuals or families. The Federal
    share should be equal to 75 percent of the actual cost incurred and the
    remaining 25 percent of the cost should be paid from funds made
    available by the State. Also, since assistance for the IFG program will
    be provided directly by FEMA, there will be no need for providing the
    State a 5 percent administrative fee. According to FEMA projections, an
    annual cost savings of $8,756,200 would be realized.
        Repeal Section 417, COMMUNITY DISASTER LOANS. Based on our
    assessment of the this program in fiscal year 1995, we estimated that
    the default rate for these loans would be 97 percent and the rate for
    loans subject to the Credit Reform Act would be 100 percent. With these
    facts in mind, we believe a disaster grant would be a more prudent and
    cost effective means to assist State and local governments that suffer
    a substantial loss of tax or other revenues after a disaster and
    demonstrate a need for financial assistance to perform governmental
    functions. The Credit Reform Act of 1990 imposes complex accounting and
    funding requirements for loans. Unlike a grant program, additional
    appropriations are required to cover the subsidy and administrative
    expenses associated with each loan. In fiscal year 1994, for example,
    these expenses exceeded $11 million.
        Under Section 705(c)(1), REBUTTAL OF PRESUMPTION OF RECORD
    MAINTENANCE, clarify the language that defines the binding nature of
    grant requirements. To eliminate any confusion about what constitutes
    the ``binding nature of grant requirements,'' we suggest that this
    section be revised to read: ``The payment was authorized by an approved
    grant agreement specifying the costs. FEMA's estimate of disaster costs
    as reflected in a Disaster Survey Report does not constitute an
    approved agreement.
        Again, thank you for the opportunity to share our concerns with you
    regarding the Senate proposal to amend the Stafford Act. Should you
    have any questions or wish to discuss our comments in more detail,
    please contact me.

                          HAZARD MITIGATION PROPOSALS

        Senator Bond. One of the things that has concerned me about
    S. 1691, is the average annual spending in the 404 program has
    been $422 million, and as we interpret S. 1691 that would go to
    $562 million, or a 33 percent increase. There have been a
    number of suggestions from the IG as well as from the GAO. I
    would like to know if you think there are any of them that are
    not practical or if you see any significant problems with them?
    Do you have any comments on the proposals in general?
        Mr. Witt. I think some of the proposals are very good. Some
    of them I would probably not agree with. I think it is very
    important that some form of the 404 program continue to be in
    the disaster program because many times pre-disaster prevention
    may not address all of the problems after a disaster associated
    with rebuilding.
        I think the concept that your staff talked to me about is
    very interesting as are the IG's recommendations.
        Senator Bond. The competitive grant program?
        Mr. Witt. Yes, sir. I did share that information with the
    NEMA when I visited with them. They agree to work with us and
    your staff in looking at this and seeing what the possibilities
    are.

                    WORKING WITH NASA DATA FOR FLOOD MAPPING

        Senator Bond. On this and so many others, we would
    appreciate your discussion and obviously we will be in
    communication with you on that program and the other
    recommendations.
        Let me turn to flood map modernization. Since this
    committee has the unique privilege of funding NASA as well, I
    am interested in the collaboration. We had some discussion
    about the ability of NASA to work with FEMA and I understand
    NASA recently flew a mission involving topographical mapping.
    How is your effort to utilize NASA's resources moving and can
    we lessen the costs, and have you encountered any roadblocks or
    problems in that relationship?
        Mr. Witt. Money.
        Senator Bond. They are charging too much? Is that what I am
    hearing you say?
        Mr. Witt. Yes, sir. I think it could have possibilities to
    really, truly help us. I have seen a brief overview of the
    maps. I am going to go meet with Dan Goldin to look further at
    this. Some of their information is classified and they are not
    going to be able to release it. But, a lot of it I think we
    could be using.
        But I think also we need to work on the cost that is
    charged for this in order to save money. Federal agencies'
    administrative costs vary and some are higher than others.
        Senator Bond. We will pursue that. I think we have two
    friendly agencies working together and we will want to
    encourage them to work more cooperatively.
        Mr. Witt. Thank you.

                        LICENSING FEE FOR FLOOD MAPPING

        Senator Bond. Talking about something, though, that has
    gone up the flagpole without any salutes, last year's
    settlement fee, and this year there is a new $12 licensing fee
    proposed. Have you submitted it to the Banking Committee, and
    do you really think there is any chance of getting that
    enacted?
        Mr. Witt. Mr. Chairman, I am always hopeful and we are
    always trying to come up with alternative solutions for funding
    this including sharing the costs with the people that use them
    so that it is not just a burden on the taxpayers. We have hopes
    for implementation of the fee, but I cannot guarantee that the
    Banking Committee will agree with the proposal that we put in
    the 2001 budget.
        The proposal moves the process away from the bankers, and
    places it with map determination organizations using the
    regular tracking system that we have. I am hopeful, but I
    cannot guarantee it yet.

                        FEMA'S ROLE IN COUNTERTERRORISM

        Senator Bond. All right. A final question. I would like
    your comments on the counterterrorism program. I mentioned
    concerns about whether we are focusing adequate attention on
    it. I would just like your general comments on how you think
    the program is focused, coordinated, what FEMA's role can be,
    and how well the concerns we have had for the last year or so
    have been addressed.
        Mr. Witt. I am very concerned about this program. I am very
    concerned that the people out on the front line get exactly
    what they need. Attorney General Janet Reno and I talked this
    week, and I expressed my concern about the NDPO, including
    where it has been put. I feel that it should be elevated to the
    level of at least a director or deputy director's office in the
    FBI.
        We have not come to agreement on that yet. I feel like that
    it is very important now, with John Magaw now heading up the
    consequence management side, to elevate the anti-terrorism
    office in FEMA to a co-chair level with the NDPO--especially
    when you look at what we do in the areas of planning,
    development, training, and exercises.
        Our programs cost across all lines and involve over 15 or
    16 partners. I feel strongly about this program and the
    importance of it. But I do not think we are where we should be
    yet.
        Senator Bond. Mr. Director, I think it is safe to say this
    committee shares your concerns and we are going to do
    everything we can to work with you to address those concerns,
    because this is something that cannot be downgraded to an
    afterthought or an office in the basement someplace. This has
    got to be able to bring together all those resources.

                         ADDITIONAL COMMITTEE QUESTIONS

        With that, I would like to thank you for the cooperation
    and wish you well, and maybe if Senator Stevens is successful
    and Mrs. Witt does not veto it we may have a chance to see you
    back again. But we will be submitting questions for the record.
        [The following questions were not asked at the hearing, but
    were submitted to the Agency for response subsequent to the
    hearing:]

               Questions Submitted by Senator Christopher S. Bond

                                    BUYOUTS
        Question. Please describe the basis for FEMA's $77 million fiscal
    year 2000 supplemental request for additional Hurricane Floyd buyouts.
        How will FEMA ensure that the most at-risk properties, and the most
    needy individuals, will be given priority in this program?
        Answer. FEMA derived the $77 million estimate for supplemental
    buyout funding needs by contacting the affected States in early January
    2000. FEMA requested that the States identify the anticipated need for
    buyouts generally meeting the criteria as defined in the previous
    Supplemental for Floyd-related buyouts. States based their estimates on
    best available information, which in most cases involved letters of
    intent, pre-applications, other communication with affected
    communities, or information gathered by the State and/or FEMA region
    during applicant briefings and fieldwork.
        FEMA is working closely with affected States to ensure that the
    funding will only go towards valid needs that meet the criteria of the
    appropriation law. FEMA is requesting the States to identify the most
    heavily impacted structures as candidates for this buyout program.
    States will receive funding allocations only after they demonstrate the
    number and value of properties that meet the program requirements. Our
    implementing regulation stressed to States that assisting low and
    moderate income families who suffered major disaster damage is a
    priority use for this funding. Also, based on information we have
    received so far, nearly all of the properties proposed for acquisition
    are relatively low in value for their respective areas. -
        Question. Can you estimate how many of the buyout properties will
    have had flood insurance? Will priority be given to those properties?
        Answer. At this time we do not yet know how many of the potential
    buyout candidates have flood insurance. We will better be able to
    provide this information as communities provide details about
    participating properties. Our estimates show flood insurance coverage
    in North Carolina to average approximately 34 percent in the Special
    Flood Hazard Area. While a significant number of these policies are in
    coastal areas, many buyout participants are expected to live in
    slightly inland riverine areas, rather than coastal. States and
    communities have the flexibility to determine which properties are the
    highest priority for assistance, among those that meet the stringent
    eligibility requirements.
        Question. Last year you said FEMA supported requiring homeowners
    who do not accept a buyout to pay actuarial rates in the flood
    insurance program. Do you still support this, what is the status of
    this effort, and when will FEMA have a final rule?
        Answer. FEMA is developing the program policy and guidance to
    support the implementation of the ``Mitigation Offer''. The Federal
    Insurance Administration (FIA) published a proposed rule on August 5,
    1999 that would apply full-risk premiums for flood insurance coverage
    to target repetitive loss properties whose owners decline an offer of
    mitigation funding to acquire or elevate their structure. Target
    properties include those with four or more insured losses, as well as
    those structures that have had two or three losses that cumulatively
    exceed the building value. There are currently approximately 10,000
    properties on this target list. FEMA has also drafted a Federal
    Register Notice that outlines the procedures necessary in making the
    official mitigation offer. This draft has been shared with our State
    partners, and we are incorporating their comments before publishing the
    Notice. We expect to be able to make official mitigation offers by this
    summer.
                                    s. 1691
        Question. The Inspector General has listed a number of options to
    improve S. 1691, the Disaster Mitigation bill, recently marked-up in
    the Environment and Public Works Committee. Please describe for each
    proposal whether FEMA supports the recommendation, and the rationale
    for FEMA's support or opposition.
        Answer. Many of the Inspector General's recommendations warrant
    additional consideration. As we committed during the Senate
    Appropriations hearing, we will consult with our State partners through
    NEMA to discuss many of these proposals. The following is a
    recommendation-by-recommendation analysis:
      --Under Section 203, PREDISASTER HAZARD MITIGATION.--We believe the
            recommendations made for this area are worthy of future
            consideration as Project Impact matures. At this time, we would
            like the communities, and the States that recommended their
            selection, to be given an opportunity to shape the program in
            ways that fit the individual community. Experience may dictate
            that we may want to limit some eligible activities as
            suggested, but at this stage of the program's growth we do not
            want to limit the approaches various communities may choose.
            Also, the connection to EMPG is something that may evolve as
            States gain experience with Project Impact, however, given the
            unique relationship between FEMA and the communities, that
            linkage is probably premature at this point.
      --Under Section 204, NATURAL DISASTER MITIGATION ZONES.--FEMA
            supports the substantial damage rule and acknowledges that
            communities often do not adequately enforce this requirement.
            To combat this lack of enforcement, FEMA has developed a
            variety of mitigation tools to help communities better
            implement the substantial damage determinations and provides
            homeowners with Increased Cost of Compliance flood insurance
            coverage, as well as other forms of financial assistance. At
            the same time, there are sanctions currently in place for
            communities that fail to enforce this rule. Currently, a
            community that does not enforce the NFIP substantial damage
            rule can be placed on probation or even suspended from the
            program. While the merits of incentives versus disincentives
            may be debated for helping communities better comply with the
            substantial damage rule, it is clear that Section 204 is not
            the appropriate place in legislation for these measures. It is
            not the appropriate place because Section 204, as currently
            written, applies to individual buildings and not to
            communities; substantial damage determinations are made during
            the same period of time in which disaster obligations are made,
            making it difficult to change cost share for a particular
            disaster; and, consequences for not making substantial damage
            declarations should apply to all communities and not just those
            that contain Mitigation Zones.
      --Under Section 204, NATURAL DISASTER MITIGATION ZONES.--FEMA is
            concerned about the increased development in high-risk coastal
            areas and the resulting potential for increased costs for
            disaster assistance in these areas. While disaster assistance
            is currently provided to rebuild infrastructure that existed
            before the disaster, FEMA is reviewing whether rebuilding this
            infrastructure contributes to a community's willingness to
            rebuild, and to make unwise investments in high-risk locations.
            If limitations are to be placed on disaster assistance,
            however, this should not be done in Section 204 which applies
            only to Mitigation Zones. The Inspector General also suggests
            that provisions could be included in the amendments that
            eliminate flood insurance rate subsidies for secondary homes in
            high-risk coastal areas. Because subsidies are only provided to
            buildings that were built prior to the NFIP and not for new
            construction, this would have little impact on the rate of new
            development. For fiscal reasons, however, FEMA agrees that it
            is desirable to reduce the subsidy for second homes and other
            buildings that are not primary residences. This would, however,
            be more appropriately handled as part of a more comprehensive
            legislative package of subsidy reduction proposals that would
            amend the National Flood Insurance Act. FEMA has proposed
            legislation, which is currently under OMB review, to phase out
            this subsidy over a seven-year period.
      --Under Section 204 (a) (3) (C), AVAILABILITY TO THE PUBLIC.--The
            Inspector General recommended that maps and services shall be
            made available to the public for a nominal fee to be
            established each year by the Director. FEMA believes that this
            is a proposal worth considering.
      --Under Section 404, HAZARD MITIGATION.--The Inspector General
            recommended that Section 404 of the Stafford Act be amended to
            give specific guidance on property acquisition and relocation
            projects. While we agree that amendment to the current language
            regarding property acquisition and relocation assistance may be
            desirable, we prefer that it be moved to Title II of the
            Stafford Act. FEMA has provided the Committee with suggested
            language for Title II to create uniform property acquisition
            and relocation project guidelines for all FEMA programs
            regardless of funding source. This language addresses most of
            the guidance items provided by the Inspector General. We
            strongly believe uniform guidance for all programs is important
            to reduce confusion for participating homeowners and the States
            and communities that implement our programs.
          Further, it is important that any of this type of guidance
            conform to already existing Hazard Mitigation Grant Program
            provisions. Being overly prescriptive could preclude other
            important and effective mitigation measures, such as elevation
            projects.
      --Under Section 404, HAZARD MITIGATION.--The Inspector General
            recommended that the Stafford Act be amended to reduce or
            eliminate Section 404 hazard mitigation assistance in favor of
            pre-disaster mitigation funding authority only. FEMA believes
            that the IG's proposal requires careful review and analysis.
          FEMA believes in a two-pronged approach to mitigation: (1)
            institutionalize preventative planning and measures into daily
            activities at the community level; and (2) take advantage of
            the opportunities disaster events provide to reconstruct to
            higher standards and in safer locations. FEMA is dedicated to
            focusing attention to mitigation and disaster prevention before
            disaster strikes. However, it is also critical to seize the
            opportunities in the post-disaster environment to assist
            communities in rebuilding stronger and smarter. Section 404
            assistance provides these key resources to communities after
            the devastation of a disaster, enabling them to reconstruct in
            safer locations and in a sustainable manner.
          We have made great strides in improving the effectiveness and
            efficiency of the Hazard Mitigation Grant Program. Through our
            coordination with both the Inspector General and General
            Accounting Office, we are better able to assess and manage
            program effectiveness on an ongoing basis. Through our Managing
            State pilot initiative, we are working with States to devolve
            more authority and responsibility to capable States. The
            Stafford Act amendments support this approach. With the
            Inspector General's assistance, we evaluated each of the three
            pilot States twice. All demonstrated a high level of capability
            and professional, effective program management.
      --Under Section 406(c), LARGE IN-LIEU CONTRIBUTIONS.--We believe this
            is an incorrect citation. The Stafford Act amendments propose
            to reduce the Federal contribution for Large In Lieu
            Contributions from 90 percent of the Federal share to 75
            percent. However, the provision which the IG is addressing is
            not in the statute but contained in the regulations at
            206.226(d). This section provides that when damages to a
            facility are more than 50 percent of replacement cost, the
            facility is eligible for assistance for full replacement. The
            IG would like to see this threshold raised to 75 percent. The
            50 percent threshold is consistent with the substantial damage
            threshold of the NFIP and is also the industry standard for
            code upgrades. Given that three-quarters of our disasters are
            flood disasters, it is important to maintain consistency among
            FEMA programs.
      --Under Section 406(e), ELIGIBLE COST.--The IG proposal is to specify
            in law the meaning of current applicable codes . . . to mean
            those codes in effect at the time of the disaster. In as much
            as we have recently (February 1999) made the same provision in
            our regulations at 206.226(b)(3), we have no problem with this
            proposal.
      --Under Section 408, TEMPORARY HOUSING ASSISTANCE.--The IG suggests
            amendments to the Stafford Act which are at variance from those
            proposed by the Administration and endorsed, with only slight
            differences, by the House in HR 707. The IG's proposal requires
            further review and analysis. We are concerned, however, that
            the proposal could lead to delays in disaster assistance.
        Programmatic Comparison.--The IG recommends changing Section 411,
    to ``authorize'' FEMA to provide assistance directly to individuals or
    families. This would seem to create an approach in which FEMA would be
    spending State funds. All FEMA accounting, auditing and grant
    management systems are set up for the purpose of the Federal government
    to monitor and oversee state implementation of Federal grant programs.
    The concept of federalism in which Federal money is provided to States
    to spend is well established. This proposal runs counter to these
    accepted norms of federalism. In addition, since the IG program does
    not fundamentally change the structure and makeup of these programs,
    the existing problems of providing two checks through two separate
    eligibility determination processes remains.
        The approach to modification of the individual assistance
    authorities proposed in the Administration bill is the result of a
    carefully crafted plan to rationalize these programs, improve their
    effectiveness, and eliminate confusion and frustration on the part of
    disaster victims. One of the common concerns voiced by disaster victims
    is the confusion created by the array of programs and agencies they
    must deal with to access assistance. For example, in most cases a
    victim will deal with FEMA for housing assistance, and then be referred
    to either the State for IFG, or to SBA for a loan. Many people referred
    to SBA are subsequently referred to the State, if their loan
    application is rejected due to their economic means.
        We believe that one of the most useful steps we can take to improve
    governmental services, and to reduce the stress on disaster victims
    created by this system is to reduce the number of agencies a victim has
    to deal with, and to reduce the number of different sets of rules under
    which governmental assistance is administered. Our solution is to
    combine the temporary housing program and the Individual and Family
    Grant program into one uniformly administered human needs program that
    covers uninsured real and personal property losses. This will allow all
    assistance decisions to be made simultaneously and expeditiously, and
    with no confusion as to which program will pay for what costs (as it is
    now, IFG can pay for personal property as well as some real property
    costs. An IFG eligible applicant, therefore, could get real property
    repair assistance from both programs, for different parts of the
    house.) A combined program would allow the creation of a uniform set of
    rules and eligibility criteria, and would allow applicants to get the
    sum of assistance for which they qualified in one payment.
        Since the IFG program is currently based upon the lack of repayment
    ability for a low interest SBA loan, we determined that this concept
    should be carried over into the new combined program. We believed this
    would be possible because of the great strides that SBA has made in
    accelerating their loan approval and streamlining their application
    process. Our primary intent was to find a way to improve program
    delivery in a manner that was cost neutral. We believed that requiring
    those that can afford to repay a loan to take out a loan is good public
    policy, reserving grant assistance for those that truly cannot recover
    without it. We anticipated that this provision would offset the cost
    increases due to the elimination of state participation in funding of
    the IFG Program.
        If the combination of these two authorities into a single,
    integrated human needs program were only cost neutral, we believe it
    would be a significant improvement over the current system. We believe
    firmly that it will result in measurable simplification of the process
    and measurable improvement in the speed of delivery and effectiveness
    of assistance to disaster victims.
        The net effect of the Administration proposal is that, while the
    same amount of SBA disaster loan indebtedness will be created, it will
    be offset by improved effectiveness and efficiency of assistance for
    those victims that really need it and a reduction in cost to the State.
    The IG's proposal does nothing to improve service to disaster victims.
      --Repeal Section 417, COMMUNITY DISASTER LOANS.--The Inspector
            General recommended repealing the Community Disaster Loans
            section of the Stafford Act and replacing it with a grant
            program. FEMA had proposed eliminating the program but agrees
            with the Senate that a $5 million cap was more appropriate. The
            cap will allow the program to return to its purpose of helping
            small communities, through limited loans rather than uncapped
            grants, to recover their tax base while maintaining services.
            Under this limitation, recent loans such as those to the Grand
            Forks, ND School District would still be available.

                     STREAMLINING DISASTER FIELD OPERATIONS
        Question. Director Witt, I understand you are looking at
    initiatives to streamline disaster field operations, including
    developing 3 levels of disasters, utilizing standardized staffing
    templates, and State management of small disasters. Can you describe
    this initiative in more detail, the cost-savings which could be
    achieved, whether legislation is needed, and your timeline for
    implementation?
        Answer. During the past seven years since I joined FEMA, both FEMA
    and the States have been working hard to improve both our disaster
    response and recovery capabilities and our delivery of disaster
    assistance. While we can be proud of our increased capabilities to
    respond to disasters, we continually work toward streamlining disaster
    operations to achieve more cost-effective, timely service in all
    disasters. Each of the initiatives listed below are being performed
    within our current statutory authorities. Cost savings may be realized
    by the increased efficiency promoted with each of these initiatives.
    Developing 3 Levels of Operational Responses to Disasters
        FEMA is developing three levels of operational responses to
    disasters. In June 1998, FEMA published the ``Disaster Levels,
    Classifications and Conditions Job Aid'', which lays out our three
    levels of operational response. These levels of operational response
    are similar to how the U.S. Forest Service classifies incidents by the
    complexity of the response, such as Type 2 and Type 1. At FEMA, we have
    three levels of operational response. In order of complexity, from
    least to greatest, they are:
      --Level III--Minor.--An event/incident involving minimal levels of
            damage, which could result in a Presidential declaration of an
            emergency or a disaster. Some Federal involvement may be
            requested by State and local jurisdictions, and the request
            will be met by existing Federal regional resources.
      --Level II--Moderate.--An event/incident involving moderate levels of
            damage, which will likely result in a major Presidential
            disaster declaration, with moderate Federal assistance. Federal
            regional resources will be fully engaged, and it is possible
            that other Federal regional offices outside the affected area
            may be called upon to contribute resources. Select national
            resources may also be utilized.
      --Level I--Massive.--An event/incident involving massive levels of
            damage, with severe impact or multi-State scope. This level of
            event will result in a Presidential disaster declaration, with
            major Federal involvement and full engagement of Federal
            regional and national resources.
        For the most part, categorizing the magnitude of an event and the
    resultant level of Federal operations is an evaluative tool that
    assists the Federal Government in preparedness activities, and aids in
    the evaluation and selection of appropriate resources during the
    disaster. The magnitude and impact of an event may change over time
    during the course of operations. As a result, the categorization of
    events and levels of operational response is a dynamic activity that
    occurs as part of the monitoring and assessment activities that occur
    continually during each emergency management phase.
    Disaster Staffing Templates
        The purpose of the Disaster Staffing Templates is to serve as a
    planning tool to aid disaster managers in staffing disaster operations
    more efficiently, by providing a baseline staffing range. The templates
    are based upon the three operational response levels, as well as the
    scenario in which FEMA is responding: for example, hurricanes,
    earthquakes, tornadoes, floods, and weapons of mass destruction. The
    templates will provide a baseline staffing range of numbers of
    employees by functional program area for the Emergency Response Team,
    Advance Element (ERT-A); the first 72 hours of initial operations; 24-
    hour operations, if required; and continuing operations until the
    functional program area reaches it's peak staffing. These templates
    will assist managers in determining what baseline personnel resources
    they need to deploy, and then managers will be able to augment or
    deactivate personnel as the situation warrants.
    State Management of Small Disasters
        We believe that many States are capable of managing small public
    assistance disasters, and are now working with States to develop a
    concept of operations and an implementation plan. This initiative would
    allow States, not FEMA, to assume primary responsibility for managing
    their disaster recovery operations. Participation in the program will
    be voluntary. We do anticipate some savings to result from streamlined
    operations (fewer FEMA staff and lower administrative costs), though we
    would expect to pay the State for reasonable management costs. It is
    too early at this point to project exactly what the savings will be. We
    plan to pilot this initiative this summer, with full implementation
    targeted for October 1, 2000.

                            FLOOD MAP MODERNIZATION
        Question. FEMA is proposing a new $12 licensing fee to finance the
    flood map modernization initiative. Can you explain why this proposal
    is an improvement over the settlement fee that FEMA proposed last year?
    How and on whom will this $12 fee be assessed, and does FEMA anticipate
    that it will be passed on in its entirety to the prospective homebuyer?
    Please provide the basis for the $104 million estimate in revenue
    estimated for fiscal year 2001. What is FEMA's current estimate for the
    modernization initiative, and what is the basis for that estimate? What
    is FEMA doing to collaborate with other agencies including NASA and the
    Corps of Engineers to maximize existing federal resources and reduce
    the total price tag for this effort? How will mapping activities be
    prioritized?
        Answer. The new fee proposal differs from last year's Mortgage
    Transaction Fee in three significant ways. First, this year's fee is a
    true user fee to be imposed on an industry that depends on FEMA-
    generated flood maps. Unlike last year's fee, the flood map license fee
    would charge the flood hazard determination industry, which profits
    from the commercial use of FEMA's flood maps. Second, lenders would not
    need to establish an accounting mechanism to track the fee since the
    new fee would likely be added to the existing fee charged to lenders by
    map reading service providers. Third, the Map License Fee would apply
    to use of the standard flood zone determination form regardless of
    whether the mortgage is federally regulated. The Map License Fee will
    be assessed on the commercial use of the maps pursuant to the National
    Flood Insurance Act requirement for mandatory flood insurance
    determinations. Non-federally regulated mortgage transactions often
    involve completion of the standard flood zone determination form
    because these loans are often sold on the secondary market, which
    require flood zone determinations. Fourth, the Map License Fee proposal
    would likely limit the fee collection activity to those providing map
    reading services. Thus, the current proposal affects less than 300
    firms, compared to the thousands of lenders that would have been
    impacted by the Mortgage Transaction Fee proposal. This should greatly
    reduce administrative expense overall, and make the collection process
    administratively less complex than last year's proposal. The changes
    reflected in the new proposal were made to address concerns raised by
    lenders over the Mortgage Transaction Fee proposal.
        In addition, map reading service providers realize special benefits
    from the flood mapping program in that they use the maps for commercial
    purposes but only pay for a portion of reproduction and distribution
    costs, which amount to less than 2 percent of the cost of producing a
    flood map. Map modernization will allow service providers to do their
    jobs more precisely, consistently, and efficiently. It is uncertain
    whether the fee would be passed on in its entirety to the prospective
    homebuyer, but it seems likely that it would be, just as other expenses
    in the mortgage process are passed on to borrowers. Property owners
    significantly benefit from the use of accurate flood hazard data,
    because these data are used to make decisions on protecting the
    investment in a property.
        The $104 million in revenue estimated for fiscal year 2001 is based
    on Home Mortgage Disclosure Act data, available on the Federal
    Financial Institutions Examination Council Web site. These data
    indicate approximately 12.9 million loan originations in 1998 and 13.8
    million in 1999. The percent change in housing starts for 1999, 2000
    and 2001 was used to project the percent change in mortgage
    originations. This projection results in 11.3 million mortgage
    originations in 2001. This number was multiplied by an adjustment
    factor of 0.77 to account for some non-federally regulated lenders
    choosing not to require a flood hazard determination. Thus, the
    estimate of loan originations generating a license fee would be
    approximately 8.7 million. That number multiplied by $12 yields a
    revenue estimate of approximately $104.4 million.
        The budget finances the $134 million map modernization effort not
    only with the map license fee, but also with $30 million in annual
    appropriations from the Disaster Relief Fund. This way the taxpayers
    will also support a mitigation program that benefits the general public
    through decreased disaster relief spending.
        Our current estimate for the modernization initiative is for $773
    million over the period from 2001 to 2007. This figure derives from our
    projection of mapping needs based on community surveys conducted
    through July 1999. We project that 20,500 map panels (4,100
    communities) need flood data updates; 60,800 map panels (12,150
    communities) need routine map maintenance and digital conversion; and
    13,700 map panels need to be created for approximately 2,700 unmapped
    flood-prone communities.
        FEMA is cooperating with NASA's Jet Propulsion Laboratory, the
    National Imagery and Mapping Agency (NIMA) and the U.S. Army Corps of
    Engineers' Topographical Engineering Center (TEC) to develop new
    technologies for mapping the floodplains.
      --FEMA is working closely with NASA and TEC in developing Light
            Detection And Ranging (LIDAR) and InterFerometric Synthetic
            Aperture Radar (IFSAR) technologies.
      --With NIMA, FEMA is cooperating in the development of vegetation
            penetrating IFSAR at two test sites.
      --With U.S. Geological Survey (USGS), FEMA is jointly funding the
            purchase of digital orthophotos for use with floodplain maps.
        FEMA is developing the first working specifications for LIDAR,
    IFSAR, and LIDAR/IFSAR data fusion. FEMA also maintains active
    participation in the Federal Geographic Data Committee (FGDC) where
    standards, processes, products, and technology are shared and
    leveraged. One example is that we use the USGS orthophoto quadrangles
    as our base maps.
        Development of this type of topographic information and related
    engineering analyses account for approximately 60 percent of flood
    study costs. We expect these costs to decline as map modernization is
    implemented. In the map modernization cost estimate, FEMA modeled a
    declining cost base with a maximum decrease of 20 percent of the unit
    cost for these study elements beginning in 2005. Also, we reduced the
    long-term maintenance costs afforded by the remote-sensing technologies
    and by converting the maps to a digital format.
        To inventory and prioritize map update needs, we are updating the
    Mapping Needs Update Support System (MNUSS) database to include a
    ranking module. This ranking is based primarily on a benefit/cost
    analysis, with the primary benefit being reduced flood losses for new
    structures by designing and siting new buildings based on updated flood
    data.
                               COUNTER-TERRORISM
        Question. The Nunn-Lugar-Domenici program is a DOD program to train
    first responders how to address a terrorist CB attack. From its
    beginning, there was an understanding that this program would transfer
    to another agency, and it appears it will shift to the Department of
    Justice. Was there any consideration of FEMA taking over that program
    given its established expertise in working with state/local government
    to deliver training and planning on these topics? Should the program
    shift to FEMA?
        Answer. Since the inception of the NLD activity, there has been the
    suggestion that FEMA would be the best agency to coordinate the overall
    domestic preparedness program. Under its authorities, FEMA provides
    grants to the States and eligible local jurisdictions and for the
    delivery of first responder and emergency management training programs
    to support their terrorism-related planning, training, and exercise
    requirements. FEMA could assume the program under certain
    circumstances, including adequate resources for both manpower and
    funding a clearly defined leadership role.
        Question. In a May 1999 report, GAO was critical of FEMA's exercise
    program. GAO said that most of the FEMA-led exercises were tabletops
    that did not involve actual movement or employment of consequence
    management response elements. GAO also noted that interagency exercises
    generally did not simulate crisis management and consequence management
    concurrently, yet both would occur simultaneously in an incident. Have
    FEMA and the other agencies made progress in these areas?
        Answer. In responding to a terrorism event, FEMA will use the
    structures of the Federal Response Plan to implement its lead agency
    responsibilities for consequence management. The Plan is used in real-
    world situations literally dozens of times a year, and many of the same
    capabilities and resources will be used in a terrorism response. FEMA-
    led exercises up to this point have emphasized the differences from the
    typical natural disaster situation and focused on tailoring the
    response to meet those needs.
        FEMA has also participated in a number of interagency exercises
    where both crisis and consequence management issues have been
    addressed. With the upcoming TOPOFF exercise scheduled for May 2000,
    FEMA and other agencies will have another opportunity to exercise
    concurrent crisis and consequence management scenarios.
        Question. FEMA's request represents an increase of $5.9 million and
    19 new workyears, for anti-terrorism/weapons of mass destruction (WMD)
    efforts. Please provide a detailed description for the record of how
    these new resources would be used.
        Answer. With the increasing effort of the Federal government to
    help build and sustain a viable preparedness and response capability at
    the local, State and Federal levels of government, a total of (31)
    work-years are requested in fiscal year 2001 to support the Agency's
    terrorism-related programs and activities. This includes an increase in
    the level of effort of (19) work-years to fully support programs and
    activities at Headquarters and in the ten Regional Offices around the
    country. A list of the key activities to be accomplished with this
    increased level of effort includes the following:
    FEMA Headquarters
        Coordinate the overall FEMA involvement in terrorism-related
    preparedness and response activities in coordination with the
    Department of Justice, other Federal departments and agencies, the
    Congress, and the States.
        Undertake terrorism-related planning and operational response
    enhancements under the interagency Federal Response Plan framework.
        Support special events planning and preparedness, including support
    for the 2002 Winter Olympics in Salt Lake City, Utah.
        Develop and implement the time-phased force package concept to
    provide expedited logistical support for the deployment of critical
    response resources.
        Establish an initial group of six Urban Search and Rescue (US&R)
    Task Forces with the capability to operate in contaminated
    environments.
        Update and maintain the Rapid Response Information System (RRIS).
        Provide grants and guidance to the States to support terrorism-
    related planning, training and exercises.
        Deliver and revise courses in the Emergency Response to Terrorism
    curriculum, develop terrorism scenarios for the Incident Simulations
    Lab and provide instructor training to support the delivery of
    terrorism-related courses for fire and emergency services.
        Deliver and revise exercise-based courses, including the Integrated
    Emergency Management Course on the Consequences of Terrorism.
        Support terrorism-related exercises, including a major consequence
    management exercise, conduct of tabletop exercises, and support for
    other Federal terrorism exercises.
        Provide support for the development of terrorism-related materials
    to support Congressional and legislative affairs activity.
        Conduct emergency public information planning activities to keep
    the public informed during a terrorism incident.
        Develop and disseminate terrorism-related policy regarding
    terrorism-related programs and activities.
    FEMA Regional Offices
        Support terrorism-related planning, training and exercise
    activities in coordination with other regional-level offices of Federal
    departments and agencies.
        Administer and manage the terrorism consequence management grant
    assistance program to the States in support of terrorism-related
    planning, training, and exercise activities.
        Work with the States to help ensure that terrorism-related plans
    and capabilities are developed and available for response.
        Serve as the primary FEMA conduit to the States to keep them
    informed of Federal initiatives and activities.
        Support continuing implementation of the Nunn-Lugar-Domenici
    Domestic Preparedness Program activities.
        Maintain an interagency forum to support Federal coordination of
    terrorism-related preparedness activities, in conjunction with other
    departments and agencies and the States.

                           FIREFIGHTER GRANT PROGRAM
        Question. FEMA is requesting $25 million for a new grant program
    for firefighter equipment in needy communities. What is the rationale
    for this program, and how does it relate Forest Service's fire
    assistance program that provides equipment to local fire departments?
    Was this program recommended by the Blue Ribbon Panel report of October
    1998? Are there higher priority activities recommended by the Panel
    that FEMA has not implemented or requested funding for?
        Answer. The rationale for the proposed $25M Firefighter Health and
    Safety Grant Program is to enhance firefighter health and safety
    because fire fighting continues to be one of the nation's most
    dangerous professions. In 1999 alone, more than 100 firefighters lost
    their lives while on duty. In addition, approximately 90,000
    firefighters are injured on the job each year. As fire departments are
    being called on to provide an ever expanding and more complex array of
    skills such as services related to hazardous materials, search and
    rescue, emergency medical, and counter terrorism, local governments and
    fire departments are encountering severe budget challenges. A federal
    firefighter health and safety grant program will allow financially
    challenged jurisdictions and fire departments to address issues that
    could contribute to a safer and more efficient working environment for
    the firefighter and safer communities for the American people.
        We understand that the Forest Service Volunteer Fire Assistance
    (VFA) Program is available only to small rural communities, is focused
    on operational firefighting and includes a 50/50 matching fund
    requirement. The proposed FEMA program targets firefighter health and
    safety and is available to needy departments in communities of all
    sizes. In addition, the proposed program has a broad focus and is
    designed to include training, staffing, equipment and wellness
    programs. FEMA's United States Fire Administration will administer the
    program at the national level and grants will be made directly to the
    needy departments. The VFA program is managed through the State
    Foresters, and the criteria and administration may vary by State.
        Recommendation # 31 of the Blue Ribbon Panel of October 1998 report
    calls for ``. . . the creation of a federal grant/local matching
    program to enable fire/EMS departments to acquire training resources,
    new technology, specialized equipment and safety resources.'' Since the
    fire problem in the United States is multifaceted, we are unable to
    determine if there are higher priority activities that should be
    addressed first. However, three major fire service organizations that
    were represented on the Blue Ribbon Panel have consulted on the
    development of the proposed grant program for 2001. These groups are
    the International Association of Fire Chiefs, the International
    Association of Fire Fighters, and the National Volunteer Fire Council.

                         DISASTER RELIEF FUND ESTIMATES
        Question. Last year FEMA did not accurately identify existing
    funding needs for disaster relief, and it came to the Subcommittee's
    attention in May that the agency had underestimated projected spend-out
    rates resulting in a shortfall of almost $1 billion. The need for this
    supplemental funding was due in part to a problem with the budget
    methodology that FEMA was using, which did not take into account the
    fact that FEMA had been obligating disaster dollars at a much faster
    rate than it had been historically. What steps has FEMA taken to revise
    its budget methodology, and how is FEMA monitoring the needs associated
    with the Disaster Relief Fund to better ensure that it is using
    appropriate rates for estimating?
        Answer. Around the 15th of each month, FEMA submits a report to the
    appropriations subcommittees on the status of the Disaster Relief Fund
    (DRF) as of the end of the previous month. This report shows
    availability, actual obligations, unmet requirements for disasters that
    have occurred to date as well as a projection for disasters in the
    remaining months, an estimate for obligations during the remainder of
    the fiscal year, and estimates for requirements and obligations in the
    next fiscal year. Prior to last April's report (submitted on May 20),
    FEMA used one consolidated formula to predict obligations for the
    remainder of the fiscal year. This formula, based on 5-year averages
    with adjustments for Northridge, consisted of the following:
      --58 percent of total current year requirements, including the
            projection for disasters in remaining months, adjusted for
            obligations to date;
      --52 percent of total requirements as of the beginning of the fiscal
            year from all prior year disasters, adjusted for obligations to
            date and Northridge;
      --estimated Northridge obligations for the remainder of the fiscal
            year; and
      --unobligated funds budgeted for disaster support.
        Starting with the April 30 report, FEMA decided to break out
    obligation estimates for the remainder of fiscal year 1999 into the
    various components in order to better reflect the activities of the
    disaster close out teams who were concentrating on those disasters that
    occurred prior to 1998. When this was done, it became very obvious that
    the amount forecast for 1999 obligations from all prior year disasters,
    particularly 1998 declarations, was inadequate and that the shortfall
    in projected obligations had been masked by using a single formula.
    FEMA then refined the methodology used for estimating obligations. In
    this April 30 report, the amount of obligations forecast for the
    remainder of the year for prior year disaster declarations was changed
    as follows:
      --for 1989-1997, 95 percent of total requirements as of the beginning
            of the fiscal year, adjusted for obligations to date and
            Northridge; and
      --for 1998, 65 percent of the total requirements as of the beginning
            of the fiscal year, adjusted for obligations to date. During
            the remainder of fiscal year 1999, obligations from the 1998
            disaster declarations continued to increase at an unprecedented
            rate. Each month FEMA continued to increase the percentage for
            obligations from 1998 declarations until the percentage used in
            the August 31 report reached 86 percent.
        For current year disasters, FEMA developed separate percentages for
    disasters that had occurred and estimates for disasters during the
    remainder of the year. These percentages were based on 1997 and 1998
    actual obligations for declarations in each month versus total
    projected costs for those disasters. As each month of the fiscal year
    goes by, these percentages either remain the same or decrease. For the
    April 30 report, these percentages were as follows:
      --70 percent for disasters that had occurred to date; and
      --40 percent for estimated requirements for the remainder of the
            fiscal year.
        For the fiscal year 2000 reports, FEMA added 1999 actual data into
    percentages used to project obligations from current year disasters on
    a monthly basis. In addition, FEMA revised percentages used for prior
    year data in the fiscal year 2001 section of the monthly report. The
    percentage used for obligations forecast from 2001 declarations
    remained at 58 percent of requirements in the first year of a disaster.
        FEMA continues to monitor its estimates for obligations for
    reasonableness. However, forecasting disasters and projecting when
    obligations from these disasters will occur remain inexact sciences, at
    best. One very real variable in the estimates continues to be the lack
    of a discernible pattern when disasters occur. FEMA projects remaining
    requirements for disasters based on the remaining weeks in the fiscal
    year pro rated against the five year average obligations for disasters.
    For both fiscal year 1998 and 1999, the bulk of requirements from
    disaster declarations did not occur until September. In other years,
    the big disaster or disasters have occurred earlier in the year (most
    notably the Northridge earthquake in January or even the Loma Prieta
    earthquake in October). Also, projections in the early stages of large
    disasters tend to vary, making it more difficult to forecast
    obligations. Nevertheless, FEMA continues to explore ways to improve
    its ability to forecast requirements and obligations from disasters.

                         ACCURACY OF DISASTER COST DATA
        Question. GAO has found potential problems in the obligation data
    provided to FEMA's Regional Offices for use in preparing the Quarterly
    Disaster Financial Status Report. This report represents the ongoing
    record of the financial status of each major disaster by program. The
    quarterly reports get compiled into a national database which forms the
    basis for FEMA's estimate of total federal remaining costs for each
    open disaster, as well as FEMA's budget submissions and other
    congressional reports. Obligation data errors cause inaccurate
    calculations in a disaster's total estimated federal costs and the
    remaining costs. What steps has FEMA taken to identify the source(s) of
    data errors, and why did FEMA fail to correct these data errors when it
    first became aware of them? What actions has FEMA taken to ensure that
    future Disaster Financial Status Reports are correct? To what extent
    have errors in the Disaster Financial Status Reports impacted FEMA's
    budget submissions?
        Answer. FEMA is taking a number of actions to ensure that
    obligation data, and the resulting projected and remaining cost data,
    are accurate. One of the first steps was to identify exactly why the
    obligations data used for the Disaster Financial Status Report (DFSR)
    did not always agree with data from other automated and manual systems.
    The cause of some of the reported differences was due to comparing data
    generated at different times (timing differences). The cause of the
    other discrepancies, however, was much more difficult to determine.
    Identifying which data was inaccurate (i.e., the data extracted from
    the Integrated Financial Management System (IFMIS) for the DFSR, or the
    data the regions use from various systems) was a time consuming and
    labor intensive task that required looking at transactions and records
    for over 500 major disaster declarations, 280 fire suppression
    agreements, and 60 emergencies totaling almost $28 billion over 11
    years and spread across nearly 200 object codes and 350 organization
    codes. We recently isolated the problem and began an extensive review
    of the methodology used to extract the obligation data from IFMIS. A
    new method was developed and is being rigorously tested. So far, it
    appears the new methodology is generating accurate obligation data.
        Last summer FEMA began intensive work on a new system to collect
    projected costs. Recognizing the limitations of the electronic
    spreadsheets used for the current DFSR, FEMA began developing a new
    system using the Agency's standard Microsoft Access Database software.
    The new system will give regional personnel more time to review and
    analyze the validity of the data by freeing them from much of the data
    entry work, implement certain business rules to ensure the validity of
    data when it is entered rather than relying on subsequent reviewers to
    identify problems, and improve the timeliness of the data so that
    errors are more apparent.
        As the new system is introduced to the regional offices, Office of
    Financial Management personnel from the Disaster Closeout Teams and the
    Disaster Finance Center will work side-by-side with regional personnel
    to reconcile any differences in the obligation data extracted from
    IFMIS with the various records maintained in the region. Any needed
    changes will be made to IFMIS or the regional systems. This process
    started in mid-March at FEMA's Philadelphia Regional Office. The
    differences that were identified were researched and, for the most
    part, will require making ``adjusting'' entries into the regional
    records. One discrepancy, appeared to be the result of a transaction
    being entered into the regional records, but not into IFMIS--a problem
    associated with managing the paper flow rather than the new methodology
    used to extract the data from IFMIS.
        The introduction of the new DFSR will continue region by region and
    include centralized training at workshops or conferences to familiarize
    the largest possible number of personnel and further reinforce the
    importance of accurate data. We plan to visit FEMA's New York and
    Denton Regional Offices starting in April. After the new DFSR is
    fielded to all regions, the Disaster Closeout Teams will continue to
    work closely with the regions and the Disaster Finance Center to
    identify and resolve any subsequent discrepancies in obligations.
        The extract report of obligations, provided to the regions on a
    quarterly basis, is just one of the tools that the regions use to
    develop the DFSR. Even though FEMA is still in the process of
    quantifying the effect of any identified problems in the extract
    report, the magnitude of errors found to date indicates that any effect
    on projections of remaining costs and the budget submission is about
    one percent.

    PROBLEMS WITH FEMA'S INTEGRATED FINANCIAL MANAGEMENT INFORMATION SYSTEM
        Question. FEMA's Office of Inspector General and the GAO reported
    on several occasions that FEMA's Integrated Financial Management
    Information System (IFMIS) lacks the ability to generate the reports
    necessary to properly manage the Disaster Relief Fund. The preliminary
    results of an ongoing GAO audit indicate that this shortcoming has
    contributed to the erroneous obligation data previously mentioned.
    Specifically, the auditors noted that because of this shortcoming, FEMA
    must extract and manually manipulate the IFMIS obligation data that the
    regional offices ultimately use to develop total estimated federal
    costs for individual disasters. What is FEMA doing to correct this
    shortcoming in the system's reporting capabilities?
        Answer. FEMA acquired the Integrated Financial Management
    Information System (IFMIS) from the Digital Systems Group in fiscal
    year 1994, and began implementation in fiscal year 1995. It was
    selected from the mandated group of commercially available core
    financial management systems that had been approved by Treasury and the
    GSA for acquisition by Federal agencies. This approval was granted on
    the basis of demonstrated satisfaction of government requirements,
    including reporting requirements. IFMIS has been on the approved list
    every year since then, and has been approved by the JFMIP under its new
    process.
        For the last six years, FEMA has received unqualified audit
    opinions on its annual financial statements of which the last two were
    consolidated Agency-wide statements, which include the Disaster Relief
    Fund. For the last four years, those statements have been produced
    based on reports from IFMIS. This suggests, at least, that the data in
    the system is reliable, even if the ``canned'' reports do not readily
    support different management approaches. While the statements on
    internal control do cite problems with the lack of reconciliations and
    oversight, the basic reports are not questioned.
        IFMIS is a classical funds control and accounts payable system.
    This is largely acceptable because FEMA manages each appropriation that
    it controls as if it were a single fiscal year appropriation. That
    means that we issue new allocations covering only the current budget
    fiscal year, regardless of whether it is a single or multi-year
    appropriation. Therefore, the management of all funds is restricted to
    the current year, not a multi-year effort based on some other element
    of an accounting coding structure. This is fine for funds control
    purposes, but it does complicate our ability to report on a
    consolidated basis over a period of years.
        When IFMIS was implemented for the Disaster Relief Fund (DRF), in
    April of 1996, data was converted from the predecessor systems at
    current unliquidated obligation balances. This is what was required to
    be able to assess available allocations, obligated balances and
    evaluate the propriety of additional payments, which was adequate for
    most of FEMA's appropriations. Even at that, several million
    transactions had to be converted to IFMIS. However, even this level of
    detail was insufficient to provide historical information required for
    reporting purposes from the DRF.
        Over the years, we have refined our approach to capturing data to
    support the necessary Disaster Relief Fund reporting requirements. We
    have built history records in IFMIS to support the balances that were
    converted from the predecessor systems. We have had several task forces
    that attempted to reconcile all the varying sources of data used by
    Headquarters, the Regions, and others. However, we have not always
    modified our approaches to capturing data and reporting it for the
    DFSR. We feel that the ``new'' method for extraction of data mentioned
    above for the DFSR will satisfy the current requirements.
        Data will continue to be extracted from the production IFMIS
    database in order to put it into an environment that allows for ``what-
    if analysis'' and projections for events that do not yet constitute
    accounting transactions. These activities are not appropriate for an
    official accounting environment. However, it is expected that the
    manual manipulation previously required to move obligations from one
    column to another for the DFSR will no longer be required. It occurred
    previously due to shifting definitions of object classes or the
    addition of new object classes that did not fit the previous columnar
    structure of the DFSR.

                      PROBLEMS WITH DATA TIMELINESS IN DRF
        Question. Because FEMA information systems cannot provide data on
    the total estimated federal costs of each disaster, the agency must
    rely on its Regional Offices to update the Quarterly Disaster Financial
    Status Report with those estimates. Also, because FEMA information
    systems cannot provide data on obligations to date by program for each
    disaster, the data must be extracted and manipulated before it is
    forwarded to the Regional Offices. We understand that, as a result of
    the time needed to extract, manipulate, and ship that data to and from
    the Regions, the Disaster Financial Status Reports may contain
    obligation data that can be, at times, three months out of date. What
    actions can FEMA take to reduce this delay in order to obtain and
    report real time data?
        Answer. The FEMA Chief Financial Officer (CFO) established the
    current Disaster Financial Status Report (DFSR) reporting process in
    December 1995. The quarterly submission dates were timed to provide a
    ``snapshot'' of the status of disaster funding estimates (projections)
    and remaining costs (projections less obligations ``as of'' the report
    period) at critical points in FEMA's budget development (e.g.,
    submissions to OMB and Congress and for appropriations hearings). In
    order to reduce a reporting burden on the regions, and to allow for
    more in-depth analysis, the CFO determined that quarterly reports were
    sufficient for budget forecasting. However, the projections are updated
    with estimates for new declarations that occur between the quarterly
    reporting periods.
        The regional disaster program officials, Federal Coordinating
    Officers, and Regional Directors are ultimately responsible for
    estimating what a given disaster will cost over the life of that
    disaster. No agency information system could automatically calculate
    those costs without field office input, and the input must come from
    the officials who manage the disaster. The regions maintain an ongoing
    record of their projection data using an Excel Spreadsheet, which they
    forward to Headquarters for compilation into a national database (i.e.,
    DFSR) for reporting purposes. The obligations data sent from
    Headquarters is but one tool that the regions use to calculate their
    projections and remaining costs. The regions primarily use program data
    available to them to develop their cost estimates for the major
    disaster program activities, i.e., Public Assistance, Individual
    Assistance, Individual and Family Grant, and Hazard Mitigation
    programs. The CFO relies on the regional program expertise to develop
    the cost estimates, and the DFSR process provides the reporting
    mechanism for the regions to compile disaster estimates for all program
    and administrative costs.
        Last summer, the CFO's office began an intensive effort to correct
    identified shortcomings in the current DFSR reporting process. The
    process is time-consuming and susceptible to human error. The agency
    has developed a user-friendly version of the DFSR using Microsoft
    Access. This new system will rely on a shared database extracted from
    IFMIS and maintained in a central location. The regions will be given
    password-protected access, based on need, to make modifications to the
    central database. The new system will allow the regions to utilize the
    tool at any given time, and will facilitate the reconciliation of any
    data discrepancies between the regions and headquarters. With the
    simplicity of the new system and improved analytical tools, the Agency
    plans to maintain the DFSR on a monthly basis, which will lead to a
    more frequent updating and analysis of disaster cost estimates. The
    Agency plans to field the new system, in a pilot status, with selected
    regions beginning in May 2000.

                            DRF SET-ASIDES PROPOSED
        Question. FEMA proposes two new set-asides within the disaster
    relief fund: $30 million for flood map modernization and $50 million
    for repetitive loss property buyouts following disasters. Please
    describe the rationale and the authorization for these set-asides. Will
    the repetitive loss buyouts be limited to flood-insured properties?
        Answer. Under FEMA's current Stafford Act authority, DRF money may
    be used only to generate flood recovery maps to support hazard
    mitigation activities following a flood. This includes collecting field
    data, conducting engineering analyses, and preparing flood maps for
    community use; it does not include updating the Flood Insurance Rate
    Maps (FIRMs).
        We have asked that our authority under the Stafford Act be
    broadened to allow DRF monies to be used to develop up-to-date,
    modernized FIRMs, fully compliant with National Flood Insurance Program
    requirements, for areas affected by Presidentially declared disasters.
    Developing flood recovery data to support hazard mitigation activities
    within the present authority has a supplementary benefit in that these
    flood recovery data comprise a significant portion of the effort
    necessary to update and modernize the FIRMs. The requested authority
    would allow the remainder of the work also to be completed under the
    DRF.
        In the immediate aftermath of a flood, field data (e.g., high water
    marks, physical conditions) would be collected and engineering analyses
    prepared. These would be provided to the community so that rebuilding
    activities, and also future new development, could be based on the most
    accurate, up-to-date data. Further, it is imperative that higher flood
    elevations than those adopted by the community be formally acknowledged
    so that they can be incorporated into existing floodplain regulations.
    The information is also used to identify potential hazard mitigation
    projects and to conduct benefit/cost analyses for mitigation projects.
        DRF funding, in addition to other funding sources, is appropriate
    because:
        1. The flood recovery scenario provides a unique opportunity,
    outside the normal flood map update and prioritization process, to
    gather data that exist for only a short time after the floodwaters
    subside.
        2. In the immediate recovery environment, those that have suffered
    property losses are anxious to rebuild their homes as quickly as
    possible. Thus, there is a limited window of opportunity to gather the
    data, provide these property owners with updated flood data and
    positively guide their rebuilding design decisions.
        3. Existing funds cannot be reprogrammed quickly enough to respond
    to post-disaster needs. Planned contracts have already been funded, and
    the DRF will provide needed flexibility to develop data for disaster-
    affected areas.
        Using DRF funding also makes funding of flood hazard data
    collection and analysis more equitable. Through DRF funding, all
    taxpayers will participate in the costs, which is appropriate because
    all taxpayers will benefit through the long-term reduction of disaster
    costs.
        The $50 million authorization to mitigate repetitive losses would
    be directed at National Flood Insurance Program (NFIP) insured
    properties following disaster declarations. FEMA has identified 10,000
    repetitive loss buildings that have the greatest risk of flooding and
    which account for about $65 million in NFIP claims annually. These
    properties have either four or more losses or have two to three losses
    that when added together exceed the building's value.
        The $50 million will fund the acquisition, relocation, elevation,
    of approximately 1,160 of the 10,000 repetitive loss buildings that
    FEMA has identified as having the greatest risk.

                               MITIGATION ISSUES
        Question. Last August, GAO issued a report on opportunities for
    FEMA to improve cost-effectiveness determinations under the Hazard
    Mitigation Grant program. FEMA agreed with the report's recommendations
    and noted that they complement activities already under way at the
    agency. What specific actions have been taken to implement each of the
    recommendations in the GAO report? What is the status of the
    independent study the Subcommittee called for to assess the future
    savings resulting from the various types of mitigation activities?
        Answer. The GAO report made three recommendations.
        First, that ``the Director of FEMA should establish an analytical
    basis supporting the cost-effectiveness of acquiring substantially
    damaged properties in the floodplain''. This is related to the Agency's
    policy of exempting from benefit-cost analysis structures that meet
    certain criteria. In September 1999, FEMA completed a study of
    approximately 2,000 such structures nationwide, about ten percent of
    the total number of acquisitions the Agency has funded. Analysis of
    structures included in the study produced a benefit-cost ratio of 2.21.
    This means that, for the sample, an expenditure of one dollar is
    expected to produce $2.21 in savings. The study found that some
    individual properties were not cost beneficial, but the projects in the
    aggregate were. Since the study was completed, FEMA has also issued a
    memorandum asking regional offices to provide data for all projects of
    50 or more structures that meet the exemption criteria so that more
    studies can be done.
        Second, the GAO recommended that FEMA conduct periodic reviews of
    projects after they have been implemented to determine if they are
    cost-effective. In response to this recommendation, FEMA has begun
    studies of projects funded in three categories of projects that are now
    exempt from benefit-cost analysis: those funded through the ``5 percent
    Initiative'' and the ``Tornado'' and ``Planning'' exemptions. One study
    includes the first two categories. It will be completed by the end of
    August 2000. The results will be provided to the GAO, Congressional
    oversight committees and the FEMA Inspector General.
        For the ``Planning'' projects exemption, the FEMA Office of the
    Inspector General and the Mitigation Directorate are engaged in a joint
    study that will evaluate the overall effectiveness of local mitigation
    planning initiatives funded by the Hazard Mitigation Grant Program
    (HMGP) and Flood Mitigation Assistance (FMA) program. This study will
    assess the quality of mitigation projects completed in the context of
    comprehensive mitigation plans, and determine how planning can
    contribute to the efficiency of disaster recovery operations. We expect
    this study to be completed by December, 2000.
        Third, the GAO recommended that FEMA should ``provide the best
    available data for analyzing the cost-effectiveness of proposed flood
    hazard mitigation projects'' by conducting post-disaster hazard
    identification and by making the Agency's data on past insurance claims
    more readily available to analysts. As noted in FEMA's initial response
    to the recommendations (in the ``60-day Letter''), the Agency has two
    initiatives underway in the area of hazard identification, the Map
    Modernization Program and the Cooperating Technical Communities (CTC).
    Both of these are ongoing, long-term projects. In the area of claims
    data, the Agency made the Federal Insurance Administration's claims
    data available to FEMA employees on a web site in summer, 1999. The
    Headquarters Mitigation Directorate issued a memorandum to all its
    regional offices informing them about the web site. This was done in
    February, 2000.

                            SUBSTANTIAL DAMAGE RULE
        Question. The IG reported in a September 1999 report that NFIP
    communities were not effectively identifying potentially substantially
    damaged structures. Only 106 structures were declared in a sample of
    603 structures identified as substantially damaged using insurance
    claims data. As a result, mitigation efforts (e.g., the requirement to
    meet codes and standards) were not taking place. What is FEMA doing to
    help NFIP communities do a better job identifying substantially damaged
    properties and enforce the substantial damage requirement?
        Answer. Along with providing ongoing technical assistance and
    monitoring NFIP community compliance both in the pre- and post-flood
    disaster environment, we have a variety of tools to improve enforcement
    of the 50 percent rule. The role of the community is critical to the
    enforcement of the 50 percent rule because the authority to regulate
    floodplain development rests with the local government. Claims data is
    just one tool that we offer communities to assist them in identifying
    possible substantially damaged buildings. There may be legitimate
    differences between what the communities determines as the cost of
    repairs and market value compared to claims data values.
    Post-Disaster Guidance
        FEMA's regional staff undertake a multi-faceted, multi-phased
    response to provide technical assistance to NFIP communities to ensure
    they have the necessary tools and guidance to administer their
    floodplain management ordinance and to ensure that citizens with flood-
    damaged buildings are protected in the future. This assistance
    includes:
      --Initial telephone contacts with local officials in the immediate
            disaster response period.
      --One-on-one meetings and/or workshops with local officials and
            workshops to provide detailed guidance and training on the
            substantial damage requirement.
      --Opening Disaster Recovery Centers to provide assistance to the
            general public on retrofitting techniques and on the available
            mitigation programs.
      --Locating Mitigation staff in the Disaster Field Office to provide
            ongoing technical assistance throughout much of the recovery
            period.
      --Extensive public outreach on our mitigation programs and on
            mitigation success stories to the general public through press
            releases, FEMA's web site, and through special events including
            those sponsored by the State or communities.
        We have specialized tools that we provide to local officials and
    assist them in their use during the recovery period to help them
    identify substantially damaged buildings:
      --Training on the use of the Residential Substantial Damage
            Estimator, a computerized program to help communities estimate
            building value and damages.
      --Preliminary Damage Assessment forms, completed by insurance
            adjusters during the initial adjustment process provide an
            estimate of building value and damages on individual buildings.
            We will be implementing procedures this spring to provide this
            information more efficiently to local officials.
      --Implementing this spring a ``Quick Claims'' process that will
            capture initial contacts from the insured about damages. While
            the information will not be as detailed as the Preliminary
            Damage Assessment form, it will provide preliminary information
            on damages earlier. This information will help communities
            identify areas that have been damaged.
        Financial resources provide opportunities to communities to break
    the cycle of damage and repair:
      --The Hazard Mitigation Grant Program (HMGP) available following a
            Presidentially declared disaster.
      --The Flood Mitigation Assistance program which provides pre-disaster
            mitigation assistance.
      --Since June 1997, the $15,000 Increased Cost of Compliance (ICC)
            coverage for insured buildings that have been determined by the
            community to be substantially damaged. This past year we have
            been assessing this coverage and making appropriate
            adjustments, including increasing the amount of the coverage to
            $20,000 effective May 1, 2000. We will be implementing several
            activities to improve training and education on ICC, outreach
            and marketing of ICC, especially to the policyholder, local
            officials, and the adjuster, and operational processes to
            ensure ICC is integrated into the disaster operation and used
            effectively to complement the HMGP.
    Pre-Disaster Guidance
        FEMA conducts extensive training on the NFIP floodplain management
    requirements, including the substantial damage requirement.
      --NFIP week long course where over 150 local officials are trained
            each year.
      --Numerous workshops for hundreds of local officials throughout the
            country.
      --Recently deployed Independent Study course, which includes detailed
            guidance on making substantial damage determinations.
        FEMA has published extensive guidance on the substantial damage
    requirement and on retrofitting flood damaged property including:
    ``Answers to Questions about Substantially Damaged Buildings'' and a
    new ``Homeowners Guide to Retrofitting''.
        FEMA and State Floodplain Management Coordinators also conduct
    hundreds of Community Assistance Visits (CAV) each year, which is a
    scheduled visit with individual communities to assess their floodplain
    management program and to provide guidance and assistance in
    implementing effective mitigation measures. A CAV is generally
    conducted in communities that experienced a flood disaster several
    months after the event to assess the community's effectiveness in
    implementing its floodplain management program in response to the
    disaster and provide technical assistance if appropriate.

                         RULEMAKING IMPROVEMENTS NEEDED
        Question. In reviewing the public buildings insurance rule, GAO
    found some significant shortcomings in FEMA's internal rulemaking
    processes. For example, FEMA hadn't designated a regulatory policy
    officer and its procedures governing the formulation of proposed
    rulemaking hadn't been updated in a decade. What is FEMA doing to
    address these internal problems? Please describe for the record how
    FEMA will respond to each of GAO's recommendations in the report
    ``Issues Related to the Development of FEMA's Insurance Requirements.''
        Answer. The following are GAO's recommendations and FEMA's
    responses:
        GAO Recommendation: The Director should designate a Regulatory
    Policy Officer as required under Executive Order 12866 and charge that
    individual with responsibility for being involved at each stage of the
    rulemaking process
        Response: Director Witt appointed the General Counsel as the
    Regulatory Policy Officer for the Agency on February 29, 2000.
        GAO Recommendation: FEMA should update its external regulations and
    internal written guidance and manuals governing the rulemaking process
    to reflect the current requirements contained in federal laws,
    executive orders and OMB guidance.
        Response: FEMA's Office of General Counsel has developed updated
    regulatory guidance. This guidance is in draft form and is being
    circulated within FEMA for comment.
        GAO Recommendation: The Director should monitor FEMA's compliance
    with relevant federal laws, executive orders and OMB guidance governing
    the rulemaking process.
        Response: As a result of constructive dialogue with GAO and OMB,
    our Regulatory Policy Officer is working to ensure compliance with the
    relevant federal laws, executive orders and OMB guidance governing the
    rulemaking process.

                           NEW HEADQUARTERS LOCATION
        Question. FEMA's budget includes almost $24 million to begin the
    process of relocating. Please provide a complete break-out of the
    budget request, as well as the fiscal year 2002 costs we may
    anticipate.
        Answer. The following shows the breakdown of all the relocation
    costs (in thousands of dollars). All estimated costs are based upon the
    top range of square footage allowed, i.e., 339,247 rentable square
    feet. FEMA has worked closely with the General Services Administration
    (GSA) in developing these estimates:

    Move costs....................................................    $1,414
    Office space (telecom) @ 6.94 per square foot (sq.ft.)........     1,963
    Customization allowance above Tier 3 (build out)..............     1,130
    ADP/Special @ $17.45 per sq. ft. for 55,150 sq. ft............       962
    National Interagency Emergency Operations Center (NIEOC)......    15,048
    Sensitive Compartmented Information Facility (SCIF) area @
        $120 per sq. ft. for 15,000 sq. ft........................     1,800
    Level IV Security Requirements................................     1,500
    Systems furniture (including installation)....................     5,566
    GSA Administrative Fees (fiscal year 2002)....................     3,077
                        --------------------------------------------------------------
                        ____________________________________________________

          Total Relocation Project Costs..........................    32,460
                        ==============================================================
                        ____________________________________________________
    Basic security increase (Federal Protective Service) @ .16 per
        sq. ft. ($54,280 for new space less $40,367 for current
        space)....................................................         4
    Projected rent increase (projected new rent costs, $14,587,621
        less fiscal year 2000 estimate of $8,290,000 = $6,298,000)     6,298
                        --------------------------------------------------------------
                        ____________________________________________________

          Net Cost of Move........................................    38,772

        Of the total costs listed above, the 2001 budget submission
    includes the following:

                            [In thousands of dollars]

    Office Space (Telecom)........................................     1,963
    Systems Furniture/Installation................................     5,566
    Customization Allowance.......................................     1,130
    ADP/Special Space.............................................       962
    NIEOC.........................................................    10,000
    NIEOC Furniture...............................................       707
    SCIF Area.....................................................     1,800
    Level IV Security Requirements (initial)......................     1,500
                        --------------------------------------------------------------
                        ____________________________________________________

          Total...................................................    23,628

        Estimated costs for fiscal year 2002 include the following:

                            [In thousands of dollars]

    Move Costs........................................................ 1,414
    NIEOC Equipment................................................... 4,341
    GSA Administrative Fee for Project................................ 3,077
                                                                      ______
          Total cost increases other than rent and security \1\....... 8,832

    \1\ Projected rent and security cost increases for the new facility
    total $6,312,000. If FEMA remains at its current location, lease
    extension will undoubtedly be at a much higher rate than the current
    lease (GSA reports that sometimes the rent doubles). GSA suggested that
    FEMA estimate the lease extension at $43.00 per sq. ft. for fiscal year
    2002. Full year lease extension estimated costs could be as high as
    $2,622,308 over current budget. All estimated costs are subject to the
    GSA procurement process, which could range from best case to worse case
    depending upon building procured and when the build out is completed.

        Please note that the fiscal year 2002 costs are preliminary and may
    change prior to submission of the fiscal year 2002 budget.

                              SUBCOMMITTEE RECESS

        Senator Bond. I will now recess the subcommittee meeting.
    Thank you.
        [Whereupon, at 10:53 a.m., Wednesday, March 1, the
    subcommittee was recessed, to reconvene subject to the call of
    the Chair.]

     DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT AND
            INDEPENDENT AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2001

                                  ----------

                            THURSDAY, MARCH 23, 2000

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 9:39 a.m., in room SD-138, Dirksen
    Senate Office Building, Hon. Christopher S. Bond (chairman)
    presiding.
        Present: Senators Bond, Stevens, Mikulski, Leahy, and
    Lautenberg.

                        ENVIRONMENTAL PROTECTION AGENCY

    STATEMENT OF HON. CAROL BROWNER, ADMINISTRATOR
    ACCOMPANIED BY:
            W. MICHAEL McCABE, ACTING DEPUTY ADMINISTRATOR
            MICHAEL W.S. RYAN, ACTING CHIEF FINANCIAL OFFICER

                OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

        Senator Bond. Good morning. The Subcommittee on VA-HUD and
    Independent Agencies will come to order.
        This morning we take testimony from the Environmental
    Protection Agency on the administration's fiscal year 2001
    budget request, and it is a pleasure to welcome EPA
    Administrator Carol Browner, Acting Deputy Administrator
    Michael McCabe, Acting Chief Financial Officer Mike Ryan, and
    the rest of the EPA team.
        We have a great number of issues to discuss this morning,
    many of which focus on our concern that the EPA is not
    attending to core management responsibilities.
        There are votes at 11 o'clock. I have a feeling that we may
    not finish up by then, so be prepared to stay with us and we
    will try to get through as many of them as we can.
        Early this month the Inspector General was unable to give
    EPA a clean opinion of its fiscal 1999 financial statements.
    According to the Inspector General, EPA failed to provide
    complete, accurate and reliable information by the agreed upon
    dates. Moreover, none of the recommendations made by the IG 1
    year ago to improve financial management at EPA have been fully
    addressed.
        What does that actually mean? It means the government
    auditors could not even issue a judgment on the condition of
    EPA's books, as in how much money was spent, for what purpose,
    who spent it, what did it do.
        I am very much concerned about the Agency's sloppy
    financial management practices and whether they exemplify a
    systemic problem where Agency leadership does not seem to rank
    sound management procedures very high. EPA's unwillingness to
    make a priority of critical management challenges, many of
    which have been cited by the Inspector General and GAO for
    years, such as protecting EPA's computer system from hackers,
    effective oversight of billions of dollars in grant funds, and
    improving the reliability of data information systems, raise
    significant questions about the Agency's accountability to the
    taxpayer and its stewardship of resources.
        But equally disturbing is the finding of GAO that, contrary
    to the well-publicized statements by this administration, that
    reinvention has not cut the paperwork burden by more than 26
    million hours per year, that in fact not only have the public
    claims been vastly overstated, but even using EPA's own flawed
    data and overstated savings that the actual burden imposed on
    the public has risen at least 10 million hours, from 109
    million hours of paperwork burden in fiscal year 1995 to a
    total of 119 million hours in fiscal year 1998.
        The true increase we now know must be even larger. One
    example tells the tale. The goal of the Office of Water
    regarding pollution discharge monitoring, the goal of reducing
    4.7 million hours of paperwork burden, has over time
    transformed itself into an accomplishment, even though GAO now
    tells us that EPA officials admit the actual results were
    significantly less reduction, that in fact they could not even
    say how much, if at all, the burden was reduced.
        Only in Washington could we have an agency confuse a goal
    with an accomplishment. It is like saying that the goal of my
    basketball team was to win the Final Four. Unfortunately, they
    got knocked out in the first round, but under this kind of
    accounting we would come back and say that next year, that they
    achieved their goal of winning the Final Four because that was
    the goal. It does not make sense to me or people in the real
    world.
        Frankly, Madam Administrator, when just this one example is
    25 percent of the claimed savings, the whole reinvention effort
    is beginning to look like an effort to reinvent the facts. We
    cannot accept that.
        We cannot accept the fact that the EPA has been laggard in
    addressing computer security concerns raised by the IG and the
    GAO several years ago, leaving vulnerable to hackers
    confidential business information and putting at risk EPA's
    core financial systems. GAO in a recent review found EPA's
    information security program completely ineffective, with
    mission-related and financial programs riddled with security
    weaknesses. The GAO found many instances of hackers penetrating
    EPA's computer files without EPA even knowing about it.
        Correcting this problem should not be rocket science. It
    takes some high level attention, a long-term commitment, and
    the use of resources now available. I understand that steps are
    being taken to implement proper firewalls and I congratulate
    you for that.
        Ms. Browner. They are installed. They are in.
        Senator Bond. That is good to know. It seems to have come
    about, however, only after the media attention initiated
    recently.
        In addition, while EPA seems to be responding to the
    immediate crisis, there does not appear yet to be any plan for
    addressing and making a priority of long-term computer security
    challenges, such as putting in place an effective testing and
    monitoring program.
        With respect to the issue of environmental data information
    systems generally, for the third year the Inspector General has
    listed this issue as a key management challenge. EPA's data
    systems have been criticized as providing data that is often
    inaccurate, inconsistent, and unreliable. While EPA did
    establish an Office of Environmental Information, EPA still
    does not have an action plan that would address specifically
    how they will deal with the myriad of information management
    issues that need attention. We were promised that plan 2 years
    ago.
        An overarching vision of how we address the myriad of
    information management issues is critical. It seems very little
    has been accomplished in the last year other than reacting to
    the crises, as we saw when EPA shut down its web site a few
    weeks ago owing to the computer security fiasco.
        Moving on to the issue of EPA staffing, as you know, the
    fact that EPA's staff has been growing while States have been
    picking up more and more of the responsibility for direct
    implementation of environmental requirements and while the rest
    of the Federal Government is downsizing led us last year to
    include in the appropriations bill a limitation on total EPA
    staffing and to request a GAO review.
        GAO's preliminary findings, which will be included in
    testimony for the record today, are troubling. GAO found that
    EPA has no work force plan strategy to determine the number and
    types of people needed to carry out strategic goals and
    objectives. GAO says that EPA has not assessed changes in its
    work load resulting from factors such as productivity
    improvements and delegation of responsibility to States, and
    GAO further says that EPA has not made progress toward its
    stated goal of developing a process for continually monitoring
    and assessing its work force in light of changes in its
    internal and external environment.
        GAO also tells us that we do not have reliable information
    as to what EPA's 18,000 employees are doing, raising the
    accountability question once again.
        Now, EPA has toyed with this issue with attempts to gain a
    better understanding of the work force requirements, but,
    according to GAO, ``They have not received the resources and
    senior management commitment needed to bring them to fruition
    and they have fallen short of their objectives.''
        One final example of continuing management problems. The
    Inspector General continues to raise serious concerns about
    EPA's oversight of grants, which amount to more than half of
    EPA's total budget. Back in 1996 the IG testified that EPA
    grantees too often did not provide the products and services
    specified in the grant agreements, meet the performance goals,
    or comply with procurement requirements. Today the problem has
    not gotten much better.
        The IG has noted concerns about inadequate monitoring of
    grantees to ensure proper performance, noncompetitive grant
    awards, and grants being issued when contracts were more
    appropriate. A recent audit found that an EPA headquarters
    office and EPA regional office awarded grants with identical
    work plans to the same recipients. The offices expected
    different work products, but the grantee thought one grant
    supplemented the other and EPA offices did not respond to the
    grantee's requests for clarification. This means that the
    recipient received money twice for the same work and EPA did
    not receive the product expected.
        The IG also found examples of grantees who did not complete
    the work promised, but still received all the funds. Now, that
    is a problem and that is not acceptable.
        The IG's testimony before a House committee last fall sums
    up this situation: ``Without determinations of cost
    reasonableness, the Agency cannot demonstrate that the level of
    funding provided to the grantee is appropriate for the work to
    be performed. Without monitoring performance, the Agency cannot
    determine whether grantees are successfully carrying out the
    purposes of the grants. By diverting grant funds to Agency
    responsibilities, fewer dollars are available to obtain the
    benefits of grantee performance. Without adequate justification
    for noncompetitive awards, the Agency appears to
    inappropriately favor a single recipient.''
        It should not be too much to ask that we know where the
    dollars are going, what the staff is doing, and whether we are
    accomplishing the goals which have been set forth.
        Now, moving on to the budget request before us today, a
    $7.3 billion request for fiscal year 2001, that represents a
    decrease below the current level, but I note with grave concern
    that the decrease is largely attributable to the
    administration's decision once again to slash the Clean Water
    State Revolving Fund. While cutting this critical program by 40
    percent, EPA again proposes several new unauthorized boutique
    programs. I feel like I am experiencing deja vu.
        This budget proposal does not seem to be a carefully
    crafted budget based on an analytical assessment of EPA
    programs yielding the most environmental and human health
    protections. Rather than initiating new unauthorized programs,
    I would hope EPA would be getting its house in order, focusing
    on key management challenges.
        It is puzzling to me that EPA would propose new programs
    when it has not resolved longstanding material weaknesses, such
    as the backlog in the NPDES program. As I understand it, there
    has been virtually no progress in reducing the backlog in the
    last year and apparently it has grown. Rather than fixing the
    problem, EPA proposes tens of millions of dollars in new
    programs.
        New programs include a proposed $85 million Clean Air
    Partnership Fund, resurrected from last year's budget proposal,
    with no specific authorization, no specific criteria, no
    specific goals. EPA also proposes a $50 million Great Lakes
    Grant Program without specific authorization or criteria. What
    precipitated the need at this time for a $50 million program is
    unclear. If we are going to have a new Great Lakes Grant
    Program, why not a Chesapeake Bay, Lake Champlain, or Lake of
    the Ozarks Grant Program?
        While EPA proposes to start these new activities, as I
    said, the Clean Water State Revolving Fund is slated to be cut
    by $550 million or 40 percent. As we discussed last year, EPA
    itself has found at least a $200 billion nationwide need for
    wastewater infrastructure financing, including replacement
    costs, and those replacement costs could be over $100 billion.
        In addition, EPA's proposed new rules for TMDL's would make
    further clean water infrastructure financing even more critical
    if States were forced to comply with the new standards. While I
    was unable to be at the EPW hearing in the Senate last month, I
    understand you cited clean water as one of the top three
    environmental programs, so I am very distressed that this
    authorized program with a proven track record and a
    demonstrated need would be slated for a cut. I think one of our
    highest priorities to the extent our allocation will allow
    should be restoring the cut to the Clean Water State Revolving
    Fund.
        The administration has also dusted off the Better America
    Bonds Initiative. It would give EPA the authority to select
    proposals for $2.15 billion in bonding authority aimed at
    creating open spaces and restoring open areas. A new twist this
    year, the proposal would earmark $250 million for anthracite
    coal-related projects. Why anthracite coal projects have been
    singled out for special consideration is not explained in the
    budget documents.
        Once again, the program is another example of EPA seeking
    to pursue new activities and boutique programs, without
    specific Congressional direction or authority, while we have
    other ongoing activities and management challenges not being
    addressed.
        Again, the budget proposes a doubling of the Climate Change
    Technology Initiative. I do not believe this is a critical
    element in the mandate to address core environmental problems.
    The decision to increase this program really makes me wonder
    about the budget process which is supposed to be based on a
    scientific assessment of priorities and activities which yield
    the most protection to human health and the environment.
        Finally, turning to what is probably the hottest
    environmental issue of the year, EPA's proposed Total Maximum
    Daily Load, or TMDL rule. The latest acronym in the Federal
    alphabet soup to receive notoriety, TMDL refers to EPA's
    proposal to require the States to set pollution budgets for
    impaired waters and establish implementation plans to bring
    these waters into compliance with water quality standards.
        The proposal has generated tremendous controversy, as it
    seems EPA would require the regulation of certain non-point
    sources even while EPA has no authority to do so under the
    Clean Water Act. In addition, serious questions have been
    raised as to how States would come up with the resources needed
    and whether the States would even have the ability to implement
    the rule. There are also serious gaps in data, research, and
    monitoring to meet the requirements EPA has set forth.
        As I traveled around my State, I have heard concerns that
    the rule represents a new unfunded Federal mandate, an expanded
    Federal role which would undermine EPA's relationship with the
    States, and basically a command-and-control approach.
        The National Governors Association has said: ``The
    regulations fail to properly respect President Clinton's
    executive order on federalism, which notes that prescriptive,
    inflexible approaches to public policy problems can inhibit the
    creation of effective solutions.''
        Madam Administrator, at a minimum EPA has many concerns it
    must address before it can finalize the rule on TMDL's.
        In closing, EPA has many challenges before it. We know the
    important role that the EPA must have in assuring that we
    continue to clean up our environment. I assure you that we on
    this committee are committed to doing everything we can to
    improve the environment and to see that the Agency meets the
    challenges to ensure a proper stewardship of the taxpayer's
    dollar and the environment.
        With that, I now turn to my distinguished ranking member,
    Senator Mikulski.
        [The information follows:]

                  [General Accounting Office, March 23, 2000]

     Human Capital: Observations on EPA's Efforts to Implement a Workforce
                               Planning Strategy

                             (By Peter F. Guerrero)

        Mr. Chairman and Members of the Subcommittee: We appreciate the
    opportunity to present our observations on the Environmental Protection
    Agency's (EPA) efforts to determine the workforce it needs to meet its
    strategic goals and objectives. During the past decade, when most
    federal agencies reduced their staffing, EPA's workforce grew by about
    18 percent, even though the states were assuming more responsibility
    for carrying out federal environmental programs and enforcement
    activities. EPA officials attribute much of the growth during this
    period to additional statutory responsibilities given the agency, such
    as the Clean Air Act Amendments of 1990. Concerned about such growth,
    the Congress, in its deliberations on EPA's fiscal year 2000 budget
    request, expressed its expectation that the agency, while remaining
    flexible to meet its program requirements, would not exceed a personnel
    level of 18,000 full-time equivalents (FTE) \1\ by the end of fiscal
    year 2001, a reduction of about 100 FTEs from EPA's estimated level for
    fiscal year 2000.
    ---------------------------------------------------------------------------
        \1\ An FTE represents 2,080 work hours, the equivalent of one
    person working full time for 1 year.
    ---------------------------------------------------------------------------
        This Subcommittee has also expressed concern that increases in
    EPA's personnel levels may reflect incremental responses to meet the
    demands of new environmental initiatives, rather than the results of a
    workforce planning strategy linked to the agency's strategic planning
    efforts. Such a strategy would identify EPA's current and future human
    capital needs, including the size of the workforce, its deployment
    across the organization, and the competencies (knowledge, skills, and
    abilities) needed to meet the agency's strategic goals and objectives.
    In response to the Subcommittee's interest in EPA's workforce planning,
    we reviewed (1) how EPA determines the number of employees and the
    competencies needed to carry out its strategic goals and objectives and
    (2) what actions, if any, EPA is taking to improve its workforce
    planning activities.
        In summary, our findings are as follows:
      --EPA does not now have a workforce planning strategy to determine
            the number of employees and competencies needed to carry out
            its strategic goals and objectives. In preparing the agency's
            annual budget request, EPA assistant administrators, regional
            administrators, and other senior officials determine the
            increases or decreases in the FTEs requested by the agency. The
            senior officials make their decisions on the basis of
            information provided by program managers, who identify
            incremental changes in their needs from the prior year.
            However, EPA does not have the detailed workforce planning
            information it needs to inform such decisions, including (1)
            information on the linkage between the FTEs requested and the
            agency's ability to meet its strategic goals and objectives and
            (2) any excesses or gaps in needed competencies within the
            agency's various headquarters and field components.
            Furthermore, EPA has not assessed the accuracy of its existing
            data to ensure that its employees are being used in ways that
            are consistent with the intent of its congressional
            appropriators.
      --Although EPA does not currently have a workforce planning strategy,
            it has taken steps to identify its current and future human
            capital needs, including the size and competencies of its
            workforce. In May 1999, EPA completed a study that identified
            (1) the competencies needed to meet the agency's current
            missions, (2) possible alternative missions that EPA may face
            in the future, and (3) new competencies that may be needed
            under each of the future mission scenarios. While a step in the
            right direction, the study was not detailed enough to identify
            in total or in individual organizational components the number
            of employees who need to possess the competencies identified.
            Furthermore, citing budget constraints, EPA discontinued its
            efforts to implement a workforce planning strategy, which was
            to include a continuous process to monitor and assess the
            agency's workforce in light of internal and external changes in
            its environment. Although EPA currently has no resources
            designated for implementing a workforce planning strategy, the
            agency recently prepared a draft human resources strategic
            plan. According to EPA officials, a workforce planning strategy
            would be developed and implemented as part of this plan. EPA
            officials plan to meet in April 2000 to consider whether to
            approve the draft plan.
        We met with EPA officials, including the Associate Director of
    EPA's Annual Planning and Budgeting Division, Office of the
    Comptroller, to discuss this statement for the record. They told us
    that the information reported is a fair assessment of EPA's workforce
    planning activities. They provided several technical comments and
    clarifications, which we incorporated as appropriate.

                                   BACKGROUND
        EPA is organized into 13 major headquarters offices, located in
    Washington, D.C., that receive administrative, investigative, and
    laboratory support from various headquarters' field entities located
    throughout the country. EPA also maintains 10 regional offices to
    implement federal environmental statutes and to provide oversight of
    related state activities. While total federal employment was reduced by
    about 17 percent from fiscal year 1990 through fiscal year 1999, the
    FTEs available to EPA to carry out its programs grew from 15,277 to
    18,078, an increase of about 18 percent. (See fig. 1.) Most of the
    growth occurred from fiscal year 1990 through fiscal year 1993, when
    the FTEs increased from 15,277 to 17,280, an increase of about 13
    percent. Since then, EPA has grown at a more moderate rate, averaging
    less than 1 percent a year.

        EPA's employees possess a wide range of educational backgrounds and
    skills. Figure 2 shows the occupations that represent the largest part
    of the agency's workforce. EPA also makes extensive use of contractors
    to perform its work. The agency estimates that it would need an
    additional 11,000 to 15,000 employees if it did not receive
    appropriations to fund contractors. Thus, EPA's workforce must be adept
    both at delivering services directly and at effectively managing the
    cost and quality of mission- support services delivered by third
    parties on the government's behalf.

    Figure 2.--EPA Employees by Major Occupational Category, as of September
    30, 1999

                                                                     Percent
    Engineers.........................................................    13
    Scientists........................................................    24
    Attorneys.........................................................     6
    Environmental protection specialists..............................    15
    Clerical..........................................................     7
    All others........................................................    35

    Source: EPA.

        The Government Performance and Results Act of 1993 (the Results
    Act) requires EPA and other federal agencies to set goals, measure
    performance, and report on their accomplishments as a means of
    achieving results. Effective implementation of performance-based
    management, as envisioned in the Results Act, hinges on senior
    managers' willingness and ability to strategically manage all of the
    agency's resources--including human capital--to achieve missions and
    goals. Specifically, this requires aligning strategic and program
    planning systems with an explicit workforce planning strategy that
    includes (1) identifying the current and future competencies needed and
    any gaps, (2) developing a workforce action plan designed to address
    the gaps, and (3) monitoring and evaluating the workforce planning
    actions taken. Workforce planning is a key component of a human capital
    self-assessment checklist we published as a discussion draft last
    September.\2\ (See attachment I.)
    ---------------------------------------------------------------------------
        \2\ Human Capital: A Self-Assessment Checklist for Agency Leaders
    (GAO/GGD-99-179, Sept. 1999.)
    ---------------------------------------------------------------------------

    EPA DOES NOT NOW HAVE A WORKFORCE PLANNING STRATEGY TO ASSESS ITS HUMAN
                              CAPITAL REQUIREMENTS
        Although EPA's senior managers are closely involved in decisions
    concerning the agency's annual budget requests for staffing, the agency
    has not developed and implemented a workforce planning strategy to
    systematically and comprehensively assess its human capital
    requirements. Consequently, EPA cannot determine whether it has the
    appropriate number of people and competencies needed to effectively
    carry out its strategic goals and objectives. Furthermore, although EPA
    collects cost-accounting data on the amount of time its employees spend
    in carrying out the agency's strategic goals and objectives, it has not
    assessed the accuracy of the data. Thus, EPA lacks assurance that its
    employees are being used in ways that are consistent with the intent of
    its congressional appropriations legislation, which identifies the
    number of FTEs approved for each strategic goal and objective.
        During most of the 1980s, EPA used a workload model for calculating
    the total number of FTEs needed and for allocating them among its
    various headquarters and regional offices. The model was based on
    studies of the amount of time required to perform key functions of the
    agency. The agency used the model to allocate its staff among its
    various organizational units but did not use it for determining the
    number of employees. An EPA official explained that the number of
    employees needed, according to the model, consistently exceeded the
    personnel ceilings established for the agency by the Office of
    Management and Budget. In 1987, EPA froze the workload model because it
    believed it was spending an inordinate amount of time each year
    negotiating the distribution of marginal staffing increases. Although
    the model continued to be used for allocating staff resource levels
    into the early 1990s, it was not updated to reflect new circumstances,
    became outdated, and was discontinued.
        EPA's current process for preparing its budget request involves
    identifying funding and staffing increases, (``investments'') in areas
    it considers to be priorities, which are usually offset by decreases,
    (``disinvestments'') in areas of lower priority. For example, for
    fiscal year 2000, EPA identified investments totaling 311 FTEs and the
    same number of disinvestments. Increases were identified for program
    priorities such as clean air, climate change, information management,
    and children's health. To accommodate the increases, decreases were
    identified in other agency activities, such as those for assessing
    chemical risks, enforcing clean water regulations, and cleaning up
    contaminated waste sites. Through such reallocations, EPA focuses on
    the number of staff available and does not consider the types of skills
    needed for program activities. We did not review the basis for EPA's
    decisions on the reallocations.
        After the Congress reviews EPA's budget request and appropriates
    resources to the agency, senior officials allocate the available FTEs
    to EPA's organizational units. Because EPA does not have a system in
    place to assess its human capital requirements and to allocate
    resources accordingly, the allocations are based primarily on the
    number of FTEs that were allocated in previous years, with increases or
    decreases made incrementally to reflect the agency's ``investments''
    and ``disinvestments.'' However, an approach based on historical data
    may not accurately reflect the conditions facing EPA today and those
    likely to face it tomorrow. For example, over the past decade,
    technological changes have had a major impact on the skills and
    technical expertise needed to carry out federal programs. In addition,
    changes have occurred in EPA's regional environmental responsibilities
    as states have accepted more responsibility for the day-to-day
    implementation of federal environmental statutes. For example, in 1993,
    only eight states had accepted responsibility under EPA's delegation
    process for implementing provisions of the Safe Drinking Water Act. By
    1998, 36 states had done so. The Environmental Council of the States,
    an association representing state environmental administrators, has
    pointed out that the states now assume responsibility for more than 75
    percent of federal environmental programs. Such changes may reduce
    EPA's activities in some areas, such as carrying out inspections, but
    may in turn create the need for additional people and competencies in
    other areas, such as providing technical assistance and reviewing and
    measuring the effectiveness of state programs.
        Fact-based human capital management requires data on how EPA's
    current workforce spends its time. However, the agency's efforts to
    account for the time spent to carry out its various tasks have been
    hampered by inaccuracies in existing data. For example, although each
    of EPA's regional employees is assigned to a specific work area, such
    as pollution prevention or groundwater protection, the employees may be
    directed to perform tasks in other areas. In a September 1996 report,
    EPA's Inspector General stated that in two regions reviewed, employees
    spent a significant amount of time working in areas unrelated to the
    program areas to which their time was charged. In October 1998, EPA
    modified its cost-accounting system to account for tasks related to its
    strategic goals and objectives. EPA officials told us that the accuracy
    of the data collected under the new system has not been assessed,
    although they said the agency recognizes the need to do so. Assessing
    the data is crucial for their use under the agency's plans to develop
    and implement a workforce planning strategy. For example, an official
    representing EPA's Office of Enforcement and Compliance Assurance,
    which relies extensively on regional employees to carry out its
    functions, told us that it is important that the office have an
    accurate system of accounting for time spent in order to determine
    appropriate personnel levels.

      EPA HAS BEGUN TO DEVELOP AND IMPLEMENT A WORKFORCE PLANNING STRATEGY
        EPA's decentralized organizational structure and the size and
    deployment of its workforce have long been issues of concern among
    outside reviewers of the agency. For example, in an April 1995 report
    to the Congress, the National Academy of Public Administration (NAPA)
    \3\ commented that EPA has little data to determine the day-to-day
    activities of its regional employees. NAPA recommended that EPA
    complete an analysis of the activities of the regional offices,
    determine their appropriate size, and add or reduce staff accordingly.
    ---------------------------------------------------------------------------
        \3\ NAPA is a nonprofit, nonpartisan, collegial organization
    chartered by the Congress to improve governance at all levels--federal,
    state, and local.
    ---------------------------------------------------------------------------
        During the past decade, EPA has attempted to improve its workforce
    planning but has fallen short of implementing an effective strategy for
    doing so. As previously mentioned, EPA stopped using its workforce
    analysis model in the early 1990s, partly because the model required
    more resources than EPA considered appropriate to spend. For fiscal
    years 1995 through 1997, the agency conducted annual surveys to analyze
    the human capital needed to achieve its mission. Once each year,
    employees estimated the time they spent on various tasks for the first
    several months of the year and projected how they would spend their
    time during the remainder of the year. The purpose of the survey was to
    gain an understanding of where the workforce was deployed, ensure that
    the budget reflected this deployment, and make certain that resources
    were directed toward high-priority objectives and performance goals.
        EPA officials told us that the survey was discontinued after fiscal
    year 1997 because of data collection flaws that caused EPA to lose
    confidence in the validity of the survey data. They said that the
    survey did not clearly define terms and reporting requirements, causing
    inconsistencies in the data reported by various employees and
    organizational components. In analyzing the results of the 1997 survey,
    EPA found that the workforce data differed substantially from the data
    reported to the Congress in EPA's fiscal year 1997 operating plan. For
    example, the survey data showed that the amount of time spent on
    activities of the Office of Enforcement and Compliance Assurance was 23
    percent less than the amount reported by EPA in its operating plan,
    whereas the time spent on activities of the Office of Policy, Planning,
    and Evaluation was nearly three times the amount reported in the plan.
        EPA has recently attempted to address the need for a more credible
    strategy to determine its workforce requirements. In June 1998, EPA
    initiated a project to assess and act upon the implications of
    strategic change for the agency's workforce. Through this project,
    which was completed in May 1999, EPA (1) developed a workforce profile
    identifying the competencies of the people employed by the agency and
    (2) estimated what competencies it would need in the future under
    various scenarios. By comparing the current workforce with estimated
    future needs, EPA identified potential gaps.
        While the workforce assessment was a step in the right direction,
    it was a limited measure toward needed actions to implement a workforce
    planning strategy capable of meeting the agency's diverse goals and
    objectives. For example, the assessment focused on the competencies,
    such as communication and computer skills, needed to carry out EPA's
    missions. However, the study was not designed to determine how many
    employees needed such competencies or how employees should be deployed
    among strategic goals and objectives, across program areas, and in
    various areas of the country. Furthermore, although EPA has identified
    the competencies that it believes are vital and difficult to obtain and
    maintain, it has not used this information to develop an integrated
    workforce strategy for recruiting, developing, and maintaining needed
    competencies in its current and future workforce.
        EPA had intended to build on its workforce assessment by developing
    and implementing a workforce planning strategy to (1) continually
    monitor and assess its workforce in light of internal and external
    environments and (2) monitor and evaluate workforce actions taken.
    Although EPA had contracted for the development of the strategy, EPA
    officials terminated this work in February 1999, citing budget
    constraints. Nevertheless, the director of EPA's Office of Planning,
    Analysis, and Accountability told us that, while the agency currently
    has no resources allocated for implementing a workforce planning
    strategy, it recognizes the need to complete the job. He said that EPA
    is considering linking a workforce planning initiative to its strategic
    planning efforts. However, little time remains for implementing a
    workforce planning strategy before EPA's current strategic plan is
    scheduled to be revised and issued by September 2000.
        EPA officials told us that in terminating the contractor's work for
    the development of a workforce planning strategy, EPA decided to
    develop such a strategy itself. Such an initiative is being considered
    under the auspices of EPA's Human Resources Council, which consists of
    senior managers in EPA's headquarters and regional offices. At the
    direction of the Council, a multifunctional group of program office
    executives and representatives of EPA's Office of Human Resources and
    Organizational Services has prepared a draft strategic plan for human
    resources. The plan calls for securing essential competencies through a
    workforce planning strategy aimed at recruiting and developing staff
    and providing incentives to retain highly competent employees. EPA
    officials told us that this strategy in essence would continue the
    efforts that EPA had planned to do under the contract. The Human
    Resources Council is scheduled to meet in April 2000 to discuss the
    plan.

                                  OBSERVATIONS
        The growth in EPA's personnel levels during the past decade has
    been accompanied by substantial changes in the roles and
    responsibilities of the agency and its state partners. In addition,
    technological advances during this period have provided opportunities
    for efficiencies to carry out the agency's strategic goals and
    objectives. While EPA has implemented several initiatives during the
    past decade to gain a fuller understanding of the demands facing its
    workforce, these initiatives have not received the resources and senior
    management commitment needed to bring them to fruition, and they have
    fallen short of their objectives. Without a workforce planning
    strategy, EPA is not able to identify the size of its workforce and the
    competencies that need to be deployed among its organizational
    components to effectively and efficiently carry out its strategic goals
    and objectives.
        EPA's current efforts to develop and implement a human resources
    strategic plan, including a workforce planning strategy that is focused
    on continually monitoring and assessing its workforce and evaluating
    the effectiveness of actions taken, is a step in the right direction.
    If the plan is adopted, its ultimate usefulness will depend largely on
    the extent to which EPA's senior management remains committed to and
    provides the resources needed to ensure its success. Furthermore, as
    part of its workforce planning strategy, EPA will need to ensure that
    it collects and analyzes accurate data on the amount of time being
    spent on various programs and activities. Without such data, EPA cannot
    accurately determine the costs of carrying out its strategic goals and
    objectives and ensure that its workforce is being used in ways that are
    consistent with the intent of its congressional appropriators. In
    addressing these concerns, it is important that EPA identify the
    resources that would be necessary to implement a workforce planning
    strategy and to assess the accuracy of its cost-accounting data on the
    amount of time employees spend in performing tasks related to the
    agency's strategic goals and objectives.
        We performed our review from October 1999 through March 2000 in
    accordance with generally accepted government auditing standards. If
    you have any questions about this statement, please contact me on (202)
    512-6111. Major contributors to this statement were Ed Kratzer, Bill
    Roach, Ken McDowell, and Rosemary Torres-Lerma.

                                  Attachment I

                          THE HUMAN CAPITAL FRAMEWORK
        We recognize that there is no single recipe for successful human
    capital management. But we have identified a number of human capital
    elements and underlying values that are common to high-performance
    organizations in the public and private sectors. The five parts of the
    human capital framework are as follows:
        1. Strategic Planning: Establish the agency's mission, vision for
    the future, core values, goals, and strategies.
        2. Organizational Alignment: Integrate human capital strategies
    with the agency's core business practices.
        3. Leadership: Foster a committed leadership team and provide
    continuity through succession planning.
        4. Talent: Recruit, hire, develop, and retain employees with the
    skills for mission accomplishment.
        5. Performance Culture: Enable and motivate performance while
    ensuring accountability and fairness for all employees.

                   STATEMENT OF SENATOR BARBARA A. MIKULSKI

        Senator Mikulski. Thank you very much, Mr. Chairman. Mr.
    Chairman, I know that it is about 5 of 10:00. I note that the
    chairman of the full committee is here, so I am going to ask
    unanimous consent that my full statement be included in the
    record and just make a few highlights because also other
    colleagues want to make a few statements and questions.
        First of all, I really want to welcome Carol Browner and
    her team to this hearing. I know that for Ms. Browner this is
    her eighth appearance before this subcommittee, and I would
    like to thank you for your service to the Nation and all of the
    much help that you have given to my own State of Maryland,
    because in Maryland the environment really is tied to economic
    development. We feel good environment is good business in
    Maryland.
        You have had to deal with the alligators in the Everglades
    and you have had to deal with the alligators in Congress and
    you have had to even deal with alligators at OMB. So I know
    alligators are an endangered species, but we really want to
    compliment you for that.
        I think the chairman has laid out a road map that he would
    like to pursue, but I think when we have someone who has served
    the Nation for 8 years--we have had continuity in leadership,
    therefore continuity in policy, and this is why we could get
    into those details.
        I would like to thank you and President Clinton for what
    EPA has meant to the State of Maryland. The ongoing funding for
    the Chesapeake Bay, its cleanup, and all the aspects of it
    related to clean water and safe water are very much
    appreciated. It was begun by Senator Mac Mathias and now
    through President Carter, President Reagan, President Bush, and
    President Clinton. We want to say thank you.
        We want to thank you for your help in issues related to
    smart growth, because we in Maryland believe in development,
    but we have very serious concerns about encroachment and what
    that means to the environment.
        We also want to particularly acknowledge your role in
    working in a partnership with our governor and our mayor on the
    devastating effects of lead poisoning, which is really a
    killer. We have children within the very shadow of Johns
    Hopkins University that are so loaded with lead, one little boy
    on his way to school just lay down on the street and said: I am
    too sick to go any further. So we thank you for your
    relationship with our governor, with our mayor, and his health
    teams, because we believe in a couple of things: one, that
    there is a direct linkage between the environment and public
    health, and that our environmental policies should always be
    strengthening the public health of our community.
        Second, environment tied to economic development. Certainly
    the Chesapeake Bay, other bay initiatives, and so on, where
    really our natural assets need to be preserved, which is why
    people want to live and work near there.
        In addition to a good environment for economic development,
    it is really the brownfields issues, and I am going to talk
    about it. In my own home town there are 3,000 acres of
    brownfields surrounding the water, and when we clean them up it
    offers homes, commercial real estate, and we are now turning
    our Inner Harbor--everybody knows the glitz and the stadiums,
    but we are taking old factories and turning them into digital
    economic development parks. We are really digitalizing our
    harbor, where it is no longer appropriate to use for shipping.
        These are some of the areas that I want to go over with you
    and talk with you in more detail, as well as the pfisteria
    research that caused problems. But again, many thanks. I
    personally am grateful to have you as a constituent in downtown
    Takoma Park, and I have been--really, I want to compliment you
    for your professional relationship certainly with me and I
    believe the Congress and your service to the Nation.
        With that, I will submit my statement and wait for my time
    for my questions.
        Senator Bond. Without objection, the statement will be
    accepted, and thank you very much, Senator Mikulski.
        Now I turn to Chairman Stevens.

                        STATEMENT OF SENATOR TED STEVENS

        Senator Stevens. Well, thank you very much.
        I do not have a prepared statement. I do greet the
    Administrator with thanks before I ask a couple of questions. I
    am not going to ask them; I will submit them. I do thank you
    for the fact that the President's budget this year has a $15
    million request for Alaska sanitation problems in rural Alaska.
    I have been working on this now for a series of years and we
    have had earmarks in the past, and at this time we have got a
    request. I cannot guarantee you we will not try to increase it,
    but I do appreciate the request.
        I do have some questions I would like to submit. Let me
    just outline two of them. One concerns the Red Dog Mine that is
    north of Kotzebui above the Arctic Circle, a very unique
    arrangement, owned by the Alaska Native people and operated by
    a very fine Canadian company. They have a unique arrangement
    for employment. At least two, perhaps three, people share one
    job. With a two-shift mine, it means that they have got two and
    a half times the employees of any other mine operating in
    similar circumstances.
        They have asked for and received State approval to expand
    that mine through the use of an additional generator. Your
    section 10 reversed the State finding that this was the best
    available control technology, and I am just sort of appalled at
    that because in this region of the world I do not think your
    people have the capabilities that we have. Our State is
    probably the number one State in terms of protecting air
    quality.
        It really has been a shock to the State. I know that you
    have talked to the governor. But I hope you will answer the
    questions I have got to submit. I cannot ask questions right
    now.
        But the second one concerns the Fairbanks carbon monoxide
    problem. Fairbanks, again located the farthest north major city
    in our State, it has a national ambient air quality standard
    problem for carbon monoxide. It has tried its best to achieve
    that, but we note that the automobile manufacturers have not
    produced the cars that they were supposed to produce to reduce
    both the carbon monoxide emissions and other forms of
    pollution, and yet the cities now are being put in the position
    of sanctions because they cannot meet the goals that should
    have been attainable had the automobiles been modified as
    contemplated by the basic law.
        I think that the clock is ticking. As I understand it, it
    runs out in April and our second largest city is going to face
    sanctions which will lead, strangely, to reduction in the use
    of automobiles in an area that you cannot walk and you cannot
    take buses and there are no other forms of transportation. We
    do not quite understand that.
        I would urge you to take a look at that. In both instances,
    your Agency has reversed our State in areas where they had
    delegated authority under the law to make these decisions, and
    people made plans based on long, long conferences and working
    these things out with the State and now they cannot continue.
        So again, I thank you for what you have done in the past,
    but I would urge you to take a look at this. I think in those
    two instances--I will tell you what. Why do you not send your
    people up and have them live in Fairbanks or in Kotzebui for a
    year, okay? In Fairbanks its 68 below, 70 below in Kotzebui.
    They work all year long. Your people come in the summer time
    and try to understand this. It is just not fair.
        Thank you.
        Ms. Browner. Mr. Chairman, I understand that Chairman
    Stevens will have to leave. If I might respond quickly before
    he leaves.
        Senator Stevens. I do have to leave. I am going to submit
    the questions.
        Senator Bond. I think if you have got just a minute I would
    be happy to, if nobody objects, to allow her to respond.
        Ms. Browner. I want to say something about the mining
    issue. I did have a very good meeting with your governor. Since
    that time we have been able to reach an agreement so that the
    construction schedule for the company can be taken into
    account. We are trying very hard to get this resolved as
    quickly as possible. I thought the meeting was very helpful.
        Senator Stevens. Good. That is good news.
        Ms. Browner. I think we will be able to find the
    resolution.
        Senator Stevens. It has the highest level of unemployment
    of any area in the country.
        Ms. Browner. Yes, I understand.
        Senator Stevens. Thank you very much.
        Senator Bond. Thank you very much, Chairman Stevens.
        Now I turn to Senator Leahy.

                     STATEMENT OF SENATOR PATRICK J. LEAHY

        Senator Leahy. Thank you, Mr. Chairman.
        I am delighted to have Administrator Browner here. I am a
    big fan of hers and I think she has done a superb job in
    running the EPA. I also am pleased that she has had a number of
    occasions to come to Vermont.
        I was going to try to talk to Senator Stevens about who
    gets colder weather, but the 70 degrees did kind of top our 45
    degrees below zero this year and I realized I had lost all
    bragging rights and will stay away from that.
        You have shown a great deal of leadership on environmental
    and public health issues, from lawsuits against dirty power
    plants to recommendations to Congress regarding toxic fuel
    additives. And you have done it even though you know that in
    some of those you would face from different special interests a
    lot of criticism.
        But I think that, because you have been persistent in this,
    you have improved our environment and the public health. That
    helps not just us today, but it helps people like your own
    children, who will live most of their lives in this century, my
    grandchild who will, and others.
        In my case--once in a great while we get parochial on this
    committee. I know that the Senator from Maryland is shocked to
    hear that, but it is true. And I have considered the
    environment, the unique environment of my own State of Vermont,
    preserving it to be one of my highest priorities. The funding
    that EPA has consistently requested for the Lake Champlain
    Basin program has allowed Vermonters to form some very long-
    term good commitments and programs and partnerships with our
    communities, our State agencies, nonprofit organizations, and
    it has helped all of us, because they have focused on pollution
    reduction and toxic hot spot cleanup, and have also benefited
    the hundreds of thousands, even millions, of people who during
    that time have visited that area from other parts of the
    country.
        A lot remains to be done, but I think we can continue to
    protect precious water resources in Lake Champlain and
    throughout the State, from our lakes and our ponds, major
    watersheds like the Connecticut River.
        I am pleased to see you sponsoring grants for smart growth
    pilot projects in urban and rural communities. In Vermont we
    have two of these pilot projects, one in a small city, one in a
    rural watershed. They are rapidly gaining attention. They
    integrate economic and natural resource data into web-based
    interactive tools for city planners. I think that I could see
    this, especially with the Internet spreading throughout our
    State, I think that you are going to see these kind of things
    promoting smart growth initiatives all over the country.
        We have a unique project in Vermont on acid rain that
    monitors the on the ground ecological and human health effects
    of continuing acid deposition in the Northeast. We know there
    is a lot of transport of atmospheric pollutants from the
    Midwest to the Northeast, but we have to know what the long-
    term damage of that is, and I hope we can continue these kind
    of studies.
        A final note. I want to go on record with my strong support
    of your recent announcement with Secretary Glickman that you
    want to significantly reduce or eliminate the use of the fuel
    additive MTBE and to increase use of safe, renewable
    alternatives. I strongly support that. I think it is something
    that will benefit all of us and it reinforces some legislative
    strategies promoted earlier this year by Vermont and seven
    other States in the Northeast. So I commend you.
        I have to go to Judiciary and I will leave, with your
    permission, Mr. Chairman, a number of questions for the record.
    But I did want to highlight those areas.
        Senator Bond. Thank you very much, Senator Leahy, for
    joining us. We will, of course, as usual have questions
    submitted for the record that we will forward to the
    Administrator. I think Senator Stevens had some, and we will
    ask that the Administrator and the Agency respond as quickly as
    possible. Thank you very much for being here.
        Now we turn to Senator Lautenberg.

                    STATEMENT OF SENATOR FRANK R. LAUTENBERG

        Senator Lautenberg. Thanks, Mr. Chairman. I start by
    congratulating you and Senator Mikulski for your work on the
    VA-HUD bill.
        I also want to extend my congratulations to Carol Browner
    for her leadership on issues affecting public health and the
    environment. I congratulate you also, Madam Administrator, for
    creating an excellent team around you, for providing the kind
    of inspired devotion to duty that we see with the folks that
    all of us have occasion to work with at EPA.
        I see a record of successes that I do not think are really
    matched, if we look over history, of an Agency that was taken
    over at a period of relatively troubled times, had been through
    defaults by leadership, programs not working, and what I see is
    that you have taken the broad authority given you to protect
    the public health, to use it effectively to develop programs
    that clean the air and to respond to emergencies.
        When I look at the list of things that have happened under
    your administration, the information that is provided through
    to the public through the web site is so valuable that we have
    heard complaints from both public and industry when you had to
    shut it down. You have used the opportunity to exercise
    leadership on so many fronts and that is respected. That is
    what I would have wanted of an executive when I ran a company
    and that is what I want of the head of a department in my role
    here with my public responsibility.
        I look at the success of Superfund. Ninety-one percent of
    the sites listed on the NPL are undergoing cleanup,
    construction, or are deleted. I note that over the life of
    Superfund EPA has reached settlements with private parties of
    an estimated $16 billion. So challenges to whether the
    polluters should pay or should not pay is really moot. The
    question is--the outcome is they pay. They have committed a sin
    that they have had to pay for, they have committed a public
    affront, and they pay for it.
        We see brownfield successes: generated 1,580 cleanup
    programs, 4,300 redevelopment jobs, and leveraged $1.6 billion
    in public and private investment. Clean water, increasing the
    public's right to know about health risks at beaches by
    completing a database of beach monitoring programs, a program
    close to my heart and my interests; and increased the number of
    communities to 11,000 that have programs in place to protect
    drinking water sources.
        So Madam Administrator, I am proud of the work that you
    have done. I am proud of the work that this committee has done
    to support it, and I am delighted to see you in this, our
    mutual kind of swan song here.
        In recent years the bill sent by the President has
    allocated scarce resources in a sensible manner, it has been
    relatively clean of controversial language, and it has moved
    through the process in a timely manner, and I appreciate this
    and hope that we will be able to work together to ensure that
    if any such language, restrictive language, is included that we
    are wary of that, but the language that permits us to balance
    the use of our resources will enjoy, I hope, bipartisan
    support, and I am confident the chairman will agree with that.
        We welcome the opportunity to learn more about EPA's budget
    request. I remain particularly interested in providing adequate
    funding, though, for core EPA programs. There is a temptation
    to get attracted to new initiatives, but we dare not lose sight
    of the programs that are the backbone of the Agency. We have to
    continue to fund and support those.
        Whether the issue is cleaning up Superfund sites,
    addressing the ongoing hazardous waste sites so that they do
    not become future Superfund sites, reviewing the safety of
    pesticides, setting standards for toxins in the air, EPA's core
    programs have proven over the years to be of tremendous benefit
    to the health and well being of our constituents, and we dare
    not ever lose sight of them.
        In addition, I have been encouraged by the accomplishments
    of the EPA brownfields program, as I earlier mentioned. I want
    to assure you that we will do everything we can, we want to, to
    foster those efforts.
        Mr. Chairman, once again I do thank you for holding this
    hearing and look forward to the presentation from the longest
    serving Administrator in EPA history, one who did not go down
    with the ship, but took over the helm and did it masterfully.
        Senator Bond. Thank you very much, Senator Lautenberg.
        We have raised a lot of questions, so, Madam Administrator,
    we would be happy to give you 10 minutes for your opening
    statement and comments you want to make, and then obviously we
    will have, we hope to have a number of very productive rounds
    of questioning. Welcome.

                           STATEMENT OF CAROL BROWNER

        Ms. Browner. Thank you, Mr. Chairman and Senator Mikulski,
    Senator Lautenberg, for the opportunity to appear again before
    this committee in my eighth year as Administrator of the
    country's Environmental Protection Agency. I am pleased to be
    here today to present the Clinton-Gore Administration's budget
    request for the EPA.
        Accompanying me today are the Agency's senior managers,
    including Mike McCabe, our Acting Deputy Administrator, and
    Mike Ryan, our Acting Chief Financial Officer.
        I would like to begin by saying, Mr. Chairman, Senator
    Mikulski, Senator Lautenberg, we look forward to working with
    all of you and the other members of this subcommittee to craft
    a budget that will allow us to meet the very important public
    health and environmental needs of the people of this country. I
    believe we have fostered a productive working relationship
    which has enabled us to meet the mutual goal of protecting
    public health and the environment. Together, once again, we
    have a great opportunity to work in partnership to provide the
    American people with strong public health and environmental
    protections that they want and that they have every right to
    demand of us and that they deserve.
        The budget that we put forward achieves that goal. The
    President has presented a budget that maintains fiscal
    discipline while making essential investments in environmental
    priorities. This administration has repeatedly demonstrated
    that we can enjoy enormous economic prosperity, including the
    longest economic expansion in history, while aggressively
    cleaning up the air we breathe, the water we drink, the land we
    live on, the communities where we raise our families.
        Over the past 7 years of unprecedented economic progress,
    this administration, working with this committee, has
    distinguished itself through unprecedented environmental
    protections. We have done it through common sense, cost-
    effective measures that emphasize partnerships and cooperation
    with businesses, State and local governments.
        The 1996 amendments to the Safe Drinking Water Act are an
    example of what we can do together, bipartisan work on behalf
    of the American people to provide clean, safe water to drink.
    Working with this subcommittee, we have supplied the first ever
    funding, a $3.2 billion loan program, for communities to
    upgrade their drinking water systems.
        We set up the first public right to know program for
    ensuring that all consumers of tap water know the source and
    the quality of that water. We have announced new measures to
    protect the health of 140 million Americans by strengthening
    protections from emerging threats like cryptosporidia.
        As a result of these efforts, efforts we have undertaken
    together, 89 percent of Americans now get tap water from
    drinking water systems that meet public health standards. That
    is an increase of 6 percent since the standards went into
    effect in 1994.
        We have tripled the pace of cleaning up toxic wastes under
    the Superfund program. More toxic waste sites have been cleaned
    up and cleaned up more affordably in this administration than
    in all previous years combined. At the end of 1999, a total of
    670 Superfund sites had been cleaned up. Of those sites, 515
    were completed under this administration.
        We have taken important steps to reduce emissions from
    autos and small trucks by up to 95 percent. For the first time
    ever we have ensured that the very popular sport utility
    vehicles, minivans, light duty trucks will meet the same
    stringent air quality standards as other passenger vehicles.
        We have required reductions in sulfur levels in gasoline.
    We have cut toxic air pollution from municipal combusters and
    other important source categories by 90 percent or more, and we
    have unveiled new efforts to improve our air quality in 156
    national parks and wilderness areas. As a result of these
    efforts, some 43 million Americans are breathing cleaner air.
        At the same time, we have dramatically increased the
    public's right to know about toxic chemicals released into
    their local communities and into their neighborhoods. The
    Clinton-Gore Administration has nearly doubled the number of
    chemicals that must be reported to communities and required
    over 6,000 new facilities to report releases of their
    emissions. As a result, in the past decade toxic pollution has
    fallen by nearly 50 percent, partly as a result of simply
    arming local citizens with information about local pollution,
    about local conditions.
        We have revitalized communities by accelerating the cleanup
    of brownfields, abandoned or contaminated property. Senator
    Mikulski, I visited one of those sites in Baltimore. DAP
    Company has moved into a wonderful old warehouse. It has been
    cleaned up and restored. Every time I am able to visit a
    brownfield site it just gives me----
        Senator Mikulski. 400 jobs.
        Ms. Browner. 400 jobs. A huge sense of accomplishment for
    the community and of a program that really is working on the
    ground to meet the needs of local communities.
        Across the country, communities are gaining new hope with
    nearly $70 million in seed grants awarded to over 300
    brownfield projects. Senator Lautenberg, as you pointed out,
    this has leveraged new investments, over a billion dollars. It
    has created thousands of jobs. It has expanded the tax base for
    local communities and it has brought decaying areas of the
    cities back to vibrant life.
        Working with Congress in a bipartisan manner, we also
    passed the new Food Quality Protection Act that for the first
    time sets pesticide safety standards that are clearly
    protective of our children. We have taken action to reduce
    significantly special risks posed to children by limiting the
    use of two pesticides most widely used on foods found in the
    diets of our children.
        While ensuring strong environmental protection, we have
    also reinvented government in innovative ways to achieve
    greater environmental results at less cost. We have vigorously
    pursued common sense, cost-effective solutions to today's
    environmental problems.
        The budget before you requests $7.3 billion for the
    Environmental Protection Agency. We are also requesting $2.2
    billion for the Better America Bonds Program. This builds on
    and continues 7 years of environmental achievement under this
    administration.
        In terms of our core programs, and Senator Lautenberg, you
    spoke to this, the budget before you provides for an 11 percent
    increase in EPA's core programs. We do everything from setting
    air and water quality standards, drinking water standards, food
    safety, scientific research, and most importantly, we enforce
    the environmental and public health requirements. This is the
    single largest increase in our operating programs under this
    administration.
        The administration's request provides for such programs as
    President Clinton's Clean Water Action Plan. It provides for a
    new initiative to protect and improve one of our Nation's
    greatest shared treasures, our Great Lakes. It provides for the
    President's program for cleaner waters across America, which
    for the first time targets individual waterways for cleanup
    plans tailored specifically to meet their needs.
        This part of the budget gives States the flexibility that
    they need to fight polluted runoff. Again, Mr. Chairman, we are
    going to ask this committee for specific language to allow
    States the flexibility to set aside up to 19 percent of their
    Clean Water Revolving Fund to address the needs of polluted
    runoff. Not a requirement for the States, but an opportunity
    should they choose to address their water pollution problems in
    this way.
        The President's budget provides the necessary funding for
    one of the administration's top environmental priorities,
    protecting our children. Senator Mikulski, you mentioned the
    very serious problem of lead. There is no reason why any child
    in this country should experience lead poisoning. It is a
    preventable disease, and we are investing in our ongoing
    efforts to prevent this very horrible disease. We are also
    seeking money in our children's program for asthma and for
    dangerous levels of pesticide residues in foods.
        The President's budget does provide for a Creative Clean
    Air Partnership Fund. The partnership fund promotes early
    reduction in air pollution, and it fosters partnerships and
    flexibility between State and local governments to encourage
    new ideas for improving air quality. Some of the best ideas
    happen at the local level. This program is designed to
    encourage those local ideas, to give life to those ideas, to
    make them possible.
        The budget calls for continuing to expand the public's
    right to know, including a new effort to develop a network for
    key environmental data with our State partners. The States are
    looking at modernizing their computer programs. It is part of
    everything from one-step permitting to better environmental
    management. We are asking for $30 million to support the States
    in that effort.
        We continue our commitment to Superfund cleanup.
        Mr. Chairman, I see my time is up. Let me say in closing--
    --
        Senator Bond. If you need another minute or two, please.
        Ms. Browner [continuing]. We are presenting a budget that
    builds on the work that we have been doing over the last 7
    years, under the President and the Vice President's leadership,
    that prepares us to meet the emerging challenges.
    Unfortunately, in the work of public health and environmental
    protection, the job is not really done. As we solve one
    problem, a new problem emerges. This is a dynamic budget that
    allows us to speak to the ongoing problems, to resolve them,
    but also to meet the challenges of the future.
        Thank you.
        [The information follows:]

                     Prepared Statement of Carol M. Browner

        Mr. Chairman and Members of the Committee, I am pleased to be here
    today to present the Clinton-Gore Administration's fiscal year 2001
    budget request for the Environmental Protection Agency. Our $7.3
    billion request, and the $2.15 billion Better America Bonds program,
    continue and strengthen the Administration's commitment to the
    environment and public health by providing our children, our
    communities with cleaner water, cleaner air and an improved quality of
    life.
        I would like to express my pleasure to have worked with this
    distinguished Committee over these past seven few years. I believe we
    have fostered a productive working relationship, which has enabled us
    to work together towards our mutual goal of protecting public health
    and the environment. Although we may not have agreed on every issue and
    policy, the Agency has benefitted in many ways from the support given
    by this Subcommittee. For that, we are grateful to you, Mr. Chairman,
    Senator Mikulski, and the members of the Subcommittee. I again look
    forward to working with you this year, Mr. Chairman, and Senator
    Mikulski, as I know the strong bond between our Agency and this
    Committee will continue.
        I am particularly proud of this budget request. Seven point three
    billion dollars will directly support our operating programs, air and
    water infrastructure, and the trust funds. Two billion, one hundred and
    fifty million dollars are for the Better America Bonds program, to help
    communities invest in green-space preservation, water quality
    improvements and brownfields cleanup. Most importantly, this budget
    includes an 11 percent increase, or $384 million, for EPA's core
    environmental programs.
        Once again, the President presents a budget that maintains fiscal
    discipline while making essential investments in environmental
    priorities. This Administration repeatedly has demonstrated that we can
    enjoy enormous prosperity--including the longest economic expansion in
    history and a plan that will eliminate our national debt for the first
    time since 1835--while implementing important environmental and public
    health protections. The American people know that our Nation does not
    have to choose between a strong economy and a healthy environment.
        Over the past seven years of unprecedented economic progress, this
    Administration, working with this Committee, has distinguished itself
    through unprecedented environmental progress.
        The 1996 amendments to the Safe Drinking Water Act, a fine example
    of what we can achieve when we work together, coupled with the
    President's Clean Water Action Plan, have contributed greatly to
    cleaning up the Nation's waters and to making drinkable, fishable and
    swimmable water a reality for all Americans.
        We have set the tightest emissions standards ever for cars and the
    first such standards that apply equally to SUV's and minivans.
        We have placed special emphasis on protecting our Nation's greatest
    resource--our children--through actions like working for, winning and
    implementing the Food Quality Protection Act, that for the first time
    puts emphasis on protecting the health of infants and children from
    pesticide risks.
        We have provided communities with new access to more information
    about toxic chemicals released into their communities by greatly
    expanding the public's right-to-know.
        Under this Administration, more than three times as many toxic
    waste site cleanups have been completed than were completed in the
    previous 12 years of the Superfund program.
        And we have taken the unprecedented step of revitalizing
    communities by accelerating the cleanup of Brownfields and returning
    the land to productive use.
        The budget we are announcing today preserves this record of success
    and builds on it.
        As it has since the inception of the Clinton-Gore Administration,
    the EPA budget builds upon those core environmental programs that are
    the backbone of this agency. This includes: setting environmental
    standards; environmental enforcement and compliance; and direct
    implementation programs for the states.
        In fiscal year 2001, the Clinton-Gore Administration is requesting
    an 11 percent increase, or $384 million, over last year for core
    environmental programs, which allows the Agency to meet the American
    public's expectations for a safe and healthy environment. The increased
    is directed at programs for cleaner air and water, safer food and sound
    science.
        For water, the President's fiscal year 2001 budget bolsters the
    successes we have achieved by providing $495 million in Clean Water
    state grants, including a $50 million increase to specifically address
    polluted runoff, the largest current threat to our Nation's water
    quality.
        The Great Lakes, among our Nation's most revered and beautiful
    water resources, receive $50 million in the President's Budget for a
    new initiative that will continue the progress we have made in their
    cleanup and restoration. Through this initiative, states and
    communities will be eligible for competitively-awarded matching funds
    to improve water quality through stormwater pollution control, wetlands
    restoration and remediation of contaminated sediment.
        We are stepping up our efforts to identify and restore polluted
    waterways by providing an additional $45 million in state grants for
    the Administration's new Cleaner Waters Across America program. The
    program is aimed at waterways still in need of improvements. Resources
    will be used to develop specific restoration plans for some 20,000
    waterways across the Nation.
        Consistent with our goal to provide sufficient capital so that,
    over the long-term, $2 billion in average annual assistance will be
    available to localities, the President's Budget provides $800 million
    for the Clean Water State Revolving Fund--a flexible funding mechanism
    designed to help communities provide clean, safe and healthy water.
    This year, we are requesting authority to give states the option of
    using 19 percent of their Clean Water SRF in the form of grants to
    fight polluted runoff. I am asking this Committee to join us in
    providing states with this additional flexibility to provide clean and
    safe water for the public.
        The Administration has taken the most aggressive actions in history
    to provide cleaner, healthier air for all Americans, and this budget
    continues that effort.
        The President's Budget is providing $85 million for the Clean Air
    Partnership Fund--a fund that will provide resources to states, cities
    and tribes to help reduce air pollution. This initiative will foster
    public-private partnerships to help communities achieve their own clean
    air goals in ways that make the best sense for them.
        In addition, to continue reducing the air pollution that
    contributes to global warming, $227 million has been proposed for the
    third year of the Climate Change Technology Initiative. This program
    promotes voluntary measures that reduce energy use and bring down the
    energy bills of all Americans, while also reducing greenhouse gas
    emissions.
        Furthermore, to continue to strengthen our relationships with our
    state and tribal partners, this budget provides $215 million in state
    and tribal grants to help find solutions to air pollution. Of these
    resources, $5 million will be granted to states and regional planning
    bodies specifically to combat the problem of regional haze--one of the
    most obvious effects of air pollution.
        The Administration remains dedicated to improving children's health
    by providing $68 million for the Children's Environmental Health
    Initiative. These funds go for critical programs that fight such
    threats as lead contamination and childhood asthma. We also are
    continuing our dedication to food safety through the Food Quality
    Protection Act by providing $75 million for its implementation so that
    the American public will continue to enjoy one of the safest, most
    abundant, and most affordable food supplies in the world.
        The President's Budget continues expanding the public's right-to-
    know about toxic releases in their local communities through several
    initiatives. One of those new efforts is a new environmental
    information system that will provide the public more critical
    environmental information than ever before. Under this Initiative, the
    Administration will provide $30 million to work with the states to
    provide one of the Nation's greatest sources of shared, key
    environmental information.
        To better protect America's communities, the Administration is
    again proposing the Better America Bonds Initiative. This Initiative,
    which has increased by more than a billion dollars over 5 years from
    last year's proposal, will help communities grow in ways that ensure
    sustainable economic growth by providing them the resources they need
    to address local smart-growth challenges like protecting water sources
    and shrinking parklands as well as cleaning up brownfields. Through
    this initiative, the Administration will provide the authority to issue
    $2.15 billion for investments by state, local, and tribal governments
    in 2001.
        This budget provides almost $1.45 billion to continue our progress
    in cleaning up the Nation's Superfund toxic waste sites. The Agency
    plans to complete construction at 75 sites for a total of 830
    construction completions by the end of 2001. This will keep EPA on a
    path towards meeting the President's goal of 900 construction
    completions by 2002. In the Clinton-Gore Administration, about three
    times as many Superfund sites have been cleaned up as in the 12
    previous years of the program. The new budget proposal will continue
    that progress. In addition, to help communities return their abandoned
    or idled industrial properties to productive use, the President has
    committed $92 million for the extremely successful Brownfields
    redevelopment program.
        The Clinton-Gore budget request for fiscal year 2001 protects
    public health and the environment by ensuring that we will be able to
    provide America with cleaner water, cleaner air, better protection of
    children, more protection for individual communities and a continuing
    cleanup of toxic wastes and restoration of Brownfields.
        The Clinton-Gore Administration's budget protects the health and
    the environment of the American public. Last year, however, Congress
    ``earmarked'' from EPA's budget some $470 million for more than 320
    special projects in individual congressional districts. These earmarks
    direct money away from the Agency's core programs--the very programs
    that keep the environmental cops on the beat, use the best science to
    set standards to protect our children, and support the work of our
    partners, the states, tribes and local governments. That is why we have
    continued the Administration's policy to not carry over earmarks into
    the new budget, and that is why we will continue to oppose earmarks
    this year.
        We also remain strongly opposed to any legislative riders that
    undermine our country's basic environmental laws. Our goal is to work
    with Congress to provide real protections for the Nation. I strongly
    believe that the authorizing committees, the traditional forum for
    discussing these issues, should again guide the process.
        By providing our children and our communities with cleaner air,
    cleaner water and an improved quality of life, this budget maintains
    the Administration's dedication to the protection of public health and
    the environment. It ensures that the Environmental Protection Agency
    will have the funds to continue the seven years of unprecedented
    environmental progress built under the Clinton-Gore Administration.
        These are the highlights of our fiscal year 2001 request. I look
    forward to discussing with you, as the year progresses, these
    initiatives and innovative financing mechanisms. I would be happy to
    answer your questions at this time.

                      ENVIRONMENTAL INFORMATION: DATA GAPS

        Senator Bond. Thank you very much, Madam Administrator.
        You may recall 2 years ago, then-Deputy Fred Hansen
    indicated that environmental information issues would be a high
    priority. I am disappointed in the progress to date. We still
    do not have any overarching plan. A comprehensive error
    correction process is still not in place, as we understand it.
    We still do not have an inventory of key data gaps.
        What is the problem? Why have not these things been done?
    And what has been accomplished in the last year?
        Ms. Browner. Mr. Chairman, this is a very high priority for
    the Agency, and we have been working on it. For example, we
    have created a new Office of Information Management. One of the
    challenges, and you understand this, that we face that we had
    historical databases of environmental information in a variety
    of areas within the Agency which were collected under a variety
    of statutes. We are now in the process of bringing all of that
    together into one program. We are also looking at how to
    modernize ongoing data collection and how to better make that
    available to all of the parties that need it, which would
    include the States.
        It is not without its challenges; it is an enormous
    undertaking. I would hope that the committee could look very
    seriously at our request for funding for the States. We will be
    able to do all of this information integration and management
    in a much better way if the States are able to move along.
        The interesting thing, Mr. Chairman and other members of
    the committee, is that this is not an issue of simply States
    that we would all perceive to be with the older environmental
    agencies or the more sophisticated environmental programs. It
    is a variety of States that are already doing it. We are
    providing some modest funds. We are asking for money so that
    all of the States can begin this kind of information upgrade,
    this kind of computer systems upgrade, and allow us to better
    manage environmental information across the country.
        Senator Bond. Certainly assisting the States is a very,
    very important part and something that we would be supportive
    of, sure. But we do not see the plan of how it is going to
    work, how this is going to fit in with your plan. In last
    year's committee report, we noted that several action items,
    including establishing an agenda of information products,
    published semiannually, that would identify information
    products EPA is preparing for the public, establishing
    procedures to engage the public in development of information
    products that it offers the public, and we asked for a report
    by March 1 on policies to protect confidential business
    information. What progress has been made on these items on page
    80 of the report from last year?
        Ms. Browner. We will provide a status of the report to you
    within the next week. And I apologize for our tardiness in
    doing that. We do have a number of actions underway. For
    example, we are working with NACEPT to develop a long-term
    action plan. We will, next month, be putting out a short-term
    action plan. The first step was to integrate the office, and
    now we are developing those plans.
        We are also working with NACEPT to develop external
    guidance on how best to approach our data needs and gaps. We
    would be happy to provide for you a full list of all of the
    things we have underway.
        [The information follows:]

                  Report On Confidential Business Information

        As we reported to Committee staff in the Quarterly report on
    appropriation requirements, submitted March 17, EPA is reviewing claims
    of confidentiality, including ``those claims that are based on the
    argument that multiple pieces of publicly available data can be put
    together to form a `mosaic' picture of trade secrets.'' EPA held
    discussions with stakeholders about the mosaic effect as part of the
    EPA/State Stakeholder Forum on Public Information Policies, in Chicago
    on November 15-16, 1999 (for summary see EPA's Web site at www.epa.gov/
    oei/issuepapers). No consensus was reached on whether the mosaic effect
    exists, how extensive or serious it is, or how EPA could address it; in
    fact, no examples of harm where EPA was involved were noted. This lack
    of consensus was also reflected in the General Accounting Office's June
    1999 report, citing the range of views expressed by industry
    representatives and competitive intelligence professionals.
        OEI is now in the process of examining the mosaic effect in the
    broader context of revising the confidential business information (CBI)
    regulations (40 CFR, Part 2, Subpart B). This review will strive to
    ensure that the regulations are up-to-date, adequate, and effective.
    The Agency will also examine how different program offices categorize
    and protect various types of sensitive information, including
    confidential information.
        As part of this effort, EPA will examine its statutes, regulations,
    and policies to determine the extent to which they may limit CBI
    claims. We plan to publish an advance notice of proposed rulemaking in
    late spring that will seek public comment on possible CBI revisions,
    including potential mechanisms for addressing the mosaic effect. The
    Agency also will convene a public meeting in early summer to solicit
    further stakeholder comment on its CBI regulations. We believe the
    Agency can best address the issues raised in the Senate Committee
    report (106-161) through these efforts.

                       Information Management Activities
        Following are descriptions of other specific information management
    activities EPA has underway.

                         Agenda of Information Products
        The Senate Subcommittee's request that EPA establish ``an agenda of
    information products'' was raised and discussed at our Forum. Forum
    participants agreed that providing advance notice of significant
    products in planning and development stages, as well as opportunities
    for public comment and stakeholder involvement, would be very
    beneficial. They were concerned, however, that EPA not delay product
    development unnecessarily by developing a process that was too
    complicated. As a result, the Agency and our State and tribal partners
    have committed to establish a workgroup to explore the concept of
    developing an ``information products bulletin'' that would report on
    significant upcoming information products and provide opportunity for
    public comment and stakeholder participation in our product development
    process. The workgroup has been tasked with finalizing its
    recommendations on the scope of such a ``bulletin'' by this Fall and
    making the first ``bulletin'' available in early 2001. In addition, to
    assure some opportunity for notice on significant information products
    currently underway, an interim products bulletin is planned for this
    Fall.

       Procedures to Engage the Public in the Development of Information
                         Products and Error Correction
        As part of the development of our information products bulletin,
    the workgroup will recommend the process and appropriate means for
    members of the interested public to participate in the development of
    significant information products. In fiscal year 2000, the Agency will
    implement a web-based error reporting and tracking process for use by
    the public, States, and other EPA data users. The process will allow
    data users to report suspected errors in EPA data to the Agency and
    will track the error resolution process from initial report through
    final resolution.
      ensuring information security--firewall, training, and verification
        EPA has taken a number of steps to install a full firewall system
    to protect EPA information systems from unauthorized intrusion. On
    February 20, 2000, the third and final component of the Agency's full
    firewall system was installed. The first two components, the network
    gateway firewall and the public access firewall, were already
    operational. The third component separates the rest of the EPA Wide
    Area Network from the Internet and includes automated intrusion
    detection technologies, as well as logging and analysis of accepted
    inbound traffic.
        EPA has completed additional measures to strengthen its information
    security and plans to continue to expand and improve upon these
    efforts. These efforts include increasing Agency training on
    information security and the dissemination of information security
    policies and procedures via an Intranet site, through all-hands memos,
    and by means of seminars and conferences. EPA also is conducting
    analyses of its network architecture and investment review process to
    ensure that information security is adequately addressed. Finally, the
    Agency has expanded its testing and verification of computer security
    measures, including the use of independent analyses.

                  ENVIRONMENTAL INFORMATION: BURDEN REDUCTION
        Senator Bond. We are concerned about this, because we have
    been working on this for 2 years. I have a memo that is getting
    a little yellow with age here, talking about sharing high-
    quality environmental data. It is from back in April 1998. And
    we are anxious to see all of these good things come to
    fruition.
        In an EPA memo just 1 year ago, called ``The Framework for
    Early Action Projects for the New Information Office,''
    reducing reporting burdens is listed as a priority activity.
    But, again, when we get the GAO report on the EPA, GAO says EPA
    has been playing games with the numbers and that the paperwork
    burden has increased. So I have questions about how much has
    been accomplished in this area.
        Ms. Browner. Mr. Chairman, one of the responsibilities we
    have as the Environmental Protection Agency is to not only
    streamline requirements. We also have a number of ongoing
    efforts underway which you are very familiar with. They are not
    things that are achieved overnight. In some instances, we have
    to look to the States to implement them on a daily basis. We
    have to wait for the permits to come through the process.
        On the other hand, and I want to be clear about this, this
    administration has been very committed to reinvention and
    burden reduction. We have also been committed to setting tough
    standards, requiring new reductions in pollution, and expanding
    the public's right to know. Thus, so when you talk about
    increases, a large percentage of those increases are tied to
    the very aggressive work we have had, for example, in our air
    pollution program, under the Clean Air Act. This is a new
    statute that we are implementing.
        Under the Safe Drinking Water Act, the Consumer Confidence
    Report, which we worked with this committee and members of
    Congress to develop, requires time and energy for water systems
    to report to their consumers the condition of drinking water.
        We have also expanded the public's right to know, under
    TRI. You are right in some instances, the numbers have grown.
    However, we believe that is part of how we better do our job,
    by requiring facilities that perhaps did not need them
    previously to get permits, to reduce their pollution, and by
    answering the public's right to know.
        At the same time, we remain absolutely committed, within
    existing and new programs, at looking at how to streamline any
    information requests, and burdens that may be put on reporting
    industries.
        Senator Bond. We will continue on that later. I just would
    note that we had been advised that there was a reduction, a 27-
    million-hour reduction. That did not happen. There are many
    aspects to that. We will deal with them later on.
        I will turn now for questions to Senator Mikulski.

                               CORE BUDGET ITEMS

        Senator Mikulski. Thank you very much, Mr. Chairman.
        Ms. Browner, this is your eighth appearance and we do not
    know if it will be your final appearance. It is conceivable
    that a Gore administration would ask you to continue in the
    outstanding job that you have done. And that will be up to
    President Gore and you to decide.
        I know Chairman Bond might have an alternative viewpoint on
    this. But, either way, when we pass our appropriations for
    fiscal year 2001, it will be the final days of the Clinton
    administration. And I would like to ask you what would you say
    are the three top things that are the must-do in this budget,
    to be able to stay the course and all the way through the first
    year of a new Administrator? What core budget items would you
    really feel is a must-do, that we really look at and ensure
    adequate funding to be able to continue the important mission
    of the EPA and have the tools for either you or the next
    Administrator to have? What would be your top three?
        Ms. Browner. First is to honor the President's request for
    an increase for the EPA core programs. As I said previously,
    this is the nuts and bolts of public health and environmental
    protection. EPA core programs are where we do virtually
    everything that results in a cleaner environment and more
    public health protection. It is an 11-percent increase.
        Second, we are asking for fairly significant increases in
    money to the States to manage various water pollution programs.
    An example is the non-point source programs, the Section 319
    grants. States are good partners in this effort, but they need
    Federal financial assistance in running their day-to-day
    programs. We have significant increases in this budget.
        Finally, we have been very pleased that over the last
    several years this has not happened and will not happen this
    year, to have a bill that is essentially rider-free. One that
    does not restrict how we might go about or how the next
    administration might go about doing its job of public health
    and environmental protection.
        Senator Mikulski. Well, I appreciate those. Let me then go
    to some specific things. Let us go to the brownfield issue. You
    visited something called the American Can property.
        Ms. Browner. Right.

                                  BROWNFIELDS

        Senator Mikulski. This was an old factory that made tin
    cans, really. We had a cannery row in Baltimore. That moved out
    of the community and eventually out of the State. This factory
    has been recycled into a digital building. And now, 400 people
    work in it. So we are pretty brownfields exuberant actually.
        My question to you is, what should we be doing to, number
    one, stay the course on brownfields and what improvements would
    you recommend that we could do through the appropriations, both
    in funding and fine-tuning some of the directions? Because I
    believe not only in my own community--3,000 acres, 3,000 acres
    of waterfront property that could be recycled into what now are
    dead zones, into prosperity zones. And I wonder what your
    recommendations for that.
        Ms. Browner. We strongly recommend that the committee
    maintain the split in funding that we are requesting. If you
    think about the brownfields program, there are three big pieces
    to it. There are the site assessment grants which is what was
    used at the American Can site that you mentioned. There are the
    showcase communities. We are preparing a second round of those
    and, we would like to be able to continue those activities.
    Showcase communities are brownfield sites where not just EPA
    works, but we bring in a whole host of Federal agencies that
    can be helpful.
        Finally, Mr. Chairman, if I might just take a moment,
    because I think this will be a source of some discussion in
    your future meetings, the revolving loan program. What you are
    going to hear, and this is absolutely true, is that only a
    handful of loans have been made. It is a new program. It takes
    a little bit of time to get these loans up and out the door.
    But, we are up and running now. Once we are running, the worst
    possible thing to have happen would be to miss a year of
    funding.
        It would be extremely important, once Congress made that
    decision. We asked for several years before you made that
    decision to continue funding the revolving loan program. I
    think it is a half-million dollars that goes out to local
    communities. The communities then loan the money out to perhaps
    a developer who cannot find a bank in the initial phases. The
    developer pays back the loan and another developer can become
    eligible.

                            SAFE DRINKING WATER ACT

        Senator Mikulski. In my last few minutes, we talked about
    local cooperation. That takes me to the Safe Drinking Water
    Act, which is so crucial for our communities. A significant
    component of that Act was the new State revolving fund for the
    Nation's drinking water needs. Could you share with us the
    experiences you have had in implementing that? How would you
    assess it? And what improvements do you think you could make?
        Ms. Browner. We think it has been incredibly successful
    since its inception in fiscal year 1997. Working with Congress,
    we have provided $3.6 billion in funding for the SRF program.
    And we really appreciate this committee's commitment and
    leadership on this issue. The States will soon make their one-
    thousandth loan under this program. In other words, 1,000
    communities are benefitting from the work that we have been
    able to do together.
        I think it is also important to understand that we are
    fulfilling the goals of the Safe Drinking Water Act with
    respect to assistance for small systems. Three-quarters of the
    loans made to date have gone to small water systems. These are
    systems that serve fewer than 10,000 people. It is not
    necessarily Baltimore which has the rate base and the
    expertise. It is the small systems where I think has been
    hugely successful. I just hope that we can continue to provide
    the funds to the States so that they can meet the needs of the
    smaller systems.
        Probably the single greatest reason why we are seeing the
    upswing in the rate of compliance in drinking water systems
    across the country is the fact that these smaller systems have
    access to resources that they did not have previously.
        Senator Mikulski. Thank you.
        Senator Bond. Thank you, Senator Mikulski.
        Senator Lautenberg.

                      KYOTO PROTOCOL: KNOLLENBERG LANGUAGE

        Senator Lautenberg. Thanks Mr. Chairman.
        Administrator Browner, it was nice to hear the testimony to
    you coming from both sides of the aisle, from the chairman of
    the committee, the chairman of the appropriations committee.
    So, be careful, it may cost you some money, but we have to take
    it whenever it comes.
        EPA has been accused of kind of back-door implementation of
    the Kyoto Principles on Climate Change. Some people think the
    Agency is developing rules and regulations despite the fact
    that the Protocol has not been ratified. How do you respond to
    that?
        Ms. Browner. We are absolutely in compliance with what I
    think is routinely referred to as the Knollenberg language.
    First of all, I think, as everyone knows, there is no Kyoto
    Protocol in effect in the United States. We are not doing
    anything at the Environmental Protection Agency to implement a
    protocol which is not in effect in the United States.
        Having said that, we do believe that climate change is
    probably the most significant environmental challenge the world
    will ever face. We do have programs, many of them started under
    the Bush administration, where we work in partnership with the
    business community to help develop energy efficient products.
        In fact, I was able to present awards to 25 new Energy Star
    partners, everybody from I think the State of New York to the
    private sector, who are investing in energy efficient
    technologies, which are good business, air pollution, and
    climate change decisions. This budget seeks an increase for
    those programs.
        Senator Lautenberg. Thank you. If anybody has any doubts
    about the changes in the climate that we kind of see around us,
    I would suggest that all members of the Senate take the trip
    that I took just 2 months ago to go to the South Pole and see
    what is happening and watch the water run where ice used to be
    solid. And today they noted that an ice break was taking place
    that would result in an iceberg twice the size of Delaware
    floating in shipping channels out there. So keep up that focus.
        Do we do anything to coerce developing countries into
    accepting the standards of the Kyoto Protocols? Because India
    and the President came to an understanding to protect the
    environment and develop clean energy resources. Is there
    anything that your Agency is doing?
        Ms. Browner. No, absolutely not. We do work in partnership
    with countries around the world who are interested, for
    example, in exploring American technologies that may bring them
    clean air and clean water. But in no way do we have anything
    that ``coerces''. I cannot imagine how we would go about doing
    something like that. We do not.

                          BEACH PROTECTION LEGISLATION

        Senator Lautenberg. You are aware of the fact that I have
    introduced legislation to improve water quality at our
    country's beaches. And we are working hard to pass a bill this
    year which would authorize funds for EPA, beginning in fiscal
    year 2001, to implement the legislation. How would the EPA go
    about implementing that if we were able to provide you with
    these funds?
        Ms. Browner. We would be thrilled to accept the
    responsibility for implementing the program. One of the most
    important things I think that we can do is make sure, because
    of the way various States have handled beach monitoring, is to
    make sure there is some continuity, so that we can put in place
    what are the monitoring protocols and what are the reporting
    requirements. Your State is very successful and aggressive, but
    not all States are. We have a real disparity in the quality of
    the information. One of the first things we want to do is to
    put in place the requirements so that we are getting even
    information across the country.
        You mentioned in your opening statement our web site. The
    effort is not because of any specific requirement that we are
    imposing, but rather through the public's right to know, to
    help local health departments or States really upgrade the
    quality of their information. We are starting to see some
    effect from that, but we certainly think your bill would be
    very helpful.

              DOD'S APPROPRIATIONS BILL: ENVIRONMENTAL VIOLATIONS

        Senator Lautenberg. There is a provision that was added to
    the conference report for fiscal year 2000 in the DOD
    appropriations bill. It said, ``No funds appropriated may be
    used for the payment of a fine or a penalty imposed against the
    Department of Defense arising out of environmental
    violations.''
        Now, how has this worked in practice? I find it incredible
    to say that such an important part of our government, our
    Defense Department, our military installations, is exempt from
    monitoring and maintaining under environmental standards that
    we ask of everybody from the bakery shop, the cleaning store,
    on to giant industrial companies.
        Ms. Browner. We share the concern. The Governors are
    equally concerned. The Governors feel it is extremely important
    that they have all of the tools available to them that the
    Federal laws give them under the Clean Air Act to enforce the
    environmental requirements and to collect penalties if there is
    a violation.
        A Governor said to me recently, ``It is just ridiculous'';
    we are out there enforcing against our cities and yet we cannot
    enforce against a DOD facility. They are very troubled.
        The administration and the President, in signing the DOD
    appropriations bill last year, did so with objections to this
    provision. As I understand it, the administration has told DOD
    that they are to come to Congress and seek the authorization to
    pay the penalties, particularly where the States are asserting
    their rights to collect a penalty.
        We strongly encourage Congress to reconsider the language.
    The administration has prided itself, and the President signed
    an executive order very early on, that Federal agencies would
    not be above environmental requirements. For example, under the
    President's leadership, for the first time ever, Federal
    facilities, including EPA, report under the Toxic Release
    Inventory.
        We need to be good neighbors. Part of being good neighbors
    is honoring environmental requirements. If we fail to, then we
    should be subject to the penalties that any other business is
    subject to. Exempting DOD we think really flies in the face of
    that.
        Senator Lautenberg. Mr. Chairman, thank you.
        Thanks very much, Administrator Browner. I will miss you,
    even if you stay here with the Gore administration.
        Ms. Browner. Well, I will certainly miss you. You have been
    a wonderful friend to the Agency.
        Senator Mikulski. Mr. Chairman, if I could make some
    comment. I know that you are going to be at many other hearings
    on this subcommittee, but I would just like to acknowledge for
    the record the champion that Senator Lautenberg has been both
    on the authorizing and the appropriations for the environment,
    particularly his steadfast support for the SuperFund cleanup of
    toxic waste and the innovative approach on brownfields. So,
    really, you very much are going to be missed. And I would like
    to personally and professionally thank you for your
    contribution.
        Senator Lautenberg. Thank you.
        Ms. Browner. Mr. Chairman, if I might just second that, and
    say to Senator Lautenberg, frequently over the years, when I
    have tried to understand why something is done at EPA, I will
    say, well, where did that come from? Who did that come from?
    More often than not, the answer would be, Senator Lautenberg's
    provision in this or that bill. You really have been a
    tremendous friend to the environment and to public health
    protections, particularly to the EPA. I thank you on behalf of
    all of my colleagues at the EPA.
        Senator Lautenberg. Thank you.
        Senator Bond. Thanks, everybody. I will miss Senator
    Lautenberg, too.
        Senator Lautenberg. That is the sweetest thing you have
    ever said to me.

                     ENVIRONMENTAL INFORMATION INTEGRATION

        Senator Bond. Madam Administrator, to come back to your
    last answer, you talked about the extensive information that
    you are getting in. And that is really why I am so concerned.
    Last year, we directed EPA to provide us with assurances, with
    verification from the I.G., that appropriate steps were being
    taken to install firewall systems, train staff and management
    on computer security, to test the integrity of the computer
    security measures on a periodic basis.
        We need to be able to ensure good environmental information
    and we need to be able to protect from inappropriate disclosure
    the confidential business information that is reasonably
    disclosed to EPA. And when you have hackers getting in there
    and learning that information, perhaps changing or messing with
    the environmental information, we have got a problem. Clearly,
    according to the GAO testimony of last month, after more than 3
    years, EPA has not fixed the critical problem of computer
    security.
        And beyond dealing with the immediate crisis, we believe
    EPA needs a long-term plan for ensuring computer security. EPA
    must be on top of determining whether its intrusion detection
    systems are effective. The threats are changing very rapidly.
    The Office of Environmental Information, for example, must set
    standards and enforce them for computer security throughout the
    Agency.
        I would like to know how we can be confident that EPA will
    put the staff and the contractors on board to address the
    problems. We need to know what assurances that you can give us.
    We know that EPA is requesting $30 million for a new
    environmental information integration initiative, yet we have
    received few details about that. So I would also like to know
    how the funds will be allocated, what will be the
    accomplishments this year, and is this a multi-year funding
    requirement?
        Ms. Browner. Let me answer the last question first and then
    go to your earlier point. On the issue for the States, I will
    come back to it. While a lot of money, $30 million will not
    upgrade all of the States, it will take more resources.
        Senator Bond. So it will take more. I just want to know, do
    you have a plan in place for how the first $30 million will be
    spent?
        Ms. Browner. Yes, we do. I do not know if your staff has
    participated in this planning, however, other staff on the Hill
    have participated. We have had some States that have already
    developed programs come in and do a presentation of these
    programs. We would be happy to do that again. They are quite
    significant and really quite remarkable. They bring with them
    burden reduction for the reporting community and better data
    quality. We would be happy to do that.
        [The information follows:]

                Environmental Information Integration Initiative

        The Agency's integration effort is foremost a partnership effort
    with the States to create and sustain a national environmental
    information exchange network. The scope of the effort is great. The
    States and EPA currently operate with a vast array of individual data
    and information relationships. Building these individual relationships
    into an integrated whole will involve developing and implementing
    smaller components (i.e., individual data standards, program specific
    data models, etc.). While each of these components will have work plans
    with detailed milestones and assignments of responsibility, there will
    also be an overarching blueprint or road map that ensures consistency
    and cooperation among the individual efforts.
        We are currently working with the States to develop that blueprint.
    A critical part of our active dialogue with the State (though the
    Information Management Workgroup under the auspices of the
    Environmental Council of the States) is to ensure that we are prepared
    to make meaningful progress toward the network in fiscal year 2001.
    Together, we have identified a number of key areas for fiscal year 2001
    action, which the President's $30M budget request will support:
    defining the functional and technical requirements of a data exchange
    network, jointly developing and implementing essential data standards--
    the core engine of information exchange and integration, developing the
    technical exchange protocols that allow web-based data exchanges across
    a variety of differing state and federal data systems. Even as we work
    on these foundation pieces, we will identify and pursue opportunities
    for establishing a number of State-EPA electronic data flows through a
    central exchange function. We anticipate that implementing the ever-
    advancing information technologies and the modernization efforts
    underway in a number of states will allow us to see a significant
    volume of data flowing in the emerging network in the next year. This
    approach, building the broad foundation even as we work with individual
    states on specific data exchanges will require us to provide resources
    to individual states (to take bold steps forward in electronic data
    exchange as well as to build capacity to participate in the network) as
    well as resources to broader collective efforts (like data standards
    and technical exchange protocols).
        In order for EPA to be a full partner and equal peer in a State/EPA
    data exchange network, we will continue our efforts in fiscal year 2001
    to modernize and integrate our internal information systems. EPA's role
    in this joint venture requires that our systems be integrated
    internally. Data contained in EPA's unlinked stove-piped information
    systems will not support a type of network that we and the States
    envision. In fiscal year 2001, we will build on efforts initiated in
    fiscal year 2000 to build a secure core of high quality integrated
    information. We will integrate across traditional program lines to
    allow multi-media geographic views of our information assets. The broad
    categories for this integration are: facility and place information,
    regulatory information (permitting, compliance and enforcement),
    chemical and pollutant information and ambient information. In fiscal
    year 2000 we brought together technical staff from EPA's programmatic
    information systems to define the requirements for an integrated system
    and plan for its creation. By bringing a diverse staff representing the
    Agency's main programs together, we have begun the important work of
    building Agency-wide support as well as identifying the priorities for
    integrating our internal information assets.

                               COMPUTER SECURITY

        Senator Bond. We have had some summary briefings. We have
    not seen the plans. We would like to see the plans.
        Ms. Browner. We will do that.
        Mr. Chairman, on the issue of confidential business
    information and security, it is a fast-moving, dynamic world
    out there in the Internet. Like many in government and the
    private sector, we are constantly looking at how to upgrade our
    systems. There were members of Congress aware of our plans.
    Specifically, they were aware of equipment to be installed,
    firewalls to be built, and the schedule for doing these.
    Unfortunately, after some statements made, we were advised that
    we had become a particular target for hackers and that the best
    thing we could do would be to bring our system down while we
    installed the firewalls. We were already planning to install
    these firewalls and had a schedule for installing and people
    were aware of that appropriately.
        It was a difficult decision, because we do service a lot of
    people in industry, the public, and the States. But, we did
    make the decision.
        I think it would be important to note here that we have no
    information, GAO has presented us with no information that I am
    aware of, that CBI information has been inappropriately
    accessed through our Web site. We are vigilant about that. We
    have to remain vigilant about it. We did have an issue with
    paper copies, and reported it several years. These were not in
    our Internet system.
        Second, a number of the stories or reports about
    inappropriate access, or hackers as they are sometimes referred
    to, are situations which we ourselves found and disclosed to
    the GAO. That is the way it should work. It is not to say that
    we do not need external experts or external advice. We do have
    that.
        Mr. Chairman, we would be happy, if we have not done so, to
    meet with your staff in a more private setting to go through
    with you a detailed description of the firewalls. There are
    reasons why that might be something we would not discuss
    publicly.
        Senator Bond. Well, I think it is important. We certainly
    accept that opportunity. And it is important that we have, I
    think, the GAO and the I.G. involved, because they have done
    significant operations in this.
        Ms. Browner. They have been involved.
        Senator Bond. Three years ago, we said you have to have
    firewalls. And I am very disappointed that we are still----
        Ms. Browner. We had firewalls, and we have been upgrading
    the firewalls. Mr. Chairman, as I am sure you know, this is a
    fast-moving world that we do this in. We have been upgrading
    our firewalls. We had a schedule to further upgrade them and
    those upgrades are now all in place.
        Senator Bond. The other thing I understand from the GAO
    report is that you said there has been no access to
    confidential business information but, in reading the reports,
    I get the real sense that there is no means of detecting
    whether there has been unauthorized access. And that is one of
    the problems.
        Ms. Browner. As far as I know, the GAO has not notified us
    that they are aware of access to CBI through our Internet. If
    they are, then it is news to me.
        Senator Bond. Well, I am not saying that there is. I am
    saying that there is no means of determining whether there has
    been or not.
        Ms. Browner. Part of the firewalls are enhanced intrusion
    devices. I do well to turn on my computer.
        Senator Bond. I have to have help.
        Ms. Browner. That is why I have a 12-year-old. He comes
    around to help.
        Senator Bond. Let me turn to Senator Mikulski. Further
    questions?
        Senator Mikulski. Mr. Chairman, I had to step outside for a
    minute. Were you going over the information security system?
        Senator Bond. Yes.
        Senator Mikulski. Do you feel that you have covered the
    ground that you needed to?
        Ms. Browner. Pretty good.
        Senator Bond. We are going to get together again.
        Ms. Browner. We are going to have a private meeting on the
    firewalls.
        Senator Bond. We are going to open some sodas and cook some
    hamburgers and talk at length about this.
        Senator Mikulski. You better watch about those emissions
    when you do that killer grilling.

                               INTERNET SECURITY

        I, too, am concerned about the information security
    aspects. First of all, we were glad that we got through Y2K.
    And I think while we are looking at what we need to really
    develop, I think it has really served the Nation well that we
    did not have the computer glitches that could have caused
    serious problems in our water supply and our waste water and so
    on had that not worked at the State and local level. And I know
    that you, as well as the President's task force, worked very
    hard with the Governors and FEMA on that. So that was very,
    very good news.
        But I, too, am concerned about these security issues. More
    and more people are going to be turning to EPA and they are
    going to be wanting to go to your Web sites and so on. In many
    ways, that really can help a lot with the right to know. Then
    they can get back to you on the right to be heard. But, again,
    there are these security concerns. And when you have this
    private meeting, either I or my staff would like to participate
    in them.
        Ms. Browner. Thank you.

                                 PUBLIC HEALTH

        Senator Mikulski. I would like to be able to go to the
    issues related to your interagency help. Because I am really
    tremendously interested in the public health linkages. EPA, in
    your strategic plan in 1997, found that there were over 25
    Federal agencies that require greater integration and review of
    efforts in terms of public health. Could you tell me what you
    have been doing on the issues of asthma, and then, if we have
    time, on the issue of lead paint? Because this cuts across what
    EPA needs to be doing.
        You are not meant to be a public health--I mean we have Dr.
    Satcher, who is the Surgeon General, but so much of this goes
    across community lines, I mean agency lines.
        Ms. Browner. We agree. I think one of the real successes of
    this administration has been the increased work across agency
    lines. Two things that I will mention. One is regarding asthma.
    I co-chair the President's Kids' Health Task Force and many
    other agencies participate in. Together we have put forward a
    coordinated asthma strategy, bringing together the expertise of
    the various agencies. We do seek funding in this year's budget
    for implementation of that strategy.
        Second, we have developed a coordinated lead strategy. It
    goes beyond agencies you might even think would be part of a
    lead solution. Obviously HUD needs to be an important part. We
    work very closely with them in terms of enforcement. But we are
    also bringing in the Department of Energy. A lot of lead
    contamination in older housing is a product of opening and
    closing old windows. The dust comes down, the kids play in the
    dust, and they ingest it.
        As you look at energy efficiency, as upgrades in these
    older housing stock, you can replace the window, resulting in
    increase energy efficiency and lead abatement. And we are
    continuing to expand our efforts with other agencies on lead
    abatement.
        Senator Mikulski. What have you found to have been the
    major causes of asthma? And what has been the role of EPA in
    dealing with this? Asthma, particularly among children, and we
    see this both among the children of the poor, but as well as
    the children of the middle-class, that it has in many of our
    schools, reached epidemic proportions. Many of the children who
    require medication during school are asthma kids. The question
    is always, who can give the medication? Those are legal issues.
    But I am really worried about this, and our school system is
    really worried.
        Ms. Browner. We have worked with Hopkins on the asthma
    issue. The role of the Environmental Protection Agency is in
    setting outdoor air quality standards. What the scientists and
    the public health experts tell us is that we do not necessarily
    know why one child is an asthmatic and another child is not an
    asthmatic. They cannot answer that question yet.
        What they do know and the many studies that have looked at
    this, is for an asthmatic child, when the air pollution reaches
    certain levels, the quality of their attack will be worse.
    There are extensive studies involving what are called the
    summer camp kids in New Jersey, where it actually charts their
    breathing at any given moment. The air pollution goes up and
    the severity of their attack goes up.
        This has been our primary focus. We recognize that it is a
    crisis and an epidemic. It is the single largest cause of
    childhood hospital admissions in the United States today. We
    are also working through our indoor air program and through our
    Tools for Schools Program, to provide some advice and some
    ideas on how to help reduce the children's attacks and some of
    the exposures beyond the work we do on outdoor air.
        Senator Mikulski. Thank you.
        Thank you, Mr. Chairman.

                           CLEAN WATER: GAP ANALYSIS

        Senator Bond. Thank you, Senator Mikulski.
        Madam Administrator, in our hearing last year, we talked
    about the gap analysis that EPA was working on for water
    infrastructure funding needs, which identified a $200 billion
    need, excluding replacement costs and operation and
    maintenance. One year later, it still is not out. We have a
    copy of a presentation the EPA made recently on the gap
    analysis. It lays out a few critical facts: Waste water capital
    investment is declining, but it needs to double; the annual gap
    in capital spending for waste water treatment is increasing;
    the amount paid by consumers in waste water treatment user fees
    has doubled in a little over a decade. It recommends increasing
    SRF authorizations and Federal grants.
        In view of the funding gap for water infrastructure
    financing of at least $200 billion, coupled with the prospect
    of new TMDL requirements, and your own analysis would suggest a
    larger Federal role is needed, why is the President's budget
    cutting, once again, the Clean Water SRF by 40 percent?
        Ms. Browner. Mr. Chairman, we discussed this last year. We
    continue to believe that we have to modernize and reauthorize
    the Clean Water Act and then, with that, provide the
    appropriate funding. The administration made a commitment at
    the beginning of the administration to have the Clean Water
    SRF, which is one large and important part of solving water
    pollution challenges in this country, but it is not the only
    part.
        We made a commitment to have that portion of it revolve at
    $2 billion annually, in terms of loans going out annually, by
    the year 2002. We are going to be there before that. The money
    is moving at the rate that we promised the cities. We think it
    is now time to focus all of our efforts on modernizing the
    Clean Water Act. It has not been reauthorized in a significant
    period of time. We know a lot more about remaining water
    pollution problems and how to create a funding mechanism for
    States and local governments that speak to the whole host of
    remaining issues, from upgrading sewer plants to dealing with
    polluted runoff.
        We have money in this budget request outside of the SRF for
    the dollars that go to States. As I mentioned in the previous
    answer, the Section 319 money gets increased as well as the
    TMDL money. TMDL is a base of $115 million. We would increase
    that by $45 million. Section 319, the non-point, or polluted,
    runoff money would get a 25-percent increase. It would go from
    a base of $200 million to $250 million.
        We are asking for specific money for the States. You and I
    do not have a disagreement over the long-term infrastructure
    funding needs. We simply would request that that be done
    through a reauthorization process, to look at all of the
    issues.
        Senator Bond. It is interesting that not having an
    authorization is given as a reason OMB has not submitted to us
    requests for adequate funding. At the same time, we get
    requests for funding for clean air partnerships and a host of
    other unauthorized programs. We have fought to raise the amount
    spent on the Clean Water Revolving Fund each year, and that is
    the only reason we are getting up close to $2 billion. But even
    that $2 billion fund, given the information that we have, is
    woefully inadequate.
        Your own Agency officials have said the United States now
    spends about $9.4 billion annually on waste water and wet
    weather infrastructure, but needs to spend $15 billion. And by
    the year 2020, the annual investments needed will be $21
    billion to meet the projected waste water treatment needs
    alone. Are you saying that having a $6 billion annual funding
    gap is acceptable in this?
        Ms. Browner. No, we are not suggesting that. We want to
    work with Congress, to modernize the law and the funding
    programs.
        I am not sure what copy you have. I think it may be a copy
    we provided to your staff of our initial gap analysis. We are
    finalizing that, as I promised you we would do. We will be back
    up in April to give you the final report. Hopefully, that can
    form a basis for working together, through this committee and
    the authorizing committee, to find the appropriate legislation
    and then the appropriate funding.
        Senator Bond. Again, I would like to see the Clean Water
    law reauthorized. As far as I know, there are not any problems
    in the SRF's related to the authorization.
        Senator Mikulski, do you have any further questions, or can
    we finish it up?
        Senator Mikulski. No, Mr. Chairman. We can finish it up.

                                      TMDL

        Senator Bond. Okay, we will go very quickly, and I will try
    to summarize these things.
        Senator Mikulski. Very good.
        Senator Bond. We appreciate very much your participation.
        Ms. Browner, you support flexible approaches to achieving
    environmental standards. Yet the EPA TMDL approach is the old
    style, command and control, one size fits all. As an example,
    concerns have been raised by experts that EPA's proposal
    discourages a cap-and-trade system for reducing nutrients in
    surface water. Is not a cap-and-trade system one of the most
    promising means for meeting water quality standards?
        Ms. Browner. If someone has suggested that we are opposed
    to cap-and-trade and TMDL's, they are categorically wrong. We
    are not. They provide a huge opportunity for finding cost-
    effective solutions. I have been a big proponent of them in the
    air pollution programs where they are used to great success. We
    would like nothing better than to see States use them as a very
    efficient tool for addressing remaining water pollution
    problems.
        Senator Bond. We had the testimony of Leonard Shabman and
    Kurt Stephenson, agricultural economists in Virginia Tech's
    Department of Agriculture and Applied Economics. They were the
    ones who said it would.
        Ms. Browner. I do not think they work for EPA. EPA likes
    these programs.
        Senator Bond. No. That is why I said experts, people who
    are looking at it from academia.
        EPA determined the proposed rule does not contain a Federal
    mandate that would result in expenditures of $100 million or
    more for State, local and tribal governments. Most of us here
    are absolutely astonished at that conclusion. The States have
    indicated to us that the estimate is at least $600 million per
    year, based on the average cost of TMDL's developed to date.
        What has been your experience with the TMDL's developed to
    date? Do you have a cost on that or do you want to get back to
    me with that?
        Ms. Browner. Yes, I think we should do that.
        One of the reasons, Mr. Chairman, just quickly, we had
    proposed this--well, there are many reasons in the Clean Water
    Act, of course.
        But second, we are being sued. The cause of action, as
    created in the Clean Water Act lies against EPA not against the
    States, for failing to set these loads and developing sensible
    plans to achieve the load reductions. So one of the reasons we
    have come forward with a rule is to get out from under this
    litigation. What we have are judges saying, do it more quickly,
    do it in 7 years. We are proposing 15 years for the States.
        So we have now done some of these. So we would be happy to
    give you a figure on what any individual one that we have done
    has cost.
        [The information follows:]

      Analysis of the Incremental Cost of Proposed Revisions to the TMDL
                              Program Regulations

                                  INTRODUCTION
        This report estimates the incremental costs of EPA's proposed
    revisions to the TMDL program regulations. The costs estimated here are
    the costs of the revised TMDL program beyond those that will be
    incurred for the base program--beyond those that would be necessary to
    meet the requirements of current regulations, consent decrees and State
    commitments. For the purpose of estimating incremental costs, the
    proposed regulatory revisions can be grouped into Five categories:
        I. Changes affecting the listing program.--The changes clarify or
    revise the format and content of the State 303(d) submissions, and also
    require additional public participation. The proposed regulations also
    request comment on options that may alter the required frequency of
    submissions ranging from leaving the frequency at the current two years
    to reducing it to once every four or five years.
        II. Changes affecting the development and content of TMDLs.--The
    proposed regulations specify elements that must be included in each
    TMDL, including an implementation plan. Enhanced public participation
    in developing TMDLs is also required. Most of the specified TMDL
    elements are already required by existing regulations. The new required
    elements for TMDLs do not mandate additional monitoring, data
    acquisition or analysis, but specify that existing information that
    must be obtained anyway for other ongoing water program purposes should
    be organized, formatted or reported in a new manner.
        III. Changes affecting the schedule for completing TMDLs.--The
    proposed regulations specify that all required TMDLs must be developed
    within 15 years, and that TMDLs for high priority waterbodies must be
    developed first. For those few States that have not already committed
    to a schedule of 15 years or less, this requirement will mandate an
    acceleration of program effort.
        IV. Changes affecting Agency effort.--The proposed changes in the
    listing program for States will result in increased EPA effort, and
    proposed changes in the content of TMDLs will increase the Agency's
    effort in reviewing TMDLs. The proposed regulations highlight an option
    for the public to petition EPA to take a desired action rather than
    proceeding directly to litigation. EPA also will propose to provide
    reasonable assurance for implementation of a TMDL when a State does not
    do so--the specific procedures are included in the proposed revisions
    to the Agency's permitting regulations, and a separate analysis
    addresses the incremental costs that may result.
        V. Summary of the impact on the Agency's Information Collection
    Request.--The Agency is in the process of renewing its Information
    Collection Request for the 305(b) and 303(d) programs. The proposed
    regulations increase the level of effort estimated by the Agency for
    States and for EPA. However, the savings that can result from adopting
    an option to reduce the frequency of the required 303(d) lists could
    more than compensate for the increased burden from the other changes
    affecting the listing program.
        In no case do any of these proposed revisions require any new
    monitoring or data collection. States are already collecting the needed
    information as part of this program or under other parts of the water
    program. In some cases, it may be necessary to accelerate the
    development of information that is already required. By and large, the
    intent of many of these requirements is to improve efficiency and
    national consistency by establishing uniform formats, eliminating
    ambiguities, encouraging prudent planning, improving information for
    public participation, and perhaps by extending the intervals between
    required 303(d) lists. However, we recognize that States meeting these
    requirements for the first time will likely require additional effort
    in the near term, while the benefits will accrue in later years.
        The remainder of this introduction summarizes the estimated costs
    of the proposed regulations and outlines the general procedures we used
    to develop the estimates. The remaining chapters of the report are
    organized according to the five categories described above. In each
    chapter, each proposed regulatory change is described in terms of its
    effect, its relation to the baseline, and its potential incremental
    cost.
                           SUMMARY OF ESTIMATED COSTS
        The following summarizes the results of this analysis for those
    aspects of the proposed rule that are expected to result in incremental
    costs or savings to States and to the Agency. In addition, these
    incremental costs are placed into perspective by comparing them to the
    cost of ongoing State, Territorial and authorized Tribal programs for
    water quality.
    Overall Summary
        The following table summarizes the results of this analysis for
    those aspects of the proposed regulations that are expected to result
    in incremental costs or savings to States. As shown in the table, the
    proposed regulations are expected to increase the costs to States by
    approximately $10.3-$24.4 million annually from the present through
    2015. As shown in the summary table, the bulk of the additional costs
    ($10.1-$23.8 million) are associated with the proposed requirements
    affecting the content and development of TMDLs. For the listing
    program, if the listing cycle is lengthened, then the resulting savings
    could offset the increased listing costs associated with the proposed
    regulations.
        The Agency anticipates that its costs will increase significantly
    in the future, primarily as a result of the increased State activity
    for developing TMDLs that is expected to occur in the baseline. As
    reflected in the Agency's proposed Information Collection Request, the
    Agency anticipates that its annual burden for the 303(d) program will
    increase from about 600 hours annually to about 6,600 hours annually.
    The bulk of this increase (5,600 hours) is for increased Agency effort
    for approving or disapproving TMDLs that are developed by States--this
    burden will occur regardless of the proposed regulation. As already
    reflected in the EPA's proposed ICR for the period 3/1/99-22/28/01, the
    Agency anticipates that the proposed regulation will further increase
    its burden by about 450 hours annually at a cost of about $18,000
    annually. If the listing cycle is lengthened, then the savings that
    result to the Agency would offset the increased burden associated with
    the proposed regulation.
    Perspective on the Magnitude of These Incremental Costs
        The requirements of the proposed revisions will impose a relatively
    small additional cost to ongoing State, Territorial and authorized
    Tribal programs. In fiscal year 1999 States, Territories and authorized
    Tribes will receive $200 million for nonpoint sources under section
    319. This represents an increase of $100 million dollars specifically
    targeted for implementation of the Clean Water Action Plan. Identifying
    impaired and threatened waterbodies and initiating activities designed
    to attain water quality standards is a key part of establishing TMDLs.
    In addition, States, Territories and authorized Tribes will receive
    $105 million under section 106 for implementing their water quality
    management programs, including the development of lists of impaired and
    threatened waterbodies and establishment of TMDLs as required by
    section 303(d). Thus, the proposed regulation's incremental costs of
    $10.3-$24.4 million represent only 3-8 percent of the amount of support
    provided annually by the federal government for these programs, and
    undoubtedly a much smaller proportion of the total State spending for
    these activities.
        The proposed regulation is expected to increase EPA's costs by
    $18,000 annually. This is an insignificant increase compared to the
    overall annual cost of $279 million budgeted by EPA for water quality
    program management.
        As the number of waterbodies identified stabilizes and increasing
    numbers of TMDLs are established, the additional annual costs
    associated with the proposed regulation are expected to decrease. At
    the same time, water quality will improve as TMDLs lay the groundwork
    for more cost-effective and improved controls.

    Summary of the Incremental Costs and Savings To States Associated with
    the Proposed Regulations

                            [In millions of dollars]

    Changes to the Listing Program:                          Annualized Cost
        I.5. Listed waterbodies are grouped into 4 Parts. Only
          Part 1 waters require TMDLs. H/M/L priorities must be
          set for Part 1. (Additional public part. cost is
          included in 7)..........................................     0.02
        I.6. A State's list must include a schedule for
          establishing each TMDL..................................     0.01
        I.7. Listing methodologies must be subject to public
          review and submitted to EPA by January 31 each year a
          list is due.............................................     0.19
        I.8. A new format is prescribed for the listing
          methodology.............................................     0.01
                        --------------------------------------------------------------
                        ____________________________________________________

              Subtotal Annualized Cost............................     0.23
        I.10. Option C: Changing to a 5-year cycle from a 2-year
          cycle after the 2000 listing............................    (0.32)
                        --------------------------------------------------------------
                        ____________________________________________________

              Subtotal Annualized Cost Including Option C.........    (0.09)
                        ==============================================================
                        ____________________________________________________
    Changes Affecting the Content and Development of TMDLs:
        II.1. TMDLs must include specified elements (costs are for
          implementation plan).................................... 5.3-14.3
        II.2 Minimum required public participation in TMDL
          development.............................................  4.8-9.5
                        --------------------------------------------------------------
                        ____________________________________________________

              Subtotal Annualized Cost............................10.1-23.8
                        ==============================================================
                        ____________________________________________________
    Changes Affecting the Schedule for Completing TMDLs:
        III.2. TMDLs for all Part I waterbodies must be developed
          within 15 years of listing..............................   .01-.4
                        --------------------------------------------------------------
                        ____________________________________________________

              Subtotal Annualized Cost............................   .01-.4
                        ==============================================================
                        ____________________________________________________
              Total Annualized Cost (Excluding Savings from I.10.
              Option C)...........................................10.3-24.4

       METHODOLOGY--GENERAL PROCEDURES FOR DEVELOPING THE COST ESTIMATES
        This section reviews several general elements of our cost
    estimating methodology. We use the approach described in this section
    to develop, in subsequent chapters, estimates for the costs of the
    individual provisions of the proposed regulations. This section covers
    the following topics:
      --Definition of the Baseline
      --Data Sources
      --Time Period for Cost Estimates and Annualization Procedure
      --The Number of TMDLs to Be Developed
      --Labor Rates and Costs for Supervisory and Clerical Functions
      --Affected Entities
      --Costs When EPA Performs a Function Rather Than a State
    Definition of the Baseline
        Estimates of the incremental impact of some of the proposed
    revisions are sensitive to how the baseline of current program
    requirements is defined. The more that is said to be already required
    in the baseline, the less is the incremental burden of the proposed
    regulations. For this report, the baseline has been defined as the
    greater of:
        1. The requirements of existing TMDL regulations, other existing
    water program regulations, and consent decrees affecting the program;
    and
        2. Current State program practice, as reflected in the combination
    of recent State TMDL program performance and commitments the States
    have made regarding future performance.
        Practices called for by EPA's TMDL program guidance materials--to
    the extent they go beyond existing regulatory requirements and to the
    extent State performance falls short of them--are therefore not
    included in the baseline.
        Several examples will clarify the application of this definition.
    First are instances where State practice falls short of existing legal
    requirements:
      --In some cases, existing Federal regulations require States to do
            something that they may not have done in practice. For example,
            existing regulations \1\ require each State to describe the
            methodology it used to develop its 303(d) list. Despite the
            existing regulation, in some cases some States have not
            provided this description of their listing methodology. The
            proposed regulations restate and clarify the requirement to
            describe the listing methodology. Under our definition of the
            baseline, we attribute no incremental cost to this provision of
            the proposed regulations. States are required by existing
            regulations to describe their listing methodology. The cost of
            doing so is associated with the current program; it is not a
            cost of the proposed revisions.
    ---------------------------------------------------------------------------
        \1\ 40 CFR 130.7(b)(6).
    ---------------------------------------------------------------------------
      --The proposed regulations go further to specify the format of the
            State's description of its listing methodology. This does not
            appear in existing regulations, and few if any States have
            described their listing methodology in this manner. In our
            view, this proposed requirement does impose incremental costs
            beyond the baseline. The incremental costs we estimate,
            however, are not the entire costs for a State to describe its
            listing methodology, but the added costs of describing the
            methodology in this particular manner. A description of the
            State's listing methodology and the on-going costs of preparing
            the description are part of the baseline. The costs of this
            proposed regulatory provision are whatever additional costs
            accrue in providing the description in this more specific
            format rather than in the less specific format that would
            suffice under the existing regulations. Further, the effort to
            reformat the description would only be a one-time cost.
        In other cases, State practice exceeds what is called for by
    existing legal requirements (current regulations and existing consent
    decrees). Here we assume that States will continue their current
    practice, and the proposed regulations will impose costs only to the
    extent that they require more than what States are currently doing.
    Here are two examples:
      --Existing Federal regulations do not explicitly require an
            implementation plan as a part of each TMDL. The consensus among
            TMDL practitioners, however, is that a thorough TMDL should
            include such a plan, describing how the TMDL decisions will be
            implemented and how progress will be monitored toward
            attainment of the water quality standards. Accordingly, many of
            the TMDLs that States have developed recently (perhaps roughly
            \1/4\ of them, as discussed in chapter II) have included an
            implementation plan, even though EPA regulations have not
            required these plans. The proposed regulations will now
            explicitly require implementation plans for all waters for
            which TMDLs will be developed. We assume in the baseline that
            States will not backtrack on their current practice of
            preparing these plans for about \1/4\ of the TMDLs. In the
            absence of the proposed regulations, States will continue to do
            this. We therefore estimate that the incremental cost of the
            proposed regulations requiring these plans will be roughly the
            average cost of preparing such plans for a typical TMDL
            multiplied by \3/4\ of the total number of TMDLs to be
            prepared.
      --Existing Federal regulations do not specify the time by which a
            State must complete TMDLs for all its listed waters.
            Nevertheless, due to public pressures, legal action and other
            factors, most States have now committed to complete their TMDLs
            within some specified time frame. Eleven States have signed
            consent decrees committing to deadlines for completing all
            their TMDLs, and 40 additional States have made other deadline
            commitments to EPA. States have chosen a variety of time frames
            for completing their TMDLs, ranging from as little as three
            years to as many as twenty. The proposed regulations will now
            require all States to complete their TMDLs within 15 years
            after listing, thus effectively requiring that all TMDLs for
            waters listed in the year 2000 (the first list to which the new
            regulations would apply) must be completed by 2015. We assume
            the existing State commitments to be part of the baseline--we
            assume that State practice will match what they have committed
            to. All but 4 of the States have committed through consent
            decrees or otherwise to complete TMDLs for all their currently
            listed waters by 2015--3 states are in the process of making
            their commitments and one state planned on completing its TMDLs
            by 2018. Thus, the proposed regulations may have an incremental
            impact on these four States to the extent it requires them to
            accelerate their planned pace for completing their TMDLs.
        To summarize, the baseline we define for purposes of incremental
    costing is the greater of existing legal requirements (regulations and
    consent decrees) and existing practice (recent State performance and
    commitments).
    Data Sources
        Most estimates of the amount of staff level of effort (LOE) needed
    to perform a new task required of States by the proposed regulations
    have been provided by a State representative. Estimates of the State
    LOE associated with the baseline 303(d) listing program have been drawn
    from EPA's analysis of the respondent burden for this program as
    reported in the Agency's most recent approved Information Collection
    Request (ICR) submission. Similarly, estimates of the Federal LOE
    required for tasks under the baseline listing program are also drawn
    from the ICR.
        Other information is drawn from a review of State 303(d) list
    submissions, TMDLs submitted to the Agency, and a data base of listed
    waters prepared by Tetra Tech, Inc.\2\ This information was current as
    of early December, 1998. It includes those State list submissions and
    TMDLs received by EPA Headquarters and entered into the data base as of
    this time. For most States, this means their 1998 lists, but for some
    States that had not yet submitted their final 1998 lists or for which
    data base entry was not yet complete, our information is based on their
    1996 lists. This information can be updated as more 1998 lists are
    submitted and analyzed. The cost estimates will likely change slightly
    as this newer information is incorporated.
    ---------------------------------------------------------------------------
        \2\ Kevin Kratt, Tetra Tech. ``Updated memo on TMDL listing and
    development questions relating to EPA's new regulations.'' November 20,
    1998.
    ---------------------------------------------------------------------------
    Time Period for Cost Estimates and Annualization Procedure
        The first 303(d) lists to which the proposed regulations will be
    fully applicable will be the lists to be submitted in 2000. The
    proposed regulations will require TMDLs for all listed waters to be
    completed within 15 years, by 2015. We have chosen the time period for
    the cost analysis as extending from the beginning of 1999 through 2015
    so as to encompass the full cycle of program activities for this set of
    waters--from initial work on the listing through completion of TMDLs
    for all these waters. We estimate the incremental costs associated with
    each provision of the proposed regulations over this 17 year period.
    Some of these costs will occur once during this period (such as the
    one-time costs associated with adopting a new format), some will occur
    several times (e.g., under one option proposed for the listing program,
    lists will be required to be submitted every 5 years, starting in 2000
    and then in 2005, 2010 and 2015), and some will occur each of the
    thousands of times a TMDL is developed during this period. In each
    case, we estimate the amount of the cost and how often and when it will
    recur during this period. Projected costs are then summed for each year
    from 1999 through 2015 and discounted back to the beginning of 1999
    using the OMB-recommended real discount rate of 7 percent annually.
    When discounting, we assume that all of the costs incurred in a year
    occur at the beginning of the year--this is a conservative assumption
    that tends to increase the present value cost of the proposed
    regulations. We then annualize this present value figure over the 17
    year period of analysis. The result is the estimated annual cost of
    each proposed regulatory requirement.
    The Number of TMDLs to be Developed
        One of the most important data elements needed in estimating the
    costs of the proposed regulations is the number of TMDLs that will need
    to be developed over this time period. Some of the proposed regulatory
    requirements increase or accelerate the cost of developing a typical
    TMDL. The total cost of such requirements can generally be estimated by
    multiplying the cost increase for a typical TMDL by the number of TMDLs
    to be developed. Unfortunately, there are several unknowns in
    estimating the number of TMDLs to be completed.
        The best initial indicator of the number of TMDLs is the number of
    waters listed by States in their 303(d) lists. By combining the most
    recent lists from each State, we estimate a current national inventory
    of some 20,198 listed waters. The ultimate number of TMDLs needing
    development will differ from this number for several reasons:
      --Several sorts of waters must be included on States' 303(d) lists
            even through they will not in the future need TMDLs developed
            for them. These sorts include: (1) Waters that are impaired or
            threatened by pollution (e.g., flow alteration or exotic
            species) rather than pollutants and that are thus not amenable
            to TMDLs; (2) Waters that have already had TMDLs developed for
            them, but for which WQS have not yet been attained; and (3)
            Waters that are impaired, but for which planned activities
            other than TMDLs will bring them into attainment. Under the
            proposed regulations, these three sorts of listed waters not
            needing TMDLs would be classified in separate parts of a
            State's 303(d) list.
      --Many additional currently listed waters will eventually prove not
            to need TMDLs. States often list waters on a conservative
            basis, choosing to list a water even though the information
            suggesting that it is impaired is very limited. Subsequent
            monitoring may find that the water is not impaired and need not
            be listed.
      --On the other hand, not all the waters that will eventually need
            TMDLs are currently known and listed. States have monitored or
            assessed only a fraction of their waters. As assessment and
            monitoring efforts expand to more of the Nation's waters, more
            impaired waters needing TMDLs will be found. The States' 303(d)
            lists submitted in 2000 will undoubtedly include some waters
            recently discovered to be impaired that were not on the 1998
            lists. Similar additions will occur in the lists due in future
            years after 2000.
        Some perspective on the likely balance between the factors tending
    over time to increase the number of listed waters and other factors
    decreasing it is provided by the change between 1996 and 1998 in the
    number of waters listed by States. For the 38 States for which 1998
    list data has been tabulated, the 1998 lists in total are about 35
    percent longer than the 1996 lists. This suggests that the discovery
    over time of new impaired waters that should be added to the lists has
    had a greater impact than the process of paring the lists down by
    eliminating waters that really do not need to be listed (in effect,
    that the third of the bulleted factors mentioned above has outweighed
    the second).
        Additional factors complicate the relationship between the number
    of listed waters and the number of TMDLs that will need to be done:
      --Many listed waters have more than one cause of impairment, and a
            TMDL may be needed to address each cause. For the 1998 303(d)
            lists, there are about twice as many causes of impairment as
            waters. If each cause were to require a separate TMDL, then
            about twice as many TMDLs would be required as there are
            waters. However, it is often possible to develop a single TMDL
            that simultaneously addresses multiple causes of impairment in
            a water.
      --The geographic scale at which TMDLs are developed may not match the
            scale at which waters are listed. Some listed waters are very
            large, and multiple TMDLs will likely need to be developed for
            different portions of a single listed water. Conversely (and
            probably more commonly) some listed waters have water quality
            problems and potential solutions that are very closely related
            to those for adjoining listed waters, and a single TMDL can be
            developed on a watershed basis addressing a set of several
            listed waters.
        In sum, there are large uncertainties about how many currently
    listed waters will not need TMDLs done for them, about how the number
    of listed waters will change over time, and about how many TMDLs will
    be needed per listed water. Assessing the combined impact of the
    various factors affecting the relationship between the number of
    currently listed waters and the number of TMDLs that will eventually
    need to be done through 2015 is extremely difficult. Our rough guesses
    are that:
      --The three factors we cited initially--the three sorts of currently
            listed waters that will not need TMDLs, the deletion from the
            lists of waters that ultimately prove not to be impaired, and
            the addition to the lists of additional waters found to be
            impaired--on balance will result in a number of waters
            eventually needing TMDLs that is somewhat greater than the
            current number of listed waters.
      --The ``causes'' information suggests that a minimum of 1 and a
            maximum of 2 TMDLs on average will need to be developed per
            listed water.
      --The frequency of geographic consolidation of TMDLs (developing one
            TMDL on a watershed basis that covers several listed waters)
            will prove much greater than the frequency of geographic
            disaggregation (developing multiple TMDLs to cover disparate
            sections of a single listed water).
        On balance, we will assume, we believe conservatively, that the
    roughly 20,000 currently listed waters will result in the need to
    develop between about 20,000 and about 40,000 TMDLs over the period
    from the present through the year 2015.
    Labor Rates and Costs for Supervisory and Clerical Functions
        A State representative provided an estimate of $80,000 as the
    typical current fully loaded cost (including salary, all benefits and
    indirect costs) of a technical State FTE with typical qualifications
    for performing TMDL work. This is generally consistent with estimates
    made by states that have prepared workload estimates for their water
    quality and TMDL programs.\3\ By contrast, the cost of an EPA FTE
    working on the 305(b) or the 303(d) program has been estimated to be
    somewhat higher, at $83,971 per year.\4\
    ---------------------------------------------------------------------------
        \3\ For example, the Washington State Department of Ecology
    developed a detailed workload model for their TMDL program. For this
    model, they estimated that the current annual cost of an FTE is roughly
    $80,000 per year. (Total Maximum Daily Loads Workload Model, Program
    Definition and Cost. Department of Ecology Publication # 98-26, July
    1998, page 9).
        \4\ EPA's recent ICR for the 305(b) and 303(d) programs assumed
    that work was done by staff at an average salary level of Grade 10 Step
    7, and applied an overhead rate of 110 percent. Using 1998 salary
    rates, this amounts to a loaded labor rate of $83,971 per FTE.
    ---------------------------------------------------------------------------
        The State representative also expressed some concern that EPA's
    proposed TMDL program regulations might slightly increase the average
    quality of the State technical staff needed (e.g., the increased public
    participation requirements would increase the need for skilled public
    meeting facilitators) and increase States' needs for travel money and
    laptop computers. He suggested that, in order to be conservative in our
    cost estimates, we might want to assume that the additional State LOE
    required by the new regulations, with support, might cost slightly more
    than the $80,000 figure for the fully loaded average cost of an FTE
    under the current program. In response to this suggestion, we have
    assumed that the additional State LOE required by the new regulations
    will cost as much as an EPA FTE, or $83,971 per year. EPA's recent ICR
    makes the same assumption that State FTEs cost the same as EPA FTEs. On
    an hourly basis, this is the equivalent of a fully loaded cost of
    $40.37 per hour. In this cost analysis, therefore, we assume that
    incremental State technical LOE required by the proposed regulations
    costs $40.37 per hour.
        This accounts for the cost of the incremental technical staff
    hours. To this we add the costs of clerical and supervisory support for
    the technical staff hours, as follows. The State representative cited
    the detailed study conducted by the State of Washington that found that
    one clerical worker was needed for every 8.5 technical staff and one
    supervisor was needed for every 7.7 technical staff. Together, clerical
    and supervisory personnel needs are thus approximately .25 FTE for
    every 1 technical FTE.\5\ We thus added a 25 percent factor for
    clerical and supervisory support to the estimates provided for the
    technical LOE needed to accomplish a task required by the proposed
    regulations. All the LOE estimates provided in this report include this
    25 percent factor, they therefore include both the technical and the
    clerical/supervisory support needed to meet the requirements of the
    proposed regulations.
    ---------------------------------------------------------------------------
        \5\ 8.5 technical staff per 1 clerical staff means 118.5 or 0.1/8
    clerical per technical. 7.7 technical staff per 1 supervisory staff
    means 1/7.7 or .130 supervisory per technical. Summing the two gives
    .248 clerical plus supervisory per one technical.
    ---------------------------------------------------------------------------
    Affected Entities
        In this document, we use the term ``States'' for convenience to
    include the 50 States plus the District of Columbia, Puerto Rico, the
    Virgin Islands, American Samoa, Guam, and the Commonwealth of the
    Northern Marianas. When we refer to the cost for a typical State to
    perform an activity, we mean the average cost that will be incurred
    across these 56 entities. We will often then multiply this average cost
    by 56 to obtain a national cost estimate. In the future, Tribes may
    apply and be authorized to implement the TMDL program for their waters.
    If so, the average cost per ``State'' would need to be multiplied by
    more than 56 to obtain a national cost estimate.
    Costs When EPA Performs a Function Rather Than a State
        Many TMDL program activities must be performed by EPA in instances
    when a State fails to perform a required function. When this happens,
    it is likely that EPA's cost of performing these functions will be
    higher than the State's costs for several reasons: EPA's performance in
    stepping in for a State will likely be less efficient than the State's
    performance would have been; EPA personnel will be less familiar with
    the particular State context and because of increased travel needs,
    EPA's LOE would probably be greater than the State's would have been.
        We have not estimated in this report the likely increased costs for
    EPA to perform a required TMDL program function when a State does not
    perform it. There are several reasons why we have not made such
    estimates:
      --Most importantly, it is EPA's expectation that in virtually all
            cases the States will perform the functions that are being
            asked of them. Two primary purposes of the proposed regulations
            and supporting draft guidance are to clarify and bring
            consistency to the TMDL program and to provide States with the
            necessary information so that they will fully and successfully
            implement the program.
      --Apart from the reasonable assurance issue, we have no reason to
            foresee any instances in which a State is unlikely to perform a
            required function, and no basis for estimating quantitatively
            how often States might not perform required functions.
        However, in the case of the reasonable assurance requirement,
    States may occasionally be unable to meet a specific requirement of the
    proposed regulations. The specific procedures for this requirement are
    included in the proposed revisions to the Agency's permitting
    regulation, and a separate analysis addresses the incremental costs
    that may result.
              i. proposed revisions affecting the listing program
        The proposed revisions that alter the listing program in ways that
    might be thought to affect cost are:
        1. Clarifying the definition of ``threatened.''
        2. Codifying the scope of the lists to include waterbodies that are
    impaired or threatened by atmospheric deposition, and by all
    combinations of point and nonpoint sources (i.e., point sources only,
    nonpoint sources only, and a combination of point and nonpoint
    sources);
        3. Expanding the scope of the lists to include waterbodies that are
    impaired or threatened by pollution (as well as pollutants);
        4. Requiring that waterbodies remain listed until standards are
    attained (rather than only until TMDLs are approved);
        5. Changing the format for specifying priorities by requiring that
    listed waterbodies be grouped into 4 categories (Parts 1 through 4,
    with TMDLs required for Part 1 waterbodies only), requiring that Part 1
    waterbodies be prioritized into three groups (as either high, medium or
    low priority), and requiring that Part 1 waters with certain
    characteristics be assigned high priority;
        6. Eliminating the requirement that states identify the TMDLs to be
    completed within 2 years, and replacing it with a requirement for
    comprehensive, TMDL-specific schedules as part of the listing:
        7. Requiring that a State's listing methodology be subject to
    public review and submitted to EPA by January 31 prior to each
    submission;
        8. Changing the format for a State's required description of its
    listing methodology; and
        9. Changing the date by which lists must be submitted to EPA to
    October 1 from April 1.
        The incremental impact of each of these revisions is discussed
    below in Sections I.1.-I.9. The combined incremental impact of these
    revisions is summarized at the conclusion of this chapter.
        In addition, the proposed regulations ask for public comment on
    options for further altering the frequency with which lists must be
    submitted:
        10. Options for altering the listing cycle, ranging from leaving it
    a 2-year cycle to changing it to a 4-year or 5-year cycle, either
    effective immediately or subsequent to the next listing due in the year
    2000.
        The incremental costs (which in this case amount to savings rather
    than costs) associated with some of these options are evaluated in
    Section I.10.
        Some provisions in the proposed regulations affecting the listing
    program are not addressed in this chapter because they clearly have no
    or minimal incremental cost or savings associated with them. These
    include:
      --Revising the definitions of TMDL, wasteload allocation and load
            allocation, as well as adding definitions for the terms
            pollution, pollutant, impaired waterbody, thermal discharge,
            and waterbody. These definitions are intended to clarify
            meaning rather than to change the substance of the definitions,
            and do not affect the listing program. To the extent that any
            of these revisions might affect the cost of developing TMDLs,
            they are discussed in the next chapter (II. Proposed Revisions
            Affecting the Development and Content of TMDLs.)
      --Requiring a georeference for each listed waterbody does not affect
            incremental cost because EPA already has a program nearing
            completion that provides this capability at no cost to the
            States.
      --Additional revisions that do not affect cost include:
      --Eliminating the existing regulatory provision that a rationale be
                provided for any decision not to use some existing and
                readily available data and information.
      --Clarifying that violation of a narrative criterion is a basis for
                placing a waterbody on the Sec. 303(d) list.
      --Clarifying the steps and time frames for actions that EPA will take
                if the Agency disapproves a State submittal (list or TMDL).
        This chapter focuses on the incremental costs or savings that
    States may realize due to the provisions of the proposed regulations.
    Chapter IV includes the impact of the proposed regulations on the
    Agency's workload.
    I.1. The definition of ``threatened'' waterbody is clarified.
                Requirement
        The proposed regulations clarify ``threatened'' to mean that
    adverse declining trends for a waterbody currently meeting water
    quality standards indicate that standards will be exceeded by the next
    listing cycle.
                Baseline
        The existing regulations include the requirement to list threatened
    waterbodies, but do not define ``threatened.''
                Incremental Cost
        The additional costs of this clarification are expected to be
    minimal for two reasons. First, no additional data or information are
    needed for States to apply this definition. Second, the time horizon
    specified in the definition only requires a very near-term focus (one
    listing cycle), and likely represents the minimum time horizon that
    States might use to comply with the existing requirement to list
    threatened waterbodies. Further, this clarification may reduce costs in
    those cases where States previously interpreted ``threatened'' to
    require a longer term assessment, such as projecting a decade ahead.
    I.2. The scope of the lists is codified to include waterbodies that are
            impaired or threatened by atmospheric deposition, and by all
            combinations of point and nonpoint sources.
                Requirement
        The proposed rule codifies EPA's existing policy that waterbodies
    impaired or threatened by atmospheric deposition be listed. The
    proposed regulations also codify the Agency's long-standing
    interpretation that the Sec. 303(d) listing requirement applies to
    waterbodies that are impaired or threatened by any combination of point
    and nonpoint sources (i.e., point sources only, nonpoint sources only,
    or a combination of point and nonpoint sources).
                Baseline
        The proposed regulations arc consistent with the Agency's long-
    standing interpretation and policy regarding atmospheric deposition and
    combinations of point and nonpoint sources.
                Incremental Impact
        No additional costs are anticipated since the proposed regulations
    do not alter existing requirements.
    I.3. Expanding the scope of the lists to include waterbodies that are
            impaired or threatened by pollution.
                Requirement
        This proposed revision requires States to use existing and readily
    available data and information to list waterbodies that are impaired or
    threatened by ``pollution'', in contrast to only those impaired or
    threatened by ``pollutants''. States are not required to obtain any new
    data or information to comply with this requirement. The revision adds
    cases where impairments or threats cannot be linked back to any
    specific substance or parameter added to the water (i.e.,
    ``pollutant'', including chemicals, sediment, BOD, bacteria, heat,
    etc.), such as for flow alterations. Waterbodies that are listed as
    impaired or threatened by pollution but not pollutants will be listed
    as Part 2 waterbodies (discussed further below in Section I.5.) and
    TMDLs are not required for them.
                Baseline
        Waterbodies impaired or threatened by pollution are already
    identified as part of the 305(b) reports that States provide. Many
    States have gone further and include on their 303(d) lists some of
    their waterbodies that are threatened by pollution. For example, during
    the 1996 listing cycle, 35 of the States' lists identified at least one
    water listed because of a pollution cause, and 16 of these States'
    lists identified many waterbodies listed due to pollution causes. From
    available information for the 1998 listing cycle for 38 States, at
    least an additional 6 States have identified pollution causes, of which
    4 states identified many causes.
                Incremental Cost
        EPA does not anticipate that these proposed revisions will
    significantly increase the resources needed to prepare listings. States
    have already identified all impaired and threatened waterbodies in
    their 305(b) reports whether due to pollution or pollutants. Further,
    States that have already listed many waterbodies that are impaired or
    threatened by pollution should be only minimally affected by this
    requirement.
        As discussed above, at least 20 States have already listed many
    waterbodies for such causes. The 36 States that have not listed
    waterbodies for such causes previously, or who have done so only to a
    limited extent, may feel it appropriate to hold a public meeting
    regarding their new policy for listing waterbodies affected by
    pollution. This public meeting might be in addition to the public
    participation that already occurs as part of the State's listing
    process. If needed, this additional public participation effort would
    only occur once in support of the State's 2000 listing. However, as
    discussed below in Section I.7., the proposed regulations already
    require that all States hold an additional public meeting that could be
    appropriate for this purpose. The additional public participation cost
    that might be associated with this requirement has been included in the
    incremental cost estimated in Section I.7. below.
    I.4. Waterbodies are listed until standards are attained.
                Requirement
        Currently, most States list waterbodies until TMDLs are approved,
    then drop them from their lists. The proposed revision requires that
    waterbodies remain listed until water quality standards are actually
    met. This only affects when waterbodies are removed from the list, and
    does not require the development of any information that wouldn't
    otherwise be available anyway. These waterbodies will be listed as Part
    3 waterbodies, as discussed later in I.5.
                Baseline
        In most States, a water is removed from the list when all required
    TMDLs for that water are approved. However, the Agency's current
    guidance allows waterbodies to remain on a State's list until standards
    are attained. Some States, such as those in Region 10, have already
    been following this practice.
                Incremental Cost
        No additional costs are anticipated as a result of keeping
    waterbodies listed until standards are attained.
    I.5. Waterbodies must be grouped into 4 Parts (1-4), with only Part 1
            waterbodies requiring TMDLs and these must have high, medium
            and low priorities set for them. Part 1 waterbodies with
            certain characteristics must be classified as high priority.
                Requirement
        The proposed revision requires that waterbodies be grouped into 4
    categories as follows:
        Part 1: Waterbodies impaired or threatened by one or more
    pollutants requiring the development of TMDLs.
        Part 2: Waterbodies impaired or threatened by pollution rather than
    pollutants. A TMDL is not required for waterbodies on this part of the
    list.
        Part 3: Waterbodies for which EPA has approved or established a
    TMDL, but for which water quality standards have not yet been attained.
        Part 4: Waterbodies that are impaired, but for which planned
    activities other than TMDLs will bring them into attainment. If such a
    waterbody does not attain water quality standards by the next listing
    cycle, the waterbody must be included in Part 1.
        Only Part 1 waterbodies require TMDLs to be developed and
    priorities to be established. The proposed regulations further specify
    that, starting with the 2000 listing, Part 1 waterbodies must be
    grouped into three classes of priorities: high, medium and low. The
    proposed regulations specify that high priority Part 1 waterbodies must
    include all waterbodies for which the designated use is public drinking
    water supply or that contain or serve as habitat for endangered or
    threatened species under section 4 of the Endangered Species Act. The
    definition of medium and low priority is left to the States'
    discretion. High priority waterbodies must have TMDLs completed for
    them before low and medium priority waterbodies, and all of the Part 1
    waterbodies must have TMDLs completed for them within 15 years of being
    listed as Part 1--the impact of requiring that TMDLs be developed
    within these specified time frames is evaluated in chapter III (III.
    TMIDLs Must Be Completed Within Specific Time Periods).
        Part 2 waterbodies were discussed earlier in Section I.3. and Part
    3 waterbodies were discussed earlier in Section I.4.
        The proposed regulations do not alter the current requirements for
    Part 4 waterbodies. The proposed regulations do clarify that the time
    horizon over which attainment must be achieved for these waterbodies is
    15 years plus the length of one listing cycle.
                Baseline
        There is no current requirement to group waters. However, no new
    data or information is needed for States to group their waterbodies in
    accordance with the four categories (Parts 1-4) as now specified in the
    proposed revisions.
        With regard to setting priorities, States are already required to
    set priorities for listed waterbodies under the current program. About
    75 percent of the States in their 1996 lists assigned some type of
    priority to their impaired waterbodies, and an additional 10 percent
    assigned some type of priority in their 1998 lists. Some States
    assigned explicit high, medium and low priorities to each water. Some
    States separated their lists into several tiers (e.g., First, Second,
    Third) and waterbodies in each tier were assigned the same priorities.
    Some States actually ranked all their waterbodies or watersheds in
    numerical priority order. Some States set priorities using a rotating
    basin approach, planning to develop TMDLs at the same time for all
    waterbodies located in the same basin. Overall, about 10 of the 56
    States used approaches for setting priorities that are essentially
    equivalent to high, medium and low priorities or that can readily be
    grouped in this manner.
                Incremental Cost
        Setting priorities is already a statutory requirement and an
    ongoing process under the current program. The cost of developing and
    applying approaches for setting priorities is part of the cost of the
    existing program, even for States that have not yet developed or
    applied approaches for setting priorities. Therefore, it is not
    appropriate to attribute any of the cost of this existing requirement
    to set priorities to the proposed revisions. The proposed regulations
    do specify the way that priorities must be set, adding modestly to the
    cost of setting priorities, as discussed below.
        The proposed revisions require a change in the way that waterbodies
    and priorities are grouped. It is anticipated that the additional
    effort to group waterbodies into the 4 Parts would be small. Further,
    it is anticipated that there would not be much additional effort needed
    to identify the small number of high priority waterbodies (i.e., those
    for which the designated use is public drinking water supply or that
    contain or serve as habitat for endangered or threatened species).
        States that are not already grouping waterbodies according to high,
    medium and low priorities may require an additional one-time effort to
    re-orient their approaches for setting priorities for Part 1
    waterbodies. On average, about 100 hours of effort should be adequate
    for revising an existing priority setting system to meet the
    requirements of the proposed regulations. Since 10 of 56 States already
    employ approaches that provide the equivalent of high, medium and low
    priorities, perhaps 46 listings may require the additional 100 hours of
    effort to revise their priority setting systems. However, since the 10
    states that already have appropriate priority setting systems may still
    wish to re-evaluate their systems in light of the proposed regulations,
    we conservatively assume that all 56 states will require, on average,
    an additional 100 hours of effort. This one-time effort amounts to an
    additional 5,600 hours (about 2.7 FTE) at $40.37/hour for a total one-
    time cost of $226,075 to be incurred in 1999. The present value of this
    cost is $226,075 \6\ and the annualized cost of this one-time effort
    through 2015 is $21,641.
    ---------------------------------------------------------------------------
        \6\ As discussed previously in the methodology section, all costs
    are discounted to January 1, 1999 and all costs incurred in a year are
    conservatively assumed to occur at the beginning of the year. Thus, the
    present value of any costs incurred at any time in 1999 ($226,075 in
    this case) is the same as the undiscounted cost ($226,075). This is a
    conservative simplifying assumption because it maximizes the present
    value of any costs incurred.
    ---------------------------------------------------------------------------
        In addition, States that are substantially revising their priority
    setting systems as a result of the proposed regulations might wish to
    hold an additional one-time public meeting for this revision. This
    additional public participation has been included within the
    incremental cost for the new requirement for public participation
    discussed below in Section I.7.
        Finally, it is not anticipated that the proposed regulations will
    result in additional costs for Part 4 waterbodies. Part 4 waterbodies
    are cases where States expect attainment of standards without TMDLs.
        If a State's expectation for a waterbody proves wrong, the existing
    regulations would require the development of TMDLs. The proposed
    regulations' requirement to reclassify Part 4 waterbodies as Part 1
    waterbodies if they fail to achieve attainment within one listing cycle
    only clarifies that there must be a reasonable time horizon for the
    expectation that standards will be attained. This requirement limits
    the time horizon to one listing cycle plus 15 years (the time limit for
    completing TMDLs that are newly listed as Part 1 waterbodies), Thus, a
    waterbody that is classified as Part 4 in the 2000 listing, must
    achieve attainment by the next listing--2002 for the current two-year
    cycle, 2004 if a 4-year cycle is adopted and 2005 if a 5-year cycle is
    adopted; if the waterbody is not in attainment by then, it must then be
    classified as a Part 1 waterbody, and therefore it must either achieve
    attainment or have a TMDL developed for it within 15 years--2017 for
    the current two-year cycle, 2019 for a 4-year cycle, and 2020 for a 5-
    year cycle. The time frame that States currently apply when
    anticipating that waterbodies will achieve attainment without the need
    for TMDLs should be well within the 17-20 year time horizon as
    clarified by the proposed regulation.
    I.6. A State's list must include a schedule for establishing each TMDL,
            replacing the existing requirement to target only those TMDLs
            that will be completed within 2 years.
                Requirement
        The proposed regulations require that States develop comprehensive
    schedules for developing TMDLs for all waterbodies included on Part 1
    of the list. This requirement would replace the existing requirement to
    identify only those TMDLs to be developed within two years. Further,
    the workload for establishing TMDLs must be reasonably paced over the
    duration of the schedule. As time passes, States may alter the sequence
    of TMDL development from the original schedule as technical and
    analytic needs demand. Therefore, the comprehensive schedule commits
    States more to the overall pace of TMDL development, rather than to a
    rigid schedule for specific TMDLs.
                Baseline
        The proposed provision replaces the current requirement that States
    identify those waterbodies for which TMDLs will be developed over the
    next two years.
        Past and ongoing litigation has and will likely continue to result
    in States preparing comprehensive schedules for developing TMDLs. 11
    States representing about 30 percent of the national total of listed
    waterbodies have already developed comprehensive schedules as part of
    Consent Decrees. Plaintiffs have filed litigation for another 15
    States, representing 33 percent of the national total of listed
    waterbodies; and notices of intent to sue have been filed in 5
    additional States. Thus, it is likely that, due to current litigation,
    comprehensive schedules for developing TMDLs would be prepared in the
    baseline for perhaps half of the States, representing a substantial
    portion of the TMDLs.
        About half of the States use a rotating basin or watershed approach
    to water quality management, in which States work sequentially through
    each of their basins on a five year cycle, and schedule all their
    activities in these basins or watersheds accordingly, including
    establishing TMDLs.
                Incremental Cost
        States with Consent Decrees already have comprehensive schedules
    for developing TMDLs. States that use a rotating basin or watershed
    approach to water quality management should be able to readily schedule
    TMDL development in accordance with their existing basin schedule of
    activities, especially given the flexibility in the regulations
    regarding the specific sequencing of TMDL development. States without
    Consent Decrees or States that do no use a rotating basin or watershed
    approach may require the most planning effort to develop realistic,
    comprehensive schedules.
        For the purpose of estimating incremental cost, we conservatively
    assume that all 45 States without existing Consent Decrees will need to
    develop new comprehensive schedules. The task of developing a
    comprehensive schedule is simplified since all these States will
    already have developed high, medium and low priorities for Part 1
    waterbodies (the incremental cost for this effort was included above in
    Section I.5.). The task is further simplified because the regulations
    emphasize primarily the pace of TMDL development rather than the
    precise sequence (the proposed regulations provide States with the
    flexibility to alter the sequence of the specific TMDLs that are to be
    developed). Tbus, it is anticipated that the additional effort needed
    to develop a comprehensive schedule for each of the 45 States would be,
    on average, about 20 hours. The total effort for all 45 States for
    developing the initial comprehensive schedule would amount to 900 hours
    (.4 FTE) at $40.37/hour for a total cost of $36,333 to be incurred in
    2000. However, it is anticipated that the schedule would also need to
    be reviewed with each listing cycle and revised as needed. These
    revisions might require perhaps half of the original effort or an
    average of about 10 hours per listing cycle per State for a total cost
    of $18,167 in each subsequent listing cycle. Across all the States, the
    present value cost of preparing the initial schedule and revising it
    through 2015 (8\1/2\ listing cycles under the existing regulations)
    would be $108,764 and the annualized cost through 2015 would be
    $10,411.
    I.7. Requiring that the listing methodologies be subject to public
            review and submitted to EPA by January 31 for each submission.
                Requirement
        States' listing methodologies must be subject to public review and
    submitted to EPA eight months prior to the deadline for submission of
    the list (which the proposed regulations shift from April 1 to October
    1 of the listing year as discussed later under Section I.9.).
                Baseline
        States currently must submit their listing methodologies to EPA for
    review. The current program requires public participation and review of
    all aspects of the listing submission, which would include the listing
    methodology. In compliance with the Paperwork Reduction Act, EPA has
    periodically prepared Information Requests (ICRs) for the National
    Water Quality Inventory Reports, which include the estimated burden
    associated with the TMDL listing process for respondents and for EPA.
    EPA's current approved ICR (in effect through 2/28/99) estimated the
    States' effort to conduct public participation for the 303(d) program.
    For EPA's current ICR, the total State effort for public participation
    (for the listing program) per listing cycle per State was estimated to
    be, on average, about 120 hours.
                Incremental Cost
        The requirement to submit the listing methodology to EPA eight
    months before submitting the list should not increase the level of
    effort needed by a State to develop the listing methodology. This
    requirement may result in the need for some States to shift forward
    their effort for developing or revising their listing methodology by a
    few months. Generally, it is not anticipated that the cost of
    developing the methodologies will be affected by this requirement.
        However, separating the public review of the listing methodology
    from the State's public participation activities regarding the list
    itself by eight months would likely result in the need for States to
    increase their public participation effort. This additional effort for
    public participation would occur for every listing cycle. Further, as
    discussed previously (in Sections I.3., and I.5.), more extensive
    public participation would likely be required for the first listing
    cycle under the proposed regulations to review changes in the listing
    methodology regarding ``pollution'' causes, changes in the priority
    setting approach, and perhaps changes regarding how atmospheric
    deposition and combinations of point/nonpoint sources are covered. In
    addition, the proposed regulations emphasize the importance of public
    participation. Therefore, the resulting increased State effort for
    public participation is estimated as follows:
      --For the first listing cycle under the proposed regulations (i.e.,
            for the year 2000), we anticipate that the additional public
            participation effort for a State might range from 200-800 hours
            depending on the level of interest in the State and the extent
            of the revisions in the listing methodology. This is considered
            a conservative estimate, given the Agency's current estimate
            that the on-going State effort for all public participation for
            the listing program is on average about 120 hours per listing
            cycle per State. To estimate the national one-time cost for the
            first listing cycle, we conservatively assume that, on average,
            the increased level of effort across the 56 States and
            Territories would be 500 hours per State (i.e., over four times
            the estimated current average for all public participation
            activities), for a total increased effort of 28,000 hours or
            13.5 FTE for the year 2000 listing cycle.
      --For subsequent listing cycles, we anticipate that public
            participation would likely be more routine in nature and
            require far less effort than for the first listing cycle under
            the proposed rules. Nevertheless, to conservatively estimate
            national cost for subsequent listing cycles (beyond the year
            2000), we assume that the average State effort for public
            participation will nearly double from current levels, with the
            average level of effort increasing by 100 hours for a total of
            5,600 hours or 2.7 FTE per cycle subsequent to the year 2000
            listing.
        Therefore, the overall incremental cost for the additional State
    effort for public participation for the first listing cycle (January,
    2000) would be $1,130,373 and would drop to $226,075 for subsequent
    cycles. The present value of this additional cost through 2015 (8\1/2\
    listing cycles under the existing regulations) would be $1,987,363 and
    the annualized incremental cost through 2015 would be $190,239.
    I.8. New format for the listing methodology.
                Requirement
        The proposed revision specifies a new format for describing the
    listing methodology. This new format will not affect the methodology
    that States use.
                Baseline
        The current regulations already require that the listing
    methodology be described. About 69 percent of the 1998 State lists
    explained their listing methodology (up from 56 percent for the 1996
    listing cycle). Because the existing regulations require that the
    listing methodology be described, the cost of describing the listing
    methodology is considered to be part of the baseline, regardless of
    whether a State is currently 20 complying With this requirement.
                Incremental Cost
        Describing the listing methodology is an on-going requirement of
    the current program. However, changing the format may result in some
    additional one-time effort to repackage and clarify the description of
    the listing methodology in accordance with the new format. An
    additional one-time effort of 40 hours in the year 2000 should be
    adequate for adopting the new format. For all 56 listings, the total
    additional level of effort would be 2,240 hours (1.18 FTE), amounting
    to a one-time cost of $90,430 assumed to occur in the year 2000. The
    present value of this cost is $84,514 and the annualized value over the
    period of analysis is $8,090.
    I.9. Changing the listing cycle so that lists must be submitted to EPA
            on October 1 instead of April 1.
                Requirement
        The proposed regulations will require States to submit their lists
    to EPA on October 1 instead of April 1 in each year that lists are due
    to be submitted.
                Baseline
        The current regulations require that States submit their
    Sec. 305(b) water quality reports and Sec. 303(d) lists on April 1 of
    every even-numbered year.
                Incremental Cost
        Shifting the due date for listing submissions by six months to
    October 1 is expected to ease any difficulties that States may have in
    completing both Sec. 305(b) water quality reports and Sec. 303(d) lists
    for submission at the same time. This revised due date is not expected
    to result in increased costs.
    I.10. The proposed rule requests comment on options for changing the
            listing cycle from a 2-year cycle to a 4-year or 5-year cycle,
            either effective immediately or subsequent to the listing due
            in the year 2000.
                Requirement
        The proposed revision asks for comment on options for altering the
    listing cycle. These options include:
      --Option A.--Retain the current 2-year listing cycle,
      --Option B.--Adopt a 4-year or 5-year listing cycle immediately,
      --Option C.--Require that the first list submission under the new
            rule occur no later than October 1, 2000, with subsequent list
            submissions occurring every 4 or every 5 years.
        If the listing cycle is lengthened (Option B or C, then fewer lists
    would need to be prepared and approved in the future, For example, the
    current listing cycle (Option A) would require 8\1/2\ lists to be
    prepared and approved through 2015, while switching to a 5-year cycle
    after the 2000 list (Option C) would require 4 lists. From a cost
    perspective, lengthening the listing cycle would result in savings for,
    both States and the Agency. Potential savings to States are evaluated
    in this section, while potential savings to the Agency are evaluated in
    chapter IV. For simplicity, we have only assessed the savings that
    States would realize from Option C where a listing is required for
    October, 2000 and subsequent listings are required every 5 years
    (instead of every 2 years as currently required).\7\
    ---------------------------------------------------------------------------
        \7\ Generally speaking, the savings associated with a four-year
    cycle would be somewhat less than for a five year cycle--for Option C,
    for example, a four-year cycle through 2015 requires effort for 4\3/4\
    lists as opposed to the 4 lists needed for a five-year cycle. The
    savings associated with Option C would be somewhat less than for Option
    B--for example, for five-year cycles through 2015, Option C requires
    effort for 4 lists as opposed to the 3\2/5\ lists needed for Option B.
    ---------------------------------------------------------------------------
                Baseline
        In compliance with the Paperwork Reduction Act, EPA has
    periodically prepared Information Collection Requests (ICRs) for the
    National Water Quality Inventory Reports, which include the estimated
    burden associated percent with the TMDL listing process for respondents
    and for EPA. EPA's current, approved ICR (in effect through 2/28/99)
    estimates the current respondents' burden of preparing a 303(d)
    listing, and is summarized in the following table. Over the time
    horizon for this analysis (1999-2015), the current program would
    require 8\1/2\ listings. At 25,424 hours per listing cycle, the
    Agency's total effort through 2015 would be 216,104 hours or 103.9 FTE.
    These estimates are also the basis for the Agency's submission to renew
    the existing ICR.

     CURRENT STATE LISTING PROGRAM EFFORT PER LISTING AS ESTIMATED IN EPA'S
                         INFORMATION COLLECTION REQUEST
    ------------------------------------------------------------------------
                                                                     Effort
       ICR                                                Effort      all
    activity           Description of activity          per State    States
     number                                              (hours)    (hours)
    ------------------------------------------------------------------------
          Identify waters needing TMDLs                     215     12,040
          Prioritize waters needing TMDLs                   118      6,608
          Conduct 303(d) participation                      121      6,776
                                                     -----------------------
                Total Hours                                 454     25,424
    ------------------------------------------------------------------------

        When analyzing the impact of Option B or Option C, it would
    appropriate to include the incremental effort associated with the
    proposed regulations as part of the baseline. As discussed in previous
    sections, the proposed regulations will likely result in increasing
    States' efforts as follows:

      INCREMENTAL EFFORT FOR ALL STATES DUE TO THE PROPOSED REGULATIONS PER
                      LISTING AS ESTIMATED IN THIS CHAPTER
    ------------------------------------------------------------------------
                                                        Total effort for all
    Chapter                                                    States
       I        Description of proposed regulatory    ----------------------
    section                  revision                  Year 2000  Subsequent
     number                                             listing    listings
                                                        (hours)     (hours)
    ------------------------------------------------------------------------
      I.5.Revise the listing methodology                 5,600  ..........
      I.6.Develop comprehensive schedules for TMDLs        900         450
      I.7.Provide additional public participation       28,000       5,600
      I.8.Revise the format for the listing              2,240  ..........
           methodology
                                                    ------------------------
                Total Hours                             36,740       6,050
    ------------------------------------------------------------------------

        Thus, over the time horizon for this analysis (1999-2015), the
    proposed regulations would increase the effort of the current listing
    program by 36,740 hours for the 2000 listing and by 6,050 hours for
    each subsequent listing.
        The total listing effort for all States per listing cycle for both
    the current and proposed regulations is summarized in the following
    table:

    TOTAL STATE LISTING PROGRAM EFFORT PER LISTING FOR ALL STATES DUE TO THE
                        CURRENT AND PROPOSED REGULATIONS
    ------------------------------------------------------------------------
                                                 (Hours--all States)
                                        ------------------------------------
                                                      Increment
                Listing year               Current      due to       Total
                                           program     proposed    resulting
                                                     regulations    effort
    ------------------------------------------------------------------------
    2000 listing.......................      25,424       36,740      62,164
    Each subsequent listing............      25,424        6,050      31,474
    ------------------------------------------------------------------------

        Thus, under the current 2-year listing cycle, the States' total
    listing effort through 2015 would be 62,164 hours for the year 2000
    listing and 31,474 for each of the 7\1/2\ subsequent listings. The
    total effort through the year 2015 under the 2-year current listing
    cycle would amount to 298,219 hours or 143.4 FTE.
                Incremental Cost
        The current 2-year listing requirement would result in 8\1/2\
    listings, occurring biennially starting in 2000 and continuing through
    2015. As shown above, taking into account the requirements of the
    proposed regulations, the total effort under the current 2-year listing
    cycle would be 143.4 FTE.
        Option C would lengthen the listing cycle to 5 years, requiring
    only 4 listings over the same period (i.e., for 2000, 2005, 2010 and
    2015). It is not anticipated that a 5-year listing would require more
    effort than a 2-year listing. In addition, Option C does not affect the
    effort needed for the 2000 listing. Consequently, the total effort
    associated with Option C is 62,164 hours for the year 2000 listing and
    31,474 for each of the subsequent 3 listings, for a total of 156,586
    hours or 75.3 FTE.
        Therefore, Option C results in substantial savings compared to the
    current 2-year listing cycle, as summarized in the following table:

       SAVINGS TO STATES ASSOCIATED WITH OPTION C: LENGTHENING THE LISTING
      CYCLE TO 5 YEARS THROUGH 2015 FOR TWO CASES: (1) THE CURRENT PROGRAM
                          ONLY AND (2) THE NEW PROGRAM
    ------------------------------------------------------------------------
                                       Total effort for all       Savings
                                        States through 2015   through 2015--
                                     ------------------------  Option C: 5-
                                        (hours--all States)     year cycle
         Applicable regulations      ------------------------  over current
                                                   Option C:  cycle (hours--
                                        2-year      5-year      all States)
                                         cycle       cycle
    ------------------------------------------------------------------------
    Current Program.................     216,104     101,696         114,408
    Including Proposal..............     298,219     156,586         141,633
    ------------------------------------------------------------------------

        Including the proposed regulations, Option C amounts to a savings
    over the baseline of 141,633 hours or 68.1 FTE. Furthermore, even with
    the increased effort that results from the requirements of the proposed
    regulations, the resulting effort of 156,586 hours is still less than
    the current effort of 216,104 hours under the existing regulations--
    this amounts to a savings through 2015 of 59,536 hours or a 27 percent
    reduction of effort.
        The cost associated with the 31,474 hours for each list beyond the
    year 2000 is $1,270,621. For the current 2-year listing cycle, the
    present value of completing the 7\1/2\ lists from 2002 through 2015
    would be $5,232,210. The present value for the Option C listing cycle
    for the three lists on 2005, 2010 and 2015 would be $1,880,734.
    Therefore the present value of the savings associated with the 5-year
    cycle of Option C is $3,351,476 and the annualized incremental savings
    through 2015 would be $320,818.
    I.11. Summary
        The costs and savings associated with the proposed revisions
    discussed in this chapter are summarized in the table on the following
    page. As shown in the table, the proposed revisions affecting the
    listing program through 2015 are expected to amount to an annualized
    cost of about $230,000.
        If Option B or Option C for the listing cycle were selected, then a
    savings would result that would offset some or all of the additional
    listing program costs of the proposed regulation. Using Option C as an
    example, switching to a 5-year cycle after the 2000 listing would save
    about $320,000 annually, more than offsetting the additional listing
    program costs of the proposed regulation, and resulting in a net annual
    savings over this period of about $90,000 per year.

    Summary of the Incremental Costs and Savings Associated with the
    Proposed Revisions to the Listing Requirements

                            [In thousands of dollars]

            Proposed Revision                                Annualized Cost
    I.1. Clarifying the definition of ``threatened''........................
    I.2. Codifying the scope of lists to include waterbodies impaired
        or threatened by atmospheric deposition & all combinations of
        point and nonpoint sources..........................................
    I.3. Expanding the scope of the lists to include waterbodies
        impaired or threatened by pollution (as well as pollutants).
        (Additional public participation cost included in # 7)..............
    I.4. Requiring that waterbodies remain listed until standards are
        attained............................................................
    I.5. Listed waterbodies must be grouped into 4 Parts, with only
        Part 1 waterbodies requiring TMDLs. Part 1 waterbodies be
        prioritized into high, medium and low priorities. (Additional
        public participation cost is included in 7)...................   22
    I.6. A State's list must include a schedule for establishing each
        TMDL..........................................................   10
    I.7. Listing methodologies must be subject to public review and
        submitted to EPA on January 31 before each submission.
        (Includes public participation cost of 3 & 5).................  190
    I.8. New format for the listing methodology.......................    8
    I.9. Requiring, lists to be submitted October 1 instead of A............
                                                                      ______
          Total Annualized Incremental Cost (19,98 $).................  230
    I.10. Option C: Changing to a 5-year cycle from a 2-year cycle
        after the 2000 listing........................................ (320)
                                                                      ______
          Total, Annualized Cost (1998 $) Including Option C (Net
          Savings)....................................................  (90)
      ii. proposed revisions affecting the development & content of tmdls
        The proposed revisions affect how TMDLs are to be developed and
    what must be included, as follows:
        1. All TMDLs must include each of the following elements: Waterbody
    name and geographic location; Target pollutant load; Deviation from the
    target; Sources, Wasteload allocation and load allocation; Margin of
    safety; Seasonal variation; Allowance for future growth; and
    Implementation plan.
        2. States must meet minimum requirements for public participation
    in TMDL development.
        These provisions potentially add to the tasks that are typically
    performed for each TMDL. We estimate the cost of these provisions by:
    (1) estimating the additional LOE needed to perform each new task for a
    typical TMDL; (2) converting this LOE into a corresponding cost; and
    (3) multiplying this unit cost by the projected number of TMDLs for
    which this task will have to be done.
        The incremental impact of each of these revisions is discussed
    below. The combined incremental impact of these revisions is summarized
    at the conclusion of this section.
    II.1. All TMDLs must include specified elements
                Requirement
        The proposed regulations require that a TMDL include: (1)
    identification of the name and geographic location of the waterbody;
    (2) identification of the pollutant load that may be present and still
    assure attainment and maintenance of water quality standards (WQS); (3)
    identification of the amount by which the current pollutant load
    deviates from this target; (4) identification of the source categories,
    subcategories and individual sources of the pollutant; (5) WLAs for
    pollutants from point sources, and LAs for pollutants from nonpoint
    sources, including atmospheric deposition and natural background; (6) a
    margin of safety, expressed as unallocated assimilative capacity or
    conservative analytical assumptions used in calculating the TMDL; (7)
    seasonal variation such that WQS will be met during all seasons of the
    year; (8) an allowance for future growth that accounts for reasonably
    foreseeable increases in pollutant loads; and (9) an implementation
    plan, including 8 minimum elements described below.
                Baseline
        Items (1) through (7) in this list of required elements are
    explicitly required by existing regulations (40 CFR 130.2(i) and
    130.7(c)(1)). Item (8) requires a State to reserve an amount for future
    growth in their allocation strategy that accounts for reasonably
    foreseeable increases in pollutant loads and explain this decision.
    This is not currently an explicit requirement for TMDLs, although many
    TMDLs have included such reserves for future growth. This new
    requirement is discussed further in section II.1a., below. Item (9), an
    implementation plan, represents another new requirement that many
    previous TMDLs have nevertheless included. It is discussed in section
    II.lb., below.
                Incremental Cost
        Each of the proposed required elements (1) through (7) represents a
    reiteration and clarification of existing regulatory requirements and
    common TMDL practice. As such, these proposed requirements add no
    incremental costs. The costs of the new requirements, items (8) and
    (9), are discussed below.
    II.1a. All TMDLs must include an allowance for future growth that
            accounts for reasonably foreseeable increases in pollutant
            loads
                Requirement
        The proposed regulations require that a TMDL provide, in the
    allocation strategy, for foreseeable increases in pollutant loads. The
    State must document its decision-making process in determining the
    amount of this allowance for growth, and should explain to stakeholders
    the implications of the growth allocation decision.
                Baseline
        In developing TMDLs, States have pursued a variety of approaches
    with respect to projected future growth in pollution loads:
      --In some cases, a portion of the target load is reserved--not
            allocated to any source or category of sources--for future
            growth. In these cases, the sum total of the WLAs, the LAs and
            the margin of safety is less than the target load that will
            assure attainment and maintenance of WQS.
      --In other cases, the full target load is allocated across all
            sources and categories of sources, but the allocations to such
            categories as natural background, upstream loadings and air
            deposition reflect their projected load growth over time. In
            these cases, the allocations to the remaining sources and
            categories are sufficiently limited that WQS will be attained
            and maintained even when the projected future loadings growth
            from natural background, etc. occurs.
      --In other cases, inadequate or no provision is made for growth.
            Sometimes likely growth in nonpoint source category loads is
            ignored, too much of the target loading is allocated to point
            sources, and the WLAs given to point sources eventually prove
            to be too high when growth in nonpoint source loads occurs.
        The first two of these common approaches will be allowable under
    the proposed regulations, the third will not be. No information is
    available on the relative frequency with which recent TMDLs have
    employed one or another of these approaches.
                Incremental Cost
        The proposed provision requiring an allowance for foreseeable
    growth will necessitate changed practice only for the portion of TMDLs
    like the third category. In our view, the requirement to provide for
    foreseeable growth will result in cost savings for these TMDLs. A TMDL
    that does not properly account for likely growth will ultimately prove
    insufficient to attain and maintain WQS when the growth occurs, and the
    TMDL will need to be redone. Much of the TMDL process will need to be
    repeated, and the WLAs and/or LAs for some sources or categories will
    need to be ratcheted down. Sources will need to implement control
    measures to meet the original WLA or LA, and then to implement
    additional controls to meet the subsequent, tighter requirements. This
    two-step process that becomes necessary when growth is not properly
    accounted for will likely be more costly to both the State and to the
    sources than it would have been to account for likely growth and get
    the TMDL right the first time. We are unable to estimate the likely
    magnitude of this savings.
    II.1b. States must develop an implementation plan for each TMDL,
            including 8 required elements
                Requirement
        The eight elements required in implementation plans include: (1) a
    description of the control actions and/or management measures needed to
    implement the TMDL; (2) a timeline for the implementation activities,
    including a schedule for revising NPDES permits, implementation of
    BMPs, etc.; (3) reasonable assurance that the implementation activities
    will occur; (4) a description of the legal authorities under which
    implementation will occur; (5) an estimate of the time required to
    attain water quality standards; (6) a monitoring plan to determine the
    effectiveness of the implementation actions; (7) a description of
    milestones that will be used to measure progress in attaining WQS; and
    (8) a description of when failure to meet milestones will trigger a
    revision of the TMDL.
        The proposed regulations will allow a State substantial flexibility
    regarding the scale at which these implementation-related components of
    a TMDL must be developed. In general, the scale at which an
    implementation plan is written should match the scale at which the
    TMDLs have been done. Thus, it may sometimes be appropriate for a State
    to develop an implementation plan for each particular TMDL for each
    specific water. Other times, it may be appropriate to develop a broader
    implementation plan that covers multiple waters in a watershed if all
    these waters had their TMDLs developed in an aggregated watershed-wide
    process or if all the waters suffered from similar problems caused by
    similar sources. In some cases, it might even be appropriate for the
    State to develop a single broadly applicable State-wide implementation
    plan if there was substantial similarity in how the State planned to
    implement the TMDLs in all the State's listed waters of some particular
    variety.
        The proposed requirement that a State provide reasonable assurance
    that implementation activities will occur merits further explanation. A
    State must demonstrate with a high degree of confidence that WLAs and
    LAs will be implemented. For point sources, this means that NPDES
    permits must be revised consistent with any WLA contained in the TMDL.
    For nonpoint sources, reasonable assurance can be demonstrated if the
    planned nonpoint source controls are specific to the pollutant of
    concern, implemented according to an expeditious schedule, and
    supported by reliable delivery mechanisms and adequate funding.
    Examples of reasonable assurance for nonpoint sources might include
    State regulations or local ordinances, performance bonds, memoranda of
    understanding, contracts or similar arrangements.
                Baseline
        These proposed requirements are new in the sense that current
    regulations do not explicitly require TMDLs to include implementation
    plans. They are not new, however, in the sense that most of these
    elements have long been understood to be included in thorough TMDLs,
    and perhaps roughly \1/4\ of the TMDLs in fact have included them.\8\
    Also, all of these elements are currently required to be addressed in
    State WQM plans, albeit on a more aggregated State-wide or basin-wide
    basis than would be required by the proposed regulations. In essence,
    States currently generate most or all of the information needed to
    prepare TMDL-specific implementation plans, but usually generate such
    plans at a higher level of aggregation.
    ---------------------------------------------------------------------------
        \8\ Discussions with a State representative and consultants who
    have assisted in preparing a great many TMDLs for States suggest that
    perhaps roughly a quarter of the TMDLs that have been developed
    recently have included all eight required implementation plan
    components. This is consistent with the results of a recent review of a
    sample set of TMDLs received by the Agency, in which \1/3\ of the
    States that submitted TMDLs included ``good'' implementation plans.
    ---------------------------------------------------------------------------
        With respect specifically to the required demonstration of
    reasonable assurance, States currently do so for all TMDLs involving
    point sources, but do not necessarily now do so for TMDLs involving
    nonpoint sources only. For TMDLs involving nonpoint sources only, the
    baseline of current State TMDL practice falls somewhat short of the
    proposed reasonable assurance requirement:
      --For TMDLs involving point sources only. States currently
            demonstrate reasonable assurance regarding WLAs for point
            sources by providing the schedule by which NPDES permits for
            the relevant point sources will be revised to incorporate their
            WLAs. Existing regulations require NPDES permits to incorporate
            effluent limitations consistent with an applicable TMDL (40 CFR
            122.44(d)).
      --For TMDLs involving both point and nonpoint sources. EPA's 1991
            TMDL program guidance provides that if a point source NPDES
            permit limit is based on a WLA that relies on nonpoint source
            load reductions, then the NPDES permit record must include (1)
            reasonable assurance that the needed nonpoint source controls
            will be implemented and maintained, or (2) a monitoring program
            to demonstrate the nonpoint source load reductions. NPDES
            permits must provide for more stringent limits on the point
            source if the expected nonpoint source load reductions are not
            demonstrated. In effect, reasonable assurance for
            implementation of an entire TMDL involving both point and
            nonpoint sources is provided by existing, mandatory regulatory
            controls over point sources.
      --For TMDLs involving nonpoint sources only. Current regulations do
            not require States to have or demonstrate assured controls over
            nonpoint sources. In practice, States have a wide variety of
            workable mechanisms for control of different sorts of nonpoint
            sources.\9\ For probably the majority of nonpoint source TMDL
            situations that arise, States likely have within this tool kit
            of mechanisms and authorities some that can provide reasonable
            assurance. States have developed many TMDLs that do include
            effective measures to assure achievement of LAs for nonpoint
            sources. However, the pattern of potential State authorities
            over nonpoint sources is widely varied, and there are
            undoubtedly TMDL situations that arise in one or another State
            where that State does not currently have an assured means of
            controlling the load from some category of nonpoint sources.
            For example. State authority to control air deposition to
            waters, particularly when the sources of the air emissions are
            dispersed or from other States, is limited. As another example,
            State mechanisms for control over agricultural nonpoint sources
            also often do not rise to the level of reasonable
            assurances.\10\
    ---------------------------------------------------------------------------
        \9\ See, for example, this summary: Environmental Law Institute.
    Enforceable State Mechanisms for the Control of Nonpoint Source Water
    Pollution. October, 1997.
        \10\ The Environmental Law Institute study cited above observes,
    for example:
        ``Agriculture is the most problematic area for enforceable
    mechanisms. Many laws of general applicability, as noted above, have
    exceptions for agriculture. Where state laws exist, they often defer to
    incentives, cost-sharing, and voluntary programs. Nevertheless, about a
    fifth of the states have some statewide sediment requirements
    applicable to agriculture, often administered by local governments or
    soil and water conservation districts. Even more states (about a
    fourth) authorize individual soil and water conservation districts, as
    a matter of local option, to adopt enforceable `land use regulations'
    for the control of erosion and sedimentation, but most of these require
    approval by landowner referendum, with approval requiring a super-
    majority (ranging from 66 to 90 percent) in order for such regulations
    to become effective.''
    ---------------------------------------------------------------------------
        In short, for TMDLs involving nonpoint sources only, current State
    practice often falls short of the requirements of the proposed
    regulations. There are two reasons for this. First, most commonly,
    States often develop TMDLs without including an Implementation plan. In
    these cases, the issue of demonstrating reasonable assurance for
    nonpoint source controls never arises. Second, less commonly, for some
    nonpoint source TMDL situations, the State does not have an authority
    or mechanism for a relevant category of nonpoint sources that would be
    sufficiently effective as to constitute reasonable assurance. The first
    of these shortcomings relative to the requirements of the proposed
    regulations would obviously be easier for a State to rectify than the
    second.
                Incremental Cost
        For a typical TMDL that does not include an implementation plan, a
    State representative estimates the average additional LOE necessary to
    meet the requirements of the proposed regulation as:
      --Preparing a monitoring plan--75 to 100 hours; and
      --Preparing the remaining eight required elements of an
            implementation plan--75 to 100 more hours. Some of the
            remaining eight elements are prepared as a matter of course in
            developing TMDLs currently, including the description of
            planned control actions, reasonable assurances for point source
            controls, and at least a rough timeline, estimate of the time
            required to attain WQS, and set of milestones. Other elements,
            such as the required description of the legal authorities under
            which implementation will occur and reasonable assurance for
            nonpoint sources can typically be developed easily from
            existing materials in the State's WQM plan and section 319
            plan. Other elements, such as the required description of when
            failure to meet milestones will trigger a revision of the TMDL,
            can rely largely on State-wide policy that needs only little
            tailoring for adaptation to a particular TMDL.
        In total, the eight required elements of an implementation plan
    would add $6,056 to $8,074 (150 to 200 hours at a cost of $40.37 per
    hour) to the cost of a typical TMDL that did not include them.
        In addition, for some sorts of nonpoint source TMDLs in some
    States, no adequate authorities or mechanisms will exist allowing
    demonstration of reasonable assurance. In such instances, the State
    would have a choice between: (1) developing adequate authorities; or
    (2) developing a TMDL that does not include reasonable assurance and
    that is therefore not approvable by EPA. For these States, the first
    course would likely be difficult (the State would presumably need to
    establish new legal and enforcement authorities or find adequate
    funding to ensure compliance by the nonpoint sources with their LAs)
    and the outcome would be unpredictable (the State might not succeed in
    establishing the new authorities). Under the second course, in the
    absence of an approvable TMDL from the State, EPA would need to develop
    the TMDL itself. The proposed regulations include revisions to EPA's
    NPDES permitting rules that describe how EPA will proceed in such cases
    where EPA must develop a TMDL because the State cannot provide
    reasonable assurances for implementation. For cost estimating purposes,
    we assume the second of these courses. We have no basis for estimating
    what the costs might be for States to develop the additional
    authorities necessary so they can provide reasonable assurance for
    implementation for all nonpoint source TMDLs. Instead, in the portion
    of the cost analysis addressing the proposed changes to the permitting
    rules, we estimate the costs for EPA in cases where States have
    inadequate authorities for reasonable assurance. That analysis is
    provided in a separate report. Thus, the incremental costs for meeting
    the reasonable assurance requirements of the proposed regulations are
    not covered in this chapter.
    II.2. States must meet minimum requirements for public participation in
            TMDL development
                Requirement
        The proposed regulations require States to provide the public with
    at least 30 days to comment on TMDLs prior to their submission to EPA.
    In addition, the State must provide EPA with a written summary and
    response to public comments.
                Baseline
        Existing regulations (40 CFR 130.7(c)(1)(ii)) require ``that
    calculations to establish TMDLs shall be subject to public review as
    defined in the State CPP''. EPA has long encouraged States to carry out
    full public participation in establishing TMDLs consistent with States'
    administrative procedures requirements. All or nearly all States now
    routinely provide for public notice and comment and the opportunity for
    a hearing in their TMDL processes. It is not known how many States
    develop a written summary and response to public comments.
                Incremental Cost
        A State representative has estimated that providing for additional
    public participation consistent with the proposed regulations and
    beyond that which routinely occurs (i.e., developing a written summary
    and response to public comments, and increasing the proportion of TMDLs
    for which a public hearing is held) might require an average of 100
    hours (or $4,037 at $40.37 per hour) per TMDL.
    II.3. Scaling Up the Cost Estimates From a Single Typical TMDL to All
            TMDLs
        In this section, we have estimated the following incremental costs
    for a typical TMDL to meet the additional requirements of the proposed
    regulations:
      --7 required elements of a TMDL--No cost
      --Allowance for future growth--Savings, not estimated
      --Implementation plan--$6,056 to $8,074 (150 to 200 hours)
      --Reasonable assurance (some nonpoint source TMDLs)--EPA's cost is
            estimated in the permit rule analysis
      --Additional public participation--$4,037 (100 hours)
        These costs represent unit costs that must be scaled up by the
    number of TMDLs for which these additional elements will need to be
    developed.
        In the Methodology section, we estimate that 20,000-40,000 TMDLs
    will need to be developed during the period of analysis. If we assume
    that implementation plans sufficient to meet the proposed new
    requirements are routinely developed now for about one quarter of all
    TMDLs and that this baseline practice will continue in the future,
    three quarters of all future TMDLs (roughly 15,000-30,000 of them) will
    face incremental costs for implementation plans under the proposed
    regulations. The estimated additional costs for enhanced public
    participation will apply to all 20,000-40,000 future TMDLs.
        To the extent that the required implementation plan and public
    participation requirements are met on an aggregated watershed basis
    rather than individually for each TMDL, the number of instances in
    which these additional activities will need to occur will be less than
    shown above. We have no adequate basis for estimating the likely extent
    to which such geographic aggregation will occur and reduce the
    incremental workload. To be conservative, we will assume no geographic
    aggregation. We assume that the additional workload for implementation
    plans will be necessary for three quarters of all TMDLs (15,000 to
    30,000 of them), and the additional workload for enhanced public
    participation will be necessary for all TMDLs (20,000 to 40,000 of
    them).
        Multiplying these numbers of TMDLs needing additional work by the
    added cost for a typical TMDL and annualizing over the 17-year period
    of analysis, we estimate the cost of the proposed new requirements to
    be $10.1-$23.8 million per year.
    II.4. Summary
        The costs of the proposed revisions discussed in this chapter are
    summarized below:

    Summary of the Incremental Costs Associated with the Proposed Revisions
                         Affecting the Content of TMDLs

                            [In millions of dollars]

    TMDLs must include 9 elements:                           Annualized cost
        7 elements..........................................................
        Allowance for future growth...............................   ( \1\ )
        Implementation plan.......................................  5.3-14.3
            ......................................................
            (Reasonable assurances)                                  ( \2\ )
    Minimum required public participation in TMDL development.....   4.8-9.5
                        --------------------------------------------------------------
                        ____________________________________________________

      Total....................................................... 10.1-23.8

    \1\ Savings.
    \2\ Estimated elsewhere.
    ---------------------------------------------------------------------------
              tmdls must be completed within specific time periods
        As discussed previously in chapter I, the proposed regulations
    require that TMDLs be developed for Part 1 waterbodies and that States
    must determine the priority of these TMDLs as either high, medium or
    low priority. All Part 1 waterbodies must have TMDLs completed for them
    within 15 years as described below:
      --TMDLs for high priority Part 1 waterbodies must be completed before
            low and medium priority waterbodies. When feasible, EPA
            encourages States to adopt a goal of completing the development
            of TMDLs for high priority waterbodies within 5 years. However,
            EPA recognizes that a 5-year time frame may not be feasible for
            all States.
      --TMDLs for all Part 1 waterbodies must be completed within 15 years
            of being listed as Part 1 waterbodies. Thus, for example,
            waterbodies that are newly listed Part 1 waterbodies in the
            year 2000 must have completed TMDLs by 2015; similarly, TMDLs
            for waterbodies that are newly listed, for example, in 2010
            must be completed by 2025.
        Requiring that TMDLs for Part 1 waterbodies be developed within
    specific time periods might result in the acceleration of the
    development of some of these TMDLs relative to the pace that might have
    occurred in the baseline. Accelerating the development of a TMDL
    results in its cost of development being incurred sooner, and therefore
    increases the present value cost of TMDL development.
        The potential cost impacts of accelerating the development of TMDLs
    that might have otherwise taken longer than required by the proposed
    regulations are estimated in this chapter for the following proposed
    requirements:
      --Requiring that TMDLs for high priority Part 1 waterbodies be
            developed first, and requiring that high priority waterbodies
            include all those for which the designated use is public
            drinking water supply or that contain or serve as habitat for
            endangered or threatened species.
      --Requiring that TMDLs for all Part 1 waterbodies, regardless of
            priority, be developed within 15 years of listing as Part 1.
        The incremental costs of these requirements due to resulting
    changes in the listing process were covered in chapter I.
    II.1. TMDLs for high priority Part 1 waterbodies must be developed
            first.
                Requirement
        The proposed regulations require that States identify all Part 1
    waterbodies for which the designated use is public drinking water
    supply or that contain or serve as habitat for endangered or threatened
    species under section 4 of the Endangered Species Act. These must be
    classified as high priority, and TMDLs for these waterbodies must be
    completed first. States are encouraged to adopt a goal of completing
    TMDLs for high priority waterbodies within 5 years of being listed as a
    Part 1 waterbody.
                Baseline
        As discussed further in section III.2. below, nearly all States
    have committed to completing TMDLs for all of their Part 1 waterbodies
    within 15 years. Of these States, 21 States have committed to schedules
    of 10 years or less. To accomplish any of these schedules, substantial
    portions of the States' TMDL workload would need to be completed within
    the first five to ten years in the baseline.
                Incremental Cost
        It is not anticipated that this proposed requirement will result in
    incremental costs to the States for several reasons.
      --To the extent that States have waterbodies for which the designated
            use is public drinking water supply or that contain or serve as
            habitat for endangered or threatened species, the Agency
            believes that States would have scheduled prompt development of
            TMDLs for these waterbodies in the baseline anyway.
      --The proposed regulation allows waterbodies which have endangered
            species present to be assigned a medium or low priority if the
            State has an approved Habitat Conservation Plan or other
            specific, enforceable mechanism developed in accordance with
            the Endangered Species Act.\11\
    ---------------------------------------------------------------------------
        \11\ This regulation, however, does not require consultation with
    the U.S. Fish and Wildlife Service.
    ---------------------------------------------------------------------------
      --The goal of completing TMDLs for high priority waters within 5
            years will likely be feasible for many States. Given the
            States' current commitments to complete their TMDLs within the
            next 10-15 years, States will generally be developing an
            appreciable fraction (perhaps \1/4\-\1/3\) of their TMDLs
            within the next five years anyway. Therefore, it should not be
            difficult for many States to sequence TMDL development
            schedules to ensure that TMDLs for high priority waters be
            developed first, and completed within 5 years. EPA recognizes
            that this time frame may not be feasible for all States.
            Therefore, the 5-year completion time frame is only a goal, not
            a requirement.
        Thus, the proposed regulations' requirement to complete TMDLs for
    high priority waterbodies first will not result in increased costs
    because the Agency believes that TMDLs for these waterbodies would
    likely have been scheduled for priority development by States anyway in
    the baseline; and if not, overall TMDL development schedules could
    readily be re-sequenced within the States' current commitments in the
    1998 listing program to address the high priority TMDLs first. Finally,
    the goal of completing TMDLs for high priority waters within 5 years is
    a goal, not a requirement.
    III.2. All Part 1 waterbodies must have TMDLs completed for them within
            15 years.
                Requirement
        The proposed regulations require that TMDLs for all priority Part 1
    waterbodies be developed within 15 years. This schedule will be
    required for all Part 1 waterbodies starting with the 2000 listing--
    TMDLs for these waterbodies must be completed by 2015. Waterbodies
    listed in 1998 actually have a 17-year maximum schedule, since the 15-
    year time-limit does not apply until the 2000 listing. In listings
    subsequent to 2000, TMDLs for newly listed Part 1 waterbodies will need
    to be completed within 15 years from their listing date. The following
    calculations focus on the cost of this requirement for the TMDLs that
    will need to be completed within the 17 years through 2015.
                Baseline
        Most States have already committed to completing TMDLs for their
    currently listed waterbodies prior to 2015--i.e., they will not be
    affected by the proposed revision. Based on EPA's December 11, 1998
    ``Status of 1998 303(d) Lists,'' 48 States have committed to schedules
    and sent them to EPA. Schedules are anticipated soon for the remaining
    8 States. Draft schedules are available for 5 of these States.
    Therefore, at this point, we have a basis for estimating the TMDL
    completion schedules for 53 States, which represent 95 percent of the
    listed waterbodies. Over the next few months, the remaining 3 States
    will submit their schedules, eliminating the need for any assumptions
    regarding their schedules.
        For the 53 States (having draft schedules or final schedules),
    commitments for completing TMDLs for their 1998 listed waterbodies
    range from 3 years to 20 years (i.e., completion by 2001 to 2018). Only
    two of these States have scheduled TMDLs to be completed past 2015:
    Missouri and New Mexico. However, New Mexico's Consent Decree
    specifically allows it to develop TMDLs for its 1996 listed waterbodies
    through 2018, and therefore New Mexico is not subject to the 15-year
    requirement of the proposed revision. Missouri has listed about 77
    waterbodies. Assuming that Missouri will develop TMDLs uniformly
    through 2018, then TMDLs for about 12 waterbodies are currently
    scheduled to be developed past 2015.
        It is more difficult to determine the baseline for the remaining 3
    States whose schedules are still pending. Therefore, we provide a range
    of possibilities. Based on the schedules for the 53 States, it would be
    reasonable to anticipate that all of the TMDLs for 1998 listed
    waterbodies for the remaining 3 States will be completed by 2015. This
    assumption provides the basis for our ``low'' estimate. To provide a
    ``high'' estimate we assumed that all of the remaining 3 States will
    complete their TMDLs by 2020 instead of by 2015, exceeding by two years
    the longest of any of the State schedules that have been submitted.
    This is a very conservative assumption since only 2 of the 53 States
    with schedules extend to even 2018. Assuming that these 3 States
    develop TMDLs uniformly through 2020, then under the ``high'' estimate,
    TMDLs for an additional 249 waterbodies are scheduled to be developed
    past 2015.
        Thus, given current State commitments, at least 52 States will not
    be affected by the proposed revision requiring that TMDLs be developed
    by 2015 (51 States with current or expected schedules prior to 2015,
    and New Mexico). 1-4 States may need to accelerate the development of
    TMDLs for as many as 12-249 1998-1isted waterbodies. This range should
    narrow over the next few months as States submit their schedules for
    developing TMDLs. The details of this baseline analysis of TMDL
    development are shown in Attachment 1, which provides State-by-State
    schedules and projected year-by-year TMDL development by State past
    2015.
        As discussed in the Methodology section, it is important to note
    that the number of listed waterbodies requiring TMDLs is only an
    indication of the number of waters needing TMDLs, not the actual number
    of TMDLs that will be done.
      --To some extent, the number of 1998 listed waterbodies can overstate
            the number of waterbodies that will require TMDLs, because not
            all 1998-1isted waterbodies will be considered to be Part 1
            waterbodies. In the 2000 listing, some of these waterbodies
            will be classified as Part 2 waterbodies (which do not require
            TMDLs because they are not impaired due to pollutants), some
            will be classified as Part 3 waterbodies (for which a TMDL has
            been completed) and some will be classified as Part 4
            waterbodies (which do not require TMDLs because other measures
            will address the problems). Therefore, since the 12-249
            estimate of waterbodies for which TMDLs that might be developed
            past 2015 assumed that all 1998-listed waterbodies would be
            Part 1 waterbodies, it is likely that this estimate is
            overstated.
      --On the other hand, most listed waterbodies have more than one cause
            of impairment and a TMDL may be needed to address each cause.
            For the 1996 listings there were slightly more than twice as
            many causes as waterbodies, and for the 1998 listings there
            were slightly less than twice as many causes as waterbodies. If
            each cause requires a TMDL, then about twice as many TMDLs
            would be required as waterbodies. However, TMDLs that handle
            multiple causes can be developed.
        For this analysis, we have assumed that the number of TMDLs to be
    completed ranges from the number of listed waterbodies to twice this
    number of waterbodies. Thus, the number of TMDLs that in the baseline
    would be developed past 2015 would range from 12 to 499: \12\
    ---------------------------------------------------------------------------
        \12\ From Attachment 1, the low end is 11.6 waterbodies rounded up
    to 12, and the high end is 249.3  2 = 498.6 rounded up to 499.
    ---------------------------------------------------------------------------
      --The low end of the range (12 TMDLs) assumes that all 3 States
            without schedules submitted yet will choose schedules
            completing TMDLs for their listed waterbodies prior to 2015.
            The low end of the range also assumes that the number of 1998
            listed waterbodies likely significantly overstates the number
            that will eventually be categorized as Part 1. This also
            assumes that multiple causes for a listed water will not
            commonly necessitate multiple TMDLs for that water.
      --The high end of the range (499 TMDLs) assumes that all 3 States
            will submit schedules that reflect even longer time frames than
            those that have been submitted to date (i.e., completion by
            2020). It also assumes that separate TMDLs will generally be
            needed to address every cause.
        This broad range provides the basis for analyzing the incremental
    cost of the acceleration of TMDL development caused by the proposed
    rule's requirement that TMDLs must be completed within 15 years after a
    water is listed.
                Incremental Cost
        In the absence of the proposed rule, we assume that approximately
    12-499 TMDLs would be developed (we assume at a steady rate) between
    2016 and 2020. As a result of the proposed rule, the development of
    these TMDLs will need to be accelerated, and we assume they will be
    rescheduled to be developed at a steady rate between 1999 and 2015. The
    incremental cost of accelerating the development of these TMDLs is the
    time-value of incurring these expenditures sooner. This is just the
    difference between the present value of completing the TMDLs under the
    baseline schedule versus the present value of completing the TMDLs
    under the new schedule required by the proposed rule.
        Thus far, we have estimated the number of TMDLs and their alternate
    schedules. The remaining key element that is needed is the average cost
    of developing these TMDLs. Studies estimating the cost of TMDL
    development have shown a wide range of potential cost. For example, one
    study \13\ examined fourteen TMDL case studies in which the costs
    ranged from about $4,000 to $1,000,000. The costs for six of the TMDLs
    were under $22,000 and the costs for the remaining eight were over
    $145,000. The cost for a given TMDL can depend on a wide range of
    factors including the watershed size, the complexity of the analytic
    work needed, the number and type of pollutants addressed, and the level
    of public interest. There are reasons to expect that the average cost
    to develop a TMDL will be at the lower end of the range found in this
    study, and that the average cost will decline over time:
    ---------------------------------------------------------------------------
        \13\ EPA, TMDL Development Cost Estimates: Case Studies of 14
    TMDLs. EPA-R-96-001, May 1996.
    ---------------------------------------------------------------------------
      --The cost depends on the extent to which TMDLs for similar
            circumstances have been developed and on the extent of the
            State's experience in developing TMDLs. The first TMDLs to be
            developed tend to be the most costly because staff is less
            experienced and many technical issues will be addressed for the
            first time. As more TMDLs are completed, staff will become more
            experienced and the work routine, so that the cost of
            developing TMDLs will tend to decline.
      --Recent experience has shown that once a ``template'' is created for
            developing TMDLs for a pollutant, that approach can often be
            applied to other waterbodies at a relatively low cost.
      --The technology for developing TDMLs has steadily improved over the
            years and its cost has declined.
      --As States increasingly adopt a watershed approach, some costs, such
            as for public participation, can decrease dramatically on a
            per/TMDL basis. For example, a single public participation
            process at the watershed level, costing, say, $50,000, might
            serve to take the place of similar efforts for perhaps ten
            TMDLs, resulting in a cost of $5,000 per TMDL.
        Thus, while the cost of developing a specific TMDL might be at the
    higher end of the range, the average cost of developing TMDLs across
    the program is expected to be at the lower end of the range.
        For this report, the average cost of developing a TMDL is assumed
    to be $25,000. This includes the increased costs that were identified
    in chapter II of this report as likely to result from the proposed
    regulations. Note that the cost estimates for accelerating the
    development of TMDLs depend directly on this assumption: if the assumed
    average cost of developing a TMDL were increased to $50,000 the
    estimated incremental cost of accelerating TMDL development would
    double; if the assumed average cost of developing a TMDL were decreased
    to $12,500, the estimated incremental cost of accelerating TMDL
    development would decline by 50 percent.
        The detailed calculations for the cost of accelerating the
    development of 12-499 TMDLs so that they are completed by 2015 are
    shown in Attachment 2--Attachment 2 shows the step-by-step calculations
    that use the specific TMDL development patterns derived in Attachment
    1. The results are summarized below:
      --Low estimate.--The total cost of developing the 12 TMDLs over the
            period 2016-2020 is about $300,000 and its 1999 present value
            is about $85,000. Developing these 12 TMDLs over 1999-2015 has
            the same total cost, but a 1999 present value of about
            $175,000. Thus, the incremental cost of accelerating the
            development of these 12 TMDLs is about $90,000. The annual cost
            of acceleration as annualized over 1999-2015 is about $9,000.
      --High estimate.--The total cost of developing 499 TMDLs over the
            period 2016-2020 is about $12.5 million and its 1999 present
            value is about $3.5 million. Developing these 499 TMDLs over
            1999-2015 has the same total cost but a 1999 present value of
            about $7.7 million. Thus, the incremental cost of accelerating
            the development of these 499 TMDLs is about $4.2 million. The
            annual cost of acceleration as annualized over 1999-2015 is
            about $400,000.
        In summary, given the assumptions made in this report, accelerating
    the development of 12-499 TMDLs from the period 2016-2020 to the period
    1999-2015 results in an increased annualized cost ranging from about
    $9,000 to about $400,000 through 2015.\14\
    ---------------------------------------------------------------------------
        \14\ Note that the incremental cost of accelerating TMDL
    development from the period 2016-2020 to the period 1999-2015 roughly
    results in doubling the cost of TMDL development. For example, for the
    low estimate of 12 TMDLs, the 1999 present value cost is roughly
    doubled from about $85,000 to about $175,000, for an incremental cost
    of about $90,500. This is not surprising, since on average, TMDL
    development is accelerated from about 2018 (the midpoint of the
    baseline period) to about 2007 (the midpoint of the accelerated
    development period), an average acceleration of about 11 years. At 7
    percent annually, time-value doubles in ten years and increases to 210
    percent in eleven years. Conversely, delaying TMDL development by 10
    years halves its cost.
    ---------------------------------------------------------------------------
      iv. increased costs for epa resulting from the proposed regulations
        The proposed regulations alter the requirements for States for the
    listing program and for the content and development of TMDLs. These
    requirements have implications for the Agency as well:
      --1. Proposed revisions to the listing program and for the content of
            TMDLs will also result in increased costs to EPA for reviewing
            and approving lists and TMDLs.
      --2. Options for reduced frequency with which lists must be submitted
            will reduce the number of State lists EPA must review and
            approve and thereby reduce cost to EPA.
      --3. The suggestion that the public petition EPA for action to
            establish TMDLs rather than proceed directly to litigation will
            likely reduce costs for both EPA and the public.
        Each of these proposed requirements is evaluated in this chapter.
        This report does not evaluate the incremental costs to EPA in cases
    where EPA must develop portions of a TMDL if a State cannot provide
    reasonable assurance for implementation of the TMDL. The specific
    procedures for this are included in the proposed revisions to the
    Agency's permitting regulation, and a separate analysis addresses the
    incremental costs that may result.
    IV.1. Proposed revisions to the listing program and for the content of
            TMDLs will also result in increased costs for EPA for reviewing
            and approving lists and TMDLs.
                Requirement
        EPA's new requirements under the proposed revisions (as described
    in chapters I, II and III) will result in changes in the content of
    list submissions as well as of TMDLs.
                Baseline
        The Agency's current activities regarding the listing program and
    for reviewing/approving lists are identified in the Agency's current
    approved Information Collection Request (in effect for the three year
    period ending 2/28/99). The Agency is in the process of renewing the
    ICR for the next period (ending 2/28/01) and has developed new
    estimates for the Agency burden associated with these activities. The
    estimates for the current ICR and its proposed renewal are shown in the
    following table.
        The Agency has estimated that its burden will increase
    significantly over the next three years, primarily due to the increased
    pace for developing TMDLs that States have committed to in their 1998
    lists. This increase in the expected Agency burden is part of the
    baseline--as detailed in chapter III, States have already committed in
    their 1998 list submissions (in the baseline) to increasing the pace of
    TMDL development, and the State schedules are consistent with the
    requirements of the proposed regulation for nearly all of the States.
    This factor accounts for the bulk of the expected increase in the
    Agency's effort as anticipated in the ICF, amounting to 5,580 hours
    (out of the total increase 6,032 hours). This expected increase also
    includes consideration of any increased effort that might be associated
    with the proposed regulation's new requirements for the content of
    TMDLs.

         COMPARISON OF EPA'S CURRENT AND EXPECTED BURDEN FOR ACTIVITIES
    IDENTIFIED IN ITS INFORMATION COLLECTION REQUESTS FOR THE 303(D) PROGRAM
    ------------------------------------------------------------------------
                                                         ICR burden estimate
                                                            (annual hours)
                                              Frequency --------------------
       Description of activity and number      (years)   Existing
                                                          (to 3/    Renewal
                                                            99)    (to 3/01)
    ------------------------------------------------------------------------
    8. Prepare 303(d) guidance..............         1        62          62
    9. Provide technical assistance to               1        96         236
     States for 303(d)......................
    10. Review draft 303(d) lists...........         2        96         236
    11. Send TMDL approval/disapproval               1        20       5,600
     notices to States......................
    12. Review final 303(d) lists. Negotiate         2       328         500
     to resolve disapprovals................
                                                        --------------------
          Total Annual Agency Burden........  .........      602       6,634
          Expected Increase in Total Annual   .........  ........      6,032
           Agency Burden....................
    ------------------------------------------------------------------------

                Increment
        The new estimates for the Agency's effort for 303(d) activities
    also take into account the provisions of the proposed regulation for
    the listing program. As shown in the following table, the Agency
    anticipates that its activities for preparing 303(d) guidance,
    providing technical assistance to States, reviewing draft lists, and
    reviewing final lists and negotiating to resolve disapprovals will
    increase by 452 hours annually--an increase of nearly 80 percent. At
    the average loaded hourly rate of $40.37/hour used in the ICR to
    estimate the cost of the Federal burden, the increased effort is
    estimated to cost $18,247 annually.
    IV.2. Options for altering the listing cycle will affect EPA's workload
            by changing the number of lists EPA must evaluate.
                Requirement
        As discussed in Chapter I, the proposed revision asks for comment
    on options for the listing cycle. These options include:
      --Option A--Retain the current 2-year listing cycle,
      --Option B--Adopt a 4-year or 5-year listing cycle immediately,
      --Option C--The first list submission under the new rule would occur
            no later than October 1, 2000, with subsequent list submissions
            occurring every 4 or every 5 years.
        As shown in Chapter I, using Option C as an example, lengthening
    the listing cycle would result in savings for States because fewer
    lists would need to be prepared. This assessment of the corresponding
    savings to the Agency also focuses on Option C, where a listing is
    still required for October, 2000 and subsequent listings are required
    every 5 years.
                Baseline
        The current listing cycle requires the submission of lists every 2
    years.
                Incremental Cost
        Altering the listing cycle would not be expected to affect the
    annual burden for EPA's activities for preparing 303(d) guidance,
    providing technical support to States, or sending TMDL approval/
    disapproval notices to States. Altering the listing cycle would affect
    the Agency's annual effort for reviewing draft and final 303(d) lists
    and negotiating to resolve disapprovals. The Agency's total effort for
    these activities for a list submission is 1,472 hours. Switching from
    the current 2-year cycle to a 5-year cycle would lower the Agency's
    annual effort from 736 hours to 295 hours annually, for a savings of
    441 hours annually as shown in the following table.

    COMPARISON OF EPA'S BURDEN FOR 303(D) PROGRAM ACTIVITIES FOR THE CURRENT
                       2-YEAR CYCLE VERSUS A 5-YEAR CYCLE
    ------------------------------------------------------------------------
                                                                ICR burden
                                                                 estimate
                                                    Current   (annual hours)
          Description of activity and number       frequency ---------------
                                                    (years)   2-year  5-year
                                                               cycle   cycle
    ------------------------------------------------------------------------
    10. Review draft 303(d) Lists................         2      236      95
    12. Review final 303(d) lists. Negotiate to           2      500     200
     resolve disapprovals........................
                                                             ---------------
          Total Annual Agency Burden.............  .........     736     295
          Expected Decrease in Total Annual        .........  ......     441
           Agency Burden.........................
    ------------------------------------------------------------------------

        This savings of 441 hours annually would essentially offset the
    increased annual burden of 452 hours identified in the previous
    section. The value of the undiscounted savings is $17,803. However,
    since the bulk of these savings would be realized after the year 2000,
    the actual savings is slightly less as explained below.
        Putting it another way, the current 2-year cycle through the year
    2015 would require the Agency to provide 1,472 hours for 8\1/2\ listing
    cycles for a total effort of 12,512 hours. Option C, which maintains
    the 2000 listing but requires only an additional 3 listings through
    2015 would result in a burden of 5,888 hours. Thus, switching from a 2-
    year to a 5-year cycle would save the Agency 6,624 hours after the 2000
    listing through the year 2015. Taking into account the pattern of
    savings through 2015, the present value of the savings would be
    $156,744 and the annualized savings over this period would be $15,004.
    IV.3. The proposed regulations suggest that the public petition EPA for
            action to establish TMDLs rather than proceed directly to
            litigation.
                Requirement
        The proposed regulation clarifies that the public must petition EPA
    prior to filing a lawsuit seeking to compel EPA to carry out TMDL
    program actions that States are directed to perform. The petition
    requirement applies only to discretionary EPA actions under CWA Section
    303(d). The petition requirement does not apply to non-discretionary
    EPA actions under Section 303(d) (i.e., to approve or disapprove a TMDL
    or list after it is submitted by a State, or to establish a TMDL or
    list if EPA disapproves a State's submission). For non-discretionary
    EPA actions, no petition is necessary and a party seeking to compel EPA
    action may proceed directly to litigation.
        The petition requirement will apply to discretionary EPA actions
    such as establishing TMDLs for a State in the alleged absence of State
    TMDL activity. Several groups objecting to what they view as slow State
    progress on TMDLs have filed lawsuits to compel EPA to step in and
    develop TMDLs or lists for a State. In such cases, EPA feels that
    litigation is premature because the Agency has not yet made a final
    decision whether or not to establish TMDLs or lists in place of the
    State. Absent a final Agency decision, EPA believes that courts lack a
    factual record to evaluate. If instead a party petitions EPA to take
    the desired discretionary action, EPA's response to the petition will
    constitute final Agency action and the record established by the Agency
    in responding to the petition will provide a record that is reviewable
    by courts in any subsequent litigation.
                Baseline
        Groups dissatisfied with State progress on TMDLs or lists have
    filed more than 40 cases involving about 34 States. High costs have
    been incurred by all litigants: plaintiffs in preparing and arguing the
    cases, and States and EPA in defending and settling them. EPA believes
    that petitions filed under the Administrative Procedures Act provide an
    opportunity to resolve many TMDL program issues in a less costly
    manner, without litigation.
                Incremental Cost
        EPA believes that compliance with this requirement will reduce
    costs for both the Agency and the public. Preparing and filing
    petitions will cost the public far less than preparing and filing
    lawsuits, and it is far less resource-intensive for the Agency to
    respond to petitions than to lawsuits. The Agency believes that many
    issues can be resolved through the petition process, avoiding
    litigation and the unnecessary expenses that all parties would
    otherwise incur. To the extent that petitions do not avoid lawsuits,
    the Agency believes that most of the effort to prepare and respond to
    petitions would have occurred anyway as part of the litigation process.
    The Agency acknowledges the possibility that the low cost of preparing
    petitions might result in more petitions being filed by parties that
    otherwise would have been deterred by the cost of litigation.
    Nevertheless, on balance, the Agency believes that compliance with this
    existing requirement would benefit all parties, and reduce the overall
    cost that otherwise would be incurred.

            V. IMPACT ON THE AGENCY'S INFORMATION COLLECTION REQUEST
        The Agency is proposing a revised Information Collection Request
    for certain activities under the 303(d) program to replace the existing
    3-year ICR which expires on 3/1/99. As discussed in chapters I and IV,
    the Agency's ICR estimates the burden for States' preparation of 303(d)
    lists, and for the Agency's activities regarding the listing program as
    well as for reviewing and approving TMDLs. This chapter summarizes the
    information developed earlier in this report regarding the extent to
    which the proposed regulation affects the burden of both the States and
    the Agency for those activities identified in the proposed ICR, which
    covers the period from 3/1/99 to 2/28/01.
    Estimated Change In State Burden
        The next ICR will encompass the next listing which is currently due
    in the year 2000. As discussed extensively in chapter I, the proposed
    regulation increases the total State effort for the year 2000 listing
    by 36,740 hours. As estimated in the ICR, at a cost of $40.37 per hour,
    this amounts to a total cost increase of nearly $1.5 million for the
    period.
        Since the next ICR covers the period ending 2/28/01, a portion of
    the increased effort for the next listing after the year 2000 listing
    should also be considered. However, this additional burden depends on
    whether the current 2-year listing cycle is continued, or whether a 4
    or 5-year listing cycle is adopted instead:
      --If the current 2-year listing cycle continues then half of the 2002
            cycle would need to be included in the ICR as well. As
            discussed in chapter I, the proposed regulations increase the
            total State effort for listings subsequent to the year 2000
            listing by 6,050 hours. If half of this effort occurs in 2001,
            then the proposed regulations increase the burden in the ICR by
            3,025 hours or about $122,000.
      --If a 4 or 5-year listing cycle were adopted it does not seem likely
            that those activities that account for the increased burden due
            to the proposed regulations would take place as early as 2001.
            Therefore, an additional adjustment for an increased burden
            associated with the next cycle would be unnecessary.
        Therefore, the total adjustments to the respondent burden as
    estimated in the Agency's ICR for the period ending 2/28/01 for the
    303(d) program range from an additional 36,740 hours at $1.5 million if
    the listing cycle is lengthened, to 39,765 hours at $1.6 million if the
    current 2-year listing cycle is maintained.
        However, for future ICRs, as discussed in chapter I, if the listing
    cycle is lengthened, savings that result from avoiding future listing
    cycles (i.e., under Option C, States would only be required to submit 4
    lists instead of 8\1/2\ lists through 2015) would more than cover the
    increased burden to States that results in the near term from the
    proposed regulations. As summarized at the end of chapter I, through
    the year 2015, the proposed regulations would increase the States'
    annualized costs by $230,000 but this would be more than offset by the
    $320,000 annually that States would save if the listing cycle were
    lengthened. The net annualized savings would be about $90,000 per year.
    Estimated Change in Agency Burden.
        As discussed in chapter IV, EPA's estimates of its ICR burden for
    the period ending 2/28/01 for, the 303(d) program already include
    consideration of both:
      --1. Increases in the States' baseline level of activity which
            results in an increased annual burden for the Agency of 5,580
            hours, and
      --2. Increases in Agency activity that might result from the proposed
            regulations, amounting to an additional annual burden of 452
            hours or $18,247.
        Altogether, the Agency has proposed to increase its burden estimate
    in the proposed ICR by a factor of 11 from the current ICF,
    representing an increase in burden from 602 hours annually to a total
    of 6,634 hours annually. Since the Agency's estimates already reflect
    expected changes in burden, no additional revisions to the estimates
    for the Agency's burden are needed to further reflect the proposed
    regulations.
        However, as noted in chapter IV, if the listing cycle were
    lengthened, then the Agency would realize savings that would offset the
    increased burden associated with the proposed rule.

                 Attachments 1 & 2 (Worksheets for Chapter III)

                          CURRENTLY LISTED WATERS SCHEDULED FOR TMDL DEVELOPMENT AFTER 2015 \1\
    ----------------------------------------------------------------------------------------------------------------
                                                             Schedule         Current commitments after 2015 \2\
                                                  Number  ----------------------------------------------------------
                 EPA region & State               listed           End
                                                  waters   Years   year   2016   2017   2018   2019   2020    Total
    ----------------------------------------------------------------------------------------------------------------
    I. Connecticut.............................       134     12   2010  .....  .....  .....  .....  .....  ........
    Maine......................................       257     13   2011  .....  .....  .....  .....  .....  ........
    Massachusetts..............................  \3\ 1,00     15   2013  .....  .....  .....  .....  .....  ........
                                                        0
    New Hampshire..............................       171     12   2010  .....  .....  .....  .....  .....  ........
    Rhode Island...............................   \3\ 100     12   2010  .....  .....  .....  .....  .....  ........
    Vermont....................................   \3\ 200  \4\ 1   2013  .....  .....  .....  .....  .....  ........
                                                               5
    II. New Jersey.............................     1,048      9   2007  .....  .....  .....  .....  .....  ........
    New York...................................       576     11   2009  .....  .....  .....  .....  .....  ........
    Puerto Rico................................   \3\ 140      6   2004  .....  .....  .....  .....  .....  ........
    U.S. Virgin Islands........................         9     13   2011  .....  .....  .....  .....  .....  ........
    III. Delaware..............................       174     13   2011  .....  .....  .....  .....  .....  ........
    DC.........................................    \3\ 38     12   2010  .....  .....  .....  .....  .....  ........
    Maryland...................................       197     10   2008  .....  .....  .....  .....  .....  ........
    Pennsylvania...............................     1,035      3   2001  .....  .....  .....  .....  .....  ........
    Virginia...................................   \3\ 939     12   2010  .....  .....  .....  .....  .....  ........
    West Virginia..............................       696     10   2008  .....  .....  .....  .....  .....  ........
    IV. Alabama................................       114      7   2005  .....  .....  .....  .....  .....  ........
    Florida....................................       712     16   2014  .....  .....  .....  .....  .....  ........
    Georgia....................................       571      7   2005  .....  .....  .....  .....  .....  ........
    Kentucky...................................       231     13   2011  .....  .....  .....  .....  .....  ........
    Mississippi................................   \3\ 700  \4\ 1   2008  .....  .....  .....  .....  .....  ........
                                                               0
    North Carolina.............................       477     10   2008  .....  .....  .....  .....  .....  ........
    South Carolina.............................       658     12   2010  .....  .....  .....  .....  .....  ........
    Tennessee..................................       351     11   2009  .....  .....  .....  .....  .....  ........
    V. Illinois................................       738     15   2013  .....  .....  .....  .....  .....  ........
    Indiana....................................       153  \5\ 2   2020    7.0    7.0    7.0    7.0    7.0      34.8
                                                               2
    Michigan...................................       312  \5\ 1   2011  .....  .....  .....  .....  .....  ........
                                                               3
    Minnesota..................................       155     13   2011  .....  .....  .....  .....  .....  ........
    Ohio.......................................       839  \5\ 2   2020   38.1   38.1   38.1   38.1   38.1     190.7
                                                               2
    Wisconsin..................................       541  \4\ 1   2011  .....  .....  .....  .....  .....  ........
                                                               3
    VI. Arkansas...............................        52     14   2012  .....  .....  .....  .....  .....  ........
    Louisiana..................................       195     12   2010  .....  .....  .....  .....  .....  ........
    New Mexico.................................       189  \6\ 2   2018  .....  .....  .....  .....  .....  ........
                                                               0
    Oklahoma...................................       533     13   2011  .....  .....  .....  .....  .....  ........
    Texas......................................       147     10   2008  .....  .....  .....  .....  .....  ........
    VII. Iowa..................................        54  \5\ 2   2020    2.5    2.5    2.5    2.5    2.5      12.3
                                                               2
    Kansas.....................................   \3\ 771      8   2006  .....  .....  .....  .....  .....  ........
    Missouri...................................    \3\ 77     20   2018    3.9    3.9    3.9  .....  .....      11.6
    Nebraska...................................   \3\ 112     10   2008  .....  .....  .....  .....  .....  ........
    VIII. Colorado.............................        85     12   2010  .....  .....  .....  .....  .....  ........
    Montana....................................       877     10   2080  .....  .....  .....  .....  .....  ........
    North Dakota...............................       133     13   2011  .....  .....  .....  .....  .....  ........
    South Dakota...............................       171     13   2011  .....  .....  .....  .....  .....  ........
    Utah.......................................       205     12   2010  .....  .....  .....  .....  .....  ........
    Wyoming....................................        63     10   2008  .....  .....  .....  .....  .....  ........
    IX. American Samoa.........................         1  \4\ 5   2003  .....  .....  .....  .....  .....
    Arizona....................................   \3\ 102     13   2011  .....  .....  .....  .....  .....  ........
    California.................................       512     13   2011  .....  .....  .....  .....  .....  ........
    CNMI.......................................         2      4   2002  .....  .....  .....  .....  .....  ........
    Guam.......................................         3     12   2010  .....  .....  .....  .....  .....  ........
    Hawaii.....................................        18      9   2007  .....  .....  .....  .....  .....  ........
    Nevada.....................................        38     13   2011  .....  .....  .....  .....  .....  ........
    X. Alaska..................................        65  \4\ 1   2008  .....  .....  .....  .....  .....  ........
                                                               0
    Idaho......................................   \3\ 728      8   2006  .....  .....  .....  .....  .....  ........
    Oregon.....................................     1,168      1   2008  .....  .....  .....  .....  .....  ........
    Washington.................................   \3\ 631     15   2013  .....  .....  .....  .....  .....  ........
                                                --------------------------------------------------------------------
          Totals...............................  \3\ 20,1  ( \7\  ( \7\   51.4   51.4   51.4   47.5   47.5     249.3
                                                       98      )      )
                                                 ........  ( \8\  ( \8\    3.9    3.9    3.9  .....  .....      11.6
                                                               )      )
    ----------------------------------------------------------------------------------------------------------------
    \1\ Based on current commitments as reflected in the 1996 TMDL lists as of 12/11/98 and interim default
      assumption of a 22-year time frame where schedule is not available.
    \2\ Assuming proportionate development over the life of the schedule--estimates are shown to nearest \1/10\.
    \3\ Approximate.
    \4\ Estimate based on draft schedule
    \5\ Temporary and conservative default assumption of 22-year schedule ending 2020.
    \6\ ``Grandfathered''--Consent decree allows 20 years.
    \7\ Including default.
    \8\ Excluding default.

                                  Attachment 2

                  ANALYSIS OF COST IMPACT OF TMDL ACCELERATION
    For low-high assumptions for the TMDL development for States
        w/o schedules and low-high assumptions (1-2) for the
        number of TMDLs per water:
        Discount rate (percent)...................................         7
        TMDL cost.................................................   $25,000

                            TMDL'S THAT WILL BE ACCELERATED DUE TO THE PROPOSED REVSIONS \1\
    ----------------------------------------------------------------------------------------------------------------
                         Assumption                         2016      2017      2018      2019      2020      Total
    ----------------------------------------------------------------------------------------------------------------
    High................................................   102.791   102.791   102.791    95.091    95.091   498.555
    Low.................................................     3.850     3.850     3.850  ........  ........    11.550
    ----------------------------------------------------------------------------------------------------------------
    \1\ The level of precision shown is not intended to indicate degree of accuracy, but rather to facilitate the
      ability of reviewers to check the calculations. No rounding was done for the projections from Attachment 1.

      COST OF TMDL'S THAT WILL BE ACCELERATED DUE TO THE PROPOSED REVISIONS ASSUMING AN AVERAGE COST OF $25,000 PER
                                                          TMDL
    ----------------------------------------------------------------------------------------------------------------
                   Assumption                   2016        2017        2018        2019        2020        Total
    ----------------------------------------------------------------------------------------------------------------
    High...................................   2,569,773   2,569,773   2,569,773   2,377,273   2,377,273   12,463,864
    Low....................................      96,250      96,250      96,250  ..........  ..........      288,750
    ----------------------------------------------------------------------------------------------------------------

                        1999 PRESENT VALUE FOR CURRENT SCHEDULE FOR POST-2015 TMDLS AT 7 PERCENT
    ----------------------------------------------------------------------------------------------------------------
                   Assumption                   2016        2017        2018        2019        2020        Total
    ----------------------------------------------------------------------------------------------------------------
    High...................................    $813,524    $760,303    $710,564    $614,332    $574,142   $3,472,866
    Low....................................      30,470      28,477      26,614  ..........  ..........       85,561
    ----------------------------------------------------------------------------------------------------------------

                     YEARLY COST AND 1999 PRESENT VALUE COST OF DEVELOPING THESE TMDLS PRIOR TO 2015
    ----------------------------------------------------------------------------------------------------------------
                                                         High             Low
    ----------------------------------------------------------------------------------------------------------------
    Uniform development starting in 1999 through              29.3             0.7  TMDL/year.
     2015.
    Cost per year from 1999 through 2015..........        $733,168         $16,985  Yearly Cost.
    1999 PV cost for TMDLs that have been               $7,659,153        $177,439  1998 PV.
     accelerated.
    ----------------------------------------------------------------------------------------------------------------

                           INCREMENTAL PV AND ANNUALIZED COST OF ACCELERATING TMDL DEVELOPMENT
    ----------------------------------------------------------------------------------------------------------------
                       Assumption                       PV current       PV accel      Incr PV Cost     Annualized
    ----------------------------------------------------------------------------------------------------------------
    High............................................      $3,472,866      $7,659,153      $4,186,287        $400,730
    Low.............................................          85,561         477,439          91,878           8,795
    ----------------------------------------------------------------------------------------------------------------

        Ms. Browner. The numbers that we looked at, Mr. Chairman,
    and we made public as part of the proposal, are the costs to
    the States of managing the program. It is the cost in terms of
    what the States have to do, the science they would do to set
    the load, and the work they would do within a community to
    actually develop the plan.

                        TMDL PROPOSAL VS. NPDES BACKLOG

        Senator Bond. That is where the States are very much
    concerned. And I am also very much concerned with EPA and the
    States taking on the new requirement and, at the same time, we
    have a large and growing backlog in the NPDES program, is not
    this TMDL workload going to limit EPA's ability to eliminate
    this material weakness?
        Ms. Browner. No. We are continuing our efforts to address
    the NPDES backlog. We agree we need to do a better job, as I
    said last year when I appeared. These are the most complicated
    permits, which is why we are stuck with them and why we are
    managing them. We are providing additional funds to the States.
    For example, the State of Texas had a very large backlog. We
    provided funds to them. We are addressing this program.
        It is separate and apart from TMDL's. In fact, in the
    future, TMDL's will allow you to better manage our NPDES
    process where a State makes a choice to use that as a tool. It
    is not a requirement. We are not saying that permits for non-
    point source will be required to meet TMDL requirements. But
    some States may use portions of their NPDES permitting program.

                         TMDL PROPOSAL: NPS AND FORESTY

        Senator Bond. It seems rather apparent when you look at the
    statute that EPA does not have the authority to regulate the
    non-point source pollution. And I just wonder where you have
    that authority.
        Ms. Browner. We have been very clear that when it comes to
    agriculture, we do not have authority to regulate non-point
    source pollution.
        Senator Bond. And forestry as well?
        Ms. Browner. The statute does not speak to forestry in the
    same manner. Well, in terms of non-point source, we do not have
    authority. In terms of agriculture, to require permits, we do
    not have authority.
        It is sometimes the practice in the forestry community to
    divert water from their lands into for example, which culverts
    becomes a point source.
        Having said that, Mr. Chairman, I want to be very clear
    about something. There are many forest companies that are
    engaged in good best management practices to address their
    water pollution problems. I have been up here three times
    talking in committees about the fact that the TMDL proposal has
    created a lot of misunderstanding. I am the first to admit this
    is a problem for us.
        One of the misunderstandings has been whether or not we
    would give credits, if you will, to a State program that relied
    on best management practices. The answer is yes. With
    reasonable assurances, absolutely, positively yes. Best
    management practices can be hugely successful.
        Senator Bond. We still have a long way to go on this one.
    One of my particular areas of interest, we have funded research
    experiments on the use of agro-forestry buffer strips along
    stream banks, riverbanks, to use revenue-producing sources for
    farmers to capture the nutrients that they apply to the fields
    or that come from a livestock operation. So we are very much
    concerned. But I am also very much concerned about the TMDL
    proposal. And we will have further questions for the record.
        Ms. Browner. If I can just say one thing, Mr. Chairman. It
    is not a one size fits all proposal. The point of TMDL's is to
    give the States 15 years to develop these plans and to give
    credit for the very kind of stream buffers you are talking
    about.

                               EPA STAFFING NEEDS

        Senator Bond. We are reading just some of the comments you
    are getting. The comments that are coming in that we are seeing
    are that it is one size fits all, it is command and control.
    And there is a real lack of confidence in what the EPA is doing
    in the perceptions out there.
        Let me just say that I will submit questions for the
    record. But we are concerned also about the GAO report, saying
    that EPA lacks assurance that its employees are being used
    consistent with the intent of congressional appropriations. The
    I.G. reported 3 years ago that in two regions it reviewed, 42
    percent of the employees worked in areas unrelated to the
    program areas to which their time was charged. And we are
    concerned about that and how we know that the money is going to
    the programs for which it has been appropriated.
        Finally, in making staffing decisions, EPA apparently has
    not taken into consideration whether the activities at the
    State level have altered EPA staffing requirements. States now
    assume responsibility for more than three-quarters of the
    Federal environmental programs, a much greater proportion than
    they did previously. Also, EPA does not consider whether
    technological advances have altered the EPA staffing needs. We
    see this as another concern with respect to staffing.
        If you would like to take a minute to respond to that.
        Ms. Browner. Very quickly. I think you made reference to an
    increase in FTE's from 1990 to 2001. I hope you can appreciate
    that the vast majority of that did not happen under this
    administration; it happened under Mr. Bush. There was a big
    growth at the end of the Bush administration at EPA.
        Senator Bond. But it has continued to go up since then.
    Others are coming down.
        Ms. Browner. That is because this President has said
    repeatedly that one of his priorities is strengthening
    environmental protection. It is, in part, a response to the
    fact that this Congress has given us two new laws to implement,
    the Safe Drinking Water Act and the Food Quality Protection
    Act. I am not saying that it has gone down, but I am saying
    that the rate of growth over the last 10 years, the lion's
    share of it, has not been under this administration. We are
    doing more, effectively, with less.
        Senator Bond. Thank you, Madam Administrator. Due to the
    press of the floor action, we now declare the hearing
    adjourned.
        Ms. Browner. Thank you.

                         Additional committee questions

        Senator Bond. We will submit further questions for the
    record.
        [The following questions were not asked at the hearing, but
    were submitted to the Agency for response subsequent to the
    hearing:]

               Questions Submitted by Senator Christopher S. Bond

      TOTAL MAXIMUM DAILY LOAD (TMDLS): WORK LOAD AND FUNDING REQUIREMENTS
        Question. Is it true that one TMDL would need to be approved each
    workday for the next 15 years by each of the 10 EPA regional offices to
    complete all of them? If not, what is EPA's estimate, and will EPA be
    requesting a sufficient increase in funding to accomplish this
    requirement? What will this cost over the next 5 years?
        Answer. Current state Section 303(d) lists would encompass about
    40,000 TMDLs. Approving all these TMDLs over the next 15 years would on
    average translate into one TMDL being approved each workday in each EPA
    Regional office. This is a significant workload for EPA and is beyond
    what we are now devoting to the TMDL program. We are encouraging states
    to realize efficiencies by ``bundling'' TMDLs for segments on a
    watershed basis, thus reducing transaction costs associated with
    administrative processes and providing for more meaningful public
    involvement. These efficiencies can reduce EPA review and approval
    costs as well. The Agency analysis of its outyear resource requirement
    is ongoing.
                         TMDLS VS. NPDES PERMIT BACKLOG
        Question. How will EPA and the states both take on this new
    requirement, as well as eliminate the large and growing backlog in the
    NPDES permit program?
        Answer. The President's request includes a substantial increase
    (+$45 million) explicitly to assist states in the development of TMDLs.
    This increase, coupled with the required state contributions for this
    increase, state flexibility to use up to 20 percent of their also
    increased Section 319 grant, and other available financial assistance
    would provide sufficient resources to allow states to substantially
    meet their TMDL obligations in 2001 based on the estimated cost of the
    new TMDL regulation proposed in August 1999. While earmarked for TMDL
    development, this increase in grant funding should allow states to
    reallocate existing base grant funds to their most significant
    priorities, including addressing their NPDES permit backlog. The
    President's 2001 request also includes an increase of $5.3 million for
    the NPDES program, a portion of which should help to address the permit
    backlog. The Agency also provides substantial technical support for
    state TMDL development and NPDES permitting efforts in our operating
    programs. Resources are also used by the Agency to address the backlog
    of expired permits in non-delegated states and are instrumental to the
    development of state water quality standards which serve as the
    environmental endpoint to which TMDLs are geared.
                           TMDL EFFECT NPDES BACKLOG
        Question. Won't the new TMDL workload limit EPA's ability to
    eliminate the backlog, an area which has been declared a material
    weakness and an area where no progress has been made in the last year?
        Answer. EPA is committed to reducing the NPDES permit backlog as
    expeditiously as possible. For 2001, EPA has established a performance
    goal, under the Government Performance and Results Act, that the
    backlog of permits for major point sources will decrease from the
    current level of 28 percent to 10 percent. While striving to meet these
    targets, EPA and the states must ensure that permits are consistent
    with the core NPDES regulations, demonstrate that appropriate permit
    development procedures were followed and documented, and ensure permit
    conditions are consistent with national policy and guidance. The fiscal
    year 2001 budget requests an additional $5 million to address the broad
    range of NPDES program activities, including work to address the
    backlog.
                            TMDLS: ASWIPCA CONCERNS
        Question. According to the Association of State and Interstate
    Water Pollution Control Administrators, ``state program budgets and
    staffing levels are not sufficient to implement the regulation as it
    now stands and even with significant increases in funding they will not
    likely grow in order to meet an ambitious waterbody restoration agenda
    merely because an arcane federal regulation is changed.'' How do you
    respond to that concern?
        Answer. We appreciate that states face a significant workload to
    carry out the TMDL program. We are working with the states to determine
    overall state needs versus available resources to carry out all their
    Clean Water Act responsibilities, including TMDLs. States are now
    completing their accounting of what they are currently spending.
        EPA wants states to succeed in implementing the TMDL program and is
    fully prepared to work with them to assure that all states are able to
    effectively carry out their responsibilities. EPA has proposed to
    substantially expand fiscal year 2001 funding for grants to states for
    water pollution control. The President's Budget proposes increased
    funding of $45 million for grants to states to identify and address the
    remaining polluted waters around the country. This increase, coupled
    with the required state contributions for this increase, state
    flexibility to use up to 20 percent of their also increased Section 319
    grant, and other financial assistance would provide sufficient
    resources to allow states to substantially meet their TMDL obligations
    in 2001 based on the estimated cost of the new TMDL regulation proposed
    in August 1999.
                          TMDLS: NONPOINT SOURCE DATA
        Question. GAO testified recently that only 3 states have a majority
    of the data they need to develop TMDLs for nonpoint sources. How will
    states get the information they need to develop TMDL's for Nonpoint
    sources?
        Answer. EPA recognizes that state ambient monitoring activities
    have not always kept pace with growing data needs, including those for
    the TMDL program. We have requested a substantial increase in Section
    106 funds in fiscal year 2001 [+$45 million] specifically for states to
    help improve their Section 303(d) lists and TMDL development. Also,
    with our requested $250 million for Section 319 grants and our
    continued 319 grant policy allowing states to use up to 20 percent of
    their 319 funds for nonpoint source (NPS) program development
    activities including TMDLs, States will have the ability to use up to
    $50 million of these funds to develop NPS TMDLs including necessary
    data collection.
        We believe States can take needed actions based on the data they
    have collected. The proposal does not change what is already required
    in the existing TMDL regulation; namely, that listing of waterbodies
    and establishment of TMDLs be based on all readily available existing
    information. In addition, some widespread kinds of water quality
    impairments can be identified without sophisticated measurements, such
    as nutrient over-enrichment and sedimentation. The later and more
    complex steps of quantifying the extent to which these pollutants
    exceed the assimilative capacity of a listed water and apportioning
    load reductions needs to occur when a TMDL is developed--which under
    our proposal may be as long as 15 years after listing allowing
    sufficient time to obtain any necessary additional data.
                                 NEPPS PROGRAM
        Question. The TMDL proposal raises serious concerns about EPA's
    commitment to working in partnership with the states. Concerns about
    the State-EPA relationship is reinforced in a recent independent
    analysis of the National Environmental Performance Partnership or NEPPS
    program. The analysis by Ross and Associates, a well-known and widely
    respected consulting firm, found that ``progress to date falls
    substantially short of the overall promise and potential of NEPPS to
    improve the state/EPA partnership and enhance the achievement of
    environmental results.'' They found continued disagreement about the
    role of EPA in enforcement and compliance, the level of necessary
    oversight, the types of data states should report to maintain
    accountability, and the amount of work sharing that should occur. EPA
    and the States signed the NEPPS partnership agreement in 1995, yet five
    years later major barriers continue to exist. Why?
        Answer. With respect to your comment on the TMDL proposal, EPA and
    the states are close partners, as well as co-regulators, who ensure
    water quality standards are maintained throughout the country. EPA
    values its partnership with states and spends much time to foster it.
    For example, EPA has committed many hours and resources to working with
    the states on the TMDL proposal. In addition to numerous one-on-one
    discussions, EPA and states have had lengthy discussions of TMDLs at
    every meeting of both the Association of State and Interstate Water
    Pollution Control Administrators (ASIWPCA) and the Environmental
    Commissioners of the States (ECOS) for the past few years, both to help
    craft the proposed rule, and to discuss changes needed for the final
    rule. EPA also held a special two-day co-regulators TMDLs Forum with
    the states in December to discuss the proposed rule and the states'
    views on how it should be changed, and another one-day forum in March.
    While the 50 states have varied perspectives about, and resources to
    support, TMDLs, EPA has taken care to discuss each concern and is
    crafting the final rule to ensure it provides states the flexibility
    needed to implement the Rule to meet their particular conditions and
    ensure attainment of water quality. At the ECOS Spring meeting this
    past April, several State Commissioners were highly complimentary of
    EPA's partnership work with the states on TMDLs. We also note that EPA
    has been successful in acquiring additional resources for states to
    support their TMDL work: an additional $5 million in fiscal year 1998-
    2000, and a Presidential request of an additional $45 Million in fiscal
    year 2001.
        With respect to your question on barriers to NEPPS, we are familiar
    with Ross and Associates' summary of NEPPS evaluations. In their
    summary, Ross and Associates conclude that both state and EPA staff
    believe that NEPPS has not reached its full potential, given underlying
    problems with NEPPS implementation. We agree with their conclusion, and
    continue to work closely with state agencies and ECOS to resolve those
    underlying problems. We would point out, however, that the quote you
    have cited does not reflect all of Ross and Associates' conclusions
    about NEPPS. Ross and Associates also concluded that:

        ``The majority of those interviewed for these reports supported the
    philosophy and objectives of NEPPS. All the reports found that
    participants in the NEPPS process believed that it had been beneficial
    and had improved the state-EPA relationship. In particular, the
    evaluations identified improved communications between EPA and the
    states, as well as greater senior management attention to program
    priorities and issues, as frequently cited NEPPS benefits.''

        In addition, within the past month, both EPA and ECOS have
    reaffirmed their commitment to the principles of NEPPS. These
    reaffirmations signify the intention of EPA and states to build on the
    progress that NEPPS has fostered over the past five years. EPA has
    planned several activities for the next several months aimed at
    improving NEPPS. EPA's goal for NEPPS for the remainder of fiscal year
    2000 and beyond is to build upon earlier successes by focusing on four
    objectives. These objectives are:
      --continued improvement of Performance Partnership Agreements between
            regions and states;
      --increasing use of Performance Partnership Grants to support NEPPS;
      --reducing reporting burden on states; and
      --greater use of results measures to manage programs.
        By pursuing these objectives, EPA and the states will develop the
    institutional capacity for NEPPS that is necessary for further progress
    in performance partnerships. EPA and ECOS already have taken steps
    toward these objectives. In April 1999, the ECOS membership voted in
    favor of the fiscal year 2000 Core Performance Measures (CPMs). These
    latest CPMs, designed by joint EPA-state committees, include more
    results measures and fewer activity measures than ever before. EPA has
    planned further joint activities, such as training of EPA staff on
    NEPPS principles, that also will help us build the institutional
    capacity for NEPPS.

          EPA RELATIONSHIP WITH STATES: ACHIEVEMENTS AND IMPROVEMENTS
        Question. What specific examples can you cite of achievements and
    improvements vis-a-vis the state-EPA relationship in the five years?
        Answer. In addition to working jointly with state agencies and the
    Environmental Council of the States (ECOS) on the National
    Environmental Performance Partnership System (NEPPS), EPA has several
    ongoing joint ventures with state agencies that demonstrate
    achievements and improvements in the state-EPA relationship. In 1998,
    EPA and ECOS created the State-EPA Information Management Workgroup.
    This workgroup developed a set of operating principles which now govern
    our data and information management activities. Recently, the
    Information Management Workgroup developed an agreement and charter for
    a Data Standards Council. Recently adopted by ECOS membership, the Data
    Standards Council is tasked to develop data standards that will ensure
    that EPA and state environmental programs can share data
    electronically. EPA's Office of Enforcement and Compliance Assurance
    established a State-EPA Enforcement and Compliance Forum to involve the
    states in establishing priorities and to examine the effectiveness of
    new directions in these programs. States also participated on FACAs to
    advise the Agency on how to implement Title VI of the Civil Rights Act,
    and how to improve the TMDL program.
        The Office of Air and Radiation provides an in-depth example of
    EPA's efforts to strengthen partnerships with the states. Highlights
    over the last year include the following:
      --In September 1999, a workshop was held in Chicago on strategic
            directions for the National Air Program over the next 10 years.
            The joint planning session was attended by 27 senior managers
            from agencies charged with air quality management, including
            representatives from ECOS, State and Territorial Air Pollution
            Program Administrators (STAPPA), Association of Local Air
            Pollution Control Officials (ALAPCO), the Executive Committee
            of the National Tribal Environmental Council (NTEC) and EPA.
            The workshop's focus was on developing a collective national,
            strategic approach to the challenges facing air quality
            managers at all levels of government over the next 10 years.
            This collective agreement on the air program's vision and goals
            reached at the workshop has been used to inform revisions made
            to EPA's Strategic Plan to be published in the Fall of 2000. A
            document entitled ``National Air Quality Program: Joint
            Statement on Vision and Goals'' is in progress and will be
            published in the near future. The Chicago meeting and resulting
            Joint Statement are the first milestones in what is intended to
            be an ongoing strategic dialogue among the Nation's air quality
            management partners.
      --In February 2000, the Office of Air and Radiation convened its
            first National State and Local Air Roundtable in Florida. The
            purpose of this forum is to bring together leaders in state and
            local air program administration three to four times per year
            to assess how we are working together to achieve air quality
            goals and to discuss issues of mutual concern.
        Objectives of the Roundtable include: (1) creating a sounding board
    for early identification of and feedback on important issues; (2)
    promote early engagement of state and local air administrators as
    policies and programs develop and evolve; (3) encourage creative,
    collective problem-solving; and (4) enhance trust among Federal, state,
    and local partners. The next meeting is scheduled for June 2000.

                          FINANCIAL AUDIT: IG OPINION
        Question. Why did the IG not give EPA's 1999 financial statements a
    clean opinion, and where are you in tracking down the funds which could
    not be accounted for?
        Answer. Toward the end of the audit, the IG questioned amounts in
    two of our financial statements that could not be resolved and audited
    before the statutory due date of March 1. The issues in question did
    not relate to a loss or misappropriation of funds, but rather to the
    sources or composition of aggregated amounts. One of the questioned
    amounts was reflected in a footnote to our Statement of Changes in Net
    Position and the other in our Statement of Financing. KPMG, the
    accounting firm that assisted us in preparing our 1999 financial
    statements, has developed documentation to respond to concerns raised
    by the OIG on the Statement of Net Position. We also engaged a general
    ledger expert from the Treasury's Financial Management Service who
    confirmed our analysis of the amount questioned in our Statement of
    Financing.

                FINANCIAL AUDIT: TIMELINE FOR IG RECOMMENDATIONS
        Question. The Inspector General made a number of recommendations
    last year to improve financial systems at EPA. None of the
    recommendations have been implemented, the IG told my staff. Why, and
    what is the time for doing so?
        Answer. We have taken important steps to address financial systems
    concerns raised by the IG. For example, we made significant
    improvements in the security plans for our major systems, as
    recommended by the IG; increased resources devoted to security; tested
    and updated disaster recovery plans for our agency-level financial
    system; reviewed, updated and re-certified user access to financial
    systems; improved coordination on security issues between various
    offices in EPA, including the offices that own systems with financial
    information, the new Office of Environmental Information, and others;
    and upgraded security awareness training for our system users.
        We are now in the process of implementing an on-going risk
    assessment program based on the GAO model. We engaged the National
    Security Agency to assess our overall financial system security
    controls for compliance with Agency and federal security policy and to
    make specific recommendations for strengthening our controls. Almost
    concurrently with the completion of the NSA review, the General
    Accounting Office conducted a review of the Agency's computer security
    infrastructure and made constructive suggestions. We then had a follow-
    up meeting with GAO to discuss implementation of their risk assessment
    model for the Agency financial systems.
           integrated financial management system (ifms) replacement
        Question. The I.G. indicates that EPA's Integrated Financial
    Management System is an outdated and inefficient system. The CFO had
    identified IFMS in its budget in previous years, but replacement has
    been put off for other operational priorities. They further indicated
    that EPA's financial systems costs were 38 percent more than other
    federal systems and 9 percent higher than the private sector. Why
    hasn't replacing IFMS been a priority, and what are the plans and
    timeline for replacement?
        Answer. We agree that IFMS is an old system and it remains a
    priority for the Agency to begin looking at alternatives for
    modernizing or replacement. However, we delayed our replacement efforts
    in fiscal year 2000 until fiscal year 2001 to ensure we adequately
    address other key system challenges such as security, and successful
    resolution of the Y2K issue. We also took into consideration that there
    were new commercial off-the-shelf federal systems currently being
    introduced and tested by the Joint Financial Management Improvement
    Program. We thought our business case decisions would be better
    informed waiting for the results of the new system tests. And while
    IFMS is an old system, it currently performs our core functions in a
    reliable manner because of our continuous upgrades.
        In addition, the financial systems cost figures cited by the IG
    should also be put in proper context. The figures were taken from a
    benchmarking study initiated by EPA Office of the Chief Financial
    Office through the governmentwide CFO Council. The study compared our
    financial processes to the processes of other government agencies and
    large corporations. The figures cited by the IG show only part of the
    story. In fact, EPA ranked significantly higher in most measures of the
    efficiency of financial operations and that our overall financial
    management costs are well in line with the average.

                                  PEER REVIEW
        Question. For quite some time there have been concerns about the
    adequacy of EPA peer review procedures, leading to potential questions
    about the reliability of EPA science. In 1997, GAO reported that
    implementation of EPA's peer review policy was uneven across the
    agency. In response, EPA put out some guidance to clarify the peer
    review requirements. But a September 1999 IG report identified problems
    where in some cases peer review leaders did not effectively attempt to
    determine whether conditions existed which would compromise an
    independent review. Why hasn't EPA made a higher priority of getting it
    right with its peer review procedures? Are you confident the problems
    identified by GAO and the IG have been corrected?
        Answer. Consistent Agency-wide application of peer review policy
    and procedures has been an EPA priority for several years. Pursuant to
    the Administrator's June 7, 1994, Peer Review Policy statement, EPA in
    1998 issued its Peer Review Handbook. The Handbook outlines peer review
    principles and procedures including issues raised in the 1997 GAO
    Report. GAO cites the Handbook in its 1999 report on peer review at
    federal agencies. The 1999 IG report notes that the Handbook ``provides
    a format that offers all users a focused reference on peer review
    issues.'' The IG also notes that EPA's Program offices and Regions
    provided Handbook training to staff and managers in 1998.
        The concerns in the IG's 1999 report focused on potential conflict-
    of-interests concerns of peer reviewer candidates, although the IG
    found no case of actual conflict of interest. The IG recommended that
    EPA's Office of Research and Development provide supplemental guidance
    directing contractors and peer review leaders to inquire whether a
    potential reviewer has or had a financial relationship with the Agency.
    The IG agreed with EPA that providing supplemental guidance, rather
    than revising its 1998 Peer Review Handbook, would be an effective way
    to address the IG's concerns.
        EPA will currently drafting the supplemental guidance to address
    this issue, as well as other secondary issues. We are confident that
    these additional actions address GAO and the IG's concerns.
          mexico border: obligations and projected end of year balance
        Question. How much of the funds appropriated for border
    infrastructure projects have been obligated, and what do you anticipate
    the year-end balance to be?
        Answer. Of the $475 million appropriated for border infrastructure
    projects since 1995, $359.7 million has been obligated. EPA expects to
    obligate all of the current unobligated balance of $115.3 million by
    year-end. Except for $54 million awaiting Congressional action on the
    San Diego/Tijuana international wastewater treatment project spending
    cap, processing of grants/amendments to obligate all except $2.2
    million of this unobligated balance is under way.

                    MEXICO BORDER: FUNDED PROJECTS AND NEEDS
        Question. Please provide a break-out of all projects funded under
    this program to date, and the remaining needs that have been identified
    (including funding requirements).
        Answer. Since 1995, the border projects funded with EPA assistance
    to date, either through direct grants or through its Border Environment
    Infrastructure Fund (BEIF) grant to the North American Development Bank
    (NADBank), are shown in the attached table. In addition, the NADBank
    has estimated the project costs for work to be certified between June
    2000 and the end of Year 2002 in which EPA is likely to participate.
    Those project costs total $466.5 million of which the EPA share is
    anticipated to be $233.8 million.

                      MEXICO BORDER: MEXICAN CONTRIBUTION
        Question. What has been the Mexican contribution to projects
    already funded, and what is anticipated for future projects?
        Answer. The Mexican government participates in those projects in
    Mexico listed in the attached table that are funded through the Border
    Environment Cooperation Commission (BECC) certification/NADBank funding
    system. That group, as shown in the attached chart, totals $369.3
    million. The Mexican share as reported by NADBank is approximately
    $109.3 million, the EPA share $106.8 million and the balance locally
    funded. EPA anticipates that it will continue its agreement to a one-
    for-one match of Mexico's federal and state grant shares, on a
    cumulative basis, for projects in which the U.S. has an interest. The
    grant amounts are arrived at after the local debt capacity of a
    community is reviewed by the NADBank.

                   MEXICO BORDER: FUNDED PROJECTS AND RESULTS
        Question. What is the status of projects to date, and what
    environmental results have been produced?
        Answer. Some of these projects are in operation, some under
    construction and some in the final design/procurement for construction
    stage. Any project that has been certified by the BECC has had its
    environmental review and financial package completed, so that
    preconstruction time has been minimized. All are for either municipal
    wastewater collection and treatment or public water supply and
    distribution, some are for both. Wastewater and drinking water
    infrastructure investments in the Mexico Border area will yield
    environmental and public health results. For example, operation of the
    international wastewater treatment plant (ITWP) in San Diego, that
    manages sewage from Tijuana, significantly reduced beach closures in
    Southern California last summer. Several other plants are about to come
    on-line. By the end of 2001, 600,000 more people (cumulative total of
    11 million people) in the Mexico Border area will be protected from
    health risks because of adequate drinking water and wastewater
    sanitation systems funded through the Border Environmental
    Infrastructure Fund.

                   MEXICO BORDER: ADDRESSING GREATEST THREATS
        Question. What assurances are there that EPA funds for border
    activities are directed at the greatest environmental threats?
        Answer. EPA funds for water and wastewater infrastructure on the
    border are directed to those projects that have been developed to the
    level at which they are ready for final design and construction. All
    projects for EPA participation are screened under an EPA policy
    applying funding eligibility criteria, which includes an affordability
    index used to determine whether a community may be unable to provide
    the needed improvements without assistance. Finally, the BECC
    certification and process is the mechanism to assure that, after public
    participation and input, only high priority projects relating to public
    health and the environment are brought online.

                             MEXICO BORDER: NADBANK
        Question. It appears that EPA grants have provided the major source
    of assistance provided by NADBank. What efforts are underway to make
    the NADBank work independently of federal grants? What are the major
    impediments to a more successful NADBank and Border Projects?
        Answer. The concept of the Border Environmental Infrastructure Fund
    (BEIF) grant is to make the project affordable for the community. By
    providing grant assistance as part of multi-agency funding package, a
    community is able to implement revenue sources, including user rates
    and reserves, that results in financial sustainability of its water and
    sewer services. Historically, EPA grant fund participation in a project
    using the BEIF has averaged about one-third of the costs for projects
    that meet out funding criteria. No commitment of EPA grant funds from
    the BEIF are made until the NADBank identifies funding commitments from
    all other sources and notifies EPA of the amount needed to complete the
    multi-agency funding package. EPA expects the rate of its participation
    to increase as additional projects in poorer communities as well as
    larger projects come to the forefront. Without EPA grant funds, most of
    these projects would simply not be completed.

                        DRINKING WATER SRF: STATE MATCH
        Question. Have all states established and provided the requisite
    matching funds for DWSRFs? If not, which states have not?
        Answer. All but two states, Rhode Island and Louisiana, have
    provided the required 20 percent match for Drinking Water State
    Revolving Fund (DWSRF) capitalization grant funds. Rhode Island, which
    had difficulty obtaining the match for its fiscal year 1997 and 1998
    grants, is now having difficulty obtaining the match required for its
    fiscal year 1999 grant of $7.5 million. The Regional Administrator for
    EPA's Region I office has communicated her concern to the Governor of
    Rhode Island that the State could lose the opportunity to fund
    important drinking water projects should it fail to provide the
    required match. Louisiana is having difficulty providing the match for
    its fiscal year 1998 and 1999 grants. Louisiana also does not have
    matching funds committed for its fiscal year 1999 grants that, to date,
    has not been awarded.

                DRINKING WATER SRF: UNOBLIGATED BALANCE BY STATE
        Question. What is the unobligated balance in this program, by
    state?
        Answer. EPA obligates funds to the states through the award of
    capitalization grant funds. States have two years to apply for and
    receive a grant award from a specific annual appropriation. As of April
    13, 2000, EPA had awarded $2.4 billion of the $3.6 billion appropriated
    to the program in fiscal years 1997, 1998, 1999 and 2000. Attached is a
    state by state breakout of this unobligated balance.

                      CLIMATE CHANGE TECHNOLOGY INITIATIVE
        Question. How much of your appropriation for fiscal year 2000 and
    your request for fiscal year 2001 is targeted to publicizing the
    benefits of energy efficiency and how much is targeted to recruiting
    new participants?
        Answer. The majority of EPA's fiscal year 2000 funding is used to
    deliver technical information to program participants so that
    organizations and consumers can choose energy efficient solutions that
    save money while reducing air pollution. EPA's appropriations are
    strategically focused on removing market barriers that impede
    organizations, businesses, governments and consumers from investing in
    cost-effective energy-efficient technology. EPA's appropriations are
    used to develop essential decision-making information and tools such as
    previously non-existent information on product performance, strategic
    plans for whole building upgrades, product specifications for energy
    efficient equipment, building performance assessment tools, and
    financial assessment tools. Less than 5 percent of our fiscal year 2000
    funding is targeted to education and outreach on the benefits of energy
    efficiency. Also, less than 5 percent of our fiscal year 2000 funding
    is targeted to recruiting new participants. Similar portions of our
    fiscal year 2001 request would be targeted to these activities.

                           CCTI: EMISSION REDUCTIONS
        Question. The budget justification states that in fiscal year 2000
    your programs will achieve reductions of 58 million metric tons from
    projected levels. How do you know that participants are reporting
    reductions from their projected levels, rather than reductions from
    historic levels? Are participants in these programs required to report
    their net reductions in energy use and greenhouse gas emissions, as
    opposed to their gross reductions? To what extent do you verify reports
    independently by participating companies?
        Answer. A variety of information and a number of factors are taken
    into account to determine the emissions reductions associated with
    EPA's programs. Taking Energy Star products as an example, emissions
    reductions are estimated directly from product sales data that are
    readily available for a range of products. Combined with regional
    emissions factors and operational data, EPA can estimate the savings
    and emissions reductions from the increased presence of more efficient
    equipment in our homes and buildings. These are net savings and
    emissions reductions that would not exist without the program. A number
    of the programs get information directly from reports from program
    participants. Estimates of net savings and emissions reductions are
    derived from these partner reports while taking account of other
    important factors such as free ridership (i.e., some organizations
    would have taken some action without the program) and free drivership
    (some organizations have benefitted from the information made available
    by the program without joining as a participant and reporting results).
    EPA expends considerable effort checking the reports that participants
    provide to ensure accuracy.

                    HIGH PRODUCTION VOLUME CHEMICAL TESTING
        Question. This voluntary testing program will provide enormous
    amounts of information about chemical hazards. What process will EPA
    use and what money has the Agency set aside for using that information
    to evaluate the risks for those chemicals?
        Answer. The screening level human health and environmental effects
    information being developed by industry sponsors under the High
    Production Volume (HPV) Challenge Program will be provided to the
    Agency in what is called ``robust summary format,'' a format developed
    for the HPV Challenge Program and accepted for international data
    sharing by the Organization for Economic Cooperation and Development
    (OECD) in its HPV Screening Information Data Set (SIDS) Program. This
    information will be posted to the Internet for review and assessment by
    both Agency personnel and outside interested parties.
        Once this basic hazard information is available on a chemical, it
    may be used to provide a platform to begin to address the question,
    ``how safe is this chemical?'' EPA has existing risk assessment
    guidelines to prepare and prioritize chemicals for risk assessment. It
    must be noted that the hazard information being provided through the
    HPV Challenge Program is screening level data intended only to support
    the initial stage of assessing chemical hazards. HPV data would not be
    sufficient on its own for the preparation of formal risk assessments;
    additional hazard data (e.g., carcinogenicity; neuro-toxicity; etc.)
    and exposure data would be needed to conduct risk assessments. The
    resources requested for of the Chemical Right-to-Know Initiative will
    be fully encumbered in collecting, managing, and disseminating the
    limited hazard screening data and will not be used to develop formal
    risk assessments on any HPV chemicals.
        In fiscal year 2000, the Operating Plan for the CRtK Initiative is
    $11.1 million, with approximately $10 million directed at HPV chemicals
    and $1.1M supporting the start-up of the program to address chemicals
    of special concern to children. EPA's fiscal year 2001 President's
    Budget Request contains a $12.6 million request for the CRtK-HPV
    program. During the initial data collection phase of the HPV program,
    the bulk of these resources must be dedicated to managing and reviewing
    the incoming data. Public outreach efforts in these early years of the
    program will include a dialogue with stakeholders to determine how they
    will use the data in order to identify the most appropriate formats,
    tools, and vehicles for effective public hazard communication. Public
    outreach will assume a steadily higher profile as data actually become
    available and are reviewed, and as additional resources are provided.

             HIGH PRODUCTION VOLUME CHEMICAL TESTING: COMMUNICATION
        Question. Beyond simply ``posting'' the numbers and test results on
    the internet, what steps are you taking and resources are you
    allocating to ensure that the information voluntarily provided by
    industry will be communicated to the public in a way that means
    something to them?
        Answer. Using established risk assessment guidelines, EPA plans to
    use the toxicity data to produce plain English chemical information
    profiles, Chemical Advisory notices, website enhancements, and other
    information tools as appropriate on individual chemicals of concern.
    EPA will work with the Consumer Product Safety Commission, the
    Occupational Safety and Health Administration, and other agencies to
    distribute this information to workers, consumers, parents, teachers,
    community leaders, public interest groups, companies, and others. EPA
    intends to use the information and experience it has gained in other
    public safety and education projects to create and distribute simple
    and understandable messages to the public.
        In addition, by classifying chemicals as presenting high, medium,
    or low hazard concerns, the Agency may be able to explain to the public
    the hazards of a chemical in simple and practical terms. In the future,
    this could then be combined with exposure information (e.g., chemical
    use profiles and exposure scenarios relevant to the specifics of
    individual chemicals) to assess, at a screening level, the potential
    risks presented by the chemical to people or the environment in various
    defined circumstances--for example, to workers, to users of consumer
    products, or to the environment. The hazard of a chemical is generally
    seen as an ``intrinsic'' aspect of the chemical, whereas uses and
    exposures can change and be ``situational'' depending on the
    particulars of a given commercial application. For this reason, clear
    and concise hazard information may be useful outputs of HPV screening
    to the public.
        EPA realigned $1.3 million of its fiscal year 1999 Enacted
    Operating Plan to initiate the Chemical Right-to-Know Initiative
    (CRtK). In fiscal year 2000, the Operating Plan for the CRtK Initiative
    is $11.1 million, with approximately $10 million directed at HPV
    chemicals and $1.1 million supporting the start-up of the program to
    address chemicals of special concern to children. EPA's fiscal year
    2001 President's Budget Request contains a $12.6 million request for
    the CRtK-HPV program. During the initial data collection phase of the
    HPV program, the bulk of these resources must be dedicated to managing
    and reviewing the incoming data. Public outreach efforts will include a
    dialogue with stakeholders to determine how they will use the data in
    order to identify the most appropriate formats, tools, and vehicles for
    effective public hazard communication.

                       CHLOROFORM RULE: AGENCY RATIONALE
        Question. In December 1998, EPA announced its decision to
    promulgate a national primary standard of zero for chloroform in
    drinking water. EPA decided to set a zero standard despite scientific
    evidence that the Agency's existing ``linear, no threshold'' carcinogen
    policy was scientifically unjustified for chloroform. That policy, a
    ``conservative default assumption,'' assumes that any exposure to
    carcinogens poses some cancer risk, in contrast with the national
    policy for non-carcinogens which recognizes that below a specified
    level there is no risk of adverse effects. The Agency's own scientists,
    along with leaders of the Society of Toxicology and many others, agreed
    that extensive scientific data on the ``mode of action'' by which
    chloroform causes cancer supported departure from the conservative
    default assumption and promulgation of a less-stringent standard of 300
    parts per billion. Yet EPA chose to ignore the weight of the scientific
    evidence and, for seeming political reasons, to stick with its old
    default assumptions. That EPA decision raises significant concerns that
    no matter how much new scientific evidence is generated the Agency will
    ignore that science if it is inconsistent with its agenda. If so, why
    spend millions of dollars generating new data? Can you explain EPA's
    rational for this particular decision?
        Answer. As part of a large-scale regulation promulgated in December
    1998 under the Safe Drinking Water Act, EPA published a health-based
    goal for chloroform (the maximum contaminant level goal or MCLG) of
    zero. EPA provided new data and analyses concerning chloroform for
    public review and comment, including a different mode of action
    approach for estimating the cancer risk, but did not reach a conclusion
    on how to use that new information in establishing the final MCLG,
    pending further review by the Science Advisory Board (SAB). The zero
    MCLG was challenged by the Chlorine Chemistry Council and others in the
    Court of Appeals for the District of Columbia; the maximum contaminant
    level (MCL) for trihalomethanes, which includes chloroform, was not
    challenged.
        After review of the SAB report, EPA concluded that it should
    withdraw the MCLG for chloroform and engage in further rulemaking
    proceedings on the MCLGs for the trihalomethanes and take additional
    regulatory actions consistent with all information available to the
    Agency, including the SAB report and other best available peer reviewed
    science. The Court recently vacated the MCLG for chloroform and has
    indicated it will ask the parties to address further remedies.

                        IRIS DATABASE: ACCURACY OF DATA
        Question. Many Federal and state environmental programs rely on
    EPA's IRIS (Integrated Risk Information System) database for making
    decisions. Concerns have been raised as to the currency and accuracy of
    the information in the database. What is the Agency doing to ensure
    that the IRIS database, on which many federal and state programs rely,
    contains the best available scientific information about the substances
    contained in the database?
        Answer. Since 1995, EPA has taken several steps to ensure that the
    best available scientific information is included in IRIS assessments.
    On an annual basis, EPA announces the next set of chemicals to be
    considered in the IRIS program, either to update an older assessment,
    or to be added to the database. This announcement includes a request
    for all relevant information to be submitted to EPA for consideration
    in the assessments. In addition, all IRIS assessments go through an
    external peer review, which can include a public meeting permitting
    more notice of relevant information. All scientific questions and
    responses generated through the external reviews are available to the
    general public.
        In addition, in its fiscal year 2000 Appropriations Committee
    Report, Congress directed EPA to ``consult with the Science Advisory
    Board (SAB) on the design of a study that will (a) examine a
    representative sample of IRIS health assessments completed before the
    IRIS Pilot Project, as well as a representative sample of assessments
    completed under the project and (b) assess the extent to which these
    assessments document the range of uncertainty and variability of the
    data. The results of that study will be reviewed by the SAB and a copy
    of the study and the SAB's report on the study sent to the Congress
    within one year of enactment of this Act.'' EPA consulted with the SAB
    Nov. 29, 1999 and again on March 7, 2000 on an approach to this study.
    The study is now underway. Though not specifically addressing currency
    or accuracy, the study will determine whether IRIS assessments
    developed using a new process adequately presented and discussed the
    range of uncertainty and variability in the data used to develop the
    assessments.

                        IRIS DATABASE: AGENCY RESOURCES
        Question. How much money is the agency allocating to improving the
    IRIS database?
        Answer. For the fiscal year 2001 President's Budget Request, EPA
    requested a total of $1.7 million to support the Integrated Risk
    Information System (IRIS) database. Some key areas of effort in 2001
    will include producing, updating, and maintaining health assessments on
    IRIS, ensuring appropriate external peer review of IRIS summaries and
    support documents, facilitating Agency consensus and resolving issues
    in a timely manner, and maintaining a widely-accessible Internet
    version of IRIS, available at the local level to support community-
    based environmental protection.
        Question. How many staff resources are allocated to this?
        Answer. For the fiscal year 2001 President's Budget Request, EPA
    requested a total of 7.8 work years to support the IRIS database.
                 project xl: progress in negotiating agreements
        Question. What is the cause of the slow progress in negotiating
    agreements with applicants in the XL program?
        Answer. When Project XL was launched in 1995, there were no models
    to draw upon. The first few XL projects posed many challenges. EPA and
    others had concerns about how to test new approaches and yet still
    maintain the same level of protection that the current regulatory
    system provides. Predicated on experimentation, Project XL has evolved
    through continuous improvement, first in policy and procedures, and
    second in program structure and process.
        In 1997, EPA announced new XL policy guidance. This Federal
    Register notice invited stakeholders to be co-sponsors of proposals and
    described changes made to streamline and improve the negotiation
    process, highlighting for the first time preproposal discussions as
    important to the building of good ideas, proposals, and relationships.
    Most importantly, it clarified three project selection criteria:
    superior environmental performance, regulatory flexibility, and
    stakeholder involvement. This guidance also set the stage for EPA's
    next task: reducing transaction costs.
    Specific Concerns Addressed
        In 1998, EPA--with industry representatives, environmental
    organizations, states, and other interest groups--worked together to
    streamline the proposal development and negotiation process by reducing
    transaction costs and improving stakeholder involvement. Through the
    reengineering process and ongoing experience, EPA continues to learn
    about how to run an innovative program like Project XL (e.g., we can
    now be more specific about what a quality proposal should contain, how
    decisions should be made, and what a reasonable process should entail).
        The Agency also developed several tools to help project sponsors,
    EPA staff, and citizens create successful projects. For example, the
    Best Practices Guide for Proposal Development, written specifically for
    project sponsors, gives greater clarity in determining what makes a
    good proposal. The Stakeholder Involvement Guide shows project sponsors
    and stakeholders how to work effectively on XL projects. Technical
    assistance is now available to stakeholder groups participating in
    project negotiations. Finally, EPA contracts with professional
    facilitators to get stakeholder discussions and internal EPA teams off
    on the right track.
    Results of the new process
        We now expect this new process to yield agreements for most
    projects in six months to a year, compared to 24 months or longer under
    the old process. For example, the Atlantic Steel Redevelopment project,
    in Atlanta, Georgia, produced a signed project agreement for phase one,
    eight months after initial pre-proposal discussions. The Exxon
    Superfund project in Fairmont, West Virginia, also produced a signed
    agreement eight months after an initial pre-proposal was submitted.
        EPA has signed 21 final XL agreements and is negotiating an
    additional 29 projects that are expected to be signed and implemented
    in fiscal year 2000.
                              PROJECT XL: EXAMPLES
        Question. One of the key elements of the XL program is testing
    ideas for innovative approaches to environmental management. Please
    provide examples of where EPA has integrated into its normal operations
    an innovative approach that was found to be successful in an XL
    project.
        Answer. In fiscal year 1999, EPA reported 30 innovations resulting
    from XL projects that have the potential to improve traditional
    regulatory programs. Overall, EPA and its partners have found that XL
    projects produce greater reductions in environmental releases than
    would have occurred under conventional regulatory approaches. At the
    same time, XL project participants reduce environmental management
    costs and improve their competitiveness as a result of expedited or
    consolidated permitting, reduced record-keeping and reporting
    requirements, and greater operational flexibility afforded by facility-
    wide emission caps.
        Eight innovations are fully implemented, and the remaining
    innovations are in subsequent stages of testing or development prior to
    being incorporated into core Agency functions. The Agency is developing
    approaches to incorporate the remaining innovations into mainstream EPA
    activities. However, the time frames for executing these changes are
    tied to legislative requirements for rule-making and regulatory
    guidance that requires comprehensive analysis, and adequate
    opportunities for public review and comment. Likewise, some innovations
    are tied to experiments that are in the early stages of development and
    have not yet produced verifiable and replicable results.
        Below are the eight XL innovations (5 regulatory and 3
    institutional changes) that have been incorporated into a permanent
    regulatory change or adopted into Agency operations.
    Regulations:
                Voluntary effluent discharge limitations
        Pulp and Paper Cluster Rule.--Voluntary effluent discharge
    limitations; participation in Voluntary Incentives Program allows
    additional time for MACT standards compliance.
        The Pulp and Paper Cluster Rule was promulgated in April 1998.
    Compliance options available in the rule were part of the XL project
    for Weyerhaeuser Flint River Plant in Oglethorpe, Georgia.
    Specifically, the Water Effluent Limitations Guidelines and Standards
    portion of the rule requires more stringent reductions for toxic
    pollutants in the wastewater discharges during the bleaching process
    and in the final discharge from the mill. As part of its XL commitment
    and its Minimum Impact Manufacturing strategy underway at the plant,
    Weyerhaeuser has conducted a feasibility study of plant-wide effluent
    reductions through innovative technologies. The Effluent Guidelines
    Voluntary Advanced Technology Incentives Program, a compliance option
    incorporated into the Cluster Rule, encourages bleach plant operators
    to install advanced technologies or make process changes that will
    reduce effluent discharges beyond the rule's limits. Weyerhaeuser's
    Flint River facility is participating in this program, but expects to
    exceed the requirements for this option. If a pulp and paper mill
    enrolls in this program and can meet the strict discharge limits
    through advanced technologies, the facility receives reduced monitoring
    and inspection opportunities, and additional time to comply with the
    air (e.g., NESHAP) portion of the Rule.
                Condensate vent stream reductions
        Pulp and Paper Cluster Rule.--Testing alternative compliance
    approaches for HAPs; developing a HAP emissions balance scheme for
    process vent controls.
        Voluntarily reducing hazardous air emissions from process water
    streams is another compliance option for kraft-pulping operations that
    was incorporated under the Pulp and Paper Cluster Rule. The Clean
    Condensate Alternative Program focuses on reducing the hazardous air
    pollutant (HAP) emissions throughout the pulp mill by reducing the HAP
    mass in process water streams. The Weyerhaeuser Flint River Facility
    expects to exceed the requirements to comply with this option since
    they are going through a mill modernization program that will reduce
    condensate vent streams throughout the facility. The Flint River
    facility's willingness to redesign the mill with this option in mind
    was instrumental in creating this opportunity within the Cluster Rule
    requirements. By lowering the HAP mass loading in waste water streams,
    fewer HAPs will be volatized to the atmosphere. Many of the pollutants
    that are ultimately emitted from production vents originate in the mill
    condensates that are recycled throughout the mill. If a mill can reduce
    these condensates instead of controlling individual specified vents,
    they achieve greater air emission reductions and reduce their
    compliance costs.
                Modification of the NESHAP for Magnetic Tape Manufacturing
                        Operations
        The revised Magnetic Tape rule was effective in June 1999 and is
    expected to increase compliance with this regulation, enhance
    flexibility for affected entities and save companies money in
    compliance costs.
        The 3M (Hutchinson, Minnesota) XL proposal did not reach final
    agreement. However, one of the flexibilities 3M had requested was used
    in revising the 1994 Magnetic Tape Manufacturing operations maximum
    achievable control technology (MACT) standard. Since the 1994 rule was
    issued, 3M provided EPA with data showing that HAP emissions from
    uncontrolled solvent storage tanks are very close (by volume) to HAP
    emissions from uncontrolled containers of mix preparation equipment. By
    balancing emissions from these uncontrolled sources against controlled
    sources in the process line, 3M was able to suggest alternative control
    options. EPA accepted 3M and other industrial data, and proceeded to
    amend the 1994 rule providing owners/operators with 25 options for
    ``undercontrolling'' tanks and/or mix equipment vessels based on the
    level of control they achieve on their coating lines. 3M developed this
    data in conjunction with a regulatory flexibility proposal submitted to
    Project XL.
                Using pollution prevention technologies
        The Pulp and Paper Cluster Rule also provides incentives for using
    pollution prevention technologies in kraft pulping operations. The MACT
    standards provide for an extension of up to eight years from
    promulgation for compliance if pollution prevention approaches that
    otherwise would not have been used are used.
        Pulp and paper facilities will have the flexibility to demonstrate
    HAP emission reductions using innovative pollution prevention
    approaches in lieu of, or in addition to, end of pipe HAP controls.
    This extension is designed to encourage mills to install pollution
    prevention technology that will reduce HAP emissions from the pulping
    process, as well as both air and water pollutant discharges from the
    bleaching process. The Weyerhaeuser XL project will demonstrate
    pollution prevention approaches to reducing HAP emissions such as:
    reducing process condensate wash water HAP content; reducing bleach
    plant HAP emissions, and reducing oxygen delignification HAP emissions;
    and reducing cylinder mould decker and filtrate tank HAP emissions.
                Limited Preapproval for Air Permits
        The recent Pharmaceutical MACT standard regulations promulgated in
    September 1998 have incorporated lessons learned from the Merck final
    project agreement, allowing the limited preapproval of certain types of
    production changes without requiring permit revision for each
    modification.
        Certain industries change their product lines and manufacturing
    processes frequently. Usually, such changes require a time-consuming
    preconstruction permit review and approval process prior to
    implementation. By focusing on the total emissions of its facility, the
    Merck XL project is testing the use flexible air emission strategies
    under a facility-wide emission cap to allow modifications that would no
    longer require prior approval under either Federal or state NSR
    regulations. The Agency is formally considering further expanding this
    use of preapproval and ``cap permits'' as part of a wider application
    of these concepts in forthcoming NSR regulatory standards.
    EPA Institutional Change:
                Compliance Screening for XL's Voluntary Project Sponsors
        EPA issued the ``Guidance for Compliance Screening for Voluntary
    Programs,'' the Agency's comprehensive screening framework, applicable
    to all voluntary partnership programs.
        EPA actively encourages a wide variety of public and private
    entities to participate in XL, but all sponsors must have a solid
    history of compliance with EPA regulations. While past record of
    compliance is not always an indicator of future performance, a
    potential sponsor's overall compliance history is relevant to ensure
    the experimental XL approach will not pose undue risks to human health
    and the environment. Initially, XL project eligibility was determined
    through an EPA Office of Enforcement and Compliance (OECA) enforcement
    screen. As the XL process matured, compliance screening became more
    frequent and time-intensive. The screening process was also not well
    defined. To standardize compliance screening, OECA developed the
    Guidance for Compliance Screening for Project XL. This guidance
    specifies the scope, criteria and process for conducting enforcement
    screens, and indicates that compliance screens will be updated prior to
    high-visibility public events. XL has laid the groundwork for testing
    and establishing guidance for an increasing number of EPA voluntary
    programs requiring compliance screening. In addition to the XL
    screening guidelines, the Guidance for Compliance Screening for
    Voluntary Programs (August 1998) provides the comprehensive screening
    framework for all of the Agency's voluntary partnership programs.
                Senior Management Support and Involvement through the
                        Reinvention Action Council
        EPA established the Reinvention Action Council (RAC) to further
    senior management involvement in advancing innovative efforts. The
    RAC's success in resolving problems in Project XL led to expanded
    responsibilities for the Council.
        For projects to succeed and system change to occur, there is a need
    for active support from senior Agency management. For XL, this support
    includes championing projects, empowering staff, giving clear direction
    to teams and providing resources. In 1996, EPA established the RAC to
    assist in reaching the Agency's goal of 50 XL projects. The RAC
    consists of senior Agency managers (Deputy Assistant Administrators and
    Deputy Regional Administrators) from each of the Headquarters and
    Regional offices. Originally, the RAC served as a resource to XL teams
    to resolve disagreements or difficult technical and policy issues.
    Since then, RAC members have committed to working directly with XL
    Coordinators within their offices to support quick decision-making and
    ensure that XL teams have suitable resources. Involving senior managers
    has proven to be effective in identifying and resolving problems for
    XL. In 1997, the Administrator expanded the RAC's responsibilities to
    support the Agency's overall commitment to reinventing environmental
    protection. To date, the RAC has taken a hard look at reinvention
    efforts throughout the Agency and has addressed a broad array of
    reinvention issues including incentives, permitting and environmental
    management systems, and continues to set new reinvention priorities.
                Developing Capabilities to Conduct Experiments with State
                        and Tribal Governments
        The ECOS-EPA Innovations agreement, developed out of the XL
    experience, defines seven principles to guide innovations and a process
    that clarifies how EPA and the states will put innovations to the test.
    The prominent role of states in the XL process, along with the
    Innovations agreement, has advanced successful Federal-state
    partnerships in developing and managing innovation strategies for
    environmental protection.
        Federal sharing of environmental responsibilities requires that
    each XL project have the support of the appropriate state or tribal
    government. For most projects, state and tribal governments are
    signatories. State and tribal governments are, and will continue to be,
    primary partners with EPA in both regulating human health and the
    environment, and designing innovative approaches. It is incumbent that
    EPA, states and tribal governments rectify any differences and produce
    agreements that satisfy each entity. XL serves as testing ground for
    such a framework. The promise of more efficient and effective
    government has led several states to develop their own XL-like
    legislation to test innovative approaches to state environmental
    programs. To provide an additional vehicle, EPA and the Environmental
    Council of the States (ECOS) negotiated The ECOS-EPA Innovations
    agreement to guide innovations in the future. Project XL continues to
    influence states as they consider and develop their own programs.
    Some Examples of Future Change:
        In addition, below are two examples of innovations that EPA plans
    to incorporate into permanent regulatory changes in 2000.
                Clean Air Act Emission Caps
        In the near future, The Agency will announce the New Source Review
    Reform and Clean Air Act revisions. The approaches tested in the
    following three XL projects have provided fundamental information about
    the value and structure of flexible air permits that has been
    incorporated into these rules.
        Three XL projects--Intel-Chandler, Weyerhaeuser-Flint River, and
    Merck-Elkton--are testing different versions of a facility-wide air
    emissions cap. The benefit of these caps is that they reduce and limit
    each facility's air emissions and allow them flexibility as to how to
    control or prevent future emissions to maintain these reduction levels.
    As long as the facilities operate within the cap limits, it also allows
    the facilities to make production changes without recurring permit
    modifications. Intel established its site-specific emissions cap as
    part of its minor New Source Review (NSR) Permit with Arizona and EPA.
    Intel is using a Plant Site Emission Limit (PSEL) for criteria
    pollutants and an Arizona Ambient Air Quality Guideline limit for HAPs
    to establish their facility caps. Intel has reduced its criteria
    emissions and hazardous air pollutants (HAPs) by more than 20 percent
    and 40 percent, respectively, below its earlier actual emissions
    baseline. Weyerhaeuser has modified its existing air quality permit
    (with Georgia and EPA) with a dual emissions cap for the two major
    sources of criteria air emissions at their facility and Merck has
    created its emissions cap as part of a new Prevention of Significant
    Deterioration (PSD) permit with Virginia and EPA. These projects are
    testing and confirming the potential for establishing caps that not
    only provide for the opportunity to reduce air emissions below
    allowable levels, but offer the flexibility to facilities to control or
    prevent emissions from exceeding these levels. These project
    flexibilities have been studied as part of a wider application of these
    concepts in forthcoming NSR regulatory standards.
                Pretreatment Mass-based Compliance Standard
        The mass-based approach used in the Steele County XL project is
    helping to inform the national pretreatment regulations streamlining
    process.
        National Pretreatment Standards establish limits on pollutants in
    specific industrial categories, establishing pollutant limitations in
    different ways for different categories. Current regulations do not
    allow alternative mass-based limits to be developed when concentration-
    based limits are required. This can serve as a hurdle for industrial
    users that are attempting to minimize their water use. Water
    conservation efforts can increase the concentration of pollutants in a
    reduced volume of water even if the total mass of pollutants have
    decreased. Complying with a mass limit that is equivalent to or less
    than the total pollutant load from a concentration limit would not
    change and could even reduce total pollutant loading, even though
    effluent concentration might increase. In a rule proposed in July 1999,
    EPA seeks to streamline the general pretreatment regulations for
    existing and new sources of pollution. The proposed rule allows the
    Steele County (MN) Project XL sponsor facilities in Owatonna and
    Blooming Prairie the flexibility to use alternative mass-based limits.
    To enable and facilitate water conservation strategies, the local
    Control Authority can allow sponsor facilities in Owatonna to use
    equivalent mass limits in lieu of concentration limits for discharges
    to the wastewater treatment facility.

      ENDOCRINE DISRUPTOR SCREENING PROGRAM: SCHEDULE FOR VALIDATION AND
                                STANDARDIZATION
        Question. What is EPA's schedule for completing the validation and
    standardization of the screens and tests in the proposed Endocrine
    Disruptor Screening and Program? Will the validation work for both
    screens and the corresponding tests for human health be completed at
    the same time? When will the test(s) for human health be validated for
    use?
        Answer. The scientific screens and tests proposed for the Endocrine
    Disruptor Screening Program vary considerably in terms of their
    readiness for routine use in regulatory programs. Because many of the
    endocrine disruptor screens and tests involve cutting-edge science, few
    of them have actually undergone the standardization and validation
    requirements necessary for pesticide and chemical regulation. Many of
    the tests proposed for the screening program have been used in
    research, but have never been formally standardized or validated
    through inter-laboratory comparisons. Standardization and validation is
    essential to establish the relevance, reliability, and reproducibility
    of methods. Therefore, EPA will validate all test systems to ensure
    that the tests are reliable and reproducible before implementing the
    testing phase of the program.
        EPA formed a technical committee called the Endocrine Disruptor
    Standardization and Validation Task Force to provide the technical
    advice needed to develop, standardize, and validate the screens and
    tests proposed for the Endocrine Disruptor Screening Program. EPA is
    currently reconstituting the Task Force as an advisory committee under
    the Federal Advisory Committee Act. Although the Task Force's
    activities have been temporarily suspended, this does not affect the
    progress of the technical work, which is ongoing. EPA expects the
    advisory committee to resume its technical advisory functions in late
    Fall 2000.
        Several years will be required to complete standardization and
    validation of the entire Tier 1 Screening and Tier 2 Testing batteries.
    However, EPA is moving as quickly as possible and anticipates
    implementing the screening program in phases, with initial emphasis on
    the legislatively mandated components of the Tier 1 Screening battery.
    Several screening tests have already entered the validation process,
    and we expect all the Tier 1 screens and one of the Tier 2 tests to be
    validated by 2003. The four remaining ecological tests require
    substantial development. One will be validated by 2003, two by 2004,
    and the last by 2005.
        The standardization and validation process is being conducted using
    the general principles developed by the Interagency Coordinating
    Committee on the Validation of Alternative Methods (ICCVAM), as
    described in Validation and Regulatory Acceptance of Toxicological Test
    Methods (NIEHS 1997). However, there are also Senator Bond separate
    international standardization and validation efforts being conducted by
    the Organization for Economic Cooperation and Development (OECD). As
    these future tests are developed, EPA will examine their suitability
    for use and possible replacement of tests currently proposed for use in
    the screening and testing batteries.
        The validation work for screens and tests relevant to human health
    will be completed by 2003.

             ENDOCRINE DISRUPTOR SCREENING PROGRAM: PROCEDURAL RULE
        Question. Is the Agency planning to propose a procedural rule for
    the EDSP?
        Answer. Yes, the Agency is planning the development of a procedural
    rule for the Endocrine Disruptor Screening Program. The procedural rule
    will be proposed by 2002 and finalized before screening is required in
    2003. The procedural rule will be detailed guidance on various aspects
    of policy for implementing the screening program. Included in this rule
    will be guidance on:
      --the process the agency will use follow in setting priorities and
            ordering or issuing rules to require testing;
      --who should pay for testing and how costs should be divided;
      --the justification that must be made for skipping Tier 1 screening;
      --the process to be followed to obtain an exemption or waiver from
            the testing requirements of screening programs; and
      --the procedure for submitting data.
              national air toxics assessments: public involvement
        Question. My understanding is that the Agency has an ambitious
    project underway to develop a national air toxics assessment tool that
    will allow the Agency to characterize the potential health risks
    associated with exposure to air toxics. According to EPA's most recent
    schedule, next month (April 2000) you plan on a public release of a
    1996 emissions inventory and modeled air quality results for every
    county in the country. Then in August 2000, you plan on a public
    release on the internet of exposure modeling results and estimates of
    the public's cumulative risk from 33 of the most prevalent air toxics
    in the country. How have you involved the public in building this tool?
        Answer. Our National Air Toxics Assessments (NATA) build off of
    previous modeling and analysis, the Cumulative Exposure Project (CEP),
    which estimated ambient concentrations of air toxics for 1990. We
    worked with various stakeholder groups on the CEP, including state and
    local governments, environmental groups, and industry representatives.
    In updating this effort with 1996 data and expanding our assessments to
    include exposure modeling, we have continued to involve the public and
    specific stakeholders. The main mechanism we have used to date for
    getting public input in the development of the National Air Toxics
    Screening Assessment (which includes both ambient and exposure
    modeling) has been through two public meetings in October 1999 in
    Washington, D.C., and continued updates through electronic mail with
    the participants of those meetings. At these meetings, we described in
    detail our plans for a national screening level assessment of air
    toxics risks and solicited input on example presentation formats for
    the results of the assessment. Participants, including people from
    state, city, and county offices, environmental groups, trade press,
    industry, and environmental justice representatives, provided
    recommendations on presentation formats as well as the assessment in
    general. We are actively involved with state and local air agencies in
    conducting reviews throughout the process. We have received additional
    input--written and through additional meetings with stakeholders--on
    various aspects of our assessments. Also, to inform the general public
    of our activities, we provide a description of our NATA activities on
    the EPA website.

              NATIONAL AIR TOXICS ASSESSMENTS: REVIEW AND COMMENT
        Question. Has the general public been able to review and comment on
    all specific elements of the NATA, including the emissions inventory,
    the proposed nation-wide application of the air dispersion model and
    exposure models, the IRIS values to be used, and the development of the
    microenvironment?
        Answer. Plans for the NATA 1996 national-scale assessment were
    discussed at two public meetings held in Washington, DC in October
    1999. As discussed at those meetings, the modeling approaches being
    used as part of the assessment are a mixture of previously peer-
    reviewed approaches and relatively new science which is undergoing peer
    review during the assessment process. We incorporated comments from
    these meetings on the analytical approaches being used and the methods
    being proposed to communicate the results into the assessment and the
    final documentation will reflect these changes.
        The national-scale emissions inventory (the 1996 National Toxic
    Inventory) which drives the modeling process is largely a product of
    peer involvement. To develop this inventory, technical staff in the
    state and local air pollution agencies work together with EPA staff to
    pull together the best available information on air emissions of all
    the hazardous air pollutants (HAPs) for the year 1996. The methods for
    measuring, estimating, and calculating these emissions are all
    individual subjects of peer review, but the full inventory itself is
    not. This is consistent with the development of emissions inventories
    for all the criteria pollutants.
        The air dispersion model being used for the assessment, the
    Assessment System for Population Exposure Nationwide (ASPEN), has been
    publicly peer-reviewed by the EPA's Science Advisory Board in the
    context of its use in the Cumulative Exposure Project. While the peer
    review identified some shortcomings of the model, it is still
    recognized as the most useful tool for this type of national-scale
    assessment for air toxics.
        The air pathway exposure model, the Hazardous Air Pollutant
    Exposure Model (HAPEM4), has been previously subject to peer review in
    the context of its use for estimating exposures from mobile source
    pollutants. We have modified it from previous versions to account for
    the partitioning of the 33 urban HAPs between typical outdoor
    monitoring sites to indoor locations and multiple microenvironments.
    These modifications are currently undergoing internal and external peer
    review prior to their use in the assessment.
        The cumulative risk approach (which uses IRIS values, among others)
    that we are using for the assessment is consistent with previously
    peer-reviewed Agency risk characterization methods. In addition, since
    this is a national-scale assessment, the approach is currently
    undergoing internal and external peer review, as is the overall
    assessment approach of integrating these various modeling results
    together for the full quantification of inhalation risks. Further, once
    the national-scale assessment results are completed, the entire
    assessment approach, the results, and the interpretation of those
    results will be documented and subjected to a full public peer review
    by the EPA's Science Advisory Board in the fall of 2000.
        Throughout the process, EPA is sharing interim results with state
    and local agencies in an effort to ensure the quality and consistent
    interpretation of the results.

                    PEER REVIEW AND RELEASE OF NATA RESULTS
        Question. Is it true that you plan to submit the NATA model and
    results for peer review at the same time the results will be available
    to the general public on the Agency's web site? What is the reason for
    placing this information on the web before the NATA inputs, model and
    results have been subject to peer review?
        Answer. It is the practice of the Science Advisory Board (SAB) that
    any technical product being peer reviewed by the SAB be made available
    to the public for inspection and review. To facilitate public access
    for such documents, the SAB asks that the Agency post them on the EPA
    web site. All products placed on the web site are marked as a ``SAB
    Review Draft,'' making clear that they are not final Agency documents.

                         USING NATA TO MEASURE PROGRESS
        Question. According to your budget justification, one of the stated
    purposes of NATA is to assist the Agency in determining the
    effectiveness of the nation's air toxics programs. Will NATA be used to
    measure EPA's progress toward meeting the statutory goal of a 75
    percent reduction in cancer incidence, considering all emission
    reductions from stationary sources?
        Answer. Yes, National Air Toxics Assessment (NATA) activities will
    be used to help us track progress toward meeting our overall national
    air toxics program goals, which include the statutory goal of a 75
    percent reduction in cancer incidence attributable to hazardous air
    pollutants emitted by stationary sources. This is because NATA
    activities include such efforts as expanding air toxics monitoring;
    improving and periodically updating emissions inventories; periodically
    conducting national- and local-scale air quality, multimedia and
    exposure modeling; and characterizing risks associated with air toxics
    exposures. Specifically, we plan to use the results of both the current
    and future national screening assessments of air toxics, as well as
    monitoring and other data generated from the NATA activities to measure
    progress toward meeting the 75 percent reduction requirement.

                 CONTAMINATED SEDIMENTS: NAS WORKGROUP PROGRESS
        Question. The National Academy of Sciences is developing a decision
    framework for evaluating ways to remediate sediments contaminated with
    PCBs. The NAS is looking at the efficacy and risks of remedial
    alternatives to provide a scientific basis for selecting remedies at
    these sites. The NAS expects to complete its report by October of this
    year. At the same time, EPA's Contaminated Aquatic Sediment Remedial
    Guidance Workgroup is developing guidance on essentially the same
    thing, although it is looking beyond PCBs. How far has the workgroup
    progressed in developing its guidance?
        Answer. We plan to circulate a draft Superfund Contaminated
    Sediment Remedial Guidance (SCSRG) later this year. If the NAS study is
    released as expected, in October 2000, the recommendation of the NAS
    would help to shape revision of the draft guidance. The development of
    the SCSRG draft started before we realized that there would be another
    NAS study on contaminated sediments. We believe that EPA's guidance
    development effort is responsive to recommendations in the last NAS
    report and constitutes an important element in clarifying our approach
    to assessing contaminated sediments.

               CONTAMINATED SEDIMENTS: AGENCY USE OF NAS FINDINGS
        Question. Rather than developing the guidance in advance of the NAS
    report, wouldn't it be better to base the guidance on the report's
    findings? Once the report is issued, how will the findings be
    incorporated into EPA policy?
        Answer. While EPA has made several presentations before the NAS
    committee and provided extensive materials for their information, EPA
    does not know what recommendations will come from the Committee. The
    NAS recommendations may require further work before they can be
    implemented as an agency policy. However, if the current study is
    released as expected in October 2000, the recommendations in this
    report would help to shape revision of our draft guidance. This NAS
    study will be the third NAS report on the management of contaminated
    sediment since 1989. We have reviewed the recommendations of the
    previously released NAS sediment reports to prepare materials for the
    guidance that we are currently drafting. We look forward to the final
    NAS report and intend to give it full consideration in the development
    (and if necessary, revision) of our Agency's sediment remediation
    guidance.
         information burden: agency claims to small business committee
        Question. Why did staff of the Office of Environmental Information
    make these misleading claims to my staff on the Senate Small Business
    Committee?
        Answer. The Office of Environmental Information staff did not
    intentionally make misleading claims to your staff on the Senate Small
    Business Committee. EPA believes that the General Accounting Office's
    (GAO) review underscores the complexity involved in communicating
    burden reduction. The annual Information Collection Budget (ICB) is the
    official accounting of agencies' information collection requirements.
    Under OMB's Office of Information and Regulatory Affairs burden
    measurement procedures, both program changes (e.g., the addition or
    elimination of a question on a form) and program adjustments (e.g.,
    revisions of previous burden estimates such as the number of
    respondents) are used to estimate the burden associated with an
    Agency's information collections and both are reflected in the year-end
    estimates published in the ICB.
        GAO found that EPA's estimate for hours of burden reduced, as
    reported in ``Reinventing Environmental Protection'' is misleading
    because it represents the sum of program change decreases and program
    adjustment decreases. We believe this finding does not represent the
    full range of burden reduction activities that EPA has pursued. EPA has
    acted aggressively to discuss reducing burden through a variety of
    activities that tend to make it easier for companies to comply with
    environmental regulations. EPA is not able to quantify the level of
    burden associated with these activities. They include: the
    establishment of compliance assistance centers; development of
    electronic reporting opportunities; creation of audit policy and
    regulatory compliance options; implementation of plain language
    regulations and guidance; and development of electronic tools such as
    TRIME (Toxic Release Inventory Made Easy) that help make our
    regulations and guidance more understandable and easier for the public
    to deal with. GAO's recent report on burden states that these efforts
    were outside the scope of their review of the agency's information
    collection requirements.
      information burden: agency claims to house appropriations committee
        Question. Why, when GAO shared its findings of misleading EPA
    claims of burden reduction in February, 2000, did Administrator Browner
    repeat the same misleading claims to the House Appropriations
    Committee, Subcommittee on VA, HUD, and Independent Agencies in March,
    2000?
        Answer. EPA did not intentionally make misleading claims to the
    House Appropriations Committee, Subcommittee on VA, HUD, and
    Independent Agencies in March, 2000. The $800 million estimate for cost
    savings due to burden reductions is a straightforward estimate of the
    cost of a reporter's hourly time ($30.00 per hour) and the estimated
    hours of gross annual burden reduction (approximately 26.9 million
    hours). As we have previously stated , GAO's review underscores the
    complexities involved in communicating burden and burden reduction. We
    will work with GAO and OMB to address these complexities and the
    specific issues raised by GAO about EPA's application of OMB's
    guidance. We also believe that GAO's review is too narrowly focused and
    fails to fully acknowledge the Agency's burden reduction efforts. EPA
    has acted aggressively to discuss reducing burden through a variety of
    activities.
                      INFORMATION BURDEN: BUSINESS SAVINGS
        Question. Why does EPA claim its efforts saved business over $800
    million dollars when GAO found that EPA's ``math errors, erroneous
    assumptions, and conversion of burden hours to dollars on a form that
    the agency submits to OMB have no effect on businesses' or communities'
    paperwork requirements or their expenditures.''
        Answer. The $807 million dollar figure was derived by multiplying
    the 26.9 million hour burden reduction estimate claimed by EPA and
    reported in the Information Collection Budget by $30 per hour, an
    estimate of the cost of an employee's time for a company reporting to
    EPA. We intend to meet with GAO to ensure our understanding of their
    criticisms and concerns.
                 BURDEN REDUCTION: DISCHARGE MONITORING PROGRAM
        Question. EPA's largest claimed paperwork burden reduction between
    fiscal years 1995 and 1998 of 4.7 million hours came from Office of
    Water (OW) program changes to the discharge monitoring program. But the
    4.7 million hour reduction, according to OW, was a goal and a
    significantly less burden reduction was actually achieved. Why did EPA
    take credit for this reduction goal and not the actual reduction
    achieved?
        Answer. The President's Regulatory Reinvention Initiative for the
    Environmental Protection Agency (EPA) established an interim goal of
    reducing reporting and monitoring burden by at least 25 percent. In
    response, in April 1996, EPA issued AInterim Guidance for Performance-
    Based Reductions of NPDES Permit Monitoring Frequencies. This document
    provides guidance to EPA permit writers and States on how best to
    implement EPA's National Pollutant Elimination Discharge System (NPDES)
    regulations regarding appropriate monitoring requirements in permits.
    The ICR Amendment incorporating this guidance was approved by OMB in
    1996. It was based on EPA's estimate that a 26 percent reduction in
    burden from previous levels for monitoring and reporting requirements
    would result from the implementation of the guidance. The document is
    not a regulation and cannot impose legally binding requirements on EPA,
    States, or the regulated community. It may not apply to a particular
    situation based upon the circumstances. Eligibility for reduced
    reporting frequencies depends on meeting specific criteria regarding
    facility enforcement history and parameter compliance and performance
    history. Some States establish their own baseline monitoring
    frequencies. The reduction reported in the ICR was EPA's best estimate
    of what could be achieved; EPA plans to reevaluate this estimate by
    examining actual implementation of the guidance as part of the process
    to renew the ICR in 2001.
        burden reduction: discharge monitoring program actual reductions
        Question. How many paperwork burden hours were actually reduced
    between fiscal years 1995 and 1998 by OW changes to the discharge
    monitoring program?
        Answer. EPA has no existing mechanism for collecting actual burden
    hours from permitees. However, there is data in EPA's Permit Compliance
    System (PCS) database for approximately one third of all NPDES permits
    regarding monitoring frequency. For fiscal year 1995 through fiscal
    year 1998, the percent of PCS reported permits reissued with reduced
    monitoring frequencies was 26 percent. The percent of parameters with
    reduced monitoring frequencies for those permits reported in PCS was 4
    percent. The average monitoring reduction per reissued parameter with
    reduced monitoring frequency was 70.5 percent. For the average facility
    which reduced its monitoring frequency, this would mean that monitoring
    for these parameters would be reduced from once a week to once per
    month.

       INFORMATION BURDEN: REINVENTION EFFORTS VS. NATURAL MATURATION OF
                                    PROGRAMS
        Question. Four of EPA's largest claimed burden hour reductions
    occurred as a result of the natural maturation of the programs. EPA
    took credit for 5.2 million hours of reductions associated with Air
    Operating Permits, Agricultural Worker Protection Standards, OPA
    Facility Response Plans and Data Generation for Registration
    Activities. Why did EPA claim these reductions were due to its
    reinvention efforts when they actually resulted from completion of
    initial labor-intensive or start-up phases already part of each
    program?
        Answer. The reinvention claims included both program changes and
    program adjustments. Program maturation, where a requirement is phased
    out over time, is considered a ``Program Change'' because burden is no
    longer imposed on the public after some period of time.

            INFORMATION BURDEN: REINVENTION EFFORTS VS. REESTIMATION
        Question. Another four of EPA's largest claimed burden reductions,
    each claimed to produce over 500,000 hours of savings, came as a result
    of EPA reestimating their initial burden hour estimates. In the case of
    conformity of federal actions to state implementation plans, the
    reestimation corrected an earlier collection error. Why did EPA claim
    these reductions were due to its reinvention efforts when they actually
    came from reestimates or corrections of errors?
        Answer. Three of the four reductions were correctly calculated
    using the most recent OMB guidance on reestimates and ``adjustments.''
    The reduction claimed in the case of conformity of federal actions to
    state implementation plans was a correction to a previous error and
    should not have been included in the reduction total. We will inform
    OMB of this mistake and request that the ICB be amended.

     INFORMATION BURDEN: REINVENTION EFFORTS VS. ECONOMIC CHANGES/INDUSTRY
                                   ACTIVITIES
        Question. While two of EPA's largest claimed burden hour reductions
    concerning the underground storage tank program reported on actual
    reductions to the public, these reductions came as a result of changes
    in the economy or industry's own development of new less burdensome
    technologies. Why did EPA claim these reductions were due to its
    reinvention efforts when they actually came from changes in the economy
    or industry's own activities?
        Answer. The reinvention claims included both program changes and
    program adjustments. These readjustments reflect reductions in the
    amount of paperwork burden borne by the affected public.

         BURDEN REDUCTION: COMPLIANCE ASSISTANCE CENTERS CONTRIBUTIONS
        Question. How many hours of paperwork burden did the compliance
    assistance centers reduce in fiscal year 1999?
        Answer. The compliance assistance centers (Centers) have not
    evaluated the correlation between Center use and any net changes
    associated with the paperwork burden. Rather, Centers measurement
    activities have focused on: (1) Internet site activity; (2) user
    satisfaction of Center services; (3) behavioral changes associated with
    Center use; and (4) environmental improvements associated with Center
    use.
        Businesses and local governments are using the Centers as a source
    of regulatory compliance assistance. In fact, the Centers' website
    experienced over 260,000 visits in 1999. Furthermore, the Centers'
    Website received over 890 visits on a daily basis in December 1999.
    More importantly, recent survey data demonstrate that Center users find
    the Centers very useful--and use improves environmental performance.
    Based on eight voluntary Internet surveys, over 70 percent of the
    company and local government respondents said they took one or more
    actions (e.g.,changing the handling of waste, obtaining a permit,
    changing a production process, contacting a regulatory agency) as a
    result of Center use; where applicable, over 50 percent of these
    companies and local governments felt that they had a cost savings
    resulting from these actions. Furthermore, over 58 percent of company
    and local government respondents stated that they realized one or more
    environmental improvements as a result of using a Center (e.g. reduced
    air emissions, conserved water). Lastly, the survey responses
    demonstrate a high degree of satisfaction with Center services--in
    fact, 85 percent of the survey respondents rated the compliance
    assistance provided as either very useful or useful.
        An additional study conducted by the Coordinating Committee for
    Automotive Repair (CAR) further demonstrates the Centers' success. In
    1997 and 1999, the CAR conducted a survey of automotive service and
    repair shops throughout the United States. The results of the study
    show that the automotive industry made significant strides in their
    environmental compliance program between 1997 and 1999. In 1997, the
    study concluded that 25.9 percent of the shops reported that they
    cannot judge compliance from self-reported survey were at least 80
    percent compliant with federal environmental requirements. Tin 1999,
    55.8 percent of the shops reported that they were at least 80 percent
    complaint. The CAR study also demonstrated a significant increase in
    the regulated community's awareness of CAR and the CAR-run compliance
    assistance center, CAR-Greening.

      BURDEN REDUCTION: EFFECT OF COMPLIANCE ASSISTANCE CENTERS ON BURDEN
        Question. If part of the goal of the compliance assistance centers
    is to educate the regulated community on their environmental
    obligations and help them meet those obligations, including completing
    paperwork and other reporting requirements, wouldn't the centers
    actually help increase paperwork burden?
        Answer. The paper-work burden is established through the rule-
    making process and the regulated community is obligated to comply with
    those reporting and record-keeping requirements. Therefore, in no way
    can the compliance assistance centers (Centers) alter reporting and
    recording keeping requirements associated with environmental
    requirements. However, the Centers can help the regulated community
    more efficiently meet their environmental requirements. Through plain-
    language guides, assistance lines, training events, compliance fact
    sheets, etc., Center users can more efficiently understand and meet
    their regulatory obligations. Furthermore, the Centers provide
    pollution prevention tips and ideas, that may create opportunities for
    Center users to decrease their regulatory obligations and associated
    paperwork. For example, the Printers' National Environmental Assistance
    Center's Listserv helped a client replace a solvent used for a
    specialized screen printing application with a nontoxic vegetable-based
    alternative cleaner. Not only did this behavioral change result in an
    environmental improvement, but the activity is no longer subject to
    Resource Conservation and Recovery Act hazardous waste management and
    disposal regulations--and associated paperwork requirements. Lastly,
    voluntary Internet survey responses indicate that the Centers are in
    fact helping their users realize cost savings as a result, in whole or
    in part, of Center use.

                    BURDEN REDUCTION: EFFECT OF AUDIT POLICY
        Question. How many hours of paperwork burden did EPA's audit policy
    reduce in fiscal year 1999?
        Answer. EPA believes that it is generally more cost-effective for
    companies to resolve violations under the audit policy when compared to
    more traditional enforcement, but has no practical basis for estimating
    hours of paperwork either created or reduced by the audit policy.

                   BURDEN REDUCTION: AUDIT POLICY REDUCTIONS
        Question. If the goal of EPA's audit policy is to provide an
    incentive to meet paperwork and reporting requirements, and EPA
    experience has shown that the majority of those taking advantage of the
    audit policy did so regarding potential violations of paperwork or
    reporting violations, doesn't the audit policy actually help increase
    paperwork burden?
        Answer. EPA's audit policy is designed to encourage voluntary
    compliance with all federal statutes, including those that provide for
    the monitoring and reporting of pollution. Monitoring data is the key
    to determining compliance with emission standards, and reporting
    requirements provide the public with information about releases from
    nearby facilities. Violating these important requirements is certainly
    one way to reduce ``paperwork burden,'' but EPA believes there are more
    effective and legal means to accomplish this goal that do not undermine
    federal law or put law abiding businesses at a disadvantage.

     INFORMATION BURDEN: EFFECT OF INTEGRATED INFORMATION INITIATIVE (I-3)
        Question. EPA has indicated that its Integrated Information
    Initiative (I-3) will reduce paperwork burden. Does the Agency plan to
    remove current reporting requirements when it implements I-3?
        Answer. The I-3 will result in an information network that will
    establish a fundamentally new approach to integrating and managing
    environmental information. While EPA anticipates that I-3 will reduce
    burden and transaction costs for states, tribes, regulated businesses,
    and the general public, it is too early to discuss plans for removing
    current reporting requirements. As I-3 evolves, EPA is committed to
    look for opportunities to streamline and reduce burden as appropriate
    and will consider including components to I-3 that will facilitate
    those opportunities.

           INFORMATION BURDEN: STEPS TO ENSURE ACCURACY OF ESTIMATES
        Question. What steps will EPA take to correct its future paperwork
    burden hour estimates, set straight the record of misleading statements
    before the Congress and ensure the Agency does not take credit
    improperly for burden hour reductions?
        Answer. EPA would like to meet with GAO to ensure that EPA
    understands the findings in the recent GAO report on the agency's
    burden reduction efforts. The purpose of this meeting will be to
    clarify burden reduction tabulations and statements, make changes where
    necessary and establish a process that will avoid similar findings in
    the future.

                REINVENTING ENVIRONMENTAL INFORMATION MILESTONES
        Question. For each milestone phase which EPA failed or expects to
    fail to reach by the planned date, provide a brief description for the
    delay or failure, any actions, strategies or efforts to achieve missed
    milestones or avert missing of milestones the Agency expects to miss.
        Answer. From 1997 to 1999, EPA met all of the REI milestones and
    commitments stated in its REI Action Plan. During this period, REI
    project progress was tracked and reported through quarterly progress
    reports and project status meetings. In 1999, integrated work plans
    replaced quarterly reporting. These work plans integrated the various
    REI projects to reflect ongoing activities and milestones and
    deliverables across projects. The integrated work plans also showed the
    interdependencies and potential shared resources of the REI projects.
        In fiscal year 2000, the Agency expanded the goals of REI by
    launching an effort that would leapfrog REI by working in close
    partnership with the states to build and support a national network of
    shared, integrated environmental information. The main components of
    REI--data standards, electronic reporting and state partnerships--are
    now the key components of this new effort. In organizing the
    integration effort, the Agency realized the critical need to step up
    our joint work with the states. We have increased our collaboration
    efforts through the Information Management Work Group of the
    Environmental Council of the States. We have also chartered, with the
    states and Tribes, a Data Standards Council to set priorities for and
    ensure implementation of data standards. This new integration effort,
    and our greater partnership with the states, will require us to re-
    examine our future REI milestones to ensure that we represent the
    correct milestones for this broader initiative.

       REINVENTING ENVIRONMENTAL INFORMATION NATIONAL SYSTEMS REQUIRING
                                 REENGINEERING
        Question. Identify the national systems the Agency has
    reengineered, is currently reengineering, or will reengineer before the
    Agency promulgates REI standards/protocols and estimate the cost in
    time and resources necessary to retrofit those systems to address
    completed REI standards/protocols.
        Answer. Through EPA's Reinventing Environmental Information (REI)
    data standards process, EPA committed the 13 major national program
    systems (tagged the ``REI'' systems) to incorporate the six REI data
    standards by fiscal year 2003. The target date was purposely set this
    far out to allow programs to incorporate the six data standards during
    their next system enhancement effort. Combining the incorporation of
    the data standards with the revision of the data structures during
    system enhancement would avoid any direct costs associated with
    implementing the standards in the systems. Consequently, there were no
    studies conducted on the specific cost of implementation. The six data
    standards include: Facility Identification; Chemical Identification;
    Biological Identification; Industrial Classification Code; Latitude/
    Longitude; and Date. The 13 ``REI'' systems are:
      --Permit Compliance System (PCS)
      --National Compliance Data Base (NCDB)
      --OECA Docket (Docket)
      --RCRA Information System (RCRIS)
      --Aerometric Information Retrieval System/Air Quality Subsystem (AQS)
      --Aerometric Information Retrieval System/Facility Subsystem (AFS)
      --Biennial Reporting System (BRS)
      --CAA 112(r) Risk Management Plan Information System (RMP*INFO)
      --CERCLA Information System (CERCLIS 3)
      --Safe Drinking Water Information System (SDWIS)
      --Toxic Release Inventory (TRI)
      --Water Quality Information System (STORET)
      --Envirofacts Data Warehouse (Envirofacts)

     REINVENTING ENVIRONMENTAL INFORMATION: ASSESSMENT AND CURRENT EFFORTS
                          FOR DATA QUALITY IMPROVEMENT
        Question. Provide the results of the REI assessment of current
    efforts to ensure the quality of environmental data through error
    correction, the options paper developed through REI for a comprehensive
    data program, and the status of any efforts to implement a more
    comprehensive data quality improvement program.
        Answer. The options paper for a comprehensive data quality
    improvement program is provided as attachment 1, and is formally titled
    ``Data Quality Strategic Plan'', dated December 1998. The document was
    approved by the Agency in April 1999. EPA's strategy to address data
    quality encompasses four components: data standards, electronic
    reporting, State partnership, and error correction. These goals are
    articulated in OEI's Action Plan for fiscal year 2000, and the status
    of current efforts is provided below.
    Data Standards
        Data standards is a key piece of enhancing data quality. By
    September 2000, the Office of Environmental Information expects to
    complete the following data standards and associated business rules to
    implement the standards:
      --Date
      --Standard Industrial Classification/North American Industrial
            Classification
      --Facility
      --Chemical
      --Biological/Taxonomical
      --Latitude/Longitude
        To facilitate the development, adoption, and implementation of
    additional data standards, the State/EPA Information Management
    Workgroup chartered the Environmental Data Standards Council in
    November, 1999. The Council's principle mission is: ``to promote the
    efficient sharing of environmental information between EPA, States,
    Tribes and other parties through the development of data standards.''
    The Council, made up of State, tribal and EPA representatives, is
    committed to the development and adoption of data standards for
    environmental information exchange. The Council has begun to identify
    and prioritize the next set of data standards to be developed and
    implemented. We expect to be able to finalize this list within the next
    two months
        The One Stop program, a partnership program with 25 states, began
    in March 1995 as an effort to develop more efficient methods of
    providing meaningful environmental information. Through grants to state
    agencies, this program examined opportunities to reduce the reporting
    burden on industry, states and local governments, and to foster
    geographic and multi-media approaches to environmental problem-solving
    by increased integration of environmental data at the state level.
    Integrated Error Correction Process
        This Spring, OEI will implement a web-based error correction
    function. The goal of the error correction process is to provide an
    improved mechanism for data reporters and users to report errors they
    have been identified in our public data systems, and institute a
    management and accounting system. We will begin with those systems that
    reside in the Envirofacts data warehouse, and expect to have the error
    correction process implemented for these systems by the Fall of 2000.
    Central Receiving
        Another tool for enhancing data quality is central receiving.
    Central receiving will provide a centralized source for receipt and
    processing of data submitted to the Agency. We are beginning by
    establishing a limited production infrastructure to accommodate
    electronic reporting, including Electronic Data Interchange and other
    web-based data transmission formats. Electronic reporting supports data
    quality by providing error prevention measures through validation and
    edit routines that can be run at the point of data receipt. Data which
    do not pass these routines can be sent back to the submitter for
    correction before the data are accepted and loaded into a data system.
    At full implementation, central receiving will have the capability and
    capacity to receive and process data submitted in any media (paper and
    multiple electronic formats). We will begin implementation in fiscal
    year 2000 by receiving small sets of data for several EPA programs.

                     REINVENTING ENVIRONMENTAL INFORMATION
                SUBCOMMITTEE RECOMMENDATIONS AND ESC IRM APPEALS
        Question. Describe any early warnings by the REI Subcommittee of
    projects experiencing difficulties, significant policy and technical
    issues REI has identified for resolution, and any REI Subcommittee
    recommendations accepted by the Chief Information Officer but appealed
    by an Executive Steering Committee for Information Resources Management
    (ESC for IRM) principal to the entire ESC for IRM and the outcome of
    the appeal.
        Answer. A strong project management program was in place to monitor
    the progress of REI. Comprehensive work plans, monthly program
    management meetings, regular work plan updates, and quarterly REI
    Subcommittee meetings were held to insure REI projects were being
    designed in support of the Agency's mission, in a timely manner, and
    within budget. Key policy issues were raised and addressed by the REI
    Subcommittee, which was chaired by the CIO. These included policy
    discussions about the approach to the Chemical Identification data
    standard, Facility Identification Registration, and Central Receiving.
    No appeal of REI outcomes or decisions were ever made to the CIO by a
    member of the ESC for IRM.

            REINVENTING ENVIRONMENTAL INFORMATION: QUARTERLY REPORTS
        Question. Provide the quarterly reports of each responsible party
    to the National REI Manager on the status of the policy work, efforts
    to incorporate REI standards into the national systems and to identify
    any issues requiring attention.
        Answer. The fiscal year 1998 quarterly reports are provided as
    attachment 2, which is formally titled ``Reinventing Environmental
    Information Quarterly Progress Reports for fiscal year 1998.'' In
    fiscal year 1999, a decision was made to produce integrated workplans,
    in lieu of quarterly reports. The integrated workplans reflected all
    on-going activities and status of each activity. All components of the
    REI initiative were incorporated into the core mission of the Office of
    Environmental Information when it was created in October 1999.

            REINVENTING ENVIRONMENTAL INFORMATION 1999-2001 FUNDING
        Question. Describe, by NPM, Goal, Objective, Sub-objective, Key
    Program, Office, and Activity, the level of resources including dollars
    and FTE devoted to REI efforts in fiscal year 1998, proposed in the
    fiscal year 1999 budget request, included in the fiscal year 1999
    operating plan, spent in fiscal year 1999, proposed in the fiscal year
    2000 budget request, proposed in the fiscal year 2000 Operating Plan
    and proposed in the fiscal year 2001 budget request.
        Answer. The attached table identifies this information from fiscal
    year 1998 through the fiscal year 2000 budget request. While some of
    the major milestones of the Agency's REI initiative were completed in
    fiscal year 1999, the remaining REI commitments, such as data standards
    and electronic reporting, have now been incorporated in the broader OEI
    program plan.

     REINVENTING ENVIRONMENTAL INFORMATION--EXPLANATION FOR REDUCTIONS TO
                                    FUNDING
        Question. For any REI activities which decreased from any budget
    request to its operating plan, or from operating plan levels to the
    following year's budget request, provide a brief explanation for the
    reduction.
        Answer. The REI activity entitled Reinventing Environmental
    Regulations took a reduction in its fiscal year 1999 operating plan
    from the fiscal year 1999 budget request level. This decrease reflected
    the REI initiative's share of the Agency's overall reduction to its
    fiscal year 1999 budget request. As a general rule, given the
    importance of REI, we always tried to limit cuts to the program as much
    as possible.

           REINVENTING ENVIRONMENTAL INFORMATION PERFORMANCE MEASURES
        Question. Identify and describe the GPRA or Agency performance
    measures in fiscal year 1999 and fiscal year 2000 which incorporate REI
    commitments?
        Answer. The Agency uses three Annual Performance Goals/Performance
    Measures in fiscal year 1999 and fiscal year 2000 to describe its REI
    commitments. These are:
      --Making a greater percentage of data reported to EPA available to
            the public through Electronic Data Interchange/Electronic
            Commerce;
      --Streamlining and improving the information reporting processed
            between state partners and EPA by increasing the number of
            state participants in the One Stop Reporting Program; and
      --Increasing facility identification (ID) data accuracy by
            establishing a National Facility ID file.
                     reinventing environmental information
        Question. Describe the degree to which REI has brought, to date,
    reduced confusion caused by multiple methods of representing the same
    information, and when and how much further reductions are anticipated
    to occur.
        Answer. REI is a five year plan (1998-2003) and implementation of
    data standards in Agency information systems is just beginning. The
    initial focus on data standards was to get a number of them
    established. Four of the six are now final and the last two will be
    finished this fiscal year. The focus is now moving to enabling and
    accelerating implementation of the standards in Agency data systems.
    Implementation will encompass a compliance element--requiring written
    documentation from agency programs on their actions to implement data
    standards, a communication and outreach component to make sure system
    developers and system managers understand what they are being asked to
    do, and a technical assistance component alleviating the initial system
    retrofitting that will be required for at least two of the standards.

                     REINVENTING ENVIRONMENTAL INFORMATION
        Question. Describe the degree, in terms of burden-hours, to which
    REI has directly reduced paper reporting, errors, time delays, and
    associated costs its first year and when and how much further
    reductions are anticipated to occur.
        Answer. Burden hour reductions have not been quantified at this
    early stage since the effort thus far has been to establish an
    infrastructure. REI focuses on incorporating data standards and
    electronic reporting into thirteen of EPA's national information
    systems. Promulgation of all necessary standards, policies, and
    protocols are projected to occur by the end of fiscal year 2001. As
    each new data and reporting standard becomes ready for implementation,
    each national system is projected to incorporate it by the end of
    fiscal year 2003 either through retrofitting existing systems or
    including the standard in system reengineering efforts.

              COMPLIANCE ASSISTANCE FORUM: AGENDA AND PARTICIPANTS
        Question. Provide a description of the compliance assistance forum
    the Agency held in Atlanta in March including: list of participants,
    the agenda, and a brief description of the contents of each of the
    programs, meetings or breakout sections.
        Answer. The Forum 2000--Building Compliance Assistance Partnerships
    was held in Atlanta, Georgia on March 1 and 2, 2000. The Forum was
    intended to provide an opportunity for compliance assistance providers
    to share information on compliance assistance needs and strategies, and
    to offer feedback on the Compliance Assistance Clearinghouse and the
    first EPA Annual Compliance Assistance Activity Plan. Discussions were
    also held to address several overarching issues such as integrating
    compliance assistance with enforcement, and developing a set of
    criteria to use in prioritizing compliance assistance needs. The Forum
    was also designed to foster a compliance assistance provider network.
        The attached materials include the final Forum agenda, a list of
    speakers and breakout session topics, and the meeting summary, which
    includes a list of attendees. These materials are also posted on the
    web at www.seattle.battelle.org/epa-icaa.

                     OPPTS ASSISTANCE PROVIDERS--FOLLOW-UP
        Question. Provide the results of Agency efforts to prepare and
    finalize recommendations and make assignments for implementing the
    OPPTS assistance providers national meeting results. If EPA has not
    completed this milestone, provide the status of the efforts and
    estimate of completion date.
        Answer. On December 6-7, 1999, the EPA, along with the National
    Institute for Standards and Technology (NIST) and the U.S. Small
    Business Administration (SBA), hosted a national meeting in Dallas,
    Texas, of both state and federally-funded environmental and business
    assistance providers, in part as a response to the Senate Small
    Business Committee's April 1998 hearing on ``Environmental Compliance
    Tools for Small Business.'' While the primary focus of that Senate
    hearing was on EPA's small-business compliance assistance programs, the
    larger goal, as articulated by Chairman Bond in his opening remarks,
    was to ``address the various approaches to compliance assistance in the
    context of what is working for small business.''
        Several EPA programs, including its Offices of Prevention,
    Pesticides and Toxic Substances; Enforcement and Compliance Assurance;
    Policy, Economics and Innovation; and Air and Radiation, had begun
    coordinating about this time to develop more effective and efficient
    assistance delivery to the nation's small businesses and, along with
    other EPA offices, to inculcate sound environmental performance as part
    of standard good practices within the business culture. The Dallas
    meeting, a commitment in the Agency's Aiming for Excellence report of
    July 1999, has enhanced partnerships within the EPA and among the
    Federal agencies. It has also promoted the federal ``wholesale''
    approach for compliance and technical assistance which utilizes other
    delivery agents which are closer to the customer and can sometimes
    better frame environmental approaches in a broader business context.
        In terms of implementing some of the key commitments made in the
    Dallas meeting:
      --NIST agreed to develop and maintain a dedicated list-server to
            facilitate a continuation of the dialogue among the interested
            parties that was begun at the meeting. This was accomplished
            and is now being used to identify and discuss ideas.
      --The providers agreed to work together to develop specific proposals
            for consideration by the Federal sponsors: EPA, SBA and NIST.
            One such draft proposal, a multi-state pilot effort with
            national support capabilities led by a number of Small Business
            Development Centers (SBDCs), was first mentioned at the Dallas
            meeting. Work is currently underway to formalize relationships
            and build support among the participating provider
            organizations on this proposal, which could be complete as
            early as late May 2000.
      --The Federal sponsors agreed to host providers who wished to present
            specific proposals that had gained support from the larger
            assistance community. The sponsors could host such a meeting in
            late Spring 2000, depending upon the progress of the SBDC or
            other proposals--although an agreement to host a session on a
            specific proposal does not imply Federal support for it.
        A longer summary of the Dallas meeting is available on EPA's web
    site at www.epa.gov/p2.
        This national network effort is also being coordinated with a
    number of EPA projects, led by the EPA Office of Enforcement and
    Compliance Assurance, to improve the Agency's general compliance
    assistance activities.

          ASSESSMENT OF SMALL BUSINESS ASSISTANCE SERVICES: CATALOG
        Question. If the Agency has not done so already, provide the
    catalog of small business related services and products intended to
    developed as part of the Aiming for Excellence initiative by November
    1999. If EPA has not completed this milestone, provide the stats of the
    effort, reason for delay, and an estimate of completion date.
        Answer. Development of the catalog of small business-related
    services and products is nearly complete. EPA has a number of services
    and products that are targeted specifically for small businesses and
    others that apply to broader audiences, yet still may be applicable to
    small business. We are in the process of finalizing the catalog so that
    it best reflects this mix of services and products. We anticipate
    completion in June 2000.

        ``* * * present specific proposals that had gained support from the
    larger assistance community. The sponsors could host such a meeting in
    late Spring 2000, depending upon the progress of the SBDC or other
    proposals--although an agreement to host a session on a specific
    proposal does not imply Federal support for it.''

        A longer summary of the Dallas meeting is available on EPA's web
    site at www.epa.gov/p2.
        This national network effort is also being coordinated with a
    number of EPA projects, led by the EPA Office of Enforcement and
    Compliance Assurance, to improve the Agency's general compliance
    assistance activities.

            ASSESSMENT OF SMALL BUSINESS ASSISTANCE SERVICES: SURVEY
        Question. Provide a copy of the survey to small business consumers
    of EPA environmental assistance intended to be developed as part of the
    Aiming for Excellence initiative by March 2000. If EPA has not
    completed this milestone, provide the status of the effort and an
    estimate of completion date.
        Answer. As we complete our catalogue of small business products and
    services, we will refine the set of questions for the survey of small
    business customers. Because we have been approved for a limited number
    of hours under our information collection request, we want to be sure
    that the questions we include in our survey tool will provide us with
    information that will best reflect the current state of small business
    satisfaction with our products and services. We anticipate commencing
    the survey in July 2000.

             COMPLIANCE ASSISTANCE CLEARINGHOUSE: STATUS OF EFFORT
        Question. Provide the status of efforts as part of the Aiming for
    Excellence initiative to design and develop a clearinghouse of
    compliance assistance materials and tools and whether the effort is on
    target to meet the September 2000 operational deadline.
        Answer. The Compliance Assistance Clearinghouse (Clearinghouse) is
    on target to be fully operational in September 2000.
        The goal of the Clearinghouse is to link existing networks of
    compliance assistance providers, facilitate the finding and the sharing
    of information, increase quality and speed of delivery of compliance
    assistance services, and increase the number of clients served. The
    Clearinghouse is a nationally accessible and searchable Web site that
    allows compliance assistance providers to link to existing networks to
    avoid duplication, find new tools/information, download existing tools
    and information, find experts, and exchange new ideas and information.
        The Clearinghouse is intended to serve compliance assistance
    providers, such as Small Business Assistance Programs, technical
    assistance/pollution prevention providers, state and local governments,
    trade/professional associations, sector-based compliance assistance
    centers, EPA, other federal agencies (DOD, DOT, OSHA), and
    universities. The Clearinghouse will support the tasks that providers
    perform on a day-to-day basis, such as responding to frequently asked
    questions and identifying experts.
        There are three main components of the clearinghouse. The first is
    a Providers' Directory, which will help identify providers with
    expertise in a specific area. The second is a searchable database that
    will have a user-friendly navigation system. The third component is a
    communications forum to foster communication among providers.
        Throughout the design process, EPA has worked extensively to
    involve stakeholders in the development. These efforts have included
    outreach efforts to states, small business assistance providers, and
    industry compliance assistance providers. In addition, EPA created a
    multi-stakeholder advisory group, the Compliance Assistance Advisory
    Committee (CAAC) under the existing Federal Advisory Committee Act
    chartered National Advisory Council for Environmental Policy and
    Technology. One of the key activities of the CAAC is to provide input
    on the Clearinghouse development. The CAAC has been consulted on every
    aspect of the design and population of the Clearinghouse.

                COMPLIANCE ASSISTANCE CLEARINGHOUSE: STAKEHOLDER
        Question. Provide a summary of stakeholder input, organized by
    stakeholder, which EPA obtained at its March 2000 compliance assistance
    forum on the design of the clearinghouse.
        Answer. The comments below, expressed at the March 2000 Forum,
    reflect different stakeholders' views about the content and the format
    of the Clearinghouse:
    General Services Administration
        1. The site needs to be well-connected to other Federal agencies.
    There is a need for information exchange on Environmental Management
    Systems. This should include tools for Federal workers--curriculum
    development, uniform statements of work for contracts, etc. GSA has a
    list of environmental services vendors that can be made available on-
    line to Federal Agencies.
    Bureau of Land Management
        2. Presenting a solution to implementing requirements and then
    having a link to a vendor who can help with the solution is very
    important for the user community.
        3. The EPA regulatory link is useless. The system needs to mirror
    OSHA.
    State
        4. Contacts at the state level need to be at the working level.
    STAPPA/ALAPCO provides contacts and may be a good model.
        5. State regulatory sites need to be linked.
    Industry
        6. Links to commercial sites would need a disclaimer.
        7. You need some way to indicate the quality of the data you post
    from other sources. Possibly use a ranking system based on comments,
    etc.
        8. To increase the number of providers in the directory you could
    use the log-in feature to add names to the directory.
        9. Data editing of the Clearinghouse information needs to be a
    faster process to encourage folks to keep the material up to date.
    Compliance Assistance Providers
        10. Some EPA web sites have had problems with including .com sites.
    The Agriculture Center in particular has experienced this problem.
        11. It is very important to keep the links ``live.'' The three
    ``tier'' plan the CAAC has developed would be a good start.
        12. Michigan has a pollution prevention (P2) network of providers
    that could be a good model for the directory.
    General
        13. Suggest using the ``add a link'' feature, which will pull in
    the meta-data tags from the site, thus decreasing the amount of data
    entry required.
        14. When the comment field is used, it is important that the author
    include their name.
        15. Marketing is extremely important for the success of the
    Clearinghouse. Presentations should be made at conferences. The
    Compliance Assistance Centers should also participate in the marketing.

          COMPLIANCE ASSISTANCE TOOLS DISTRIBUTION: STATUS OF EFFORTS
        Question. Provide the status of efforts under Task 5 of Action 4
    under the Aiming for Excellence initiative to distribute and market
    compliance assistance tools to organizations that are likely to have
    contact with regulated groups.
        Answer. The distribution of compliance assistance tools is handled
    primarily by the office and/or region that has the lead for developing
    the tool. Under the ``Aiming for Excellence'' report, the Agency
    committed to developing tools for economically significant rules. Of
    the ten rules identified by the Agency, two have been promulgated--the
    Office of Water's national pollution discharge elimination system
    stormwater regulation and the Office of Environmental Information's
    amendment for certain persistent and bioaccumulative toxic substances.
    The compliance assistance tool for the stormwater regulation has been
    completed and a plan for distribution is being developed. The tools for
    the other regulations require additional stakeholder input and should
    be completed this fall.
        During the development of compliance assistance tools, the lead
    office and/or region developing the tool works with stakeholders
    interested in the regulation to ensure that the tool will be useful to
    the targeted audience and the user has access to the tool. Based on
    stakeholder input a plan is developed to distribute the tool to
    compliance assistance providers and/or the regulated community. The
    tool is also distributed to EPA regional counterparts and state
    contacts.
        Tools are generally posted on the web site of the EPA office/region
    responsible for developing the tool. The tool is also made available
    through other internet resources such as the Small Business Gateway web
    site and, when appropriate, the ten industry-specific Compliance
    Assistance Centers developed by EPA. In many instances, brochures
    describing the tools and how to access them are developed, and
    distributed to appropriate stakeholders through mailings and meetings.
        The implementation of the Compliance Assistance Clearinghouse will
    greatly enhance the Agency's efforts to assure that the provider
    community has easy access, from one central web site, to all compliance
    assistance tools developed by EPA.

             COMPLIANCE ASSISTANCE TOOLS DISTRIBUTION: COORDINATION
        Question. Describe how the Agency coordinates between its offices
    the distribution or marketing of compliance assistance tools.
        Answer. The distribution of compliance assistance tools is handled
    primarily by the EPA program office or Region that has the lead for
    developing the tool. EPA offices work with other internal Agency staff
    and the stakeholders interested in the regulation in the development
    and distribution of compliance assistance tools to ensure that the tool
    is useful and that potential users have access to the tool. We believe
    that the Compliance Assistance Clearinghouse will optimize the Agency's
    ability to coordinate the distribution of materials to all parties that
    have an interest in them.

          COMPLIANCE ASSISTANCE TOOLS DISTRIBUTION: AGENCY COMPLIANCE
        Question. Describe how the Agency strategically identifies areas or
    sectors in need of compliance assistance tools and then distributes
    tools to meet those needs.
        Answer. Currently each EPA program office and region develops
    individual program plans addressing their respective areas of
    responsibility. Through its own analyses of environmental and
    regulatory problems as well as discussions with external stakeholders ,
    other governmental agencies and Congressional agencies and staff, each
    office sets priorities for the coming fiscal year(s) and then develops
    strategies and activities to address those priorities. These activities
    include a range of compliance assistance activities, such as outreach
    or technical assistance.
        The distribution of compliance assistance tools is handled
    primarily by the office and/or region that has the lead for developing
    the tool. During the development of compliance assistance tools, the
    lead office and/or region developing the tool works with stakeholders
    impacted or interested in the regulation to ensure that the tool will
    be useful to the targeted audience and the user has access to the tool.
    Based on stakeholder input a plan is developed to distribute the tool
    to compliance assistance providers and/or the regulated community. The
    tool is also distributed to EPA regional counterparts and state
    contacts.

              COMPLIANCE ASSISTANCE TOOLS DISTRIBUTION: MARKETING
        Question. Describe how the Agency identifies the need for further
    marketing of its compliance assistance tools including how EPA assesses
    the effectiveness of its current marketing activities.
        Answer. The Agency utilizes a range of techniques to develop and
    evaluate marketing approaches. Marketing approach depends on the type
    of tool developed and the audience for that tool. Generally, EPA
    continuously works with a wide range of stakeholders such as trade
    associations, state offices and facilities to ensure that the tool is
    accessible; and if not, they help us identify opportunities to enhance
    the tool's distribution to those that do not have access. This provides
    the Agency with insight into how well our marketing efforts are working
    and what additional distribution may be needed.
        Some specific examples of how the Agency furthers its marketing
    approach:
      --Many projects are put through a pilot process prior to large-scale
            distribution. The compliance assistance tools are distributed
            to a limited audience for their use. This distribution is
            followed by a survey to determine the usefulness and
            appropriateness of the materials for the targeted audience.
            This feedback is incorporated in finalizing the materials and
            the distribution of the documents.
      --EPA increasingly utilizes voluntary surveys as a method to get
            feedback on the tools that are developed. This process has been
            done extensively with the small business community as well as
            in other programs. The Agency seeks feedback on the content and
            appropriateness of the materials for the audience.
      --Monitoring of web site and hotline usage provides valuable
            information on how well the documents are reaching the
            regulated community. For example, the Compliance Assistance
            Centers Website activity growth has been quite pronounced. In
            fact, the Centers experienced over 260,000 visits in 1999, over
            890 visits per day on average. Seventy per cent of those who
            responded to an on-line survey visit said they visit the site
            at least monthly while 30 percent visit on a weekly bases.

    COMPLIANCE ASSISTANCE TOOLS DISTRIBUTION: SAFE DRINKING WATER MENTORING
                                    ``KITS''
        Question. Describe efforts included under the Aiming for Excellence
    initiative to develop by January 2000, a ``start-up'' kit to make it
    easier for local and tribal governments to participate in safe drinking
    water mentoring.
        Answer. The Safe Drinking Water Peer Review Program (Peer Program)
    began in 1996 as an effort in Georgia by EPA Region 4, along with local
    and state partners, to train volunteers from small drinking water
    systems so these operators could help themselves and other ``peer''
    system operators achieve and remain in compliance with state and
    Federal drinking water regulations.
        Training for the operators volunteering to participate as review
    team members is based on a modified version of the training for state
    and Federal inspectors. After completing training conducted by EPA and
    state regulators, these volunteers are listed in a directory along with
    areas of expertise so other small system operators can call upon them
    to conduct evaluations and reviews on site. Along with volunteer
    training, the other components of the Peer Program include self-
    assessments conducted by small system operators, and technical
    assistance and evaluations provided by the trained peer volunteers.
        What began as a Georgia pilot has expanded rapidly. Local chapters
    of national organizations like the American Water Works Association and
    the Rural Water Association have assisted EPA Region 4 and other state
    and local partners to develop program implementation customized to the
    particular state or tribe. The Peer Program has been replicated in
    Kentucky, Iowa, Virginia, Mississippi and by the United South and
    Eastern Tribes (USET, representing 23 Indian tribes from Maine to
    Texas). As a result of ``word of mouth'' experiences of Peer Program
    participants, increased Program exposure at regional/national water
    association meetings, and numerous awards, the demand for creating
    additional Peer Programs has increased. Region 4 developed a web-based
    ``tool kit'' as a way to provide information to interested EPA regions,
    states and potential partners concerning starting a Peer Program.
        The ``tool kit'' was developed to simplify as much as possible the
    creation of new state and tribal Peer Programs. It includes a
    description of the Peer Program, its components and sample forms which
    can be easily adjusted to recognize differences in varying state
    requirements. Forms include sample evaluations, a sample training
    agenda and a sample volunteer directory. Also included is a start-up
    flow chart which describes the various steps involved in creating the
    Program, as well as a detailed check list to make it easy for
    interested persons to develop a Peer Program. The ``tool kit'' includes
    information on existing Programs and provides contacts and information
    relating to potential partnership opportunities. The ``tool kit'' is
    available from Region 4 EPA in a CD ROM format upon request and is also
    accessible through an EPA website, http://www.epa.gov/region4/
    peerreview/toolbox.htm.

                     SAFE DRINKING WATER INFORMATION SYSTEM
        Question. Describe the status of efforts to convene by April 2000,
    representatives from all EPA regions for training on the development
    and implementation of safe drinking water information programs.
        Answer. In September 1998, EPA launched a major review of the
    quality of data in the Safe Drinking Water Information System/Federal
    version, or SDWIS/FED. An EPA/stakeholder working group was established
    for this purpose. A data quality assessment, which included a review of
    three years of data verification audits covering 27 states, was
    conducted. Those audits identified significant gaps in the compliance
    data that states report through SDWIS. Based on this assessment, the
    working group developed a Data Reliability Action Plan, which sets a
    data quality goal, identifies activities to establish a quantitative
    and qualitative data quality baseline, and lists interim actions to
    improve data quality.
        At the end of fiscal year 1999, the intensive data quality review
    was completed and the EPA/stakeholder workgroup identified priority
    actions to be implemented, i.e.,
      --Conduct more training so states know how to interpret rules and
            report violations;
      --Conduct more frequent data audits so states know not only their
            specific problems but also appropriate corrective measures;
      --Reissue rule guidance to specify how rules may and may not be
            interpreted.
        To implement the first recommendation regarding training, EPA is
    carrying out the following activities:
      --During May 2000, five training courses in Philadelphia, Atlanta,
            Denver, San Francisco, and Seattle will be offered on
            implementation of the Lead and Copper Rule. The training will
            provide instruction on how to report violations to SDWIS/FED.
      --EPA has already established a contract mechanism for states to
            obtain on-site technical assistance to resolve specific, ad hoc
            data entry problems.
      --EPA is developing a generic SDWIS/FED data entry course as well as
            other rule specific compliance determination/reporting courses
            like the Lead and Copper Rule course.
      --For states that adopt SDWIS/STATE (a state version of SDWIS/FED) as
            their state drinking water information management system, EPA
            provides training to state personnel on entering and retrieving
            data from SDWIS/STATE.
        To implement the second recommendation regarding data audits, EPA
    is carrying out the following activities:
      --EPA is planning to increase the frequency of audits of state data
            from once every three years to once every two years. Senator
            Bond
      --The Agency is revising and clarifying protocols for data
            verification and self-audits and encouraging states to conduct
            their own audits on a regular and consistent schedule. This
            will strengthen overall data quality oversight.
        To implement the third recommendation on reissuance of rule
    guidance, EPA is carrying out the following activities:
      --During the data verification audits that have already taken place,
            the Agency identified issues regarding compliance and
            implementation inconsistencies and confusion.
      --The Agency has worked with the states to develop clear and
            consistent guidance for these identified compliance and
            implementation issues, and will publish this in the Water
            Supply Guidance which is issued annually.
          compliance assistance tools distribution: mentoring efforts
        Question. Describe whether and where these mentoring efforts under
    the safe drinking water program might serve as a model for other
    programs around the Agency.
        Answer. The concept of utilizing peer review and self assessments
    to provide compliance assistance to rural communities is easily
    transferrable to environmental media programs other than drinking water
    programs. The initial Peer Program focusing on ground water drinking
    water systems was easily expanded to include surface water drinking
    water systems. Additionally, wastewater facility peer review programs
    are being developed in Georgia, and the United South and Eastern Tribes
    (USET, representing 23 Indian tribes from Maine to Texas) plan to adopt
    this component in their program. Solid waste is another potential area
    for further expansion.
    compliance assistance tools for economically significant rules: aiming
                for excellence--identification of economic rules
        Question. The Aiming for Excellence report called for
    identification of economically significant rules under development for
    the purposes of developing compliance assistance tools for these rules.
    The report called for identification of the rules by June 1999.
    However, EPA did not release a draft of projected economically
    significant rules until the November 1999 FACA meeting. What was the
    reason for missing this milestone?
        Answer. In May 1999, during development of the Aiming for
    Excellence Report, EPA developed a draft list of projected economically
    significant rules. The list was then reviewed for accuracy and
    completeness by all of EPA's media program offices, followed by a
    review conducted by the Agency's regulatory steering committee. The
    list was then provided to the Compliance Assistance Advisory Committee.
    EPA met its obligation to produce a timely and accurate list for use by
    the principal set of stakeholders.

    COMPLIANCE ASSISTANCE TOOLS FOR ECONOMICALLY SIGNIFICANT RULES: AIMING
                             FOR EXCELLENCE--FINAL
        Question. The Aiming for Excellence report called for finalization
    by October 1999 of the initial set of rules for which compliance
    assistance materials will be developed. What was the reason for missing
    this milestone?
        Answer. The list of economically significant rules for which
    compliance assistance material would be developed was finalized in
    October, 1999. Simultaneously, EPA established a stakeholder advisory
    group under the Federal Advisory Committee Act to meet the Agency's
    commitment (under the Aiming for Excellence Report) to work with
    stakeholders to identify potential regulations that may need compliance
    assistance. The advisory group, Compliance Assistance Advisory
    Committee (CAAC), held their first meeting on November 18-19, 1999. At
    this meeting, the list of economically significant rules was provided
    to the CAAC and any other interested stakeholder attending this
    meeting.

     COMPLIANCE ASSISTANCE TOOLS FOR ECONOMICALLY SIGNIFICANT RULES: DRAFT
          FISCAL YEAR 2001 ANNUAL COMPLIANCE ASSISTANCE ACTIVITY PLAN
        Question. The Draft Fiscal Year 2001 Annual Compliance Assistance
    Activity Plan contains an appendix listing the projected economically
    significant regulations. Does this represent the finalization of the
    initial set of rules or was the finalization accomplished with a
    different vehicle?
        Answer. Appendix B of the March 1, 2000 Draft fiscal year 2001
    Annual Compliance Assistance Activity Plan contains the complete list
    of projected economically significant regulations as of that date. The
    list of these regulations was finalized as described in the previous
    questions. However, it is possible that rulemakings will be removed or
    added to the list if there are changes in projected economic impact or
    the date of issuance for the rules.

        COMPLIANCE ASSISTANCE TOOLS FOR ECONOMICALLY SIGNIFICANT RULES
        Question. Provide the dollars and FTE each applicable program
    manager (NPM) has spent in the last three years to develop compliance
    assistance tools for economically significant rules. In meeting this
    request, organize the information by rule, NPM, fiscal year,
    appropriation, goal, objective, sub-objective, office or Region and
    activity.
        Answer. The following provides dollars and FTE spent by the Office
    of Enforcement and Compliance Assurance (OECA), the Office of Air and
    Radiation and (OAR) and the Office of Water (OW) on developing
    compliance assistance tools for economically significant rules in
    fiscal year 1998, 1999 and 2000. The GPRA goal structure was not in
    place until fiscal year 1999.
        The compliance assistance tools referred to in the OECA table
    address several activities and environmental requirements related to
    the specific economically significant rule. The full cost of developing
    the compliance assistance tool is shown because we are unable to
    isolate the cost attributable to explanation of the specific rule.
    Further, OECA supports other on-going sector-oriented compliance
    assistance mechanisms, notably ten Internet-based Compliance Assistance
    Centers, which help small and medium sized businesses, local
    governments and Federal facilities better understand and comply with
    Federal environmental requirements.

                                                 [Dollars in thousands]
    ----------------------------------------------------------------------------------------------------------------
                                                                                     Fiscal years
                                                                ----------------------------------------------------
                   Economically Significant Rule                      1998             1999               2000
                                                                ----------------------------------------------------
                                                                  FTE   Amount     FTE     Amount     FTE     Amount
    ----------------------------------------------------------------------------------------------------------------
              NPM: National Enforcement Program (OECA)

                        Appropriations: EPM

                        Goal 9, Objective 2

    Pulp and Paper: NESHAP and Pulp and Paper Effluent           .....    $115  ........    $20    ........  .......
     Guidelines--compliance assessment guide...................
    Financial Assurance for Municipal Solid Waste Landfills--    .....  ......      1.5      $2.5      1.5      $2.5
     Audit Protocol: Resource Recovery and Conservation Act
     Subtitle  D...............................................
    Land Disposal Restrictions-Phase IV: Treatment Standards     .....  ......  ........  .......      0.75    $50
     for Metal Wastes and Mineral Processing Secondary
     Materials and Bevill Exclusion Issues--CA tool; training..
    Lead-based paint Activities in Target Housing--Compliance      1.0     $50      1.0   .......      1.0   .......
     guidance; training, checklist.............................
    NPDES Comprehensive Storm Water Phase II Regulations--Storm  .....  ......      0.25    $25        0.25    $25
     Water Audit Protocol......................................
    Medical Waste Incinerators--compliance guide/checklist.....    0.3     $20      0.3   .......  ........  .......

                  NPM: National Air Program (OAR)

                        Appropriations: EPM

                       Goal 01, Objective 02

    National Emission Standards for Hazardous Air Pollutants       0.3     $50  ........  .......  ........  .......
     (NESHAP) for Petroleum Refineries, OAR-  OAQPS............
    NESHAP for Ethylene Oxide Commercial Sterilization and         0.2     $40  ........  .......  ........  .......
     Fumigation Operations, OAR-OAQPS..........................
    NESHAP for Wood Furniture Manufacturing Operations, OAR-       0.4     $80  ........  .......  ........  .......
     OAQPS.....................................................
    (8) NESHAP for Halogenated Solvents Cleaning, OAR-OAQPS....    0.4     $40  ........  .......  ........  .......
    (12) Emission Guidelines for Large Municipal Waste             1.0    $100  ........  .......  ........  .......
     Combustors, OAR-OAQPS.....................................
    (14) Emission Guidelines for Hospital, Medical, and            1.0    $100  ........  .......  ........  .......
     Infectious Waste Incinerators, OAR-OAQPS..................
    (2) NESHAP for Off-site Waste Recovery Operations, OAR-      .....  ......      0.3     $50    ........  .......
     OAQPS.....................................................
    (3) NESHAP for Pulp and Paper Industry, OAR-OAQPS,.........  .....  ......      1.0    $100    ........  .......
    (9) NESHAP for Flexible Polyurethane Foam Production, OAR-   .....  ......      0.3     $40    ........  .......
     OAQPS.....................................................
    National Volatile Organic Compound Emission Standards for    .....  ......      0.2     $40    ........  .......
     Architectural Coatings, OAR-OAQPS.........................
    National Volatile Organic Compound Emission Standards for    .....  ......      0.2     $40    ........  .......
     Consumer Products, OAR-OAQPS..............................
    Emission Guidelines for Municipal Solid Waste Landfills,     .....  ......      1.0    $100    ........  .......
     OAR-OAQPS.................................................
    NESHAP for Pharmaceutical Manufacturing Industry, OAR-OAQPS  .....  ......  ........  .......      2.0    $200

                  NPM: National Air Program (OAR)

                        Appropriations: S&T

                       Goal 01, Objective 01

    Tier II Light-Duty Vehicle and Light-Duty Truck Emission     .....  ......  ........  .......      2.0    $171
     Standards and Gasoline Sulfur Standards, OAR-OTAQ.........

                  NPM: National Water Program (OW)

                        Appropriations: EPM

                       Goal 02, Objective 01

    Interim Enhanced Surface Water Treatment (Promulgated 12/      1.1     $30      6.5    $200        5.5     $79
     98) and Stage 1 Disinfectant/Disinfection Byproducts
     (Promulgated 12/98).......................................
    Radon......................................................  .....  ......      1.3   .......      2.8     $41
    Ground Water...............................................    0.3  ......      2.8   .......      4.3     $40
    Arsenic....................................................  .....  ......  ........  .......      0.6     $15
    Drinking Water Academy \1\.................................  .....  ......      3.3    $300        3.3    $350

                       Goal 02, Objective 03

    NPDES Comprehensive Storm Water Phase II...................  .....  ......  ........  .......      0.5    $350
    NPDES requirements for Sanitary Sewer Overflows (SSOs).....  .....  ......  ........  .......      0.3    $200
    ----------------------------------------------------------------------------------------------------------------
    \1\ In 1999, EPA established the Drinking Water Academy as a long-term training initiative with the primary goal
      of assisting EPA, states and Indian tribes to build program capability to successfully carry out the
      requirements of the Safe Drinking Water Act.

    COMPLIANCE ASSISTANCE TOOLS FOR ECONOMICALLY SIGNIFICANT RULES--PLANNED
                                FUTURE SPENDING
        Question. Provide the dollars and FTE each applicable national
    program manager (NPM) plans to spend to develop compliance assistance
    tools for economically significant rules.
        Answer. In the ``Aiming for Excellence'' report, EPA commits to
    develop compliance assistance information for new economically
    significant rules generally within 90 days of issuing each rule. The
    lead for developing this information rests with the office responsible
    for the rule-making. The following charts from the Office of Air and
    Radiation (OAR) and the Office of Water (OW) provides data on future
    spending plans for economically significant rules. The Office of
    Enforcement Compliance and Assurance will work with the media program
    offices to determine how best to meet this Agency commitment by
    assisting in the development of compliance assistance guides and self-
    audit/inspection checklists. The FTE support necessary from OECA is not
    known at this time.

                             [Dollars in thousands]
    ------------------------------------------------------------------------
                                                                 Fiscal year
                                                                     2001
                   Economically Significant Rules               ------------
                                                                 FTE  Amount
    ------------------------------------------------------------------------
                  NPM: National Air Program (OAR)

                        Appropriations: EPM
    Goal 01, Objective 02:
        National Emission Standards for Hazardous Air            0.2    $50
         Pollutants (NESHAP) for Automobile and Light-Duty
         Truck Manufacturing (Surface coating), OAR-OAQPS......
        NESHAP for Industrial, Commercial, and Institutional     0.2    $50
         Boilers, OAR-OAQPS....................................
        NESHAP for Chemical Recovery Combustion Sources at       0.2    $50
         Kraft, Sulfite, and Stand Alone Semichemical Pulp
         Mills, OAR-OAQPS......................................

                  NPM: National Air Program (OAR)

                        Appropriations: S&T

    Goal 01, Objective 01: Compliance assistance tools to        1.0    $87
     implement the Tier II Light-Duty Vehicle and Light-Duty
     Truck Emission Standards and Gasoline Sulfur Standards,
     OAR-OTAQ..................................................

                  NPM: National Water Program (OW)

                        Appropriations: EPM

    Goal 01, Objective 01: Long term Enhanced Surface Water      6.0   $100
     Treatment Rule and Stage 2 Disinfectants/Disinfection
     Byproducts Rule...........................................
    Goal 2, Objective 3:
        NPDES Comprehensive Storm Water Phase II...............  0.5   $350
        NPDES requirements for Sanitary Sewer Overflows (SSOs).  0.8   $450
    ------------------------------------------------------------------------

       ANNUAL COMPLIANCE ASSISTANCE ACTIVITY PLAN: FISCAL YEAR 2001 PLAN
        Question. Describe the ways in which the fiscal year 2001 Plan
    identifies areas where compliance assistance is needed.
        Answer. The draft fiscal year 2001 Plan is a comprehensive
    inventory of the compliance assistance activities proposed by EPA
    program offices for the upcoming fiscal year. To address various
    stakeholder needs, this inventory is organized by sector, statute,
    chemicals/pollutants of concern, geographic focus, target audience and
    type of compliance activity.
        The activities included in the draft fiscal year 2001 Plan reflect
    decisions made by each program office in the Agency through their own
    planning and budgeting processes that establishes their offices'
    compliance assistance priorities (e.g., for new and economically
    significant regulations). By offering the draft Plan for comment at the
    March 1 and 2, 2000 Compliance Assistance Forum and through a Federal
    Register notice, stakeholders can provide their input on where
    compliance assistance tools or additional emphasis is needed. All
    comments received will be reviewed by the Agency's Compliance
    Assistance Advisory Committee established for providing advice on
    compliance assistance.

    ANNUAL COMPLIANCE ASSISTANCE ACTIVITY PLAN: COMPLIANCE ASSISTANCE NEEDS
        Question. Describe the methods the fiscal year 2001 Plan
    categorizes, ranks or otherwise prioritizes compliance assistance
    needs.
        Answer. The draft fiscal year 2001 Plan is an inventory of Agency
    compliance assistance activities. To address various stakeholder needs,
    this inventory is organized by sector, statute, chemicals/pollutants of
    concern, geographic focus, target audience and type of compliance
    activity. However, the draft plan does not categorize, rank or
    otherwise prioritize compliance assistance needs. The activities
    proceed from decisions made through the Agency's planning and budgeting
    process for fiscal year 2001 and are included in the Agency's budget
    submission/annual performance plan submitted to Congress in early
    February. Stakeholder comments will be taken into consideration as the
    Agency develops its fiscal year 2001 operating plan and its fiscal year
    2002 President's budget.

          ANNUAL COMPLIANCE ASSISTANCE ACTIVITY PLAN: STRATEGIC ACTION
        Question. Describe the ways the fiscal year 2001 Plan proposes
    strategic actions to meet the compliance assistance needs identified by
    the fiscal year 2001 Plan.
        Answer. The draft fiscal year 2001 plan is an inventory of the
    Agency's compliance assistance activities. These activities reflect
    decisions made by EPA program offices during the Agency's planning and
    budgeting process for fiscal year 2001. Because these assistance
    activities address priorities developed by EPA and its program offices,
    the activities are consistent with EPA's strategic directions and meet
    important compliance assistance needs.

         ANNUAL COMPLIANCE ASSISTANCE ACTIVITY PLAN: EPA ORGANIZATIONS
        Question. Describe the ways, and on what basis, the fiscal year
    2001 Plan identifies the EPA organizations best suited to implement
    individual parts of the strategy developed to ensure the Agency meets
    compliance assistance needs identified in the fiscal year 2001 Plan.
        Answer. The draft fiscal year 2001 Plan is an inventory of the
    compliance assistance activities proposed for the upcoming year based
    on individual EPA program office priorities, as developed through the
    Agency's planning and budgeting process for fiscal year 2001. The Plan
    lists the responsible EPA organizations for each activity, and the
    organizations were selected based on their expertise about specific
    regulatory requirements.

             ANNUAL COMPLIANCE ASSISTANCE ACTIVITY PLAN: RESOURCES
        Question. Describe the ways, and on what basis, the fiscal year
    2001 Plan directs Agency resources to individual EPA organizations to
    implement assigned parts of the strategy developed to ensure the Agency
    meets compliance assistance needs identified in the fiscal year 2001
    Plan.
        Answer. The fiscal year 2001 Plan lists the organization
    responsible for implementation of each activity. The responsible
    organization is best suited to the activity based on program expertise
    and capacity.

              ANNUAL COMPLIANCE ASSISTANCE ACTIVITY PLAN: CRITERIA
        Question. Describe the criteria EPA will use to prioritize
    activities within the Plan among other competing Agency priorities.
        Answer. Each program office in the Agency has an individual
    planning and budgeting process that establishes their offices'
    priorities. The items in the Plan were submitted by those offices as
    real compliance assistance needs. These needs will be weighed against
    other projects in need of funds and will be funded as resources permit.

           ANNUAL COMPLIANCE ASSISTANCE ACTIVITY PLAN: RESOURCE NEEDS
        Question. Describe how the resource needs identified in the fiscal
    year 2001 Plan and future Plans will be incorporated into the Agencies
    annual resource planning and budget request process.
        Answer. Remaining fiscal year 2001 and future resource needs will
    be identified before or at the onset of the planning and budgeting
    cycle. For future Plans the Agency will adjust the schedule for seeking
    stakeholder input to ensure that the feed-back is available prior to
    the beginning of the planning and budget cycle.

       ANNUAL COMPLIANCE ASSISTANCE ACTIVITY PLAN: LEVEL OF FUNDING FOR
                                   ACTIVITIES
        Question. Describe how, and on what basis, the Agency will decide
    the level of funding for activities within the Plan during the fiscal
    year 2001 Operating Plan process.
        Answer. The level of funding for individual projects in the Plan
    will depend on Congress's final determination of Agency appropriations
    for fiscal year 2001, stakeholder feedback about compliance assistance
    needs, and projected costs associated with development and delivery of
    specific compliance assistance activities.

     ANNUAL COMPLIANCE ASSISTANCE ACTIVITY PLAN: IDENTIFICATION OF FUTURE
                          COMPLIANCE ASSISTANCE NEEDS
        Question. Describe the ways future compliance assistance plans will
    identify areas where compliance assistance is needed.
        Answer. At the completion of the fiscal year 2001 Plan the Agency
    will evaluate the process used to develop the first plan, determine
    what improvements might be necessary, and implement those improvements
    which might help to focus compliance assistance resources where they
    are most needed. The Agency will work with the Compliance Assistance
    Advisory Committee and other stakeholders to accomplish this.

       ANNUAL COMPLIANCE ASSISTANCE ACTIVITY PLAN: FUTURE PRIORITIZATION
                                    METHODS
        Question. Describe the methods future compliance assistance plans
    will categorize, rank or otherwise prioritize compliance assistance
    needs.
        Answer. Currently each Office/Region individually establishes its
    project priorities. As a result of stakeholder input, EPA and the
    Compliance Assistance Advisory Committee are working to develop a set
    of prioritizing criteria related to compliance assistance which each
    office can incorporate into their planning process.

      ANNUAL COMPLIANCE ASSISTANCE ACTIVITY PLAN: FUTURE STRATEGIC ACTIONS
        Question. Describe the ways future compliance assistance plans will
    propose strategic actions to meet the compliance assistance needs
    identified by future compliance assistance plans.
        Answer. At the completion of the fiscal year 2001 Plan the Agency
    will evaluate the process used to meet the compliance assistance needs
    and will improve upon the approach. The Agency will work with the
    Compliance Assistance Advisory Committee and other stakeholders to
    accomplish this.

       ANNUAL COMPLIANCE ASSISTANCE ACTIVITY PLAN: FISCAL YEAR 2001 PLAN
        Question. Describe the ways, and on what basis, future compliance
    assistance plans will identify the EPA organizations best suited to
    implement individual parts of the strategy developed to ensure the
    Agency meets compliance assistance needs identified in future
    compliance assistance plans.
        Answer. An internal EPA workgroup will review all proposed projects
    that could be included in the Plan to determine if there are
    opportunities for consolidating resources between offices and to learn
    from previous efforts.

     ANNUAL COMPLIANCE ASSISTANCE ACTIVITY PLAN: RESOURCES TO IMPLEMENT
                               ASSIGNED STRATEGY
        Question. Describe the ways, and on what basis, future compliance
    assistance plans will direct agency resources to individual EPA
    organizations to implement assigned parts of the strategy developed to
    ensure the Agency meets compliance assistance needs identified in
    future compliance assistance plans.
        Answer. For future Plans the Agency will adjust the schedule for
    seeking stakeholder input to ensure that the feed-back is available
    prior to the beginning of the planning and budget cycle. This will
    provide insight into where resources are most needed.

      ANNUAL COMPLIANCE ASSISTANCE ACTIVITY PLAN: FISCAL YEAR 2001 ANNUAL
                 COMPLIANCE ASSISTANCE ACTIVITY PLAN RESOURCES
        Question. Provide the dollars and FTE devoted by the Office of
    Enforcement and Compliance Assurance, Office of Prevention, Pesticides
    and Toxic Substances, Office of Solid Waste and Emergency Response,
    Office of Air and Radiation, and Office of Water to compliance
    assistance activities as defined by the fiscal year 2001 Annual
    Compliance Assistance Activity Plan. In meeting this request, provide
    information from the fiscal year 1999 budget request, fiscal year 1999
    operating plan, fiscal year 1999 actuals, fiscal year 2000 budget
    request, proposed fiscal year 2000 operating plan and fiscal year 2001
    budget request. Organize the information by NPM, Appropriation, Goal,
    Objective, Sub-objective, Office or Region, and activity.
        Answer. The first annual Compliance Assistance Activity Plan (Plan)
    is a compilation of all of the compliance assistance activities
    planned, agency-wide for fiscal year 2001. The activities in the Plan
    reflect projects that each program office/region is envisioning for
    fiscal year 2001. These projects were identified as part of the
    planning and budget development process which began in the spring of
    1999 and will be finalized once the Agency receives the fiscal year
    2001 appropriations. Given the process of project identification, this
    first plan establishes a base-line of Agency activity.
        The draft Plan is currently undergoing a public review and comment
    process. Stakeholders have been asked to provide their views on EPA's
    selection of priorities for the upcoming year. Once the stakeholder
    comments have been summarized, they will be shared with Agency
    management. Additionally, the summary will be provided to the
    Compliance Assistance Advisory Committee (CAAC), the multi-stakeholder
    group formed by the Agency under the existing National Advisory Council
    for Environmental Policy and Technology (NACEPT). The CAAC, in
    reviewing the comments will have the opportunity to develop formal
    recommendations to be submitted through the NACEPT to the Agency.
        These formal recommendations will be considered by the Agency as it
    develops the fiscal year 2001 operating plan and the fiscal year 2002
    President's Request. Thus, at this stage of the Plan development it is
    difficult to accurately identify specific FTE and dollar levels for the
    projects identified in the draft Plan.
        The dollars and FTE for the Office of Enforcement and Compliance
    Assurance's compliance assistance program, however, is provided in the
    answer to question 186.

    ANNUAL COMPLIANCE ASSISTANCE ACTIVITY PLAN: STEPS IN SERVICE PROVIDING
                                     CHAIN
        Question. The Agency has stated that it wished to limit its
    compliance assistance activities to that of a ``wholesaler'' in the
    service providing chain. For each compliance assistance need identified
    by the Agency, who has the Agency identified will provide the other
    steps in the chain, such as manufacturing, distributing, marketing or
    retailing?
        Answer. The Agency has stated that it plans to shift to primarily
    fulfilling a wholesaler role with respect to compliance assistance.
    There will continue to be various circumstances in which the Agency
    will continue its direct provider role. Examples of the need for this
    direct assistance include working with Federal facilities, providing
    assistance related to Federally-run programs (e.g., CFCs), and
    providing assistance to facilities in states which have not been
    delegated program responsibilities.
        EPA currently provides only a small part of the compliance
    assistance that is targeted to the regulated community. State, local
    and tribal governments, who are EPA's co-regulators, provide the bulk
    of these efforts. In positioning itself as a wholesaler, EPA is working
    closely with states and various provider organizations (i.e., Chemical
    Manufacturers Association, American Forest and Paper Associations,
    Graphic Arts Technical Foundation, and Silicon Valley Manufacturing
    Group) to discuss their appropriate roles and responsibilities within a
    comprehensive, yet flexible system for providing assistance.

       ANNUAL COMPLIANCE ASSISTANCE ACTIVITY PLAN: SERVICE DELIVERY ROLE
        Question. How has the Agency determined that each of the other
    identified entities in the compliance assistance providing chain will
    effectively carry-out its role in service delivery?
        Answer. The Agency is currently evaluating how best to move into
    the wholesaler role where appropriate. It will however be critical that
    this shift include an evaluation component to assure that the delivery
    chain is working effectively. The Agency will address this issue as
    part of the ongoing discussions.
        The Agency will rely on providers that have experience and/or
    capacity to deliver compliance assistance to the appropriate audience
    in the most efficient and effective way.

      FIELD TESTING OF COMPLIANCE ASSISTANCE SOFTWARE TOOLS: APPROPRIATE
                                  REGULATIONS
        Question. Describe the status of efforts included in the Aiming for
    Excellence report to identify regulations appropriate for compliance
    assistance software development.
        Answer. The Agency has solicited stakeholder input to determine
    where software tools are most needed. As a result of this input, the
    Agency selected the Toxic Release Inventory as a rule for which this
    type of tool would be beneficial.
        TRI-ME (Toxics Release Inventory Made Easy) is an interactive,
    intelligent, user-friendly software that guides the user through the
    reporting requirements for Section 313 of the Emergency Planning and
    Community Right-to-Know Act (EPCRA) of 1986 and Section 6607 of the
    Pollution Prevention Act (PPA) of 1990. This software prompts the user
    for specific information, which the software then uses to determine if
    the user's facility has satisfied the reporting requirements for
    Section 313 and, if so, the software aids the user in completing the
    appropriate reporting forms. The software includes almost all of the
    existing TRI guidance so that the vast majority of users will not have
    to consult any other documents to complete their TRI reporting
    obligation.

          FIELD TESTING OF COMPLIANCE ASSISTANCE SOFTWARE TOOLS: STAFF
        Question. Describe the status of efforts to identify appropriate
    staff to support software development.
        Answer. The TRI Regulatory Development Branch in the Agency's
    Office of Environmental Information is presently managing the
    development of TRI-ME. This involves the oversight of both the
    information contained in the software (the script development) as well
    as the actual programming and software development. Contractors who are
    well-equipped to handle both aspects of this project have been
    retained.

           FIELD TESTING OF COMPLIANCE ASSISTANCE SOFTWARE: SCHEDULE
        Question. Describe the status of efforts to establish a schedule
    for developing and field testing software.
        Answer. Script development for TRI-ME began in October 1999 and was
    finished in January 2000. The conversion of the script to software and
    the other database management aspects of the software commenced in
    January 2000 and are due to be completed by mid-May 2000. An
    abbreviated beta test (including industry participation) for the
    software will take place in late April 2000. In mid-May 2000 this first
    version of the TRI-ME software will be distributed to facilities in
    just three industry sectors subject to Section 313 reporting; chemical
    distributors, petroleum bulk storage, and foundries. These three
    industry sectors will be encouraged to use this software for TRI
    reports due by July 1, 2000 for reporting year 1999. Subsequent
    versions of TRI-ME will address and be distributed to additional
    industry sectors subject to the reporting requirements of Section 313
    of EPCRA.

       FIELD TESTING OF DRAFT REGULATIONS: PARTICIPATION IN FIELD TESTING
        Question. Describe the status of efforts included in the Aiming for
    Excellence report to identify draft regulations and regulated entities
    to participate in field testing of draft regulations.
        Answer. In May, EPA identified draft regulations for field testing
    which some regulated entities previously had recommended. Participants
    in the field test may include facilities ranging from municipalities to
    large electrical facilities.

             FIELD TESTING OF DRAFT REGULATIONS: TRIAL APPLICATION
        Question. Describe the status of efforts to conduct a simulated
    trial application with selected regulations.
        Answer. In addition to identifying candidate draft regulations for
    field testing, the Agency is preparing guidance on how the field
    testing should be conducted. The likely approach would be to ask the
    regulated entities that volunteer to be part of the project to read and
    comply with the draft regulations using only the proposed rule and
    preamble for guidance. We anticipate that EPA and company staff would
    work cooperatively to gain insights into real-world compliance issues.

     FIELD TESTING OF DRAFT REGULATIONS: REGULATIONS TO BE USED FOR TESTING
        Question. Which regulations has EPA chosen for field testing and
    which regulated entities have agreed to participate in this testing?
        Answer. The Agency will determine which entities may participate in
    the field testing pilot after the draft regulations have been
    identified.
        Question. When will it occur?
        Answer. We plan to begin implementation of the field test by late
    July or early August.

           FIELD TESTING OF DRAFT REGULATIONS: RESULTS OF DRAFT RULE
        Question. How, and on what basis, will EPA evaluate the results of
    its trial application of a draft rule?
        Answer. The Agency will include an evaluation requirement in its
    guidance for the simulated trial application. Once the Agency
    identifies draft proposed rules for field testing, we will develop an
    evaluation plan specific to each draft rule.

      STRATEGIC USE OF COMPLIANCE ASSISTANCE, INCENTIVES, MONITORING AND
        ENFORCEMENT ACTIONS: FISCAL YEAR 2000-2001 NATIONAL ENFORCEMENT
                                    PRIORITY
        Question. Describe the status of efforts included in the Aiming for
    Excellence Report to develop for strategic use compliance assistance,
    incentives, monitoring and enforcement actions for each fiscal year
    2000-2001 national enforcement priority.
        Answer. EPA is committed to expanding the use of integrated
    strategies that combine compliance assistance, compliance incentive,
    compliance monitoring, and enforcement activities. Our experiences
    (e.g., Telecommunications Initiative) have shown that this approach can
    be very effective in addressing enforcement and compliance assurance
    program priorities. In fulfilling this commitment, we will continue to
    pursue new approaches to maximizing environmental compliance (e.g.,
    corporate-wide audit agreements). These efforts provide opportunities
    to build on our successes in addressing serious environmental problems
    and to improve compliance with environmental laws.
        A draft proposal (``guidelines'') which will assist the Agency in
    fulling this commitment has been developed. EPA will commence
    implementing the appropriate guidelines this year. Additionally, the
    appropriate strategies for each fiscal year 2000/2001 priority area
    will be developed by June 30, 2000. The answer to the following
    question reviews more concrete actions to integrate the use of
    incentives, assistance and enforcement in specific initiatives.

      STRATEGIC USE OF COMPLIANCE ASSISTANCE, INCENTIVES, MONITORING AND
                       ENFORCEMENT ACTIONS: ACHIEVEMENTS
        Question. Describe the past or current EPA efforts to use
    compliance assistance, incentives, monitoring and enforcement actions
    strategically to address chosen sectors or priorities. Provide
    quantitative and qualitative achievements including a differentiation
    of outcomes with specific environmental improvements versus compliance
    with paperwork or other reporting requirements.
        Answer. Since the reorganization of OECA in 1994, we have put in
    place the principal building blocks of an integrated enforcement and
    compliance assurance strategy with encouraging results as described in
    each of OECA's annual Accomplishments Reports. Your question, however,
    appears to be more directed to the use of integrated enforcement
    strategies. Current efforts to use integrated enforcement strategies
    that combine compliance assistance, incentives, monitoring, and
    enforcement activities are described briefly in the preceding response.
    Those efforts build upon our experiences, e.g., national sector
    strategies and initiatives.
        Recent experiences show integrated enforcement efforts are
    effective in addressing program priorities while maximizing scarce
    resources:
      --``Telecommunications Initiative''--EPA conducted extensive outreach
            efforts to heighten awareness of potential environmental
            requirements, including sending letters to 29 companies and
            approximately 40 trade associations and publishing an article
            in the trade press. In response to EPA's efforts,
            telecommunications companies voluntarily disclosed under EPA's
            Audit Policy and promptly corrected over 2,000 environmental
            violations occurring at over 600 facilities. The Agency waived
            over $6 million in gravity based penalties and collected
            $178,727 representing economic benefit gained from delayed
            compliance. At the same time, the Agency has pursued an
            enforcement action against a company based on a tip that was
            prompted by the publicity surrounding this initiative. The case
            settled for more than $600,000, helping to assure voluntary
            participants that they would not be undercut by competitors who
            continue to violate the law.
      --Region 5 ``Mini-Mills Initiative''--Early in fiscal year 1997 EPA
            Region 5 encouraged 25 small mid-west steel mills (``mini-
            mills'')--part of the iron and steel sector--to conduct self-
            audits and disclose potential environmental violations. Several
            ``mini-mills'' voluntarily disclosed violations which will
            result in significant environmental benefits. For example, EPA
            settled an administrative action with Calumet Steel in 1999
            that will lead to a reduction of approximately 100 tons per
            year of particulate matter to the air.
      --Other initiatives that reflect our integrated approach to national
            priorities included a compliance partnership program with the
            American Petroleum Institute to reduce emissions from petroleum
            storage tanks, a national audit agreement that provides
            incentives for pork producers to audit and correct violations
            of the Clean Water Act and a pilot program in Region 4 that has
            resulted in widespread auditing by municipalities to identify
            and eliminate sewer overflows.
        In addition, EPA's Office of Compliance (OC) and Office of
    Regulatory Enforcement (ORE) worked with EPA regions and states to
    develop and implement sector-based enforcement and compliance
    activities to enhance the regional commitments for the fiscal year
    1998/1999 Memorandum of Agreement (MOA). OECA selected two national
    priority sectors (petroleum refining, primary nonferrous metals) and
    four significant sectors (agricultural practices/CAFOs, coal-fired
    power plants, chemical preparations, iron and steel) for coordinated
    national sector strategies in fiscal year 1998. The attached sections
    of the ``Enforcement and Compliance Assurance fiscal year 1998
    Accomplishments Report'' contain detailed qualitative and quantitative
    information about the activities, accomplishments and strategic
    approach for each of the six sectors. OECA has achieved significant
    benefits in terms of protecting the public and the environment through
    these efforts. Preliminary data indicates we are continuing our
    successes:
      --In fiscal year 2000 EPA settled its first enforcement action with
            Tampa Electric under EPA's national coal-fired power plants
            priority for Clean Air Act violations. This action will result
            in reductions in sulfur dioxide of 60,000 tons per year, and in
            nitrogen oxide of 60,000 tons per year--the equivalent of
            taking 2.8 million automobiles off our highways.
      --In the petroleum refining sector, EPA concluded a multimedia action
            against Marathon Ashland Petroleum, LLC in fiscal year 1999
            including $12 million to correct violations and $14 million to
            perform Supplemental Environmental Projects which will reduce
            air emissions of sulfur dioxide and VOCs, and hydrocarbon leaks
            into the Mississippi River.
      --In the primary nonferrous metals sector, EPA reached a judicial
            settlement with ASARCO and a subsidiary for multimedia
            violations in several EPA regions. The 1998 phase of the
            settlement included a $3.386 million penalty for water and
            hazardous waste violations; the 1999 settlement included a $5.5
            million penalty, Supplemental Environmental Projects projected
            to cost $14.7 million, and enhancing the Environmental
            Management System used at all ASARCO facilities.
      --The fiscal year 1999 FMC Corporation, Inc. settlement--the largest
            civil penalty obtained under the Resource Conservation and
            Recovery Act (RCRA)--led EPA to include minerals processing as
            a Memorandum of Agreement priority for fiscal year 2000/2001.
            In addition, FMC Corporation Inc. committed to over a dozen
            Supplemental Environmental Projects with a capital cost of $63
            million, with benefits such as significantly improving air
            quality by reducing air pollution by approximately 436 tons of
            particulate matter per year.
        EPA has used a sector-based approach--identifying key industry
    sectors--to provide a broad perspective of the compliance problems
    facing the sectors and to identify enforcement and compliance tools to
    address the problems. The factors considered in selecting a sector
    include: compliance history, Regional and state concerns, size of the
    sector, and potential environmental and human health risks posed by
    releases. The national enforcement and compliance goals, objectives,
    and priorities--including priority sectors--are set forth in the
    nationally written Memorandum of Agreement (MOA) Guidance document
    which the regions, States, and OECA's other partners use in planning
    their annual activities and developing individual Memoranda of
    Agreement. These priorities ensure consistency of national targeting of
    environmental compliance issues that pose the greatest potential threat
    to human health and the environment.

      STRATEGIC USE OF COMPLIANCE ASSISTANCE, INCENTIVES, MONITORING AND
                    ENFORCEMENT ACTIONS: VERTICAL SELECTION
        Question. Has the strategic use of the entire vertical selection of
    enforcement and compliance assurance tools (i.e. compliance assistance,
    incentives, monitoring and enforcement actions) improved the compliance
    incentives program's relative inability to encourage reporting of
    environmental violations versus paperwork or other reporting
    requirements.
        Answer. During the past two years, EPA has received voluntary
    disclosures of release--and degradation types of violations that it had
    not in the past. For example, we've received disclosures related to
    wetlands, air treatment technology under the New Source Review and
    Prevention of Significant Deterioration programs, maintenance of
    publicly owned treatment works (POTWs), and federal fuel standards. We
    believe those disclosures result from, in part, the presence of a
    strong enforcement program. Through such types of disclosures we expect
    to see additional improvements to human health and the environment. In
    a single Audit Policy settlement related to the improper use of certain
    fuels by an airline, EPA expects an elimination of nearly 700 tons of
    pollutants from the air annually--all the result of a voluntary
    disclosure. We believe that this is a result of EPA's strong
    enforcement program, and outreach and education provided through
    compliance assistance activities, such as workshops and newsletters.

            OFFICE OF ENVIRONMENTAL INFORMATION STAFFING FTE CEILING
        Question. What is the Full Time Equivalent (FTE) ceiling in the
    Office of Environmental Information (OEI)?
        Answer. The FTE ceiling provided OEI in the fiscal year 2000
    Enacted Operating Plan is a total of 544 FTE.
         office of environmental information staffing level at 3/1/2000
        Question. At what FTE level was OEI staffed as of March 1, 2000?
        Answer. As of March 1, 2000, OEI was staffed at a level of 481 FTE.

               ENVIRONMENTAL INFORMATION STAFFING STATUS OF FTES
        Question. If OEI was below its FTE ceiling, explain the reason for
    this situation?
        Answer. OEI began its operations early in fiscal year 2000, but was
    not fully staffed at its inception due to vacant positions which
    transferred for LAN consolidation, TRI technical support, and new
    program management functions which hadn't previously existed. Many
    positions have already been filled, and most of the remaining jobs have
    active recruitment processes underway. OEI managers are working
    aggressively to fill all positions. OEI projects that it will have
    filled all positions in its authorized staffing level at the end of
    fiscal year 2000. Given the breadth of OEI's portfolio and scope of
    operations, filling all FTE slots is crucial to OEI being able to
    fulfill its base mission.

                  OFFICE OF ENVIRONMENTAL INFORMATION STAFFING
        Question. Describe the role OEI played in the development of
    specific information management activities in the fiscal year 2001
    budget request.
        Answer. The fiscal year 2001 budget request was submitted to OMB in
    September 1999. OEI was not formally created until October 1999.
    However, one of OEI's predecessor organizations, the Office of
    Information Resources Management, determined the fiscal year 2001
    investment review requirements and coordinated and reviewed Agency-wide
    investment proposals. The results of the OIRM-led review were presented
    to the Agency's Executive Steering Committee for IRM, which led to the
    Chief Information Officer's advice to the Chief Financial Officer on
    funding information proposals.
        Question. Did OEI review fiscal year 2001 investment requests from
    the program offices and recommend or not recommend funding the
    investments?
        Answer. OEI was not officially established until October 1999--
    after the submission of the 2001 budget request to OMB. However, the
    Executive Steering Committee for IRM, comprised of Agency senior
    managers, and supported by the Office of Information Resources
    Management, reviewed the fiscal year 2001 investment requests submitted
    by the program offices. Based on the advice of the ESC, the Chief
    Information Officer recommended investments for funding to the Chief
    Financial Officer. The ESC advised that additional work was needed on
    several proposals before investments could move forward.
        With the creation of OEI in October 1999, OIRM was incorporated
    into the OEI structure, and the ESC became the Quality Information
    Council. Both OEI and the Quality Information Council will have a role
    in reviewing and recommending investment proposals from the program
    offices for the fiscal year 2002 budget process.
        Question. Did OEI generate its own fiscal year 2001 investment
    requests on behalf of program offices or the Agency?
        Answer. Since OEI was not officially created until October 1999, it
    did not generate investment requests on behalf of the program offices
    as part of the fiscal year 2001 process. However, OEI's predecessor
    organizations, including both OIRM and OP, submitted investment
    requests that represented Agencywide information initiatives. In
    January 2000, OEI also submitted an investment request for the
    Information Integration Initiative as part of OMB's Exhibit 53.
        Question. Did OEI review requests for disinvestments to the fiscal
    year 2001 budget request?
        Answer. EPA's Executive Steering Committee for IRM, comprised of
    senior Agency managers, and supported by the Office of Information
    Resources Management, reviewed the fiscal year 2001 investment requests
    submitted by the program offices, and provided their advice to the
    Chief Information Officer. Program offices would have identified
    disinvestments to systems as part of the investment review process.
        Question. Describe the role OEI played in developing the fiscal
    year 2000 Operating Plan, including specific actions on information
    management funding?
        Answer. As OEI was a newly created organization at the time of the
    fiscal year 2000 Operating Plan development, it concentrated its
    efforts on sharing its vision of Agency information priorities with
    members of the Quality Information Council, and on establishing OEI's
    operating plan and priorities for fiscal year 2000. As part of its work
    with the Quality Information Council and its vision for the Integrated
    Information Initiative, EPA program offices are focused on information
    initiatives that will support integration within EPA and between EPA
    and the States.
        Question. Describe the role OEI played in recommending for or
    against reductions to the fiscal year 2000 budget request as
    implemented through the fiscal year 2000 Operating Plan including
    specific actions across the Agency on information management funding?
        Answer. OEI's predecessor organization, the Office of Information
    Resources Management, served as a staff office to the Executive
    Steering Committee in reviewing investment proposals for the fiscal
    year 2000 budget request. Based on the advice of the Executive Steering
    Committee, the Chief Information Officer advised the Chief Financial
    Officer of information investments that could be funded in the
    Operating Plan.

                    OEI PARTICIPATION IN RESOURCE DECISIONS
        Question. How many times did the Quality Information Council meet?
        Answer. To jump-start the contributions of senior Agency officials
    and their participation in the evolving information management agenda,
    the Acting Deputy Administrator convened EPA's senior officials in an
    executive forum four times during 1999 prior to the formal chartering
    of the Quality Information Council (QIC) in the Fall, 1999. Since its
    formal establishment in September, 1999, the QIC has met seven times to
    engage in a variety of information management priorities.

                                  HUMAN HEALTH
        Question. At what level, in terms of FTE and dollars, did the
    Agency fund the Human Health Research key program in the fiscal year
    1999 budget request, fiscal year 1999 operating plan, fiscal year 1999
    actuals, fiscal year 2000 budget request, fiscal year 2000 proposed
    operating plan, and fiscal year 2001 budget request. Provide the
    information by NPM, appropriation, goal, objective, office or region,
    and activity.
        Answer. The information follows:

                                                       HUMAN HEALTH RESEARCH BUDGET--FISCAL YEAR 1999-2001
                                                                      [Dollars in millions]
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             Fiscal year 1999                    Fiscal year 2000           Fiscal year 2001
                                                                   ------------------------------------------------------------------------    President's
                                                                       President's         Enacted         President's         Enacted           budget
                                                                         budget      ------------------      budget      -----------------------------------
                                                                   ------------------                  ------------------
                                                                      FTE     Total     FTE     Total     FTE     Total     FTE     Total     FTE     Total
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    S&T:
        Office of Research and Development:
            8.2 Human Health Research \1\.........................    231.9     57.0    225.3     49.7    257.9     55.7    186.6     49.1    176.8     53.4
            3.2 Research to Support New Regulatory Requirements     .......  .......     10.4      6.4     16.9      6.6     22.1      8.1     28.0     10.5
             Under FQPA...........................................
            4.3 Safe Handling and Use of Commercial Chemicals and      39.3      6.1     28.2      5.1     33.9      4.9     82.1      8.4     79.7      9.1
             Micro \2\............................................
    Superfund:
        Office of Research and Development: 8.2 Human Health            3.5  .......  .......  .......      3.5      0.5  .......  .......  .......  .......
         Research \3\.............................................
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    \1\ Figures reflect the Human Health Objective of the Sound Science Goal [8.2].
    \2\ Figures reflect the human health portion of Objective 3 of the Safe Communities Goal [4]. They include direct human health research plus a
      proportion of human health/ecosystems infrastructure [e.g., operating expenses, salaries, travel].
    \3\ Part of SF transfer S&T for fiscal year 1999 enacted.

                          HUMAN HEALTH: BUDGET REQUEST
        Question. Analysis of the Agency's budget requests indicates that
    EPA reduced funding to the Human Health Research key program in the
    fiscal year 1999 operating plan and the fiscal year 2000 proposed
    operating plan from the higher levels contained in each year's budget
    request. Why did the Agency make reductions in Human Health Research
    from each of these budget requests to the following operating plans and
    what impact did it have on the activity levels of the program?
        Answer. Fiscal year 1999 was the first year of formal
    implementation of the Government Performance and Results Act (GPRA). In
    implementing the Act's requirements, the Agency realigned its budget
    into the current goal/objective structure. During development of the
    enacted operating plan for fiscal year 1999, a review of the placement
    of certain key programs suggested that human health research directly
    supporting implementation of the Food Quality Protection Act (FQPA) of
    1996 should be realigned from the core human health research program
    captured under the Sound Science goal (8.2) to Goal 3, which directly
    supports implementation of the Act.
        Similarly, during development of the fiscal year 2000 proposed
    enacted budget, research directly supporting implementation of the
    Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) and the
    Toxic Substances Control Act (TSCA) was realigned from the Sound
    Science goal to more directly support the Agency's efforts to improve
    community safety under Goal 4.
        These funding realignments were the major influences on the changes
    to human health research under Goal 8 for the two years. While these
    changes did result in reductions to that goal, they did not impact the
    overall human health research program since they were made only to more
    clearly associate certain direct research efforts with the related
    regulatory programs under Goals 3 and 4.
        In addition to the realignments mentioned above, there were
    reductions in fiscal year 1999 as part of the general reduction
    required to meet Congressionally appropriated levels. The area affected
    by the general reduction to human health research under Goal 8 was the
    Science to Achieve Results (STAR) grants program. As a result, the
    program was able to support 2-3 fewer new grant awards than would have
    been possible otherwise.
        Funding for the total core human health research program under all
    three goals (3, 4, and 8) was $61.1 million and 263.9 workyears in the
    fiscal year 1999 operating plan, and $65.6 million and 290.8 workyears
    in the fiscal year 2000 proposed operating plan.

             ENFORCEMENT ACCOMPLISHMENTS: FISCAL YEAR 1998 DECREASE
        Question. Describe the extent to which the level of fiscal year
    1998 decrease in enforcement activities may be within the natural
    variation of enforcement activity from year to year.
        Answer. For fiscal year 1998, EPA issued 1,721 administrative
    compliance orders, 1,400 administrative penalty orders, and referred
    411 civil cases to the Department of Justice, a total of 3,532 actions
    for the year. For the previous year, the total for the same categories
    was 3,557, a difference which was not of concern to EPA after reviewing
    the detailed data about fiscal year 1998 enforcement activities.
      enforcement accomplishment: percentage change for decrease/increase
        Question. At what level or percentage change does the Agency
    believe a decrease or increase in enforcement activities would be due
    to elements beyond the natural variation of enforcement activity from
    year to year?
        Answer. It is expected that variations in enforcement outputs will
    occur due to the fact-specific nature of enforcement. Cases vary in
    terms of the entity involved, duration of violations, type of entity,
    litigations facts, and the severity of the violation, just to mention a
    few. In addition, the year to year enforcement outputs vary naturally
    as priorities change and the level of resources needed to handle
    individual activities associated with those priorities change. There
    are simply too many variables that create the total agency enforcement
    activities for each year to predict the dominant cause of the variation
    or a level or percentage change beyond the norm.

      ENFORCEMENT ACCOMPLISHMENTS: MEASURE OF RESOURCES BY TIME, FTE AND
                                    DOLLARS
        Question. How does the Agency measure the amount of resource
    intensiveness in terms of time, FTE or dollars associated with its
    enforcement cases including larger, more complex or time intensive
    cases or actions?
        Answer. The Agency does not track the resource intensiveness of
    individual cases because our goal is to target our resources through
    our compliance monitoring program at the most significant environmental
    problems rather than to aim for a certain resource efficiency level for
    enforcement cases. If our targeting is successful and we address
    significant environmental problems through enforcement it is often the
    case that these cases are larger and more complex. OECA does analyze
    regional civil judicial and administrative outputs as compared to FTE
    resources on an annual basis so that the relative efficiency between
    regions can be compared.

          ENFORCEMENT ACCOMPLISHMENTS: MEASURE OF ENVIRONMENTAL IMPACT
        Question. How does the Agency measure the amount of environmental
    impact resulting from each of its enforcement actions?
        Answer. The environmental impact from enforcement actions is
    measured by the estimated pollutants reduced from each enforcement
    case. This information allows the Agency to know the pounds of
    pollutants reduced as a direct result of single cases or categories of
    cases. In addition the Agency also measures actions taken by facilities
    (e.g., change in production process, etc.) as a result of enforcement.

      ENFORCEMENT ACCOMPLISHMENTS: ENFORCEMENT ACTIONS VS. ENVIRONMENTAL
                                     IMPACT
        Question. Has the Agency conducted a comparison of the amount of
    environmental impact resulting from each of its enforcement actions
    versus the degree of resource intensiveness of each action? If so, what
    are the results?
        Answer. The Agency does not routinely compile information about the
    costs of each individual case. Therefore, we do not have the capacity
    to compare the amount of environmental impact versus resources expended
    for each enforcement case.

                   ENFORCEMENT ACCOMPLISHMENTS: COMPLEX CASES
        Question. In general, has the agency found that larger, more
    complex or time intensive cases or actions produce greater relative
    levels of environmental impact?
        Answer. We have found that complex cases can yield greater
    environmental impacts than the cumulative effects of a group of smaller
    actions for the same violations. Resolving many types of environmental
    problems requires complex investigations to find the extent and
    remedies for the problems. If we do not devote the time and resources
    to these cases, we would not otherwise be able to achieve the
    reductions in environmental releases many of our cases have achieved.
    The cases can yield larger Supplemental Environmental Projects that can
    achieve environmental benefits that could not be gained in smaller
    cases. Also, we have been able to use the leverage of combining
    multiple violations into one case to negotiate settlements with more
    comprehensive injunctive relief that may result in additional
    environmental impacts than would otherwise be agreed to by the
    respondent.

        ENFORCEMENT ACCOMPLISHMENTS: EFFORTS TO MEASURE DETERRENT EFFECT
        Question. What efforts has the Agency conducted, or is the Agency
    conducting, to measure the deterrent effect of their enforcement
    program? Does this include any studies, document reviews, contracts or
    other inquiries? What are the results?
        Answer. The Agency's efforts to measure the deterrent effects of
    its enforcement program include: (1) the Office of Enforcement and
    Compliance Assurance's (OECA) Compliance Information Project; (2)
    OECA's implementation of its National Performance Measures Strategy
    (NPMS); (3) NPMS Compliance Measurement Cooperative Agreements; (4) an
    ongoing deterrence measurement project sponsored by EPA's Chief
    Financial Officer (CFO), (5) The Forum on Deterrence of Environmental
    Violations and Environmental Crime; and (6) Request for Proposals
    (RFP): Corporate Environmental Performance and the Effectiveness of
    Government Interventions. Specifics under each of these actions
    follows.
    Compliance Information Project
        The April 1999 Compliance Information Project (CIP) Literature
    Summaries report developed by OECA's Office of Planning and Policy
    Analysis (OPPA) contains brief reviews of seventeen pieces of
    compliance literature, plus appendices referencing over two hundred
    additional studies on a broad array of deterrence and motivational
    topics. The function of the CIP was to assemble and distribute these
    materials for followup use by federal and state compliance officials.
    Information on the CIP, and the full text of the Literature Summaries
    report, is posted on the OECA-OPPA website at .
    National Performance Measures Strategy Implementation
        The NPMS is a multi-year, high priority effort to identify, design,
    and implement an enhanced set of performance measures for EPA and the
    public to use to assess changes in the behavior and compliance status
    of regulated entities from a full range of enforcement and compliance
    activities. OECA is in the process of implementing twelve sets of NPMS
    measures referred to collectively as ``the Performance Profile.'' The
    Profile consists of eight measures of environmental results caused by
    enforcement and compliance assurance activities (``outcomes''), plus
    four measures of program activity (``outputs''). Of the twelve sets in
    the Profile, three (sets 1, 6, and 7) may prove especially interesting
    to deterrence researchers. Set 1 requires EPA to determine
    statistically valid noncompliance rates for five regulated populations
    in fiscal year 2000. OECA and others will then be positioned to analyze
    impacts on those rates from government interventions and incentive
    policies. Sets 6 and 7 require EPA to determine the average duration of
    time significant violators take to return to compliance, and the
    percentage of significant violators with recurrent significant
    noncompliance within a two-year period, respectively. The sets will
    rely on the information in the databases to track trends in the
    duration of significant noncompliance (SNC) and recidivism by media
    program.
    Compliance Measurement Cooperative Agreements
        In connection with the NPMS, OECA is awarding $1.8 million in
    cooperative agreement grants to fund a series of Compliance Measurement
    Cooperative Agreements with states to develop and implement potentially
    transferable outcome-based performance measures for their own
    enforcement and compliance assurance programs. Of particular interest
    to deterrence researchers, among the twelve projects selected for
    funding, is the Oregon-Department of Environmental Quality (DEQ) effort
    to document and measure the deterrent impacts of their enforcement
    activities. Oregon-DEQ intends to assess specific deterrence in its
    state by comparing data elements such as penalty amounts and
    recidivism, while qualitatively evaluating general deterrent effects
    via surveys and interviews with the regulated community. The surveys
    and interviews undertaken by Oregon will explore, among other things,
    the effectiveness of government efforts to communicate information on
    enforcement activities and penalties to the regulated community and the
    public. EPA hopes the results of the Oregon project will enhance its
    understanding of the relationship between how threats are communicated
    and received, the actual (objective) probability/severity of
    punishment, and subjects' perceptions of how visible or discoverable
    their noncompliance may be.
    Deterrence Measurement Project
        EPA's Chief Financial Officer and OECA are jointly sponsoring a
    project with the Eastern Research Group, Inc. (ERG) to develop a model
    for determining the impact of inspection and enforcement activity on
    firm behavior and environmental performance. The study is being led by
    Louis Nadeau of ERG, the author of EPA Effectiveness at Reducing the
    Duration of Plant-Level Noncompliance, 34 j. ENVTL. ECON. & MGMT. 54
    (Sept. 1997). In that study, Nadeau, using data from 175 pulp and paper
    plants covering 41 reporting quarters from 1979 through 1989, found
    among other things that noncompliant plants that experienced a larger
    number of tests and inspections and/or enforcement actions during their
    periods of non-compliance tended to spend less time in violation.
    Nadeau determined, among other things, that a 10 percent increase in
    monitoring activity led to 4 percent or greater reductions in the
    average length of time facilities remained in noncompliance. The new
    ongoing ERG study focuses on the behavior of firms in two industrial
    sectors, petroleum refining and integrated iron and steel. The behavior
    under review consists of facility-level pollutant loadings regulated
    under the federal Clean Water Act. For the petroleum refining sector,
    the pollutants of concern are biological oxygen demand (BOD), total
    suspended solids (TSS), and ammonia nitrogen. The pollutants of concern
    for the integrated iron and steel sector are TSS, total zinc, and total
    lead. In its simplest form, Nadeau's model will test whether
    enforcement has a discernable effect on environmental quality by
    impacting the behavior of the regulated community. The goal of the
    model is to determine the statistical relationship between compliance
    monitoring and enforcement activities, and measurable environmental
    outcomes.
    Forum on Deterrence of Environmental Violations and Environmental Crime
        The Department of Justice's (DOJ) independent research arm, the
    National Institute of Justice (NIJ), together with DOJ's Environment
    and Natural Resources Division (ENRD) and OECA, held The Forum on
    Deterrence of Environmental Violations and Environmental Crime on July
    12 and 13, 1999. The group of academic experts and senior federal,
    state, and local policy-makers and practitioners invited to the Forum
    participated in a roundtable discussion of the existing deterrence
    literature, and worked to generate research ideas and identify
    potential partners for conducting or sponsoring such research. While
    the Forum participants, consistent with Federal Advisory Committee Act
    (FACA) requirements, did not prioritize potential research topics or
    generate consensus recommendations, EPA considered their viewpoints in
    developing the RFP discussed in the following paragraph.
    Request for Proposals (RFP): Corporate Environmental Performance and
            the Effectiveness of Government Interventions
        On April 10, 2000, EPA published a Request for Proposals (RFP)
    entitled, ``Corporate Environmental Performance and the Effectiveness
    of Government Interventions.'' This research solicitation is being
    sponsored by EPA's Office of Research and Development (ORD)-National
    Center for Environmental Research (NCER), in cooperation with the U.S.
    Department of Justice (DOJ)-National Institute of Justice (NIJ). The
    solicitation opened on April 10, 2000. The closing date for submitting
    grant proposals is July 24, 2000. The RFP may be accessed
    electronically at . Through
    the RFP, EPA anticipates making up to $1 million available to address
    priority gaps in our understanding of the relationship between
    government interventions and the behavior of the regulated community,
    of which deterrence-related issues are a subset. The projected range
    for awards is $50,000 to $200,000 per research grant per year for
    durations of one to three years. Proposed research can be prospective
    or retrospective, with prospective field experiments, survey research,
    and multi-investigator projects more likely to justify higher funding
    levels. The results will be available to assist federal, state, tribal
    and local governments, industry associations, environmental groups,
    corporations, and private citizens to allocate their resources in order
    to achieve the greatest degree of environmental and health protection
    and improvement as efficiently as possible. EPA is also sponsoring a
    separate solicitation entitled, ``Market Mechanisms and Incentives for
    Environmental Management (MM&I)'' . That RFP, dated November 2, 1999 with a closing date
    of February 2, 2000, focuses on alternatives or complements to
    traditional environmental regulation that rely specifically on market
    forces, financial mechanisms, or other instruments to encourage
    regulated entities to reduce emissions or improve environmental
    performance. Examples include pollution fees or taxes, pollution
    allowance trading, subsidies, and differing liability approaches.

              ENFORCEMENT ACCOMPLISHMENTS: ADMINISTRATIVE ACTIONS
        Question. According to the fiscal year 1998 Accomplishments Report,
    EPA initiated 17 percent fewer administrative actions per year from the
    period fiscal year 1993 to fiscal year 1998 than it did from fiscal
    year 1989 to fiscal year 1992. What is the reason for this decrease in
    activity?
        Answer. There are two explanations for the decrease in
    administrative actions. First, states made greater use of
    administrative actions from fiscal year 1993 to fiscal year 1998,
    increasing such actions by 58 percent compared to their use in fiscal
    year 1989 to fiscal year 1992. Thus, states were taking more of the
    cases that EPA had previously addressed through administrative action.
    Second, during fiscal year 1993 to fiscal year 1998, EPA was expanding
    the tools it used to prevent or correct noncompliance to include
    voluntary self-disclosure cases handled informally and more focused
    compliance assistance. In addition, EPA has placed more emphasis during
    fiscal year 1993 to fiscal year 1998 on more complex judicial cases
    involving significant environmental harm.

                  ENFORCEMENT ACCOMPLISHMENTS: CIVIL REFERRALS
        Question. According to the fiscal year 1998 Accomplishments Report,
    EPA made 6 percent fewer civil referrals to the Department of Justice
    per year from the period fiscal year 1993 to the fiscal year 1998 than
    it did from fiscal year 1989 to fiscal year 1992. What is the reason
    for this decrease in activity?
        Answer. A review of the data from fiscal year 1993 to fiscal year
    1998 shows that in 3 of the years during that period, the number of
    civil referrals was higher than any single year in the fiscal year 1989
    to fiscal year 1992 period. For only two years, fiscal year 1995 and
    fiscal year 1996, were the number of referrals lower than in any single
    year in the period fiscal year 1989-1992. Further, the total for fiscal
    year 1999 (403) was also higher than during any year in the fiscal year
    1989 to fiscal year 1992 period. Finally, the number of civil referrals
    in the last three years (fiscal years 1997-1999) have set a three-year
    consecutive all-time record.

      RISK MANAGEMENT: FISCAL YEAR 1999, FISCAL YEAR 2000 AND FISCAL YEAR
                              2001 FUNDING LEVELS
        Question. At what level, in terms of FTE and dollars, did the
    Agency fund the Risk Management Plans Assistance key program in the
    fiscal year 1999 budget request, fiscal year 1999 operating plan,
    fiscal year 1999 actuals, fiscal year 2000 budget request, fiscal year
    2000 proposed operating plan, and fiscal year 2001 budget request.
    Provide the information by NPM, appropriation, goal, objective, sub-
    objective, office or region, and activity.
        Answer. Response provided in the tables below.

                                                 [Dollars in thousands]
    ----------------------------------------------------------------------------------------------------------------
                                                                              Fiscal year 1999
                                                      --------------------------------------------------------------
                                                          Budget request          Op plan         Estimated actuals
       NPM: OSWER  Appro: EPM  Goal/Obj/Sub: 050202   ------------------------------------------         \1\
                                                                                                --------------------
                                                         FTE      Amount      FTE      Amount      FTE      Amount
    ----------------------------------------------------------------------------------------------------------------
    Risk Management Plans............................     28.5   $11,870.9     28.5    $7,254.9     28.5    $7,254.9
    HQ...............................................     10.0   $10,308.8     10.0    $5,692.8     10.0    $5,692.8
    Regions..........................................     18.5    $1,562.1     18.5    $1,562.1     18.5    $1,562.1
    ----------------------------------------------------------------------------------------------------------------
    \1\ Since RMP activities are not specifically tracked in the Agency accounting system, an estimate was provided
      for fiscal year 1999 actual obligation.

                                                 [Dollars in thousands]
    ----------------------------------------------------------------------------------------------------------------
                                                                   Fiscal year 2000                Fiscal year 2001
                                                      --------------------------------------------------------------
      NPM: OSWER  Appro: EPM  Goal/Obj/S ub: 050202       Budget request          Op plan           Budget request
                                                      --------------------------------------------------------------
                                                         FTE      Amount      FTE      Amount      FTE      Amount
    ----------------------------------------------------------------------------------------------------------------
    Risk Management Plans............................     28.5   $11,804.6     28.6    $7,242.8     28.6    $7,913.5
    HQ...............................................     10.0   $10,152.9     10.0    $5,727.7     10.0    $6,297.2
    Regions..........................................      8.5    $1,651.7     18.6    $1,515.1     18.6    $1,616.3
    ----------------------------------------------------------------------------------------------------------------

       RISK MANAGEMENT: REDUCTIONS IN FISCAL YEAR 1999, FISCAL YEAR 2000
                                BUDGET REQUESTS
        Question. Analysis of the Agency's budget requests indicates that
    EPA reduced funding to the Risk Management Plans Assistance key program
    in the fiscal year 1999 operating plan and the fiscal year 2000
    proposed operating plan from the higher levels contained in each year's
    budget request. Why did the Agency make reductions in Risk Management
    Plans Assistance from each of these budget requests to the following
    operating plans and what impact did it have on the activity levels of
    the program?
        Answer. The fiscal year 1999 and fiscal year 2000 budgets contained
    an increase in the risk management planning (RMP) activity to support a
    $5.6 million grant initiative to encourage states to develop and manage
    their own RMP programs . The initiative was designed to provide states
    seed money (for up to two years) to develop their audit and inspection,
    technical assistance and outreach capabilities. It was also intended to
    help them establish the funding mechanisms needed to sustain the
    program. Reductions in the EPM appropriation in both years resulted in
    EPA removing the funding requested for this effort in order to meet
    higher priorities.
        The impact of the reductions are not immediately visible since the
    Agency currently has 10 states in the pipeline that have committed to
    developing programs. To help keep these states on track, we are making
    a small amount of funding--$300,000--available, as well as providing
    program support. To promote recruitment, we will emphasize flexibility
    in how states will be authorized to receive delegation.
        Since fiscal year 1999, when implementation of the RMP program
    began, base resources have been redirected to EPA regions to carry out
    their responsibility as the implementing agency in lieu of states.
    Regions continue to work in securing agreements through their technical
    assistance and outreach activities, however, should regions fail, EPA
    must be prepared to operate the program long-term for about half of the
    56 states and territories.

      AUDIT POLICY: FISCAL YEAR 1998 CIVIL REFERRALS TO DOJ ELIGIBLE FOR
                                     RELIEF
        Question. Many violations of emission or discharge standards are
    required to be identified by prescribed monitoring and thus violations
    encountered would not be eligible for relief under the Agency's audit
    policy and its requirement for voluntary audits. For each statute and
    section under which EPA made a civil referral to the Department of
    Justice in fiscal year 1998, identify whether a violation under that
    section would be eligible for relief under the audit policy and provide
    a short description of the reason.
        Answer. Analysis of whether a certain violation-type is eligible
    for penalty relief under the Audit Policy varies depending upon several
    factors, primarily how the circumstances surrounding the violation
    relate to the nine conditions of the policy. Violation of a statutory
    requirement may be ineligible under certain circumstances and eligible
    under others. Therefore, EPA determining whether certain violation
    types identified in fiscal year 1998 enforcement cases would be
    eligible for the policy requires consideration of many different
    hypothetical scenarios. For example:
      --How would the violation have been discovered?
      --Would discovery of the violation have been required under an
            existing permit or prior settlement or court order?
      --Had a state or local investigation begun?
      --Would the discovery have occurred prior to the commencement of
            EPA's investigation?
      --Had notice of a citizen suit been issued?
      --Did the company have prior violations that would make the violation
            at issue a repeat violation?
        Without reasonable access to this type of information about the
    cases, EPA's analysis would be difficult to conduct and would likely
    provide inaccurate responses.
        Attached is a break-down of the various statutes represented in our
    fiscal year 1998 enforcement cases.
        The Audit Policy provides that matters that are the subject of a
    federal investigation or inspection are not considered independent
    discoveries and are ineligible for penalty relief. It follows that all
    cases referred to the Department of Justice would be ineligible.
        Violations discovered solely through monitoring that is required by
    law or through a permit are ineligible--although there could be case-
    specific circumstances that would warrant treatment of such violations
    under the policy. The key issue is whether an entity had a pre-existing
    obligation under statute or permit to look for a violation--i.e., was
    the discovery of the violation voluntary--not whether an entity had a
    pre-existing obligation to report to EPA any violations it discovers.
    Therefore, in the instance of an entity that did not conduct legally
    required monitoring, a disclosure that involves failure to monitor
    would be eligible under the policy.
        The most prominent federal monitoring requirements are the Clean
    Water Act's NPDES daily monitoring requirements, as promulgated at 40
    CFR 122.41; the Safe Drinking Water Act's Public Water Sewer Systems
    monitoring requirements, as promulgated at 40 CFR 141; the Resource
    Conservation and Recovery Act's hazardous waste leak detection
    monitoring requirements, as promulgated at 40 CFR 265.1063; and the
    Clean Air Act's Title V operating permit requirements, as promulgated
    at 40 CFR 70.5.
        On September 30, 1999, EPA issued a memorandum to clarify that
    certain Clean Air Act violations discovered, disclosed and corrected by
    a company prior to issuance of a Title V permit are potentially
    eligible for the Audit Policy. That memorandum allows New Source Review
    (NSR) and Prevention of Significant Deterioration (PSD) violations
    discovered through extraordinary review of permitting history and
    meeting conditions 3 through 9 of the Audit Policy to receive penalty
    relief under the policy.

        AUDIT POLICY: FISCAL YEAR 1998 ADMINISTRATIVE PENALTY ORDER AND
              ADMINISTRATIVE COMPLIANCE ORDER ELIGIBLE FOR RELIEF
        Question. For each statute and section under which EPA issued an
    administrative penalty order or an administrative compliance order in
    fiscal year 1998, identify whether under that section would be eligible
    for relief under the audit policy and provide a short description of
    the reason.
        Answer. See BOND 129 answer. Audit policy cases are resolved
    through three mechanisms: penalty orders; compliance orders; and
    unilateral determinations (often referred to as notices of
    determination). Therefore, fiscal year 1998 administrative orders
    include many of the cases resolved under the Audit Policy, as well as
    unrelated enforcement cases. We will provide an approximate break-out
    of the fiscal year 1998 administrative orders in two weeks.
        The Audit Policy cases settled in fiscal year 1998 were resolved
    with the following distribution:
      --10 were resolved through an administrative penalty order (these are
            cases for which only partial (75 percent) credit under the
            policy was granted or for which an economic benefit was
            collected).
      --4 were resolved through a notice of noncompliance (NON) or notice
            of violation (NOV) under which no penalty was collected.
      --28 were resolved through a unilateral order (Notice of
            Determination) or Agency letter under which no penalty was
            collected.
      --31 were resolved through the use of administrative orders under
            which no penalties were collected.
        Because of the several ways in which these cases can be resolved,
    we report audit policy cases collectively without breaking down the
    cases by settlement types. However, some audit policy cases may have
    had an ongoing correction or remedy (these would be a subset of the
    fourth category above) that warranted reporting as a compliance order.
    The same applies for audit policy cases for which some aspect of
    penalties were collected (first category above).

    AUDIT POLICY: FISCAL YEAR 1998 ADMINISTRATIVE COMPLIANCE ORDER ELIGIBLE
                                   FOR RELIEF
        Question. For each statute and section under which EPA issued an
    administrative compliance order in fiscal year 1998, identify whether
    under that section would be eligible for relief under the audit policy
    and provide a short description of the reason.
        Answer. See BOND 129 answer. Audit policy cases are resolved
    through three mechanisms: penalty orders; compliance orders; and
    unilateral determinations (often referred to as notices of
    determination). Therefore, fiscal year 1998 administrative orders
    include many of the cases resolved under the Audit Policy, as well as
    unrelated enforcement cases. We will provide an approximate break-out
    of the fiscal year 1998 administrative orders in two weeks.

            AUDIT POLICY: HUMAN HEALTH OR ENVIRONMENTAL IMPROVEMENTS
        Question. EPA is committed to obtaining human health or
    environmental improvements from concluded environment actions but does
    not consider violations disclosed under the audit policy to be
    enforcement actions. So to the audit policy's emphasis on paperwork and
    record keeping violations, 84 percent of disclosures in the last
    evaluation, is in contrasts to the enforcement program's goal of 75
    percent of concluded actions requiring environmental or human health
    improvements. Is the goal of the audit policy not to require
    environmental or human health improvements? If so, why has the Agency
    structured the policy this way?
        Answer. The Audit Policy has proven to be efficient for companies
    and EPA in resolving record-keeping and reporting violations. Record-
    keeping and reporting requirements provide the framework for public
    access to information, the structure for safe handling, and the use and
    discharge of hazardous substances, and are derived from federal laws
    enacted by Congress. The failure to submit emergency and chemical
    inventory forms, e.g., can have tragic consequences, such as the death
    of firefighters unaware of the presence of hazardous chemicals. As the
    greatest number of violations tend to involve monitoring and reporting
    requirements, it is not surprising that the majority of disclosures
    include violations of this type. EPA has undertaken several efforts
    over the past year to encourage the disclosure and correction of
    violations of emission and discharge limits. These include an agreement
    with a large manufacturer to audit and disclose violations of Clean Air
    Act permit and emission standards; a compliance partnership agreement
    to encourage controlling VOC emissions from petroleum storage tanks, an
    audit agreement with the National Pork Producers Council to reduce or
    eliminate penalties for disclosure and correction of Clean Water Act
    violations; 67 municipal audits conducted in response to an initiative
    from Region 4, which are expected to reduce sanitary sewer overflows by
    improving maintenance and expanding capacity; and voluntary audits by
    airlines of compliance with fuel standards.

         AUDIT POLICY: VOLUNTARY NATURE VS GOAL OF ENFORCEMENT PROGRAM
        Question. The voluntary nature of the audit is cited as a reason
    the audit policy does not induce more violations of environmental or
    health standards. If the goal of the enforcement program is to address
    environmental and human health problems with 75 percent of concluded
    enforcement actions requiring environmental or human health
    improvements, why does the Agency conclude the voluntary nature
    provision which runs counter to the goal of the enforcement program?
        Answer. As explained in an answer to a similar question last year,
    the 75 percent goal applies to traditional enforcement actions, not
    voluntary disclosure and correction under the audit policy. The
    Agency's policy was designed to provide an incentive for voluntary
    actions to identify and correct violations. Violations identified
    through prescribed monitoring (e.g. daily monitoring reports) are
    already generally available to federal and state agencies. In addition,
    EPA believes that guaranteeing amnesty for all violations, regardless
    of how they are identified would provide an obvious disincentive to
    conduct good audits.

                  AUDIT POLICY: QUALITATIVE MEASURE OF SUCCESS
        Question. EPA has cited quantitative measures of success for its
    audit policy such as the number of violations disclosures and
    corrections generated for facilities. Why does the Agency not measure
    the success of the Audit Policy in qualitative terms such as meeting
    the goals of requiring environmental or health improvements?
        Answer. EPA reports successes of Audit Policy use in a quantitative
    measure, consistent with reporting requirements under the Government
    Performance and Results Act. For some cases, however, EPA is aware of
    the environmental and health improvements that result from the case.
    For example, EPA's settlement with American Airlines is expected to
    eliminate nearly 700 tons of pollutants from the air annually.
        Because of the recent significant growth in the Audit Policy
    program and the Agency's interest in environmental and health
    improvements, EPA has begun to further develop capabilities for begin
    tracking such improvements made under the policy.

                     AUDIT POLICY: PENALTY RELATED CHANGES

        Question. EPA considered and approved non-penalty related changes
    to the Audit policy to encourage additional quantities of disclosures.
    Why did the Agency not consider penalty related changes to increase the
    quality of disclosures in terms of meeting the goal of requiring
    environmental or human health improvements?
        Answer. Recovering a violator's economic benefit from noncompliance
    is a cornerstone of EPA's civil penalty program. In addition, many
    federal statutes explicitly require EPA and the Federal courts to
    consider a violator's economic benefit in imposing a civil penalty.
    Although the Audit Policy is a voluntary program, EPA does not believe
    participants should gain an economic advantage over those regulated
    entities that have maintained compliance with federal environmental
    statutes. To encourage increases in the quantity and breadth of
    disclosures, EPA continues its attempts to raise the regulated
    community's awareness of the Audit Policy. During the past two years,
    EPA has received certain chemical release- and degradation-related
    disclosures that we had not before received. Through the use of sector-
    related Audit Policy initiatives and targeted marketing, EPA has
    recently received disclosures related to wetlands, air technology,
    publicly owned treatment works (POTWs) and federal fuel standards.

                  AUDIT POLICY: NUMBER OF VIOLATIONS DISCLOSED
        Question. In fiscal year 1998, how many violations were disclosed
    under the state audit policies or statutes in each of the states with
    audit policies or statutes?
        Answer. EPA does not have access to this information. To obtain
    such information, EPA would need to issue to states resource-intensive
    inquiries that would require clearance through OMB.

             AUDIT POLICY: CASES SETTLED BY CORRECTING VIOLATIONS
        Question. Question. Why did only 32 percent of companies disclosing
    potential violations in fiscal year 1998 under the Agency's audit
    policy settle those cases by correcting violations and taking steps to
    prevent their recurrence?
        Answer. Many of these disclosures have yet to be resolved. EPA has
    tracked audit policy cases cumulatively by fiscal year so that the
    collective data does not distinguish when a resolved case was initially
    disclosed. The number of resolved cases in a given year may include a
    case that was disclosed that year or in another year. For example, a
    case may have been disclosed in the last month of a fiscal year and
    resolved in the subsequent year. That dynamic creates a rolling cycle
    of cases, for which the resolution time for each depending on the
    circumstances surrounding the disclosure.

            AUDIT POLICY: FISCAL YEAR 1998 DISCLOSURE OF VIOLATIONS
        Question. As of fiscal year 1998, why has the Agency granted relief
    to only 38 percent of the companies disclosing violations under the
    Agency's audit policy since inception of the policy?
        Answer. As of fiscal year 1999, EPA had granted penalty relief to
    approximately half of the facilities disclosing violations under the
    Audit Policy since the policy's inception. Facilities that have not
    been granted penalty relief fall into one of several situations: the
    disclosure has not yet been resolved; the disclosure did not meet the
    conditions of the Audit Policy; upon further analysis, EPA determined
    that a violation did not occur; or the entity disclosed the identity of
    multiple facilities at the onset of a corporate-wide audit, but
    ultimately determined that violations occurred at fewer facilities.
        Several factors influence the first category. One, a company may
    not disclose all information necessary to determine the nature of the
    violation it suspects occurred, or may disclose the information in
    subsequent communications. Two, EPA has received an increasing number
    of multi-facility disclosures that may involve many violations and more
    than one violation type. These multi-facility disclosures usually
    involve extended schedules for audits, which may not be completed for
    one year or longer. Three, EPA is receiving disclosures of violation
    types that require greater analysis than traditional record-keeping
    violations. Four, in fiscal year 1999 EPA provided Regions with
    additional tools and information resources in an effort to expedite
    case resolution time. The results of such efforts should be more
    apparent in fiscal year 2000.
        Through fiscal year 1998, EPA granted penalty relief to an
    estimated 4 out of 5 facilities whose disclosure cases had been
    resolved. Of the remaining 20 percent, some included cases where the
    audit policy was inapplicable because no violation had occurred. The
    improvements we are making to the case tracking system for audit policy
    cases will allow us to provide more accurate and detailed information
    in the future. The Agency has recently lengthened the time for
    disclosure from 10 to 21 days, and more disclosures are being made
    under structured auditing agreements with terms identified in advance
    of factual disclosures, both of which should result in fewer policy
    denials in the future.

               AUDIT POLICY: MEASURE OF UNFAIR BUSINESS ADVANTAGE
        Question. The Agency has stated that penalty related changes to the
    audit policy would allow regulated entities to gain an unfair business
    advantage. However, the Agency structured the audit policy so that the
    overwhelming (84 percent) number of violations disclosed under the
    policy do not address environmental or human health improvements. How
    has the Agency measured and determined the gain to society in
    preventing a degree of unfair business advantage outweighs the
    environmental and human health improvements which would be achieved
    from allowing those advantage gains?
        Answer. Congress, the General Accounting Office, and federal courts
    have all recognized that it is critical to recover economic benefit a
    company gains from violating federal laws. This principle is not at
    odds with EPA's goal of protecting human health and the environment,
    rather, it is fundamental to achieving that goal. Our commitment to
    recover economic benefit eliminates the incentive to violate the law by
    avoiding or postponing compliance. This deterrent effect assures more
    widespread compliance with the law, which offers obvious benefits to
    public health and the environment through reduced emissions. Finally,
    EPA does not agree that record-keeping and reporting requirements in
    statutes like the Emergency Planning and Community Right to Know Act,
    which was enacted by Congress in the wake of the Bhopal tragedy,
    provide no benefit to public health or the environment.

                         AUDIT POLICY: DETERRENT EFFECT
        Question. The Agency fears that elimination of penalties in the
    audit policy would provide a disincentive for entities to be proactive
    in their environmental compliance attempts to address the future
    conduct of an entity. Does the Agency believe that the audit policy is
    also providing a deterrent effect on the behavior of regulated entities
    above and beyond the deterrent effect of a strong and vigorous
    enforcement program? What is the basis for this opinion?
        Answer. A study by the National Council of State Legislatures found
    that more expansive amnesty laws in effect in some states had no effect
    on the overall level of auditing. EPA believes that the Audit Policy is
    one component of a multi-faceted approach to obtaining environmental
    compliance. As noted in the 1992 Price-Waterhouse study, concern for an
    enforcement action is a strong motivator for corporate environmental
    auditing. Although EPA wishes to create an incentive for companies to
    voluntarily correct historical noncompliance, we do not believe it
    should be done at the cost of those companies that have historically
    complied with regulations, including those who've made significant
    capital expenditures to comply with federal law at the time it was
    required. To treat disclosers under the Audit Policy as if they were
    historical compliers would create a financial penalty for making prompt
    capital expenditures required by law.

           AUDIT POLICY: PENALTY CHANGES AND ITS EFFECT ON DETERRENT
        Question. To what degree would penalty changes to audit policy
    would materially diminish the deterrent effect of the Agency's strong
    and vigorous enforcement program? What is the basis for this option?
        Answer. EPA has a limited number of resources. Together, a strong
    enforcement program and the Audit Policy provide a deterrent for
    noncompliance and an incentive for compliance. Elimination of all
    penalties under the Audit Policy would eliminate the incentive for
    compliance by providing a competitive advantage to those companies that
    do not comply with federal environmental requirements and then later
    elect to come into compliance without any penalty for the delay in
    compliance time.

        EXISTING CHEMICALS: FISCAL YEAR 1999--FISCAL YEAR 2000 RESOURCES
        Question. At what level, in terms of FTEs and dollars, did the
    agency fund the Existing Chemical Data, Screening, Testing and
    Management key program in the fiscal year 1999 budget request, fiscal
    year 1999 operating plan, fiscal year 1999 actuals, fiscal year 2000
    budget request, fiscal year 2000 proposed operating plan, and fiscal
    year 2001 budget request. Provide the information by NPM,
    appropriation, goal, objective sub-objective, office or region, and
    activity.
        Answer. The information requested is presented in the accompanying
    spreadsheet.

                                                                 EXISTING CHEMICALS KEY PROGRAM
                                                                     [Dollars in thousands]
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Fiscal year 1999                          Fiscal year 2000                Fiscal year 2000
                                                    ------------------------------------------------------------------------------------     Pres. budget
       Existing Chemicals key program Activities       Pres. budget \1\    Operation plan \2\      Pres. budget        Operating plan   --------------------
                                                    ------------------------------------------------------------------------------------
                                                       FTE      Dollars     FTE      Dollars     FTE      Dollars     FTE      Dollars     FTE      Dollars
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    OPPTS total (EPM)..............................    125.1   $12,491.2    122.1   $14,225.3    120.4   $23,045.6    118.5   $20,394.5    117.4   $24,412.4
    HQ Total.......................................    125.1   $12,491.2    122.1   $14,225.3    117.4   $22,779.0    118.5   $20,394.0    114.4   $24,133.2
                                                    ========================================================================================================
    Chemical Right to Know.........................  .......  ..........  .......    $1,250.0     37.0   $14,114.1     37.0   $11,490.0     34.0   $14,487.8
    Other Existing Chemicals activities............    125.1   $12,491.2    122.1   $12,975.3     80.4    $8,664.9     81.5    $8,904.0     80.4    $9,645.4
    Regions: Chemical Right to Know                  .......  ..........  .......  ..........      3.0      $266.6  .......        $0.5      3.0      $279.2
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    \1\ Fiscal year 1999 President's Budget key program totals as displayed in fiscal year 2000 President's Budget submission.
    \2\ Agency data not available at objective level for fiscal year 1999 actual.

    Note: Key Program--Existing Chemicals.

                     EXISTING CHEMICALS FUNDING REDUCTIONS
        Question. Analysis of the Agency's budget requests indicates that
    EPA reduced funding to the Existing Chemical Data, Screening, Testing
    and Management key program in the fiscal year 1999 operating plan and
    the fiscal year 2000 proposed operating plan from the higher levels
    contained in each year's budget request. Why did the Agency make
    reductions in Existing Chemical Data, Screening, Testing and Management
    from each of these budget requests to the following operating plans and
    what impact did it have on the activity levels of the program?
        Answer. EPA found it necessary to make significant budget cuts in
    fiscal year 1999 as a result of across-the-board reductions made by
    Congress. The Congressional reductions led to cuts in a variety of
    programs, including the Existing Chemical Data, Screening, Testing and
    Management key program. The fiscal year 2000 requested and enacted
    amounts for Existing Chemicals was higher than in the previous year,
    primarily because the Agency requested $14 million for the Chemical
    Right-to-Know initiative. Nevertheless, in fiscal year 2000, the Agency
    was constrained to reduce other parts of the the Existing Chemical
    program, as well as the Chemical Right-to-Know Initiative, as a result
    of the general reductions in the appropriations.
        The Agency attempted to reduce the impact of these cuts to the
    extent possible by analyzing its Existing Chemicals program using the
    principles of government reinvention to determine the most efficient,
    publicly responsive, and cost-effective way to proceed. The Agency
    concluded that the Chemical Right-to-Know (ChemRTK) Initiative offered
    both the best return on investment and the greatest promise of
    achieving the Existing Chemicals program's goals of protecting human
    health and the environment, and adjusted its program activities
    accordingly. The cooperative, voluntary nature of the program,
    especially the HPV Challenge Program segment, appeared to offer an
    excellent opportunity for government and industry to contribute as
    partners, working in concert with other stakeholders, in a program
    geared to providing near-term public access to a significant quantity
    of essential health and safety information, and for the Agency to gain
    data vital to its core risk assessment and risk management missions.
    The program offered tangible benefits in terms of both time and cost
    savings over attempting to use the traditional regulatory, adversarial
    process to achieve the same ends. The net result is that the core
    activities and mission of the Existing Chemicals program have
    benefitted from the investment of resources in ChemRTK.
        Within ChemRTK and the HPV Challenge, the Agency adjusted the
    funding for specific activities according to their relative priority in
    time. Thus, risk assessment and risk management activities, which
    require the presence of data, were de-emphasized at the beginning of
    the project in order to focus more attention on data development and
    collection activities, which will provide the necessary information in
    order to conduct the risk assessment work.

          ENFORCEMENT PERFORMANCE GOALS/MEASURES: POLLUTANT REDUCTIONS
        Question. An Agency performance goal for fiscal year 2001 is that
    75 percent of concluded enforcement actions require environmental or
    human health improvements such as pollutant reduction. Why does the
    Agency's performance measure call for only 35 percent of concluded
    enforcement actions to identify pollutant reductions?
        Answer. The Agency Performance Goal for 2001 says: 75 percent of
    concluded enforcement actions will require environmental or human
    health improvements, such as pollutant reductions and/or changes in
    practices at facilities. It is difficult to project in advance the
    percentage of cases which will produce pollutant reductions. The 35
    percent measure is a reasonable projection based on performance in
    previous years.

    ENFORCEMENT PERFORMANCE GOALS AND MEASURES: RISKS FACTORS TO DIFFERENT
                                   POLLUTANTS
        Question. Does the Agency apply any relative risk factors to the
    different pollutants reduced by enforcement actions to determine the
    degree of environmental improvement achieved by weight of pollutant
    reduced? If so, how?
        Answer. The Agency does not apply quantitative and/or relative risk
    factors to the pollutants reduced by enforcement actions. Over the past
    several years, EPA has recorded information on a range of environmental
    improvements, such as the expected pollutant reduction and
    modifications to industrial processes, resulting from Federal
    enforcement actions. Because EPA has included actions requiring
    pollutant reductions as an annual performance measure in fiscal year
    2000 and fiscal year 2001, we have focused on improving the accuracy
    and completeness of pollutant information related to concluded
    enforcement actions. EPA plans to begin a project to address the manner
    in which quantitative pollutant reduction/controlled amounts are
    measured and reported for each media program, using standard pollutant
    names, calculation methods and units of measure.

    ENFORCEMENT PERFORMANCE GOALS/MEASURES: REGULATED POPULATIONS MEASURING
                                   COMPLIANCE
        Question. For which selected regulated populations is EPA measuring
    compliance rates or other indicators of compliance?
        Answer. EPA is currently completing its analyses of potential
    regulated populations, violations within those populations, and the
    number of random inspections needed to produce statistically valid
    compliance rates. This analysis will be completed by July 1, 2000.

    ENFORCEMENT PERFORMANCE GOALS/MEASURES: FISCAL YEAR 2000 BASELINE RATE
                                 OF COMPLIANCE
        Question. What is the fiscal year 2000 baseline rate of compliance
    or other indicator of compliance for each of the selected regulated
    populations?
        Answer. The Agency will use the first year of statistically valid
    compliance rates for each regulated population as a baseline against
    which subsequent years will be compared.
     enforcement performance goals/measures: fiscal year 1998, fiscal year
      2000 and fiscal year 2001 improvements in use/handling of pollutants
        Question. What was the number of concluded enforcement actions that
    resulted in improvements in the use or handling of pollutants in fiscal
    year 1998, fiscal year 2000 and expected in fiscal year 2001?
        Answer. For fiscal year 1998 and fiscal year 1999, the percentage
    of settled enforcement cases requiring various improvements by
    facilities was 89 percent and 88 percent, respectively. Further, in
    fiscal year 1998 and fiscal year 1999 respectively, 27 percent and 22
    percent of these complying actions required the defendants to perform
    either use reduction, industrial process changes, emission or disposal
    changes, remediations or removals. Our target for these types of
    improvements in fiscal year 2000 and fiscal year 2001 is 35 percent.

          ENFORCEMENT PERFORMANCE GOALS/MEASURES: POLLUTANT REDUCTIONS
        Question. What was the number of concluded enforcement actions that
    resulted in improvements in facility management and information
    practices in fiscal year 1998, fiscal year 2000 and expected in fiscal
    year 2001.
        Answer. For fiscal year 1998 and fiscal year 1999, the percentage
    of settled enforcement cases requiring improvements in facility
    management and information practices was 52 percent and 49 percent,
    respectively. (It should be noted that settled enforcement cases
    typically require multiple complying actions, so it would not be
    accurate to claim that about half the settled cases required only
    changes in facility management and information practices.) We have not
    set specific targets for this type of improvement in fiscal year 2000
    and fiscal year 2001.

        ENFORCEMENT PERFORMANCE GOALS/MEASURES: LEVEL OF NON-COMPLIANCE
        Question. What was the level of significant non-compliance
    recidivism in each of the CAA, CWA, and RCRA programs in fiscal year
    1998, fiscal year 2000 and expected in fiscal year 2001?
        Answer. The tracking of significant non-compliance (SNC) recidivism
    only began in fiscal year 1999; therefore the only data available for
    this measure is for fiscal year 1999. In the Clean Air Act program, of
    those SNCs that returned to compliance in fiscal year 1997, 30 percent
    were again SNCs within the next two years. In the Clean Water Act
    program, of those SNCs that returned to compliance in fiscal year 1997,
    56 percent were again SNCs at some point within the next two years. In
    the RCRA program, of those SNCs that returned to compliance in fiscal
    year 1997, 17 percent were again SNCs at some point within the next two
    years. (For CAA and the RCRA program, this measure only looks at the
    inspected universe for the pool of potential repeat SNCs).
        In fiscal year 2000, we will establish a firm baseline for this
    measure, and in fiscal year 2001 our target is reducing SNC recidivism
    in each program by 2 percentage points.

     ENFORCEMENT PERFORMANCE GOALS/MEASURES: FISCAL YEAR 1998, FISCAL YEAR
           2000 AND EXPECTED FISCAL YEAR 2001 IN PHYSICAL COMPLIANCE
        Question. What was the number of facilities that returned to full
    physical compliance in less than two years for each of the CAA, CWA,
    and RCRA programs in fiscal year 1998, fiscal year 2000 and expected in
    fiscal year 2001?
        Answer. The tracking of significant non-complier (SNC) duration
    began in fiscal year 1999. In the Clean Air Act (CAA) program, of those
    SNCs (High Priority Violators) that returned to compliance in fiscal
    year 1999, 258 did so in more than two years; 278 did so in 1 to 2
    years; 226 did so in 6 months to one year; and 417 did so in less than
    6 months (In the CAA program, a facility loses its SNC status only when
    a formal order is issued and all penalties have been paid).
        In the Clean Water Act (CWA) program, of those SNCs that returned
    to compliance in fiscal year 1999, 116 did so in more than two years;
    129 did so in 1 to 2 years; 134 did so in 6 months to one year; and 570
    did so in less than 6 months (In the CWA program in order to be
    considered a non-SNC a facility does not have to come into full
    physical compliance. A formal order can take a facility out of SNC).
        In the RCRA program, of those SNCs that returned to compliance in
    fiscal year 1999 53 did so in more than 2 years; 53 did so in 1 to 2
    years; 76 did so in 6 months to a year; 184 did so in less than 6
    months (In RCRA, a facility is no longer considered a SNC if it has
    returned to full physical compliance or it is on a compliance
    schedule.).
        In fiscal year 2000, we will establish a firm baseline for this
    measure, and in fiscal year 2001 our target is increasing the number of
    facilities in each program returning to full compliance by 2 percentage
    points.

    ENFORCEMENT PERFORMANCE GOALS/MEASURES: INSPECTIONS AND OUTPUT MEASURES
        Question. All performance measures in the fiscal year 2001
    congressional justification for inspections and investigations are
    output measures. Why is this still the case? What efforts are underway
    to develop outcome performance measures for inspections and
    investigation activities?
        Answer. In developing an improved set of enforcement and compliance
    assurance performance measures, the Office of Enforcement and
    Compliance Assurance needed to limit the amount of new information
    reported by Regional offices to headquarters. Our first priority was to
    collect outcome information about compliance assistance, enforcement
    actions, and disclosures under the EPA audit policy. Outcome measures
    for inspections were viewed as a subsequent task. Through a number of
    pilots underway in Regional and headquarters-operated compliance
    inspection programs, the Agency is testing ways to collect information
    on the outcomes of inspection and investigation activities. EPA
    inspectors participating in these pilots are recording inspection-
    specific information related to compliance assistance, deficiencies
    observed, specific actions taken to respond to deficiencies, and other
    beneficial actions taken in response to the inspection. For example,
    based on one pilot involving 24 inspections:
      --Compliance assistance was provided in 21 of the 24 inspections;
      --Twenty-one inspections identified deficiencies;
      --In seventeen inspections, corrective actions were taken by
            facility; and
      --In eight inspections, other beneficial actions were taken by
            facility.
        During fiscal year 2000 the Agency will continue to run the pilot
    projects to determine the value of collecting this type of information.
    In fiscal year 2001, the Agency will review the data and determine
    whether the data collection for inspection outcomes should be
    implemented on a national basis.

      ENFORCEMENT PERFORMANCE GOALS/MEASURES: INSPECTIONS CONTRIBUTES TO
                          IMPROVED RATES OF COMPLIANCE
        Question. On what basis does the Agency believe its inspection
    presence contributes to improved rates of compliance and how did the
    Agency determine this belief including measure the degree of
    improvement?
        Answer. The Agency believes that compliance monitoring inspections
    are an essential element of a compliance assurance program, along with
    compliance assistance, incentives for self-policing, and enforcement
    targeted toward important environmental risks and patterns of non-
    compliance.
        It is not possible to isolate the effects of inspections (or any of
    the other elements) on rates of compliance. Instead, the Agency will
    rely on rates of compliance to measure the overall results of using all
    these elements. In addition, results from individual elements (e.g.,
    pollutant reductions from enforcement cases) will also be used to
    measure program outcomes.

      ENFORCEMENT PERFORMANCE GOALS/MEASURES: INSPECTIONS IMPROVEMENTS AT
                                   FACILITIES
        Question. On what basis does the Agency believe individual
    inspections result in changes and improvements at specific facilities
    and how did the Agency determine this belief including measure the
    degree of improvement?
        Answer. The Agency believes that compliance inspections produce a
    broad range of changes and improvements at the specific facilities
    inspected and in the regulated community in general. Compliance
    inspections:
      --identify potential risks to human health and the environment;
      --lead to on-the-spot or subsequent correction of violations;
      --provide a specific deterrent effect on inspected facilities;
      --provide a general deterrent effect on other facilities in the same
            industry sector or geographic area; and
      --complement citizen efforts to monitor compliance.
        As mentioned in response to a previous question, the Agency has
    been conducting pilots to begin documenting outcomes and results from
    inspections, and may begin collecting this information on a national
    basis if resources permit.

      ENFORCEMENT PERFORMANCE GOALS/MEASURES: INSPECTION/INVESTIGATIONS--
                   CHANGES IN ENVIRONMENTAL AND HUMAN HEALTH
        Question. In what ways might the Agency measure how the number and
    manner of Agency inspections and investigations bring about environment
    and human health improvements?
        Answer. Measuring how inspections and investigations ``bring about
    environmental and human health improvements'' can be done in two ways.
    First, by collecting information from inspectors about outcomes of
    inspections and investigations we may learn that pollutant reductions
    and other improvements are occurring. There are several pilot projects
    underway or planned to collect and analyze this kind of information.
    Second, by collecting information about improvements that result from
    enforcement actions, we are measuring how inspections and
    investigations bring about such improvements since cases are based on
    inspections and investigations.
        For example, the compliance investigations that the Agency has
    conducted in the electric utility and petroleum refinery sectors have
    uncovered serious non-compliance. A number of major enforcement actions
    have resulted from these investigations and on-going investigations may
    uncover further non-compliance. Most of the non-compliance identified
    through the investigations should result in measurable environmental
    improvements, e.g., reduction of air pollutants such as nitrogen
    oxides, particulate matter, and sulphur dioxides.

      ENFORCEMENT PERFORMANCE GOALS/MEASURES: INSPECTIONS/INVESTIGATIONS--
                              CHANGES IN BEHAVIOR
        Question. In what ways might the Agency measure how the number and
    manner of Agency inspections and investigations bring about changes in
    behavior in the regulated community?
        Answer. Measuring how inspections and investigations ``bring about
    changes in behavior in the regulated community'' can be done in two
    ways. First, by collecting information from inspectors about the
    outcomes of inspections and investigations, we may learn that behavior
    changes are occurring. There are several pilot projects underway or
    planned to collect and analyze this kind of information. Second, by
    collecting information about behavior changes resulting from
    enforcement actions, we are measuring how inspections and
    investigations bring about such changes since cases are based on
    inspections and investigations.

       ENFORCEMENT PERFORMANCE GOALS/MEASURES: STATUS OF REGION II PILOT
                                    PROJECT
        Question. What is the status of the Region II pilot project to
    document results achieved through inspections? Will the Agency
    implement the pilot for the entire national program?
        Answer. In fiscal year 2000, EPA Region II is piloting a tool to
    better manage inspection resources. The Region is currently collecting
    information on how inspections are targeted and the results of those
    inspections. The results of the pilot will be used by the Region to
    determine if there are more effective targeting strategies for
    compliance inspections and whether there is a more efficient way to
    manage the overall compliance inspection program.
        In fiscal year 2001, EPA plans to review the results of the Region
    II pilot as well as the results of other pilot projects to collect
    inspection outcome data currently underway in select Regional and
    Headquarters programs. A decision will then be made about whether to
    expand the used of the Region II targeting pilot and/or the other
    pilots designed to learn more about inspection outcomes.

     ENFORCEMENT PERFORMANCE GOALS/MEASURES: NUMBER OF QUALITY MANAGEMENT
                                  PLANS (QMS)
        Question. How many Quality Management Plans (QMS) will the
    enforcement program develop and implement for major systems in fiscal
    year 2000, which major systems will have plans, and which major systems
    will still require plans?
        Answer. In fiscal year 2000, no additional work will be undertaken
    on the Office of Enforcement and Compliance Assurance (OECA)'s Quality
    Management Plan (QMP) for its data systems. In fiscal year 1998, OECA
    initiated evaluations of its information systems under its Quality
    Management Plan. To date, OECA has completed a baseline data quality
    audit, data quality objectives, quality assurance project plans, and
    standard operating procedures for the National Compliance Data Base and
    the Resource Conservation and Recovery Information System, and data
    quality objectives for the Permit Compliance System. No work has been
    completed to date on the AIRS Facility System, the Enforcement Docket,
    and the Safe Drinking Water Information System.

     ENFORCEMENT PERFORMANCE GOALS/MEASURES: QMS DATA SYSTEMS COMPLETED IN
                                FISCAL YEAR 2001
        Question. For which systems will the enforcement program complete
    QMS in fiscal year 2001?
        Answer. The Office of Enforcement and Compliance Assurance (OECA)
    will use its data modernization efforts to address and resolve the
    challenging problem of improving data quality. Work on additional
    portions of the OECA Quality Management Plan (QMP) in the fiscal year
    2001 time frame will be considered in coordination with the effort to
    modernize OECA data systems and integrate enforcement and compliance
    data. Modernization and integration is being undertaken as a part of
    the Agency's Integrated Information Initiative. Additional work on the
    QMPs may well be delayed as resources are diverted to modernization in
    fiscal year 2001.

        ENFORCEMENT PERFORMANCE GOALS/MEASURES: ASSISTANCE AND TRAINING
                                   ACTIVITIES
        Question. What outcome performance measures could the enforcement
    program develop for its capacity building activities to measure
    environmental improvements resulting from the assistance and training
    activities?
        Answer. The capacity building measure was intentionally designed to
    only count outputs (i.e., training courses delivered, etc.). Measuring
    the outcomes or environmental results of capacity building efforts
    would require extensive new reporting by state, local, and tribal
    governments who use EPA training and other capacity building efforts to
    produce outcomes.

    ENFORCEMENT PERFORMANCE GOALS/MEASURES: ENVIRONMENTAL IMPROVEMENTS FROM
                             COMPLIANCE INCENTIVES
        Question. While the performance measure for the compliance
    incentives program measures the behavior of the regulated community,
    there is no measurement for environmental or human health improvements.
    What performance measures could the enforcement program develop to
    determine the environmental improvements coming from the compliance
    incentives program.
        Answer. OECA has recently started tracking environmental or human
    health improvements resulting from self disclosures in the same manner
    that such improvements are tracked for enforcement cases. We are still
    in the implementation stages of developing a reporting system and
    providing guidance to EPA Regional Offices. However, once the
    implementation process is complete, we will be able to provide full
    results from the self-disclosures similar to those currently reported
    for enforcement cases, such as pollutants reduced and changes in
    facility practices.

     ENFORCEMENT PERFORMANCE GOALS/MEASURE: NUMBER OF ENTITIES VOLUNTARILY
                             DISCLOSING VIOLATIONS
        Question. Why does the Agency not include the number of entities
    voluntarily disclosing violations of environmental violations (other
    than paperwork or record keeping requirements)?
        Answer. The Agency does currently report (e.g., in EPA's fiscal
    year 1999 Annual Performance Report) the number of entities which
    voluntarily elect to use EPA's audit policy to disclose and correct any
    or all violations disclosed under the policy.

    ENFORCEMENT PERFORMANCE GOALS/MEASURE: 10 COMPLIANCE ASSISTANCE OUTCOME
                               MEASURES PROJECTS
        Question. Describe the 10 compliance assistance outcome measurement
    projects for which information is being collected to assess the impacts
    of compliance assistance. What is the status of each of those efforts?
        Answer. Below is a table that describes each project and provides
    the status. Each of these projects will collect data on OECA's
    compliance assistance outcome measures which fall into three
    categories: (1) improved awareness/understanding of regulatory
    requirements; (2) regulatory and non-regulatory behavioral changes
    (e.g. getting a permit, conducting an audit); (3) environmental and
    human health improvements. The various projects will collect the data
    for these measures through surveys, on-site revisits and database
    reviews.

    ----------------------------------------------------------------------------------------------------------------
                   Region                      Project Summary      Measurement Methodology           Status
    ----------------------------------------------------------------------------------------------------------------
    I...................................  Evaluation of the New     Mailed follow-up Survey  Survey sent out 1st
                                           England Environmental     to 14,000 recipients     Quarter fiscal year
                                           Assistance Team's Auto    of auto service          2000 results currently
                                           Service Compliance        compliance assistance.   being summarized.
                                           Assistance Program,
                                           which consists of
                                           written assistance
                                           material, workshops and
                                           on-site assistance.
    II..................................  Evaluation of the         1. Develop a baseline    1. Baseline underway.
                                           effectiveness of the      of the compliance rate   2. Follow-up by 3Q
                                           Dry Cleaning Compliance   and perc alternative     2000.
                                           Assistance Program.       use among dry cleaners
                                                                     in NYC using data from
                                                                     inspections and
                                                                     compliance assistance
                                                                     visits that were
                                                                     conducted in to date.
                                                                     2. Follow-up surveys
                                                                     sent to those
                                                                     participating in
                                                                     compliance assistance
                                                                     program..
    III.................................  Evaluation of Clean Air   Phone Survey to 100      1. 40 percent response
                                           Act Risk Management       attendees of the         rate. 2. 68 percent of
                                           Plan Compliance           workshop.                facilities made
                                           Assistance Workshops.                              changes as a result of
                                                                                              the workshop.
    IV..................................  NPMS Pilot Project:       A. Compliance Baseline   A. Done. B. Done. C. 3Q
                                           Charleston CBEP           for 10 facilities (out   2000.
                                           Project: Developing       of 150 total). B.
                                           workshops/seminars/       Follow-Up to Baseline
                                           training and compliance   through on-site
                                           guides and on-site        inspections after
                                           visits. Bulk of           assistance provided.
                                           assistance conducted by   C. Interim Report on
                                           SC DHEC. Primary form     Results.
                                           of assistance is on
                                           site. Assistance is
                                           provided to primarily
                                           Auto Repair and Paint
                                           Body Shop businesses.
    V...................................  SDWA Project with the     A. Letters sent to 3     A. Done. B. Done. C.
                                           Department of Interior:   National Parks to        End of 2nd Q. D. Mid-
                                           Source Water              outline process for      3rd Q
                                           Assessments for           info gathering. B.
                                           groundwater sources on    Follow-up site visits
                                           National Park Service     that included
                                           Lands. Assist States of   providing assistance.
                                           Minnesota, Indiana, and   C. Summary report on
                                           Wisconsin making          assessments that may
                                           susceptibility            be used to develop
                                           determinations for        management education
                                           water supplies.           and outreach materials
                                                                     for other Federal
                                                                     Facility compliance
                                                                     assistance visits. D.
                                                                     Surveys to Park
                                                                     Service Lands visited.
    VI..................................  NPMS Pilot: Educate       A. Compliance Manifest   Completed. 150 surveys
                                           Maquiladora industries    Baseline using RCRIS     mailed out, 26
                                           through outreach          and HAZTRAKS. B.         response. 16 percent
                                           seminars on their         Survey seminar           response rate. a. 96
                                           hazardous waste           participants in mid-     percent felt more
                                           environmental             May of 1999. C.          aware and 60 percent
                                           management obligations.   Section 3007 Request     had a better
                                           Seminars were conducted   to determine changes     understanding. b. 58
                                           in July and August of     in manifest baseline.    percent made changes
                                           1998.                     (on hold due to          in env. practices and
                                                                     contract problems) D.    50 percent made a
                                                                     Final Report on          physical change. c. 42
                                                                     Results.                 percent reduced waste.
    VI..................................  Offer compliance          A. Compliance Baseline.  B. Completed. 123
                                           assistance to the         Region has an existing   surveys mailed out; 33
                                           Maritime industry at a    baseline. B. Follow-up   percent response rate.
                                           conference in August      survey to industry       a. 93 percent felt
                                           1998..                    that attended the        more aware and 85
                                                                     conference C. Post-      percent had a better
                                                                     Compliance Assistance    understanding. b. 63
                                                                     Baseline through         percent made changes
                                                                     follow-up inspections    in env. practices, 29
                                                                     to an industry sample.   percent installed
                                                                     (7 or 8 already          pollution control
                                                                     underway, facilities     equipment, and 71
                                                                     that attended the        percent made a
                                                                     workshop). D. Final      physical change. c. 24
                                                                     Report on Results.       percent reduced waste.
                                                                                              C. Based on follow up
                                                                                              inspections,
                                                                                              noncompliance dropped
                                                                                              from 33 percent to 12
                                                                                              percent.
    VII.................................  EPCRA/TRI Release         A. Follow-up survey to   A. 50 percent response
                                           Inventory Project.        industries that          rate. 58 percent of
                                           Conducted four            attended workshops. B.   those responding felt
                                           workshops/seminars/       Follow-up survey to      that the workshops
                                           training and provide      industries in specific   helped them to
                                           compliance assistance     SIC codes that did not   determine if their
                                           materials. These one-     attend workshops. C.     facility was subject
                                           day workshops were        Analysis of Post-        to EPCRA reporting
                                           conducted in April,       Compliance Assistance    requirements. 52
                                           1999 and were sponsored   Baseline through         percent felt the
                                           by EPA, Region 7 and      review of Form Rs        information they
                                           cosponsored by Local      filed. D. Final Report   received helped
                                           Emergency Planning        on Results.              improve the way they
                                           Committees. Primary                                manage records and
                                           assistance involves                                determine emissions
                                           instruction on                                     estimates and off-site
                                           completing Form R as                               transfers of toxic
                                           required under Section                             substances when
                                           313 of EPCRA.                                      completing Form R. B.
                                           Assistance is provided                             1Q 2000 C. 3Q 2000 D.
                                           to industries listed by                            3Q 2000.
                                           certain Standard
                                           Industrial Code (SIC)
                                           code that meet
                                           reporting requirements
                                           of EPCRA, Section 313.
                                           Also includes seven new
                                           industry sectors.
    VIII................................  The overall goal of this  The Region 8 project     1. Determination of
                                           project is to identify,   calls for taking Case    media/sector/
                                           measure and compare the   Conclusion information   geographic area (2nd
                                           most effective and        and reporting it as      quarter 2000). 2.
                                           efficient approaches to   environmental outputs    Ensure consistency/tie-
                                           motivating facilities     and outcomes (in         in to NPMS measures
                                           to achieve or exceed      addition to the          (2nd quarter 2000). 3.
                                           compliance, and the       ``traditional''          Focus groups with
                                           result to the             enforcement              inspectors to test
                                           environment. This is to   activities). Region 8    ability to measure
                                           be accomplished by        is working with the      activities (2nd
                                           developing measures for   State of Colorado to     quarter 2000). 4.
                                           the various activities    identify the specific    Incorporation into
                                           of enforcement            media, measurements      Region VIII CATS
                                           (pollution prevention,    and reports that will    database.
                                           compliance assistance     most effectively
                                           activities, and other     present and reflect
                                           ``non-traditional         compliance assistance
                                           activities) and           activities. The
                                           incorporating these       selected measures and
                                           measures into the         facilities will need
                                           regional inspection       to take into
                                           case conclusion data      consideration already
                                           sheets (CCDS).            scheduled inspections
                                                                     in Region 8 states.
    IX..................................  Compliance Assistance     A. Compliance            A. 1Q 2000. B. 1Q 2000.
                                           Outreach Materials for    assistance baseline      C. 3Q 2000.
                                           MACT degreaser standard.  from site visits by
                                                                     Bay Area Resources
                                                                     Board and compliance
                                                                     reports and permits
                                                                     submitted to BARD and
                                                                     EPA. B. On-site Pre-
                                                                     workshop ``test of
                                                                     workshop participants
                                                                     current knowledge. C.
                                                                     On-site Post-workshop
                                                                     ``test of knowledge
                                                                     gained during the
                                                                     workshop.
    X...................................  1. Evaluation of EPA      1. Survey of workshop    1. Results in house
                                           112(r) workshops.         participants at          112(r) workshops found
                                                                     completion of            98 percent more aware
                                                                     workshops.               as result of workshop;
                                                                                              16 percent will reduce
                                                                                              chemical inventories;
                                                                                              38 percent will
                                                                                              increase p2; 62
                                                                                              percent will increase
                                                                                              emergency response
                                                                                              measures; 19 percent
                                                                                              increase in # of risk
                                                                                              management plans
                                                                                              submitted.
    ----------------------------------------------------------------------------------------------------------------

     ENFORCEMENT PERFORMANCE GOALS/MEASURE: STATUS OF NATIONAL PERFORMANCE
                               MEASURES STRATEGY
        Question. Describe the status of the National Performance Measures
    Strategy and implementation of any remaining measures.
        Answer. Fiscal year 2000 will be the first year that OECA will be
    reporting results for all of the measures from the NPMS Profile. These
    results will be available in the second quarter of fiscal year 2001.

                        WETLANDS/CWAP: LEVEL OF FUNDING
        Question. At what level, in terms of FTE and dollars, did the
    Agency fund the Wetlands (CWAP) key program in the fiscal year 1999
    budget request, fiscal year 1999 operating plan, fiscal year 1999
    actuals, fiscal year 2000 budget request, fiscal year 2000 proposed
    operating plan, and fiscal year 2001 budget request. Provide the
    information by NPM, appropriation, goal, objective, sub-objective,
    office or region, and activity.
        Answer. Agency funding of the Wetlands key program is detailed
    below.

                               OFFICE OF WATER \1\
    ------------------------------------------------------------------------
                      Fiscal year                        Dollars       FTE
    ------------------------------------------------------------------------
    1999 Budget Request............................     $17,489,400    158.6
    1999 Operating Plan............................     $15,694,900    150.5
    2000 Budget Request............................     $18,124,500    164.6
    2000 Proposed Operating Plan...................     $15,730,000    150.3
    2001 Budget Request............................     $17,315,200    149.1
    ------------------------------------------------------------------------
    \1\ Appropriation: EPM; Goal 2: Clean and Safe Water; Objective 2:
      Conserve and Enhance Nation's Waters.

     WETLANDS/CWAP: REDUCTIONS IN FISCAL YEAR 1999 OP AND FISCAL YEAR 2000
                                  PROPOSED OP
        Question. Analysis of the Agency's budget requests indicates that
    EPA reduced funding to the Wetlands (CWAP) key program in the fiscal
    year 1999 operating plan and the fiscal year 2000 proposed operating
    plan from the higher levels contained in each year's budget request.
    Why did the Agency make reductions in Wetlands (CWAP) from each of
    these budget requests to the following operating plans and what impact
    did it have on the activity levels of the program?
        Answer. Reductions to wetlands activities resulted from the
    requirement to absorb the general reductions and congressional earmarks
    included in the fiscal year 1999 and fiscal year 2000 Environmental
    Programs and Management appropriation. Impacts of the wetlands cuts
    included diminished support for monitoring and assessment of the extent
    and health of the nation's wetlands; reduced funding for outreach and
    education on wetlands protection issues; and elimination of funding for
    the Five-Star Wetlands and Stream Corridor Assistance Grants.

                    GRANTS MANAGEMENT: NON-PROFIT RECIPIENTS
        Question. How many different non-profit recipients received new
    non-construction grant awards in fiscal year 1999?
        Answer. EPA issued new non-construction grant awards to 881
    different non-profit recipients in fiscal year 1999.

             GRANTS MANAGEMENT: DOLLAR AMOUNT OF NON-PROFIT AWARDS
        Question. How many dollars did the Agency award to non-profit
    recipients in non-construction grants in fiscal year 1999?
        Answer. The Agency awarded $252,937,107 to nonprofit recipients in
    fiscal year 1999.
     grants management: top 20 non-profit grant recipients number of awards
        Question. List the top twenty non-profit EPA grant recipients by
    number of awards in fiscal year 1999. Provide also the number of awards
    and total dollar amount awarded.
        Answer. The following table contains the top twenty non-profit EPA
    grant recipients in fiscal year 1999 by the number of awards including
    the number of wards and total dollar amount awarded.

                FISCAL YEAR 1999 TOP NON-PROFIT GRANT RECIPIENTS
                              [By Number of Awards]
    ------------------------------------------------------------------------
                                                                    No. of
    Rank       Recipient           City/State       Dollars \1\   Awards \1\
    ------------------------------------------------------------------------
       1 NATIONAL OLDER      WASHINGTON, DC...     $21,293,303       122
          WORKER CAREER
          CENTER
       2 NATIONAL CAUCUS/    WASHINGTON, DC...      $7,541,181        71
          CTR ON BLACK
          AGED, INC
       3 NATIONAL SENIOR     SILVERSPRING, MD.      $9,829,653        55
          CITIZEN EDUC. &
          RES. CTR
       4 NATIONAL ASIAN      SEATTLE, WA......      $5,916,381        50
          PACIFIC CENTER ON
          AGING
       5 NATIONAL            PASADENA, CA.....      $5,322,630        32
          ASSOCIATION FOR
          HISPANIC ELDERLY
       6 ENVIRONMENTAL       BOSTON, MA.......      $6,892,839        31
          CAREERS
          ORGANIZATION
       7 NATIONAL ACADEMY    WASHINGTON, DC...      $3,550,282        23
          OF SCIENCE NRC
       8 NATIONAL COUNCIL    WASHINGTON, DC...      $3,423,156        23
          ON AGING, INC
       9 RESEARCH TRIANGLE   RESEARCH TRIANGLE      $3,265,787        14
          INSTITUTE           PARK, NC.
      10 INTERNATIONAL CITY/ WASHINGTON, DC...      $2,232,286        12
          COUNTY MGMT ASSOC
      11 ENVIRONMENTAL LAW   WASHINGTON, DC...      $1,235,876        12
          INSTITUTE
      12 NATIONAL SAFETY     ITASCA, IL.......        $952,079        12
          COUNCIL
      13 NATIONAL            WASHINGTON, DC...        $967,176        10
          ASSOCIATION OF
          COUNTIES
      14 NATIONAL            DENVER, CO.......        $726,272        10
          CONFERENCE OF
          STATE
          LEGISLATURES
      15 COUNCIL OF STATE    LEXINGTON, KY....        $389,569        10
          GOVERNMENTS
      16 INTER TRIBAL        PHOENIX, AZ......        $624,029         9
          COUNCIL OF
          AR1ZONA, INC
      17 NEBRASKA            LINCOLN, NE......        $346,388         9
          GROUNDWATER
          FOUNDATION
      18 SOCIETY FOR         OKLAHOMA CITY, OK        $227,075         9
          APPLIED
          ANTHROPOLOGY
      19 NORTHEAST STATES    BOSTON, MA.......      $2,438,494         8
          FOR COORDINATED
          AIR
      20 GLOBAL ENVIRONMENT  ANNANDALE, VA....      $1,337,853         8
          & TECHNOLOGY FDN
    ------------------------------------------------------------------------
         \1\ Dollars and Awards include increase amendments to existing
           grants as well as new grants made in fiscal year 1999.

        Question. List the top twenty nonprofit EPA grant recipients in
    fiscal year 1999 in terms of amount of funds awarded. Provide also the
    number of awards and total dollar amount awarded.
        Answer. The following table contains the top twenty non-profit EPA
    grant recipients in fiscal year 1999 by amount of funds awarded
    including the number of awards and total dollar amount awarded.

                FISCAL YEAR 1999 TOP NON-PROFIT GRANT RECIPIENTS
                              [By Number of Awards]
    ------------------------------------------------------------------------
                                                                    No. of
    Rank       Recipient           City/State       Dollars \1\   Awards \1\
    ------------------------------------------------------------------------
       1 NATIONAL OLDER      WASHINGTON, DC...     $21,293,303       122
          WORKER CAREER
          CENTER
       2 BORDER              EL PASO, TX......     $10,000,000         1
          ENVIRONMENTAL
          COOPERATION COMM
       3 NATIONAL SENIOR     SILVER SPRING, MD      $9,829,653        55
          CITIZEN EDUC. &
          RES. CTR
       4 NATIONAL RURAL      DUNCAN, OK.......      $8,000,006         3
          WATER ASSOCIATION
       5 NATIONAL CAUCUS/    WASHINGTON, DC...      $7,541,181        71
          CTR ON BLACK
          AGED, INC
       6 ENVIRONMENTAL       BOSTON, MA.......      $6,892,839        31
          CAREERS
          ORGANIZATION
       7 BATTELLE MEMORIAL   COLUMBUS, OH.....      $6,572,500         3
          INSTITUTE
       8 ONONDAGA LAKE       SYRACUSE, NY.....      $6,243,500         1
          CLEANUP CORP
       9 NATIONAL ASIAN      SEATTLE, WA......      $5,916,381        50
          PACIFIC CENTER ON
          AGING
      10 WEST VIRGINIA       MORGANTOWN, WV...      $5,798,270         7
          UNIVERSITY
          RESEARCH CORP
      11 UPPER SAVANNAH      GREENWOOD, SC....      $5,325,000         1
          COUNCIL OF
          GOVERNMENTS
      12 NATIONAL            PASADENA, CA.....      $5,322,630        32
          ASSOCIATION FOR
          HISPANIC ELDERLY
      13 AMERICAS CLEAN      WASHINGTON, DC...      $5,185,000         2
          WATER FOUNDATION
      14 AMERICAN WATER      DENVER, CO.......      $4,989,000         4
          WORKS ASSOC.
          RES.FOUND
      15 NATIONAL ACADEMY    WASHINGTON, DC...      $3,550,282        23
          OF SCIENCE NRC
      16 NATIONAL COUNCIL    WASHINGTON, DC...      $3,423,156        23
          ON AGING, INC
      17 NATIONAL JEWISH     DENVER, CO.......      $3,412,500         1
          MEDICAL &
          RESEARCH CTR
      18 RESEARCH TRIANGLE   RESEARCH TRIANGLE      $3,265,787        14
          INSTITUTE           PARK, NC.
      19 NATIONAL FISH &     SAN FRANCISCO, CA      $3,003,279         2
          WILDLIFE
          FOUNDATION
      20 WATER ENVIRONMENT   ALEXANDRIA, VA...      $2,925,000         1
          RESEARCH
          FOUNDATION
    ------------------------------------------------------------------------
         \1\ Dollars and Awards include increase amendments to existing
           grants as well as new grants made in fiscal year 1999.

            GRANTS MANAGEMENT: BENCH AND ON-SITE REVIEWS MEASUREMENT
        Question. Why does the Agency not measure the number of bench
    reviews or on-site reviews conducted in order to gauge the activities
    of the grants management program?
        Answer. As part of the Grantee Compliance Assistance Initiative,
    all Grants Management Offices are required to report quarterly the
    number of on-site reviews and bench reviews. (We assume the definition
    of ``bench reviews'' is the same as ``desk reviews'' which are an
    evaluation performed in-house at the Federal Grants Office largely, if
    not, entirely, from the desk. The Grants Management Office will perform
    an evaluation of the recipient's procurement system, property,
    financial and general administrative system; communicate with the
    project officer and the recipient; and obtain documentation, as
    needed.) The Agency is currently expanding the Initiative to establish
    an Agency-wide overview of post-award management and outreach
    activities. In addition to the Grants Offices, Headquarters and
    Regional Program Offices will be required to identify and report on
    post-award activities. The Initiative will establish national goals;
    and identify and document post-award activities, namely on-site
    reviews. The Agency also will develop a database to track planned and
    actual grantee on-site visits performed by the Grants Management
    Offices to help avoid duplication and to help ensure adequate
    coordination across the Agency.

          GRANTS MANAGEMENT: FISCAL YEAR 1999 BENCH REVIEWS BY REGION
        Question. How many bench reviews did grants management offices
    conduct in fiscal year 1999? List by Region.
        Answer. The Grants Administration Division is defining ``bench
    reviews'' as ``desk reviews''. (We assume the definition of ``bench
    reviews'' is the same as ``desk reviews'' which are an evaluation
    performed in-house at the Federal Grants Office largely, if not,
    entirely, from the desk. The Grants Management Office will perform an
    evaluation of the recipient's procurement system, property, financial
    and general administrative system; communicate with the project officer
    and the recipient; and obtain documentation, as needed.) The Grants
    Management Offices conducted a total of 21 desk reviews in fiscal year
    1999. Please see the following chart for a list of fiscal year 1999
    desk reviews by Region.

            Grants Management Office                            Desk Reviews

    Region 1................................................................
    Region 2..........................................................     2
    Region 3..........................................................     5
    Region 4................................................................
    Region 5................................................................
    Region 6..........................................................     9
    Region 7................................................................
    Region 8..........................................................     5
    Region 9................................................................
    Region 10.........................................................
    Headquarters............................................................
                                                                      ______
          TOTAL.......................................................    21

        Active grants management involves many types of activities, desk or
    ``bench review'' being just one of these activities (some Grants
    Management Offices, Regions 1 and 4, for example, allocate significant
    amounts of time providing pre and post award workshops and training for
    grantees. In fiscal year 1999 for example, the Grants Management
    Offices nation-wide, conducted workshops and training sessions for 671
    grantees).

         GRANTS MANAGEMENT: FISCAL YEAR 1999 ON-SITE REVIEWS BY REGION
        Question. How many on-site reviews did grants management offices
    conduct in fiscal year 1999? List by Region.
        Answer. The following is a listing of on-site reviews conducted by
    grants management offices in fiscal year 1999.

            Grants Management Office                         On-Site Reviews

    Region 1..........................................................    26
    Region 2..........................................................    19
    Region 3..........................................................     6
    Region 4..........................................................     1
    Region 5..........................................................     5
    Region 6..........................................................     1
    Region 7..........................................................     5
    Region 8..........................................................     7
    Region 9..........................................................    50
    Region 10.........................................................     4
    Headquarters......................................................    20
                                                                      ______
          TOTAL.......................................................   144

                    GRANTS MANAGEMENT: SINGLE AUDIT REPORTS
        Question. How many Agency grants required single audit reports in
    fiscal year 1999 based on the level of funds received by EPA? On what
    does the Agency base this conclusion.
        Answer. Approximately 608 grantees received over $300,000 in grants
    from EPA in fiscal year 1999. This number is based on funds awarded in
    fiscal year 1999 and not the expenditures. Please note, the Single
    Audit Act requirement is based on total expenditures from all Federal
    Agencies and not award data from a single Agency.

         GRANTS MANAGEMENT: SINGLE AUDIT REPORTS CONDUCTED BY GRANTEES
        Question. How many single audit reports were conducted by EPA
    grantees in fiscal year 1999? On what does the Agency base this
    conclusion?
        Answer. Based on the Federal Audit Clearinghouse Data Query, to
    date, 325 reports were received on EPA grantees in fiscal year 1999.
    Under the Single Audit Act, the Bureau of Census is responsible for the
    collection of Single Audit Reports from recipients receiving Federal
    Assistance and for determining whether the reports are acceptable or
    unacceptable. Grantees are allowed six months after the close of the
    fiscal year to submit their Single Audit.
     grants management: assistance agreement audit fiscal year 2001 finding
        Question. Why is the Agency proposing reduced funding for the
    Assistance Agreement Audits key program in fiscal year 2001 when the
    number of assistance agreements awarded by the EPA has exploded over
    the last five years?
        Answer. The decrease is attributed to: (1) the closeout of the
    OIG's construction grant strategy; (2) the completion of the first
    cycle of OIG's Clean Water State Revolving Fund (CWSRF) Strategy; and
    (3) the implementation of the OIG's Assistance Agreement Issue Area
    Plan. In fiscal year 1999, the OIG successfully completed its
    Construction Grant Audit Strategy. In March 1994, the OIG developed a
    strategy, using a risk-based approach, where we determined that 414
    grants in the amount of $6.5 billion would be subject to audit. As of
    January 2000, only 18 projects are still under consideration for audit.
        The OIG CWSRF Audit Strategy included resources to review state
    financial statement audits conducted by other parties or to perform
    these audits ourselves. Several states plan to conduct these audits in
    the future rather than have the OIG conduct them, thus reducing the OIG
    resources requirement.
        Finally, the OIG has initiated a major new audit effort of EPA's
    management and oversight of assistance agreements with its Assistance
    Agreement Issue Area Plan. This plan focuses on EPA's systems to manage
    and administer its assistance agreements and expands OIG audit coverage
    of $2.4 billion awarded to state, local governments, tribes,
    universities, and non-profit organizations. Prior OIG audits focused on
    individual regions, programs and recipients. The implementation of our
    Assistance Agreement Issue Area Plan will result in evaluating issues
    nationally which also allows us to consolidate the OIG resource
    requirement.

                               GRANTS MANAGEMENT
        Question. At last examination, fewer than two percent of non-profit
    grantees were subject to bench or on-site reviews conducting
    transaction testing. Do the Agency's auditors believe this rate of
    review is sufficient to ensure Agency funds are protected from
    mismanagement or misuse of funds? What rate of audit is sufficient to
    safeguard Agency funds?
        Answer. Single Audits conducted in accordance with OMB Circular A-
    133 provide the primary assurance that Federal funds are protected from
    mismanagement or misuse. Non-Federal entities that expend $300,000 or
    more in a year in Federal awards must have a single or program-specific
    audit conducted for that year in accordance with the provisions of OMB
    Circular No. A-133, Revised June 24, 1997, ``Audits of States, Local
    Governments, and Non-Profit Organizations.'' An audit made in
    accordance with A-133 must be in lieu of any financial audit required
    under individual Federal awards. The scope of a Single Audit covers
    three areas: (1) financial statements; (2) internal controls; and (3)
    compliance with laws, regulations, and the provisions of contracts or
    grant agreements that may have a direct and material effect on each of
    its major programs. Any additional audits must be planned and performed
    in such a way as to build upon work performed by other auditors.
        The OIG recently expanded this audit coverage of assistance
    agreements with a new audit effort. On March 31, 2000, we issued our
    Assistance Agreement Issue Area Plan. This plan outlines a series of
    audits designed to evaluate EPA's processes and systems to manage and
    administer its assistance agreements. This will allow us to identify
    systemic problems in both the financial and performance aspects of
    assistance agreements and develop solutions that affect the entire
    population of assistance agreements. Part of this issue area will
    assess non-profits and we have recently begun that survey. With a non-
    profit universe of more than 1700 agreements totaling more than $600
    million, we believe this approach offers more potential to identify and
    correct mismanagement and/or misuse than individually targeted
    assistance agreement audits.
        The expansion of audit coverage for assistance agreements consists
    of single audits as well as Performance audits of EPA's Grants
    Management. There are three ongoing surveys which are Non-competitive
    grants, Oversight of non-profit grants, and Headquarters 40 Product
    Accomplishments. Each of these surveys have a different amount of non-
    profit grants that are being reviewed. They are as follow:
      --Non-competitive Grants = 105 non-profit grant being reviewed
            Oversight of non-profit grants = 50 non-profit grants being
            reviewed
      --HQ 40 Product Accomplishments = 48 non-profit grants being reviewed
        Additionally, during fiscal 2000, the Agency plans to increase its
    on-sight reviews of assistance recipients. The headquarters Grants
    Administration Office (GAD) plans to perform 26 reviews of assistance
    recipients (about 75 per cent of the reviews are of non-profit
    organizations) of which seven have already been completed. The GAD
    selects the recipients for review based on four criteria: (1) total
    dollar value of EPA awards to the entity; (2) number of grants awarded
    to the entity; (3) known problems; and (4) discussions with the grant
    specialist. EPA's regional offices also perform on-site reviews of
    grant recipients. These reviews provide additional assurance that
    recipients are performing and federal funds are used appropriately.

       LEAD RISK REDUCTION: FISCAL YEAR 1999--FISCAL YEAR 2000 RESOURCES
        Question. At what level, in terms of FTEs and dollars, did the
    agency fund the Lead Risk Reduction key program in the fiscal year 1999
    budget request, fiscal year 1999 operating plan, fiscal year 1999
    actuals, fiscal year 2000 budget request, fiscal year 2000 proposed
    operating plan, and fiscal year 2001 budget request. Provide the
    information by NPM, appropriation, goal, objective sub-objective,
    office or region, and activity.
        Answer. The information requested is presented in the accompanying
    spreadsheet.

              FISCAL YEAR 2001 PRESIDENT'S BUDGET BY ACTIVITY--LEAD RISK REDUCTION KEY PROGRAM AND STATE GRANTS FOR LEAD RISK REDUCTION KEY PROGRAM
                                                                     [Dollars in thousands]
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Fiscal year 1999                             Fiscal year 2000                   Fiscal year 2001
                                            ----------------------------------------------------------------------------------------------------------------
        Goal, Objective, Sub-objective,          Pres Bud \1\          Op Plan \2\              Pres Bud               Op Plan                Pres Bud
                    Activity                ----------------------------------------------------------------------------------------------------------------
                                               FTE      Dollars     FTE       Dollars      FTE       Dollars      FTE       Dollars      FTE       Dollars
    --------------------------------------------------------------------------------------------------------------------------------------------------------
          OPPTS TOTAL (EPM + STAG).........    121.4   $30,640.9    117.4     $30,623.5    115.8     $2,8698.5     95.2     $2,6519.3     92.6     $27,285.4
                                            ================================================================================================================
          EPM Total (HQ + Regions).........    121.4   $16,928.7    117.4     $16,911.3    115.8     $14,986.3     95.2     $12,807.1     92.6     $13,573.2
    Lead Risk Reduction Program:
        Obj. 2--Reduce Lead Poisoning (HQ).     45.1   $11,046.6     43.0     $11,029.2     41.4      $8,915.3     44.6      $8,425.2     43.1      $9,076.2
        Obj. 2--Reduce Lead Poisoning           74.4    $5,882.1     74.4      $5,882.1     74.4      $6,071.0     50.6      $4,381.9     49.5      $4,497.0
         (REGIONS).........................
    Grants to States for Lead Risk           .......   $13,712.2  .......     $13,712.2  .......     $13,712.2  .......     $13,712.2  .......     $13,712.2
     Reduction: Obj. 2--Reduce Lead
     Poisoning (STAG)......................
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    \1\ Fiscal year 1999 President's Budget key program totals as displayed in fiscal year 2000 President's Budget submission.
    \2\ Agency data not available at objective level for fiscal year 1999 actual.

    Note: Key Program--Lead Risk Reduction. Key Program--Grants to States for Lead Risk reduction.

                    LEAD RISK REDUCTION: FUNDING REDUCTIONS
        Question. Analysis of the Agency's budget requests indicates that
    EPA reduced funding to the Lead Risk Reduction key program in the
    fiscal year 1999 operating plan and the fiscal year 2000 proposed
    operating plan from the higher levels contained in each year's budget
    request. Why did the Agency make reductions in Lead Risk Reduction from
    each of these budget requests to the following operating plans and what
    impact did it have on the activity levels of the program?
        Answer. EPA's lead program reductions were the result of the
    following actions:
        1. EPA found it necessary to make significant budget cuts in fiscal
    year 1999 as a result of across-the-board reductions made by Congress.
    The Congressional reductions led to cuts in a variety of programs,
    including lead risk reduction. The impacts of the lead program
    reductions were felt most keenly in the areas of regulatory development
    and program implementation.
        2. EPA's policy is to not carry over Congressional Add-ons.
    Therefore, OPPTS funding for lead program outreach activities in fiscal
    year 2000 was reduced. The Agency was unable to continue funding a
    cooperative agreement with the National Safety Council for public
    education and outreach activities relating to lead risk reduction.
    Other activities that had to be curtailed included translation of
    existing outreach materials (English to Spanish), development of new
    outreach materials, printing activities and technical assessments.
        3. As part of a review of FTE charging under EPA's new GPRA
    structure, we made adjustments to more accurately reflect where
    regional work is being performed. FTE included under the lead activity
    line were in fact performing work in areas such as asbestos and PCBs.
    This correction is noted in the fiscal year 2001 President's Budget.
    There are no performance implications resulting from this technical
    correction.
        4. The remaining reductions in fiscal year 2000 result from an on-
    going effort to improve grants management. We reduced overall costs in
    2000 with no impact to the program.

                         IMPROVED PERFORMANCE MEASURES
        Question. How many annual planning goals did the Agency include in
    its fiscal year 2000 annual performance plan? How many of the annual
    planning goals were output goals? How many were outcomes? How many set
    goals to improve the environment or human health?
        Answer. EPA has 74 Annual Performance Goals (APGs) in the Agency's
    fiscal year 2000 Annual Plan.
        GAO in a report entitled ``Managing for Results--EPA Faces
    Challenges in Developing Results Oriented Performance Goals and
    Measures,'' evaluated the 73 APGs contained in an earlier version of
    EPA's Annual Performance Plan that was released with the fiscal year
    Congressional Justification document in February, 1999.
        GAO classified 44 of the 73 APGs as `Outputs' and 29 as either `End
    Outcomes' or `Intermediate Outcomes'. End Outcomes are defined as the
    results of programs and activities compared to their intended purposes.
    Intermediate Outcomes show progress toward achieving end outcomes. The
    End Outcomes explicitly show measured improvements in the environment
    or human health. GAO classified 20 of the APGs as `End Outcomes.'
        Question. How many annual planning goals did the Agency include in
    its fiscal year 2001 annual performance plan? How many of the annual
    planning goals were output goals? How many were outcomes? How many set
    goals to improve the environment or human health?
        Answer. EPA's fiscal year 2001 Annual Performance Plan contains 75
    Annual Performance Goals (APGs). The Agency has just started the
    process of classifying its fiscal year 2001 Annual Performance Goals
    (APGs) according to end outcomes, intermediate outcomes, outputs. The
    process will include an internal peer review by the various Agency Goal
    Teams.
        Question. How many performance measures did the Agency include in
    its fiscal year 2000 annual performance plan? How many of the
    performance measures measured outputs? How many measured outcomes? How
    many measured improvements in the environment or human health?
        Answer. EPA has 166 Annual Performance Measures (APMs) in the
    Agency's fiscal year 2000 Annual Plan.
        GAO in a report entitled ``Managing for Results--EPA Faces
    Challenges in Developing Results Oriented Performance Goals and
    Measures,'' evaluated the 157 APMs contained in an earlier version of
    EPA's fiscal year 2000 Annual Performance Plan that was released with
    the fiscal year 2000 Congressional Justification document in February,
    1999.
        GAO classified 118 of the 157 APMs as `Outputs' and 39 as either
    `End Outcomes' or `Intermediate Outcomes'. End Outcomes are defined as
    the results of programs and activities compared to their intended
    purposes. Intermediate Outcomes show progress toward achieving end
    outcomes. The End Outcomes explicitly show measured improvements in the
    environment or human health. GAO classified 30 of the APMs as `End
    Outcomes.'
        Question. How many performance measures did the Agency include in
    its fiscal year 2001 annual performance plan? How many of the
    performance measures measured outputs? How many measured outcomes? How
    many measured improvements in the environment or human health?
        Answer. EPA's fiscal year 2001 Annual Performance Plan contains 163
    Annual Performance Measures (APMs). The Agency has just started the
    process of classifying its fiscal year 2001 Annual Performance Measures
    according to end outcomes, intermediate outcomes, outputs. The process
    will include an internal peer review by the various Agency Goal Teams.
        Question. What process is the Agency using to increase the number
    of outcome goals and measures? How are program offices held accountable
    for producing outcome goals and measures to be incorporated into the
    annual performance plan?
        Answer. EPA is committed to increasing the outcome orientation of
    our performance measures and goals. While ``activity'' or ``output''
    measures and goals are important for program management purposes, it is
    the programmatic, environmental, and human health results from EPA's
    activities, not the activities themselves, that matter most to public
    welfare.
        In recognition of the Agency's need to increase the number of
    outcome or results-based goals and measures, EPA's Office of the Chief
    Financial Officer (OCFO) has established a Performance Measurement
    Improvement (PMI) Team. The primary objective of this team is to
    support EPA's program offices in their efforts to increase the general
    quality and outcome orientation of the Agency's performance goals and
    measures. OCFO's PMI Team is involved in efforts such as general
    workshop and training sessions, on-going analyses of annual goals and
    measures, and various other Goal-specific performance measurement
    improvement projects.
        The lead within EPA for developing results-based performance
    measures and goals, however, rests with the program offices. Working
    with the States, Tribes, OCFO's PMI Team, and other partners, program
    offices have initiated various improvement projects such as improvement
    work teams, workshops, and special analyses to support development of
    more outcome-oriented measures and goals. Specific examples of program
    office performance measurement improvement initiatives include: the
    Office of Enforcement and Compliance Assurance's development of their
    National Performance Measurement Strategy, which includes a plan to
    develop more outcome-based performance measures and goals; the Office
    of International Activities formation of a ``best practices'' working
    group which has developed more outcome-oriented measures and goals; the
    Office of Research and Development's on-going analysis to identify and
    learn from results-based, research-related measures and goals employed
    by other federal agencies; and the Office of Prevention, Pesticides,
    and Toxics Substances working group and cooperative agreement with
    Florida State University to develop more outcome-focused measures and
    goals.
        EPA's Program offices are held accountable for improving the
    general quality and outcome orientation of their goals and measures. In
    accordance with Agency guidance for developing annual performance goals
    and measures, program offices must submit their annual goals and
    measures to OCFO for review each Summer in time for the OMB budget
    submission and each winter in time for the Congressional budget
    justification and Annual Plan submission. Also, EPA's ``Goal Teams''
    meet each Spring with the Deputy Administrator to report on EPA's goals
    and measures, efforts to improve these goals and measures, and progress
    toward achieving EPA's goals. Specific topics to be addressed by EPA's
    Goal Teams this spring will likely include: development of better
    performance goals and measures using existing data, improvement of
    baseline descriptions and information, data needs for development of
    more outcome-oriented goals and measures, and plans to address data
    needs.
        Performance measurement improvement is an ongoing and incremental
    pursuit at EPA. The rate of improvement progress is currently limited
    by data availability and quality. The state of our knowledge of
    environmental conditions, their dynamics, and the contribution of
    program interventions is a critical constraint in establishing
    realistic outcome-based performance measures and goals. The creation of
    EPA's new Office of Environmental Information will facilitate
    improvement of our national information base on environmental quality.
    As data gaps are filled, EPA will accelerate progress toward
    development of more outcome-based measures and goals.

     IMPROVED PERFORMANCE MEASURES: NATIONAL PERFORMANCE MEASURES STRATEGY
        Question. How is the Agency implementing the success of the
    National Performance Measures Strategy on an agency-wide basis?
        Answer. The National Performance Measures Strategy was initiated in
    January of 1997 to develop and implement an enhanced set of performance
    measures for EPA's enforcement and compliance assurance program. The
    goals of the Measures Strategy included the adoption of the most
    effective combination of output, outcome and environmental indicator
    measures, within resource constraints. Furthermore, the Measures
    Strategy sought to develop performance measures that would improve
    EPA's ability to evaluate the effectiveness of its enforcement and
    compliance assurance program, manage that program more strategically,
    and achieve relevant Agency GPRA objectives.
        As part of the development of the Measures Strategy, extensive
    consultation with stakeholders, regulatory partners, and internal
    managers and staff were held during the February-October 1997 timeframe
    to discuss issues and solicit ideas about development, use and
    implementation of enhanced performance measures. Through this effort, a
    framework of transparent, credible, feasible, functional and
    comprehensive output and outcome-based measures were identified and are
    referred to as the Performance Profile. Agency Workgroups facilitated
    the design phase which included developing definitions, identifying
    collection processes, and piloting certain measures.
        To date, EPA's Office of Enforcement and Compliance Assurance has
    made great strides in implementing the Measures Strategy. Significant
    improvements have resulted in the form of numerous revised and new
    performance measures. However, it is important to note that the
    implementation of the Measures Strategy is not yet complete.
        Although the measures developed through the Strategy were intended
    to apply only to EPA's enforcement and compliance assurance program,
    reports detailing the process undertaken have been widely disseminated
    throughout the Agency. Unfortunately, given the status of this effort
    as well as its limited applicability to other Agency programs, it is
    premature to attempt to assess the Agency's efforts in transferring the
    success of the Measures Strategy to other Agency programs.

         COMPLIANCE ASSISTANCE FUNDING: FUNDING LEVEL DOLLARS AND FTES
        Question. Provide the dollars and FTE under the Compliance
    Assistance and Centers key program in the Office of Enforcement and
    Compliance Assurance (OECA). In meeting this request, provide resource
    levels from the fiscal year 1999 budget request, fiscal year 1999
    operating plan, fiscal year 1999 actuals, fiscal year 2000 budget
    request, proposed fiscal year 2000 operating plan, and fiscal year 2001
    budget request. Organize the information by Appropriation, Goal,
    Objective, Sub-objective, Office or Region, and activity.
        Answer. The attached spreadsheet provides resource information for
    OECA's compliance assistance key program. The information comes from
    the Agency's Budget Automation System (BAS). The resources requested
    for the fiscal year 1999 actuals and activity level information are not
    maintained in the Agency's key program data base.

           PESTICIDES REREGISTRATION: FUNDING LEVEL DOLLARS AND FTES
        Question. At what level, in terms of FTE and dollars, did the
    Agency Fund the Pesticide Reregistration key program in the fiscal year
    1999 budget request, fiscal year 1999 operating plan, fiscal year 1999
    actuals, fiscal year 2000 budget request, fiscal year 2000 proposed
    operating plan and fiscal year 2001 budget request? Provide the
    information by NPM, appropriation, goal, objective, sub-objective,
    office or region, and activity.
        Answer. This information is provided in the following table:

                                                                      [Dollars in millions]
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                 Fiscal year 1999                  Fiscal year 2000            Fiscal year
                                                                        --------------------------------------------------------------------   2001 Request
                              Approp/Goal/Obj                                Request          Op. Plan         Request          Op. Plan    ----------------
                                                                        --------------------------------------------------------------------
                                                                           FTE   Dollars    FTE   Dollars    FTE   Dollars    FTE   Dollars    FTE   Dollars
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    EPM:
        3.1............................................................    38.6     $3.2    38.6     $3.7    36.0     $3.6    36.2     $3.9    32.9     $4.3
        3.2............................................................   125.1    $23.9   125.1    $20.7   134.7    $23.8   119.3    $19.4   120.4    $22.7
        4.1............................................................    32.9     $4.5    32.9     $4.9    33.4     $4.6    31.1     $4.2    21.9     $2.7
        7.2............................................................    37.9     $5.1    37.9     $5.9    40.3     $4.1    35.8     $4.0    36.9     $4.4
    S&T:
        3.1............................................................     3.8     $1.0     3.8     $1.0     3.3     $0.7     4.0     $0.8     4.3     $0.8
        3.2............................................................    10.9     $1.4    10.9     $1.5     9.9     $1.0    10.1     $1.2     8.2     $1.1
        4.1............................................................     4.0     $0.3     4.0     $0.4     4.0     $0.3     3.5     $0.4     4.0     $0.4
    FIFRA: 3.2.........................................................   104.2  .......   104.2  .......   104.2  .......   104.2  .......   102.7  .......
                                                                        ------------------------------------------------------------------------------------
          Total All Approps............................................   357.4    $39.4   357.4    $38.1   365.8    $38.1   344.2    $33.9   331.3    $36.4
    --------------------------------------------------------------------------------------------------------------------------------------------------------

             PESTICIDES REREGISTRATION: IMPACT OF FUNDING REDUCTION
        Question. Analysis for the Agency's budget requests indicates that
    EPA reduced funding to the Pesticides Reregistration key program in the
    fiscal year 2000 proposed operating plan from the higher levels
    contained in the fiscal year 2000 budget request. Why did the Agency
    make this reduction and what impact did it have on the activity levels
    of the program?
        Answer. EPA's fiscal year 2000 Operating Plan maintains the same
    level of program activity for reregistration as contained in the
    President's budget submission. The budget Congress enacted for EPA in
    fiscal year 2000 included a substantial General Reduction to the EPM
    account, including FTE reductions. At the same time, the implementation
    of the Food Qualify Protection Act is one of EPA's top priorities and
    we tried to increase and protect resources and activities programmed to
    carry out the Act. The slightly reduced `key program' resources are the
    result of ongoing consolidation of the reregistration and FQPA's
    tolerance reassessment process, as well as a change in the schedule for
    setting up the registration review program. Moreover, we protected the
    primary components of FQPA, tolerance reassessments and the
    registration of safer substitutes and in fact these programs received
    more resources over fiscal year 1999 levels.
        The Office of Prevention, Pesticides and Toxic Substances' (OPPTS)
    share of the general reduction was $18.3 Million. Also, OPPTS had to
    project some staff reduction in the reregistration program to comply
    with Congressional directions to cut Agency staff levels to 18,000 FTE.
    OPPTS has been under a hiring freeze since the beginning of the fiscal
    year and has been unable to protect the staff support for the
    registration and reregistration programs. As vacancies occur, we have
    not backfilled, resulting in declining FTE levels. The nature of work
    in both these programs is very FTE intensive and the skills are very
    specialized; in some cases it is impossible to shift from within to
    replace lost personnel. However, OPPTS' proposed operating plan for
    fiscal year 2000 minimizes the program impact of the general reduction
    as much as possible and we project no change in outputs.
        Beyond cuts in staff, OPPTS reduced the funds budgeted to set up
    the Registration Review Program, the new FQPA requirement to review
    pesticide registrations every 15 years. The regulations establishing
    this program are proceeding and the cuts will not affect the
    establishment of the Registration Review program. In addition, the
    incorporation of some special review work into the tolerance
    reassessment process has streamlined the Special Review process,
    resulting in cost savings. We do not expect any reduced outputs from
    the reduction to the Special Review Programs.
        Altogether, Congress directed EPA to fund the registration and
    reregistration programs at $68.9 Million. EPA's operating plan
    submitted to Congress funded these programs at $65.8 Million, a small
    reduction of $3.1 Million. This reduction resulted from the
    streamlinings and schedule changes described above. These revised
    levels also allowed us to lessen the impact of the general reductions
    on other critical EPA programs like the High Production Volume Chemical
    Challenge Program, which is collecting basic hazard information on
    chemicals the public routinely encounters.
        EPA is confident that it fully carried out the intent of the
    Congressional directive to maintain a robust program to register,
    reregister and set food use tolerances using strict FQPA requirements.
    The fiscal year 2000 budget fully supports an aggressive effort to
    carry out these key programs.

               QUALITY OF LAB DATA: CHICAGO CENTRAL REGIONAL LAB
        Question. Why did EPA's initial responses to inquiries on the
    criminal investigation underway at the Chicago Central Regional Lab
    reveal that only 40 pollution cases were frozen because they may have
    been based, in part, on flawed lab test results when separate EPA court
    filings indicated that approximately 1,000 other cases . . . including
    judicial and administrative matters are being assessed for potential
    impact?
        Answer. In the initial stage of our investigation, we estimated
    that we would have to review up to 1,000 cases to determine whether
    they involved analytical data generated or reviewed at the Central
    Regional Laboratory (CRL) by either Agency or contract personnel. That
    number represented the approximate number of open enforcement cases on
    the Region 5 docket. The Agency and the Department of Justice
    identified 43 cases on the DOJ ``hot list'' of active cases in which
    CRL involvement was verified or suspected and for which notice of such
    involvement has been provided to the court and the parties involved in
    the cases. At the same time, many of the other case files that had been
    examined did not reveal involvement on the part of the CRL Agency or
    contract staff under investigation. This review of open case files is
    an on-going process.

              QUALITY OF LAB DATA: TESTS OF CONTAMINATED MATERIALS
        Question. Why did the Agency downplay the role of the lab in public
    characterizations by saying that double-checks of materials analyzed by
    outside labs retained by polluters comprising 75 percent of the tests
    of contaminated materials from Midwest states were handled by Superfund
    staff and not the suspect lab? In reality court filings revealed the
    lab actually did validate analytical data from samples analyzed by
    outside laboratories.
        Answer. More than 75 percent of Superfund cleanup activities are
    handled by Potentially Responsible Parties (PRPs), which includes any
    necessary laboratory analyses, which are carried out by the PRP's own
    contract laboratories. The data resulting from those analyses are
    neither reviewed nor validated by the CRL, except on a limited basis
    when requested by the Superfund program for oversight purposes. It is
    estimated that less than 1 percent of PRP data was reviewed or
    validated by CRL staff. In most matters not being carried out by PRPs,
    the Superfund program uses private laboratories that participate in the
    Contract Laboratory Program (CLP) to generate analytical data. These
    data are reviewed and validated by the Environmental Support and
    Analysis Team (ESAT) contractor with oversight by the Region 5
    Superfund program office. This oversight consists of double checking
    the reviews conducted by the ESAT contractor to ensure that proper data
    validation procedures have been followed.
        Data validation is a review of other laboratories' data to provide
    an opinion as to the usability of the data. The data validation process
    does not involve laboratory analytical work. It involves the review of
    a hard copy data package against an established set of Quality
    Assurance Criteria and Programmatic Data Objectives that are documented
    in a Quality Assurance Project Plan. Because the allegations which have
    been raised involve analytical work and not the expression of an
    opinion on another laboratory's work, the Agency does not believe that
    the reliability of such data has been impacted.
        There is alleged misconduct in generating organic analytical data
    for certain types of chemical analyses within CRL. Typically, a hard
    copy results package for organic data does not contain electronic files
    for review. Electronic files of processed data are usually necessary to
    detect improper manipulation of data. Therefore, laboratory misconduct
    of this nature would have been detected through the data review or
    validation process for these packages. However, the Region will notify
    parties when one of the suspect analysts is identified as the data
    validator.

      QUALITY OF LAB DATA--PROCESS TO IDENTIFY NON-ANALYSIS WORK PERFORMED
        Question. Describe the process EPA is currently developing to
    identify those sites at which the lab or its contractor performed non-
    analytical work, and any results of the process to date.
        Answer. EPA is relying on time charges submitted by the suspect
    analysts to determine the work they performed, including whether they
    were involved in non-analytical work which includes the review of
    outside laboratories' data (data validation work). The EPA employees
    were required to bill time to individual sites on which they worked. In
    addition, the CRL's receiving logs were used to track information
    regarding documents from outside laboratories. The information tracked
    included the site name, time received and the data set number assigned
    to the data from the outside lab. This process continued from about
    1981 through 1990. By 1990, the Environmental Support and Analysis Team
    (ESAT) contractor had taken over the data validation work and EPA
    employees were not involved. Also information has been extracted from
    another tracking data base covering data review when it was performed
    by EPA employees. It identifies the review of data according to EPA
    employee initials. These different data bases will be used to determine
    which data sets were reviewed by the suspect analysts.
        The ESAT time charges by employee have been summarized in data
    bases. The summaries provide information by site as to when the work
    took place, the name of the suspect analysts, hours charged, and the
    type of work involved. This information is being used to determine the
    involvement of the suspect contractor personnel.
        Where the suspect analysts have worked on data validation,
    information on the site and work performed is to be provided to courts,
    parties, and identified potentially responsible parties. Notice is
    being provided to parties to ensure that there is no question as to the
    government's forthrightness in disclosures regarding this matter.

           QUALITY OF LAB DATA: AGENCY REACTION TO NEWS REPORT ON LAB
        Question. Why did EPA wait until newspaper stories publicized the
    criminal investigation underway at the Chicago lab before transferring
    the troubled lab's director?
        Answer. The transfer of the Central Regional Laboratory (CRL)
    Director was independent of the timing of any publication of CRL-
    related stories in the press. Regional management decided to reassign
    the CRL Director to other duties once the corrective actions
    recommended by the Office of Inspector General and the Technical Audit
    Team were substantially completed. The reassignment became effective
    March 6 and the completion of the recommendations led to the CRL
    reopening March 16.

                              QUALITY OF LAB DATA
        Question. EPA states that it is establishing new quality policies
    and providing training for staff to correct the lab's problems. But
    these steps don't seem to address the reason for the fraud, that being
    a desire to even-out busy spikes of workload. What is the Agency doing
    to deal with the actual cause of the problems?
        Answer. The Regional laboratories have developed training on
    acceptable conduct in laboratories, including an emphasis on activities
    that are considered inappropriate behavior. The laboratories are also
    conducting detailed audits of their management processes and technical
    operations to ensure that proper systems are in place and are effective
    in ensuring that the analytical results are of known and documented
    quality. Management at all the laboratories are monitoring the
    analytical work at their laboratories and are taking steps to more
    closely control the workload and even-out workflow.

                     NPDES: FUNDING LEVEL DOLLARS AND FTES
        Question. At what level, in terms of FTE and dollars, did the
    Agency fund the NPDES Program key program in the fiscal year 1999
    budget request, fiscal year 1999 operating plan, fiscal year 1999
    actuals, fiscal year 2000 budget request, fiscal year 2000 proposed
    operating plan, and fiscal year 2001 budget request. Provide the
    information by NPM, appropriation, goal, objective, sub-objective,
    office or region, and activity.
        Answer. Agency funding of the NPDES key program is detailed below.

                               OFFICE OF WATER \1\
    ------------------------------------------------------------------------
                     Fiscal year                       Dollars        FTE
    ------------------------------------------------------------------------
    1999:
        Budget Request...........................     $43,408,500      338.0
        Operating Plan...........................     $30,862,600  \2\ 294.1
    2000:
        Budget Request...........................     $46,338,800      350.5
        Proposed Operating Plan..................     $36,274,900  \2\ 329.7
    2001: Budget Request.........................     $41,592,000  \2\ 327.5
    ------------------------------------------------------------------------
    \1\ Appropriation: EPM; Goal 2: Clean and Safe Water; Objective 3:
      Reduce Loadings and Air Deposition.
    \2\ Reflects a realignment of Regional workyear distributions to reflect
      a more accurate depiction of the national water program workforce.

                         NPDES: EXPIRED PERMIT BACKLOG
        Question. The Agency declared to the President that backlogs in the
    NPDES permitting program were a material management weakness and
    developed a plan to reduce the backlog down to 10 percent in December
    2001. EPA recently disclosed that the backlog is instead increasing.
    Why is the backlog in expired permits in states and territories whose
    water programs are run by EPA increasing and forecast to reach to 44
    percent in December 2001?
        Answer. The Agency has identified the backlog of expired National
    Pollutant Discharge Elimination System (NPDES) permits as a material
    weakness under the Federal Managers Financial Integrity Act (FMFIA) and
    has established a goal of reducing the backlog of individual permits
    issued to major facilities to 10 percent, or less, by December 31,
    2001.
        Based on NPDES permit backlog data collected between November 1998
    and March 2000, the national backlog of expired NPDES permits for major
    facilities (including both State- and EPA-issued permits) has increased
    from approximately 26 percent to 28 percent. The increase in the
    national backlog rate is due to an increase from 24 to 26 percent in
    the backlog of State-issued NPDES permits, which comprise approximately
    90 percent of the permitted facilities. Over this same period, the
    backlog of permits for major facilities where EPA administers the NPDES
    program has decreased from 46 percent to 41 percent. These data, noting
    the increasing backlog trend at the national level, have been provided
    to House and Senate committees on a quarterly basis since March 1999.
    The Agency does not project a 44 percent backlog of EPA-issued permits
    in December 2001. Intensive efforts are currently underway at EPA
    Regional offices in support of achievement of our national target of 10
    percent for December 2001.

                        NPDES: ACTIONS TO REDUCE BACKLOG
        Question. Why have EPA's actions to reduce the backlog in programs
    run by EPA failed to produce reductions in the backlog?
        Answer. Between November 1998 and March 2000, the backlog of
    National Pollutant Discharge Elimination System (NPDES) permits for
    major facilities where EPA is responsible for permit issuance has been
    reduced from 46 percent to 41 percent. While the backlog rate is
    falling, the Agency believes that it remains unacceptably high and has
    taken steps to reduce it to meet the 10 percent target over the next 20
    months. The Agency's analysis of the causes of the permit backlog and
    our strategy for addressing the problem is presented in the Interim
    Framework to Ensure Issuance of Timely and High Quality NPDES Permits
    (Approaches for Reducing the NPDES Permit Backlog)--July 28, 1999. This
    document provides the Agency's vision for both short and long term
    strategic objectives for backlog reduction, and is available for
    downloading on our web site [www.epa.gov/owm/permits/backlog/
    backlog.htm].

                   NPDES: STATE COMPLIANCE TO REDUCE BACKLOG
        Question. Why are only 15 states on track to meet the Agency's goal
    of reducing the NPDES permit backlog to 10 percent? Why have EPA's
    actions to reduce the backlog in delegated programs failed to produce
    reductions in the backlog?
        Answer. While the Agency is directly responsible for National
    Pollutant Discharge Elimination System (NPDES) permit issuance in seven
    states and all U.S. Territories (except the U.S. Virgin Islands), this
    represents only about 10 percent of all NPDES permits issued. For the
    remaining ANPDES authorized states, EPA acts only as an oversight
    authority. While some authorized states have been able to maintain
    successful permit issuance rates (i.e., below 10 percent backlog), the
    majority have encountered resource, technical, and administrative
    obstacles similar to EPA Regions.
        The Agency has identified a variety of potential causes for the
    current backlog of expired NPDES permits, and for the increase in the
    backlog of State-issued permits for major facilities. Based on
    discussions with EPA Regional and State permitting managers, the
    following causes of the backlog were provided in our Interim Framework
    to Ensure Issuance of Timely and High Quality NPDES Permits (Approaches
    for Reducing the NPDES Permit Backlog)--July 28, 1999:
      --The universe of facilities requiring NPDES permit coverage (e.g.,
            storm water SSOs/CSOs, CAFOs) is expanding at the same time
            that previously issued permits are expiring.
      --State environmental agencies are challenged by implementing other
            competing regulations (e.g., air, solid waste, drinking water).
      --NPDES permits have become increasingly complex due to State
            adoption of numeric water quality standards and TMDL
            requirements. Effluent guidelines have been promulgated for
            industrial operations that are increasingly complex.
      --In many cases, permit writers today need training in complex
            technical and regulatory matters to issue high quality permits.
            Due to decreasing permit resources and movement of staff to
            other program areas, it has been difficult for States and
            Regions to maintain technical experts on their permits staff.
      --States have begun shifting to a watershed approach for permit
            issuance, which may increase backlogs for the first few years
            to allow alignment of five-year permit cycles within watershed
            boundaries.
        To address these issues, the Agency's Acting Deputy Administrator,
    W. Michael McCabe, issued a memorandum on March 31, 2000, to each of
    the EPA Regional Administrators requesting State-specific backlog
    reduction plans for both authorized and non-authorized States and
    Territories. The intent of these plans, which are due by May 15, 2000,
    is to identify the actions that the Region or State must take to reduce
    the permit backlogs and meet the 2001 and 2004 backlog reduction
    targets. To adequately develop these plans, the Region must fully
    assess the backlog of both State and EPA-issued permits (for major and
    minor facilities) and actively engage authorized States in establishing
    permit issuance commitments.

                       NPDES: IMPACT OF FUNDING REDUCTION
        Question. Analysis of the agency's budget requests indicates that
    EPA reduced funding to the NPDES program in the fiscal year 1999
    operating plan and the fiscal year 2000 proposed operating plan from
    the higher levels contained in each years budget request. Why did the
    Agency make reductions in NPDES program from each of these budget
    requests to the following operating plans and what impact did it have
    on the activity levels of the program?
        Answer. Reductions to NPDES activities resulted from the
    requirement to absorb the general reductions included in the fiscal
    year 1999 and fiscal year 2000 Environmental Programs and Management
    appropriation. Resources devoted to reducing the NPDES permit backlog
    were not reduced during the development of either operating plan.
    Impacts of the NPDES cuts included eliminating funding for additional
    Clean Water Action Plan workyears; limiting guidance and support to
    states and communities implementing storm water controls; curtailing
    EPA efforts to work with other Federal and state agencies, tribes, and
    private entities to cleanup watersheds affected by mines; hampering
    implementation of the Animal Feeding Operation (AFO) Strategy and
    curtailing support for the development of guidance with USDA on how
    450,000 AFOs should manage over 1.37 billion tons of animal waste; and
    hampering efforts to study the effectiveness of approaches to
    implementing best management practices (BMPs) for silviculture.

                              FINANCIAL STATEMENTS
        Question. The Agency recently received a qualified opinion for its
    most recent financial statements. This follows the previous year where
    six months of assistance from the Office of Inspector General was
    required to get EPA's statements in a state to earn an unqualified
    opinion. What steps is the Agency taking to train its financial
    management staff to better perform the task of annually preparing
    financial statements?
        Answer. For our prior year financial statements, the OIG did
    cooperate in giving the Agency additional time in completing its
    financial statements. The number of resources available to compile the
    statements was more of the contributing factor then skill competency.
    The issues that caused the delay for our 1998 statements were addressed
    and were not the same contributing factors for 1999.
        As indicated in our answer to an earlier question titled
    ``FINANCIAL AUDIT: IG OPINION'', the Inspector General qualified its
    opinion on the Agency's 1999 financial statements based on two
    technical accounting issues that were highlighted late in the audit
    process and consequently could not be resolved by the statutory due
    date of March 1. We have in place a plan to further improve our quality
    control process for producing our financial statements. This will
    include system and process changes. We also plan to use contractor
    support to supplement EPA staff in performing technical analyses as
    needed. In addition, we have had discussion with the OIG regarding the
    number and level of technical expertise that they have assigned to the
    audit to prevent delays in receiving audit feedback to allow for
    statement adjustments.
        Our plan also includes staff training. We are committed to
    providing our staff with the tools and on-going training necessary to
    produce reliable and timely financial statements. We have sent key
    staff to financial statement and general ledger training, engaged an
    accounting expert from the Treasury Department to review our books and
    train our staff on analytical techniques, and plan to send key staff to
    project management training to help better plan and coordinate with the
    auditors.

           FINANCIAL STATEMENTS: ACCOUNTING AND RECORDKEEPING PROCESS
        Question. What steps is the Agency taking to change accounting,
    recordkeeping or other charging processes to enable the Agency to more
    accurately and quickly prepare sound financial statements?
        Answer. We are implementing systemic solutions to streamline the
    preparation and audit of annual financial statements. We are changing
    how we record certain detailed transactions to a way that facilitates
    year-end reporting; we are also taking steps to increase the amount of
    effort devoted to ongoing review and analysis of our accounting
    records. We believe this additional focus on quality assurance can
    facilitate the preparation and audit of the year-end financial
    statements by resolving potential issues during the year, rather than
    late in the audit. Finally, we have implemented a new financial data
    warehouse reporting tool that makes a great deal of current and
    historical financial information available to EPA management on a near
    real-time interactive basis.

                              FINANCIAL STATEMENTS
        Question. Why is the Agency reducing funding for the Financial
    Statement Audits key program in fiscal year 2001 if the Agency's
    financial statements have worsened over the last year?
        Answer. The Office of the Inspector General (OIG) has audited EPA's
    financial statements since 1992. During that time, the OIG has spent
    considerable resources identifying areas for improvement in EPA's
    systems and controls and working with the Agency to improve the
    accuracy and timeliness of its financial information. Internal control
    and compliance issues identified by the OIG have existed for a number
    of years, and the OIG has worked extensively with the Agency to resolve
    these.
        At this point, the OIG believes its role in identifying and
    recommending needed systems improvements is complete. It is incumbent
    upon the Agency to implement the OIG's recommended corrective actions,
    so that accurate data is available to prepare the annual financial
    statements and to manage the Agency's environmental program on an
    ongoing basis. Therefore, the funding request was slightly reduced and
    the OIG believes that this will maintain the resources necessary to
    perform the audit.

    ROOT CAUSE ANALYSIS PILOT PROJECT: INDUSTRY-SPONSORED TRAINING ON ``HOW
                             CHEMICAL PLANTS WORK''
        Question. Provide the status of any efforts to develop industry-
    sponsored training on ``how chemical plants work'' for staff of
    regulatory agencies as recommended in the EPA/CMA Root Cause Analysis
    Pilot Project.
        Answer. Developing industry-sponsored training on ``how chemical
    plants work'' was not a formal recommendation of the Root Cause
    project. It was an idea offered by an industry representative on the
    project team. Although the Agency recognizes merit in such training,
    there are currently not resources available for such a project.

      ROOT CAUSE ANALYSIS PILOT PROJECT: INDUSTRY-EPA PERSONNEL EXCHANGE
                                    PROGRAM
        Question. Provide the status of any efforts to develop an industry-
    EPA personnel exchange program as recommended by the Root Cause
    project.
        Answer. Developing an industry-EPA personnel exchange was not a
    formal recommendation of the Root Cause project. It was an idea offered
    by an industry representative on the project team. Although the Agency
    recognizes merit in such exchange programs, there are currently no
    resources available for such a program.

      ROOT CAUSE ANALYSIS PILOT PROJECT: DEVELOPMENT OF INSPECTION PROGRAM
        Question. Provide the status of any efforts to develop an
    inspection program under which technical assistance inspections are
    conducted routinely in advance of traditional enforcement inspections,
    particularly in the case of new rules as recommended by the Root Cause
    project.
        Answer. Developing such an inspection program was not a formal
    recommendation of the Root Cause project. It was an idea offered by an
    industry representative on the project team.
        Although EPA has no plans to develop the level of inspection
    program described in this question, EPA has often implemented
    compliance assistance activities in advance of enforcement initiatives.
    One recent example is the minimill initiative in Region V. Region V
    used an integrated sector-based approach to improve compliance among
    the minimills in its six states, focusing on Electric Arc Furnaces
    (EAFs). First, the Region identified relevant minimills, contacted
    industry groups and sent out a notification letter to the minimills
    concerning the initiative. Each mill had the opportunity to carry out a
    self-audit within a six-month period after being contacted. Any
    identified violations were to be handled using EPA's Audit Policy.
    During the six month period, the Region conducted compliance assistance
    activities including: a kick-off meeting, a web page on the Internet
    dedicated to the initiative, telephone and E-mail access to EPA staff,
    EPA presentations at two conferences, coordination with State agencies
    to assure consistency and correspondence and meetings with individual
    companies. Out of 22 minimills, ten minimills self-disclosed findings
    based on self-audits. One facility self-disclosed without submitting an
    audit. Most reported violations were minor and did not result in
    penalties. At the end of the 6 month period, Region V began
    investigations of the remaining minimills to pursue enforcement, if
    appropriate.
        In addition, on-site compliance assistance is routinely provided to
    facilities through on-site compliance assistance visits and EPA
    inspectors. For example, inspectors routinely share standardized
    information and references with facilities during traditional
    inspections including: copies of requirements; guidance documents;
    manuals and technology transfer documents; information on other
    assistance providers; information on control practices and equipment
    used within a specific sector to comply with environmental regulations;
    pollution prevention literature; and suggestions on simple techniques
    and concepts to reduce or eliminate pollution. In some cases,
    inspectors may provide information on compliance status; information
    and insight into a facilities particular problem and what might be
    evaluated to remedy the problem; and technical assistance on recognized
    industry or sector-based practices and concepts to reduce or eliminate
    pollution. For more specific or technical information, inspectors are
    encouraged to refer facilities to appropriate technical assistance
    programs, including the Compliance Assistance Centers, Small Business
    Assistance Programs, and Manufacturing Extension Partnerships.

         ROOT CAUSE ANALYSIS PILOT PROJECT: COMPLIANCE ``GRACE PERIOD''
        Question. What is the Agency's reaction to the Root Cause report
    recommendation to allow facilities a ``grace period'' for compliance
    with new regulations and does the Agency have any efforts underway to
    test, pilot or implement this recommendation?
        Answer. Allowing facilities a ``grace period'' for compliance with
    new regulations was not a formal recommendation of the Root Cause
    project. It was an idea offered by an industry representative on the
    project team. While EPA does not generally offer a ``grace period'' for
    compliance with new regulations, for certain rules, the Agency has
    formally established a dedicated compliance assistance period before it
    undertakes enforcement, such as in the lead-based paint Sections 1018
    and 406 programs.
        In addition, EPA routinely provides ample opportunity for
    facilities to become familiar with and implement new regulatory
    requirements. In developing and implementing rules promulgated under
    the 1990 Clean Air Act Amendments (CAA), the agency has consistently
    been sensitive to providing the regulated community ample time to
    become familiar with the new regulatory requirements and make whatever
    operational adjustments are necessary to be in compliance. Sources
    which existed prior to the proposal of new CAA rules are given up to 3
    years after the effective date to comply. Sources may also be granted
    an additional year to comply if additional time is necessary to install
    pollution control equipment.
        The Agency has also focused considerable effort on the development
    of compliance assistance material to facilitate compliance with new
    rules. In particular, the Agency is committed to early development of
    compliance assistance tools to provide the regulated community the
    information it needs to comply with regulatory requirements. In fact,
    the Agency's Action Plan for Innovation commits EPA to issuing
    compliance assistance materials for new economically significant
    regulations typically within 90 days of final rule promulgation.
        The Agency has also focused compliance assistance resources on
    rules that apply to small businesses. Even after the compliance date of
    a new regulation, the Agency continues to work proactively with the
    regulated community to ensure that small businesses understand their
    new regulatory requirements. EPA has also offered the regulated
    community opportunities through self disclosure and small business
    policies to disclose violations with, in most cases, no penalties and
    also provides small businesses with access to compliance assistance
    resources.

        ROOT CAUSE ANALYSIS PILOT PROJECT: COORDINATION BETWEEN EPA AND
                                    FACILITY
        Question. What is the Agency's reaction to the Root Cause report
    recommendation to designate a single EPA contact to work with each
    facility to coordinate EPA regulatory activities and provide assistance
    and does the Agency have any efforts underway to test, pilot or
    implement this recommendation?
        Answer. Designating a single EPA contact to work with each facility
    to coordinate EPA regulatory activities and provide assistance was not
    a formal recommendation of the Root Cause project. It was an idea
    offered by an industry representative on the project team. Although
    resource levels limit the Agency's ability to designate individual
    staff to work with each regulated facility, EPA has undertaken many
    efforts in the last several years to provide more compliance assistance
    to regulated facilities and industries. For example, EPA has partnered
    with industry, academia, and nonprofit groups to launch the ten sector-
    specific compliance assistance centers to serve as the ``first-stop-
    shop'' for compliance assistance. In addition, the creation of the
    National Compliance Assistance Clearing House will enable regulated
    entities to easily identify and access available compliance assistance
    material.

     ROOT CAUSE ANALYSIS PILOT PROJECT: TECHNICAL ASSISTANCE OR MITIGATION
        Question. What is the Agency's reaction to the Root Cause report
    recommendation to allow and encourage EPA inspectors to (1) provide
    technical assistance and (2) mitigate or omit penalties for
    noncompliance events that are addressed in a timely manner and does the
    Agency have any efforts underway to test, pilot or implement this
    recommendation?
        Answer. Encouraging inspectors to provide assistance and to
    mitigate or omit noncompliance was not a formal recommendation of the
    Root Cause project. It was an idea offered by an industry
    representative on the project team. Inspectors routinely share
    standardized information and references with facilities during
    traditional inspections. These materials include: copies of regulatory
    requirements; guidance documents; manuals and technology transfer
    documents; information on other assistance providers; information on
    control practices and equipment used within a specific sector to comply
    with environmental regulations; pollution prevention literature; and
    suggestions on simple techniques and concepts to reduce or eliminate
    pollution. In some cases, inspectors may also provide more facility- or
    industry-specific information such as: information on compliance
    status; information providing analysis of a facility's particular
    problem and what remedies might be appropriate; and technical
    assistance on recognized industry or sector-based practices and
    concepts to reduce or eliminate pollution. For more specific or
    technical information, inspectors are encouraged to refer facilities to
    appropriate technical assistance programs, including the Compliance
    Assistance Centers, Small Business Assistance Programs, and
    Manufacturing Extension Partnerships.
        EPA's penalty policies do allow penalties to be mitigated based on
    a variety of factors, including:
      --the degree of cooperation in remedying the noncompliance--in cases
            where violations are addressed immediately upon discovery,
            EPA's penalty policy allows for a substantial portion of the
            unadjusted gravity component to be reduced;
      --the level of sophistication within the industry in dealing with the
            compliance issue; and
      --ability to pay.
        In addition, EPA's ``Incentives for Self-Policing: Discovery,
    Disclosure, Correction and Prevention of Violations'' and ``Small
    Business Compliance Policy'' offer facilities the opportunity to
    discover, disclose, and correct regulatory noncompliance. Both policies
    encourage companies and other regulated entities to voluntarily
    discover, disclose, correct and prevent violations of Federal
    environmental requirements. Entities that meet policy conditions are
    eligible for penalty reductions (including penalty waivers) and other
    benefits. To date, over 750 entities have disclosed violations at over
    2,750 facilities under the two self-disclosure policies.

        ROOT CAUSE ANALYSIS PILOT PROJECT: COMPREHENSIVE VS. INDIVIDUAL
                                   EVALUATION
        Question. What is the Agency's reaction to the Root Cause report
    recommendation to redirect inspectors from a focus on individual
    noncompliance events to a more comprehensive evaluation of the
    effectiveness of a facility's systems for protecting the environment
    and does the Agency have any efforts underway to test, pilot or
    implement this recommendation?
        Answer. Shifting the focus of compliance inspectors was not a
    formal recommendation of the Root Cause project. It was an idea offered
    by an industry representative on the project team.
        However, as resources and expertise allow, EPA has conducted
    Environmental Management Systems inspections and Environmental
    Management Reviews (EMR). For example, EPA's Federal Facility
    Enforcement Office (FFEO) conducted a 2-year pilot program of
    conducting environmental management Reviews (EMRs) at Federal
    facilities. An EMR is an on-site review of selected aspects of a
    facility's environmental management program and policies in accordance
    with the Code of Environmental management principles for Federal
    Agencies (CEMP), an EMS-based set of principles similar to ISO 14001.
    These EMRs are conducted by following the EMR Policy and Guidance which
    contains an Incidental Violations Response Policy which is a hybrid of
    the EPA Small Business and Audit Policies. During the 2-year pilot
    program, EPA Regions conducted 29 EMRs at facilities of 20 different
    federal agencies. Federal facilities have been very receptive to the
    EMRs and have made numerous management and good practice changes based
    on EMR report recommendations. FFEO has issued a national report on the
    pilot program and is currently conducting a follow-up study and
    facility survey to document improvements made as a result of these
    EMSs.
        In July, 1999 EPA, after extensive consultations with a variety of
    outside stakeholders, released a major report from our Innovations Task
    Force, ``Aiming for Excellence: Actions to Encourage Stewardship and
    Accelerate Environmental Progress.'' In this report EPA commits to
    promoting the use of environmental management systems. Specifically,
    the report states that EPA will:
      --encourage organizations to adopt EMSs that improve compliance,
            prevent pollution, and use other measures of environmental
            performance;
      --continue our efforts to learn more about how EMSs can complement
            existing environmental programs and policies; and
      --evaluate how EMSs, in the long-term, might help bring about changes
            in public policy.
        As a result, EPA has developed an EMS action plan (currently in
    draft) that sets out the steps EPA will take to fulfill this
    commitment. EPA has held meetings with various stakeholder groups to
    facilitate discussion of the plan and expects to have it finalized in
    the near future. The entire draft action plan can be located
    electronically at www.epa.gov/ems.

    ROOT CAUSE ANALYSIS PILOT PROJECT: COORDINATION BETWEEN EPA AND STATES
                           ON REGULATORY REQUIREMENTS
        Question. What is the Agency's reaction to the Root Cause report
    recommendation to improve coordination between EPA and states regarding
    the interpretation of regulatory requirements and does the Agency have
    any efforts underway to test, pilot or implement this recommendation?
        Answer. EPA routinely works with states to develop and distribute
    uniform guidance on individual rules and on categories of regulations.
    Through interaction between EPA program offices, state environmental
    agencies, and media-specific associations, interpretations issues are
    identified and addressed.
        Several tools are also available to support consistent
    interpretation of regulatory requirements. Through Agency funded
    hotlines, federal regulatory determinations are easily accessed. In
    addition, EPA has created the Applicability Determination Index (ADI)--
    a searchable database of hundreds of Clean Air Act regulatory
    determinations. Lastly, the Agency is creating a national compliance
    assistance clearinghouse that will further facilitate coordination
    between EPA and the states.
        Finally, state regulations and state contacts are easily accessible
    through the Compliance Assistance Centers. As part of the Centers
    program, the Environmental Council of States (ECOS) has actively
    partnered with the Local Government Environmental Association Network
    (Center for local government officials) promoting interaction between
    the state, local and federal governments.

          ROOT CAUSE ANALYSIS PILOT PROJECT: STAKEHOLDERS FOCUS GROUPS
        Question. What is the Agency's reaction to the Root Cause report
    recommendation to create focus groups representing all stakeholders
    during early stages of revision of rules and does the Agency have any
    efforts underway to test, pilot or implement this recommendation?
        Answer. Convening focus groups during early stages of rule revision
    was not a formal recommendation adopted in the Root Cause project. It
    was an idea offered by an industry representative on the project team.
    Early and interactive stakeholder involvement is a cornerstone of the
    Agency's sector program's approach and is also a cornerstone of the
    Agency's approach to regulatory development. For example, consultation
    with small business advisory panels and federal advisory committees are
    integral to the Agency's regulatory development process.
        The Agency's sustainable industry program in particular is designed
    to build knowledge of stakeholder perspectives as a means of
    identifying worthwhile policy and programmatic changes in regulatory
    standards and other areas, to achieve better compliance, promote
    beyond-compliance stewardship, and to do so with minimum possible
    burden on the regulated community and regulators. For example, sector
    participation in the sustainable industry program has prompted
    regulatory changes for the metal finishing industry in RCRA, for chrome
    in the Clean Air Act (CAA), and for Metal Products & Machinery effluent
    guidelines. In addition, EPA is seeking public feedback on new
    regulatory projects such as the Persistent Bioaccumulative Toxics (PBT)
    initiative.

             ROOT CAUSE ANALYSIS PILOT PROJECT: PILOT TEST PROGRAM
        Question. What is the Agency's reaction to the recommendation
    recorded by the Root Cause report to pilot-test a program similar to
    OSHA's ``Nationwide Quick-Fix Program'', which offers reductions of
    penalties to employers that immediately abate hazardous identified
    during an OSHA inspection and does the Agency have any efforts underway
    to test, pilot or implement this recommendation?
        Answer. Pilot-testing a ``Quick Fix'' program was not a formal
    recommendation adopted in the Root Cause project. It was an idea
    offered by an industry representative on the project team. In the
    response to a previous question, we noted that EPA's penalty policies
    allow penalties to be mitigated in certain situations, and we noted the
    factors that determine whether mitigation is appropriate in a
    particular situation. We also referenced the Agency's self-audit and
    small business policies. The Agency believes these initiatives offer
    appropriate types of flexibility. There are no plans to adopt the OSHA
    approach.

       ROOT CAUSE ANALYSIS PILOT PROJECT: FEASIBILITY PILOT-TEST PROGRAM
        Question. What is the Agency's reaction to the Root Cause report
    recommendation to work with industry to pilot-test the feasibility of
    new rule before the are promulgated and does the Agency have any
    efforts underway to test, pilot or implement this recommendation?
        Answer. Pilot-testing of new rules was not a formal recommendation
    adopted in the Root Cause project. It was an idea offered by an
    industry representative on the project team. The Agency has committed
    to field testing certain draft regulations prior to promulgation in its
    ``Aiming for Excellence'' report. The field testing will be conducted
    through a simulated trial application of a draft rule with one or more
    regulated entities, with opportunity for public involvement.
        Furthermore, on-going Agency activities do allow industry pilot-
    testing to affect regulatory requirements. For example, the Agency's
    metal finishing sector program tested low cost pollution prevention
    technologies to reduce chrome emissions in a project that was defined
    and validated by an early focus group. The results of a successful
    research and development test may lead to changes in the Chrome Clean
    Air Act MACT standards and allow the use of the tested technology. In
    essence, this initiative road tested an approach that identified what,
    if any, regulatory change was appropriate.
        Similarly, the sustainable industry sectors approach discussed
    above: (1) develops a base of knowledge and stakeholder understanding;
    (2) determines which ideas should be tested; and then (3) defines, if
    any, appropriate programmatic and/or regulatory changes. This approach
    has worked well in the metal finishing sector, and it is being
    implemented in other sectors.

                             ENFORCEMENT TARGETING
        Question. How are EPA's efforts to strategically target its
    enforcement and compliance activities allowing the Agency to address
    the most significant risks to human health and the environment and to
    address disproportionate burden on certain populations?
        Answer. The Office of Enforcement and Compliance Assurance (OECA)
    has developed several tools for strategic targeting of enforcement and
    compliance resources by headquarters and regional programs to address
    human health and environmental risks and areas which may have
    disproportionately exposed populations. The use of these tools is
    leading to identification of important environmental risks and
    noncompliance patterns. For example, the selection of two industry
    sectors (Petroleum Refining and Metal Services) as OECA priorities for
    inclusion in the fiscal year 2000/2001 Memoranda of Agreement (MOA) was
    based on an analysis of industrial sectors that took into account
    inspection coverage, violation rates, emissions data, and the views of
    state regulatory partners. Another OECA-developed targeting tool
    incorporates interactive mapping techniques to allow users to look at
    facilities in stressed areas (e.g., a priority watershed), near
    schools, in minority communities, or other relevant factors. By
    combining various types of information and using appropriate
    technologies, the Agency is able to improve its ability to target
    compliance and enforcement resources at the most important problems.

          ENFORCEMENT TARGETING: PURPOSE AND SUPPORT TARGET ACTIVITIES
        Question. Describe the different targeting activities in which the
    enforcement targeting program is engaged including their purpose and
    support of the Agency's goals and performance measures.
        Answer. The Office of Enforcement and Compliance Assurance (OECA)
    engages in a broad range of both strategic and tactical enforcement
    targeting activities in support of Agency goals. OECA uses data
    strategically from across the Agency's programs and from external
    sources where possible to identify environmental risks or noncompliance
    patterns which may warrant intervention. Identifying these problems
    leads to further analysis and can result in a variety of responses,
    from declaring an industry sector a multi-year priority to be addressed
    by a variety of tools, to dispatching compliance assistance staff or an
    inspector to one or more facilities. By targeting our compliance and
    enforcement resources at important problems we align those resources
    with EPA goals and we can use performance measures to track progress
    and adjust strategies for maximum impact.

     ENFORCEMENT TARGETING: DATA/INFORMATION SYSTEMS PROGRAM FUNDING LEVELS
        Question. Provide funding levels in terms of dollars and FTE, for
    all activities under the Data/Information Systems program component of
    the Office of Enforcement and Compliance Assurance (OECA) in the fiscal
    year 1999 budget request, fiscal year 1999 operating plan, fiscal year
    1999 actuals, fiscal year 2000 budget request, fiscal year 2000
    proposed operating plan, and fiscal year 2001 budget request. Provide
    the information by appropriation, goal, objective, sub-objective,
    office or region, and activity. Ensure that targeting activities are
    labeled and differentiated from other data/information systems
    activities.
        Answer. The attached spreadsheet provides resource information for
    OECA's data and information efforts. The information comes from the
    Agency's Budget Automation System (BAS). The budget activities on the
    table are used primarily in budget formulation. The resources requested
    for the fiscal year 1999 actuals are not maintained in the Agency's
    database.
        OECA does not specifically identify targeting activities under this
    program. Targeting work supports the compliance assistance and
    compliance monitoring programs. However, the Integrated Data
    Enforcement Analysis (IDEA) system can be used for several
    purposes...targeting, public access to name two. These resources are
    located under the Office of Compliance's budget in Goal 7.

       ENFORCEMENT TARGETING: COMPLIANCE MONITORING PROGRAM FUNDING LEVEL
        Question. Provide funding levels, in terms of dollars and FTE, for
    all activities under the Compliance Monitoring program component of the
    Office of Enforcement and Compliance Assurance (OECA) in the fiscal
    year 1999 budget request, fiscal year 1999 operating plan, fiscal year
    1999 actuals, fiscal year 2000 budget request, fiscal year 2000
    proposed operating plan, and fiscal year 2001 budget request. Provide
    the information by appropriation, goal, objective, sub-objective,
    office or region, and activity. Ensure that targeting activities are
    labeled and differentiated from compliance monitoring activities.
        Answer. The attached spreadsheet provides resource information for
    OECA's compliance monitoring key program. The information comes from
    the Agency's Budget Automation System (BAS). The resources requested
    for the fiscal year 1999 actuals and activity level information are not
    maintained in the Agency's key program database.

                                     ______

                Questions Submitted by Senator Richard C. Shelby

                 ACCESS TO DATA: FEDERALLY FUNDED RESEARCH DATA
        Question. It is my understanding that EPA has proposed to adopt
    OMB's interpretation of my amendment by applying it only to awards made
    to institutions after November 1999. Does this mean the American public
    will not see the underlying federally funded research data that has
    been or will be cited in your agency's TIER II rule, Environmental
    Justice Guidance, 2002 PM/Ozone review, and low sulphur diesel
    regulation--among others?
        Answer. You are correct in your understanding that EPA has proposed
    to adopt OMB's interpretation that your amendment applies only to
    awards made to institutions after November 1999. As to the question of
    whether EPA will provide research data both produced as a part of
    federal assistance agreements initiated prior to November 1999 and not
    in the Agency's possession, this determination will continue to be made
    on a case-by-case basis. Of course, research data that are in the
    Agency's possession will continue to be provided upon FOIA request
    (subject to applicable FOIA exemptions). This policy applies to all
    research data related to Agency rulemakings and other preceedings,
    including those cited in your question.

          ACCESS TO DATA: PUBLIC INTEREST IN CREDIBILITY AND VALIDITY
        Question. Do you believe that the public has an interest in the
    credibility and validity of the underlying data that would support
    these agency actions?
        Answer. It is crucial that the public know that the science that
    serves as the foundation for governmental actions is sound--from
    ensuring the safety of medications to protecting the environment. One
    way to make sure this happens is sustaining the integrity of scientific
    peer review, a process that has served the scientific community in the
    United States well over the years. EPA recognizes the need for thorough
    peer review of the science behind its policy decisions and has taken
    several steps to bolster the degree to which peer review is integrated
    into all major policy actions. For example, when the Agency reevaluates
    the adequacy of National Ambient Air Quality Standards, we only
    consider information in the peer-reviewed scientific literature. EPA
    summarizes these studies in a criteria document, which is then peer
    reviewed by the Clean Air Scientific Advisory Committee. The broadening
    of our reliance on peer review is best exemplified by the issuance of
    our Peer Review Handbook in 1998.

                     ACCESS TO DATA: LEVEL OF PUBLIC ACCESS
        Question. Shouldn't they be able to see the data you claim supports
    your rules if they so choose? Or should they just take your word for
    it?
        Answer. EPA is strongly committed to the public availability of
    data used to support regulations and policies. We encourage researchers
    to make their data available for other researchers and the public
    whenever possible.
        Nonetheless, we recognize that there are circumstances that must be
    considered when determining whether it is appropriate to publicly
    release such information. For example, the Agency routinely considers
    confidential business information in its public access decisions whose
    release may place corporations at a competitive disadvantage were they
    to be made public. Additionally, the Agency sometimes bases decisions
    on health studies that rely on an individuals medical records, whose
    participation in the study was predicated on the agreement that these
    records not be made public.
        In two recent situations involving health effects studies on
    particulate matter, researchers refused to release the underlying
    health data after requested to do so by EPA, citing confidentiality
    agreements not to release personal medical records. To address public
    concerns about the integrity of these studies, EPA enlisted the help of
    the original researchers and independent research organization, the
    Health Effects Institute (HEI). HEI recruited independent researchers
    to audit the data in the original reports and to undertake their own
    re-analyses of these data. These audits and re-analyses were recently
    completed and corroborated the results of the original peer-reviewed
    studies.

                 ACCESS TO DATA: PEER REVIEW AND PUBLIC ACCESS
        Question. Do you believe peer review is a substitute for public
    access?
        Answer. EPA evaluates peer review and public access issues
    separately; one is not considered to be a substitute for the other. EPA
    policy is to require peer review for all major scientific and technical
    work products, and in special cases for non-major products.
    Independent, expert review is key to the scientific credibility of
    EPA's decisions. The Agency has taken major steps in recent years to
    enhance its peer review efforts, including its 1998 publication of the
    EPA Peer Review Handbook and the 1999 implementation of a new peer
    review database to track at the project level program and regional
    office implementation of the Agency's peer review guidance.
        EPA also supports public access to data, as long as privileged
    information such as medical records and confidential business
    information (for example, proprietary data on patented chemical
    formulations) remains protected. Over the past several years, the
    Agency has taken many steps to increase public access to data; new
    information technology has helped us considerably in this area.
        In sum, peer review and public access to data are both important,
    and neither is a substitute for the other. EPA has made great strides
    in recent years to enhance both of these key aspects of scientific
    credibility, and will continue to do so in the future.

            ACCESS TO DATA: PUBLIC ACCESS AND FEDERAL DECISIONMAKING
        Question. Do you not agree that public disclosure generally
    promotes greater scrutiny, accountability and transparency in the
    federal decisionmaking process?
        Answer. We agree that public disclosure of information that serves
    as the foundation for Federal decisionmaking promotes scrutiny,
    accountability and transparency in the process. EPA remains committed
    to such disclosure, consistent with applicable statutes and other
    requirements.

        ACCESS TO DATA: FEDERALLY FUNDED RESEARCH AGENCY ACCESS TO DATA
        Question. Aside from last year's law and OMB's new rule expanding
    the public's access to federally funded research data--it is my
    understanding that EPA and every federal agency has the rights to
    obtain federally funded research data. It is in all of your contracts.
    Has EPA ever waived its rights to the research study data it funds?
        Answer. EPA's Office of Research and Development (ORD) has never
    waived its rights to the research study data it has funded. EPA-ORD has
    the right to obtain research study data that it has funded.
        Question. If you have, why and in what circumstances have you done
    that?
        Answer. Not applicable
        Question. If you have not, when has EPA ever exercised its right to
    obtain the underlying data, if ever? Please outline those cases, if
    any, in writing to the Subcommittee.
        Answer. Please see attached Shelby Attachment 1 for instances when
    EPA-ORD has exercised its right to obtain underlying data from
    Federally funded research since 1995.

           FEDERALLY FUNDED RESEARCH: AGENCY ACCESS AND PUBLIC ACCESS
        Question. Why doesn't EPA use its existing powers to obtain that
    data to release the information as a matter of good government?
        Answer. As noted in the answer to the previous question, EPA has
    exercised its right to obtain data for public release. Such information
    exchanges also occur routinely on the part of Federally-funded
    researchers on an informal basis, as a part of the scientific process.
        To the maximum extent possible, EPA uses scientific and technical
    data for regulatory decision making that have appeared in peer-reviewed
    publication. Therefore, the data are already publicly available. For
    studies or data that do not fall into this category and were funded
    prior to the recent amendments to OMB Circular A-110, a decision to
    exercise our right to obtain data must be weighed against legal or
    other factors, e.g., the need for confidentiality of human subjects.
    There have been very few occasions where such issues have arisen. Thus,
    the Agency will continue its practice of evaluating such requests on a
    case-by-case basis.

                     ACCESS TO DATA: CRITICAL STUDIES DATA
        Question. Why won't EPA make a commitment to do everything it can
    to obtain the data for the critical studies cited in rules in a timely
    manner, so the public can review the data?
        Answer. EPA has been and remains strongly committed to the public
    availability of data used to support regulations and policies. We
    encourage researchers to make their data available for other
    researchers and the public whenever possible.
        For regulatory decision making, it is our policy to rely to the
    maximum extent possible on studies and data that have already been
    published. We believe this is the best way to assure transparency of
    the decision process. However, we recognize that there are sometimes
    countervailing considerations that must be weighed when determining
    whether it is appropriate to publicly release information. For example,
    the Agency routinely considers confidential business information in its
    decisions, the release of which may place submitters of such
    information at a competitive disadvantage were it to be made public.
    Additionally, we sometimes base decisions upon health studies that rely
    on the medical records of individuals, whose participation in the study
    was predicated on the agreement that those records not be made public.

                             NAAQS RESEARCH FUNDING
        Question. Ms. Browner, over the last few years, I have repeatedly
    requested the federally funded research data used to justify EPA's 1997
    PM/Ozone rule--specifically, the American Cancer Society and Harvard
    (of Pope) studies. For various reasons, I have been told that your
    agency can not obtain these studies. Now, it is my understanding that
    EPA did not fund these studies. As Administrator of the EPA who
    promulgated this rule, I'd appreciated it if you find out if any
    federal agency funded these studies that you relied on.
        Answer. With regard to obtaining the two studies mentioned above
    [Dockery et al., 1993, An association between air pollution and
    mortality in six U.S. cities. N Engl J Med 329:1753-1759; Pope et al.,
    1995, Particulate air pollution as a predictor of mortality in a
    prospective study of U.S. adults. Am J Respir Crit Care Med 151:669-
    674], EPA has always been able to obtain the studies themselves and has
    placed copies of the published studies in the docket for the PM NAAQS
    review. However, although EPA requested the raw health data, EPA has
    not been able to obtain the data used in these studies (see response to
    question #3).
        With regard to federal funding for these studies, EPA has provided
    funding, in part, for both studies. In the published reports for the
    two studies, the authors acknowledge funding from numerous sources. The
    Dockery et al. (1993) study was supported by several grants from the
    National Institute of Environmental Health Sciences (NIEHS) and EPA as
    well as a contract with the Electric Power Research Institute. The Pope
    et al. (1995) study, which used health data collected by the American
    Cancer Society, was also supported by grants from NIEHS and EPA. For
    both studies, EPA grant funds were provided to specifically support the
    analysis of the data, not the collection of the health data.

                         GUIDANCE AND POLICY DOCUMENTS
        Question. I am very concerned about the growing use of agency
    guidelines and policy documents that in many cases impose significant
    and substantive requirements on business and individuals. These
    documents are not given the public consideration and due process
    protections of a rulemaking procedure. What legal effect do EPA
    interpretive rules, policies, and guidance documents have?
        Answer. Interpretive rules are generally non-binding advisory
    statements that interpret the language of a statute or a legislative
    rule. They may state what we think a particular statute means and
    remind parties of existing duties. A policy statement (which includes
    guidance documents, guidelines, manuals, and opinion letters) announces
    EPA's intended future course or areas for exploration with respect to
    how EPA will interpret or enforce a statutory or regulatory provision,
    and leaves EPA free to exercise administrative discretion in carrying
    out the policy.
        Generally, interpretive rules and policy statements are similar in
    that neither have the force of law that is, they do not impose binding
    legal requirements. Interpretive rules are distinguishable from general
    statements of policy and guidance documents because while interpretive
    rules clarify or explain existing statutes or regulations, general
    statements of policy announce to the public the policy which the agency
    intends to apply in the future when making decisions, whether through
    rulemakings, adjudications, or other agency actions. See National
    Whistleblower Ctr. V. Nuclear Regulatory Comm'n, F.3d (D.C. Cir. Apr.
    11, 2000) (``the advance-notice function of policy statements yields
    significant informational benefits, because policy statements give the
    public a chance to contemplate an agency's views before those views are
    applied to particular factual circumstances''). See also EPA's response
    to the question below on legal analysis of binding effect of these
    types of documents.
        Question. If they are not legally binding, should the taxpayers you
    regulate be told clearly these documents which interpret rules and
    policies have no binding legal effect and that people, in reality, are
    free to disregard them?
        Answer. EPA believes such a provision is unnecessary. As you are
    aware, EPA issues many kinds of general guidance documents and other
    statements to help the public and regulated community understand and
    comply with the Agency's regulatory programs and requirements. EPA has
    found that the more tools we use to communicate with regulated
    entities, our regulatory partners (state, local and tribal
    governments), and the public at large, the more effective we can be in
    explaining our programs and anticipating and answering their questions.
    We believe the regulated community, our regulatory partners, and the
    public find EPA's extensive communication efforts--including guidance
    documents, policy statements, fact sheets, question and answer
    documents, reports, advisories, letters responding to individual
    questions, and other means of providing information about our
    activities--to be very helpful to, and an important part of our
    programs.
        We appreciate the need of the regulated community to be able to
    differentiate between a legally binding document and one that is not.
    To promote clarity, the Agency currently includes language in many of
    our non-binding policy statements and guidance documents notifying the
    readers that such documents are not legally binding. Requiring the
    inclusion of a statement in all non-binding Agency documents, such as
    fact sheets, analytical reports, and guidance documents may cause
    unnecessary confusion, particularly when the aim of some of the
    materials is to inform and explain to regulated entities underlying
    regulatory requirements that are legally binding.
        For example, section 212 of the Small Business Regulatory
    Enforcement Fairness Act requires agencies to publish one or more small
    entity compliance guides for any rule for which a final regulatory
    flexibility analysis was prepared under 5 U.S.C. Sec. 604. The purpose
    of these guides is to assist small entities in complying with the rule,
    by ``explain[ing] the actions a small entity is required to take to
    comply with a rule or group or rules.'' Pub. L. 104-121, sec. 211
    (emphasis added). These are non-binding guidance documents that explain
    binding regulatory requirements to small entities in ``sufficiently
    plain language likely to be understood by affected small entities.''
    Id. Including a statement that the guide is non-binding and regulated
    small entities are free to disregard it may lead to unnecessary
    confusion.
        Question. Are interpretive rules, guidance or policy documents
    subject to the administrative requirements of Section 553 of the
    Administrative Procedure Act?
        Answer. No. Section 553(b) of the Administrative Procedure Act
    states:

        ``General notice of proposed rule making shall be published in the
    Federal Register, unless persons subject thereto are named and either
    personally served or otherwise have actual notice thereof in accordance
    with law.''

        However, section 553(b)(A) expressly exempts from the requirements
    of advance publication and opportunity for public participation
    interpretive rules, general statements of policy, or rules of agency
    organization, procedure or practice. That section provides:

        ``Except when notice or hearing is required by statute, this
    subsection does not apply--
              ``(A) to interpretive rules, general statements of policy, or
            rules of agency organization, procedure, or practice . . . .''
            5 U.S.C. Sec. 553(b)(A) (emphasis added).
        A general statement of policy is merely an announcement to the
    public of the policy which EPA plans to implement in future rulemakings
    or adjudications. As a consequence, the APA does not require notice and
    comment rulemaking to issue a policy statement.
        Question. What about judicial review? Are guidance documents
    subject to judicial review?
        Answer. Policy statements, guidance documents, and interpretive
    rules generally are not subject to judicial review. However, someone
    may bring suit to challenge any of these documents if he or she
    believes it actually is a substantive rule that was not promulgated in
    accordance with the Administrative Procedure Act's requirement of
    notice and opportunity for comment.
        Question. I would appreciate you providing the Subcommittee with a
    legal analysis including citations of authorities that support the view
    that interpretive rules, guidance or policy documents have binding
    legal effect if you believe them to have some legal weight.
        Answer. EPA is not aware of legal cases that support the view that
    interpretive rules, guidance or policy documents generally have binding
    legal effect. In fact, courts have consistently held that the fact that
    such documents do not create substantive law is one reason Congress
    exempted them from notice-and-comment rulemaking when it enacted the
    Administrative Procedure Act.
        For example, in American Hospital Association v. Bowen, 834 F.2d
    1037, 1045-46 (D.C. Cir. 1987), the court noted:

        ``The reading of the Sec. 553 exemptions that seems most consonant
    with Congress' purposes in adopting the APA is to construe them as an
    attempt to preserve agency flexibility in dealing with limited
    situations where substantive rights are not at stake. The exceptions
    have a common theme in that they accommodate situations where the
    policies promoted by public participation in rulemaking are outweighed
    by the countervailing considerations of effectiveness, efficiency,
    expedition and reduction in expense. Agency actions or statements
    falling within the three exemptions are not determinative of issues or
    rights addressed. They express the agency's intended course of action,
    its tentative view of the meaning of a particular statutory term, or
    internal house-keeping measures organizing agency activities. They do
    not, however, foreclose alternate courses of action or conclusively
    affect rights of private parties . . . . Unlike legislative rules, non-
    binding policy statements carry no more weight on judicial review than
    their inherent persuasiveness commands.
        ``Substantive rules are ones which grant rights, impose
    obligations, or produce other significant effects on private interests,
    or which effect a change in existing law or policy. Interpretive rules,
    by contrast, are those which merely clarify or explain existing law or
    regulations, are essentially hortatory and instructional, and do not
    have the full force and effect of a substantive rule but [are] in the
    form of an explanation of particular terms.
        ``The function of the second Sec. 553 exemption, for general policy
    statements, is to allow agencies to announce their tentative intentions
    for the future, without binding themselves. We have previously
    contrasted a properly adopted substantive rule with a general statement
    of policy, observing that while a substantive rule establishes a
    standard of conduct which has the force of law in subsequent
    proceedings, a general statement of policy, on the other hand, does not
    establish a binding norm. It is not finally determinative of the issues
    or rights to which it is addressed. The agency cannot apply or rely
    upon a general statement of policy as law because a general statement
    of policy only announces what the agency seeks to establish as policy.
    [Emphasis added.]''

        There are cases in which a court has found an agency's purported
    interpretive rule, guidance document, or policy statement to be a
    substantive rule, either because the rule established binding norms on
    its face, or the agency applied the document with the inflexibility of
    a rule. These cases, however, are instances where the agency did not
    properly issue a substantive rule; they do not stand for the
    proposition that generally, interpretive rules, guidance documents and
    policy statements have binding legal effect.

      BEVILL WASTES DETERMINATION: NEW INFORMATION TO JUSTIFY REGULATORY
                                    DECISION
        Question. What significant new information have you received that
    would justify overriding the technical positions of EPA's professional
    staff at the end of a 19 year process as well as your own
    recommendations last March in the Report to Congress? Please provide
    any such new evidence to the Committee.
        Answer. On April 25, 2000, the EPA announced our decision to
    continue to exempt fossil fuel combustion wastes from regulation as
    hazardous waste. This decision was based on all available information,
    including new information submitted as public comments to us in
    response to our March 1999 Report to Congress.
        At the same time, we announced that we will establish non-hazardous
    waste national regulations applicable to fossil fuel combustion wastes
    when managed in surface impoundments and landfills and when the wastes
    are used as minefill. This decision was based in part on significant
    new environmental information that was submitted to the Agency in
    response to our March 1999 Report to Congress. In preparing the Report
    to Congress, EPA concentrated its efforts on damage case analyses in 5
    of the major coal consuming states, but our survey was not exhaustive
    in those states. Based on a review of facility data for these 5 states
    involving coal combustion wastes managed in surface impoundments or
    landfills, EPA identified 7 proven damage cases and 11 potential damage
    cases (a potential damage case is one in which there is a known release
    from a waste management unit, but the release has not traveled
    sufficiently far from the unit to pose an actual threat to human health
    or the environment, but has the ``potential'' to do so in the future).
    Commenters provided documentation for 59 candidate damage cases in
    another 13 states. After carefully reviewing this information, we
    concluded that 4 of these represented proven damage cases and an
    additional 25 represented potential damage cases. Thus, EPA believes
    that it is highly likely that other cases of proven or potential damage
    would be identified if we reviewed data in the remaining 32 states.
        This new information contributed to our April 25 decision to
    continue to exempt the wastes from regulation as hazardous wastes but
    to establish national non-hazardous waste regulations for these wastes,
    under Subtitle D of RCRA.

           BEVILL WASTES DETERMINATION: REASON FOR CHANGE OF POSITION
        Question. If there is no new evidence to contradict previous
    findings, then why the change of position on the determination on these
    wastes?
        Answer. As explained in the previous question,on April 25, 2000,
    EPA decided that it was appropriate to continue to exempt fossil fuel
    combustion wastes from being regulated as hazardous. Senator Shelby

            BEVILL WASTES DETERMINATION: EFFECT ON RECYCLING EFFORTS
        Question. Many states, including mine, have developed successful
    programs to increase the beneficial use of these materials, e.g., use
    in the production of concrete. This beneficial use is environmentally
    sound, conserves virgin natural resources and conserves energy. There
    is a growing market for coal combustion by-products and unless this
    waste is recycled it will have to be landfilled.
        Has the EPA considered the chilling effect and significant decrease
    in these recycling efforts that will occur if you reverse EPA's own
    studies and your Report to Congress and regulate these materials as
    hazardous?
        Answer. EPA did not identify any significant risk posed by
    beneficial uses of fossil fuel combustion wastes in construction
    applications, such as in concrete or concrete products, in production
    of wall board, and as road bed material. We have, however, identified
    the potential for significant risk resulting from certain applications
    of coal combustion wastes when used to fill underground or surface
    mines (an activity that increasingly uses these wastes). While this
    practice can provide significant benefits, when not properly done
    minefilling has the potential to contaminate ground water to levels
    that could damage human health and the environment.
        EPA wants to ensure that any actions taken by the Agency not place
    any unnecessary barriers on the beneficial use of coal combustion
    wastes. Our analyses indicate that beneficial uses of coal combustion
    wastes, with the exception of minefilling when not done properly, are
    not likely to pose significant risks to human health and the
    environment. For this reason and because most beneficial uses of coal
    combustion wastes conserve natural resources and reduce disposal costs,
    EPA decided that we would continue the exemption of fossil fuel
    combustion wastes from being regulated as hazardous wastes. Because of
    a concern that certain minefilling practices may pose significant risk
    to human health and the environment, we also decided that we would
    develop national regulations under non-hazardous waste authorities
    (Subtitle D of RCRA) applicable to coal combustion wastes when used as
    minefill. We would base these standards on the approaches taken by
    states that currently have comprehensive programs addressing
    minefilling of coal combustion wastes.
                                     ______

                   Questions Submitted by Senator Larry Craig

                                 KYOTO PROTOCOL
        Question. In EPA's fiscal year 2000 Annual Performance Plan it
    stated: ``EPA will build a program that provides appropriate credit for
    early action.''[Page VI-30]
        Has EPA developed any analysis regarding the ``credit for early
    action'' legislation introduced in the Senate in the 105th Congress and
    the 106th Congress? If so, please provide this documentation, including
    a list of any recipients of this documentation.
        Under what authority will EPA develop a ``credit for early action''
    program?
        Has EPA sponsored, co-sponsored or participated in any public
    meetings related to the global climate issue? If so, please provide the
    dates of the meetings, a list of participants, copies of as delivered
    presentations, and any presentation material used by EPA staff or
    produced as a result of a grant from EPA.
        Answer. The above questions are identical to questions asked by the
    House Committee on Science and the Senate Appropriations Committee last
    year. We have attached the responses that EPA submitted for those
    questions. Please let us know if you would like any additional
    information.

       FUNDING FOR STUDIES OF DOMESTIC OR INTERNATIONAL CARBON EMISSIONS
                                    TRADING
        Question. Has EPA provided any funding for studies of either
    domestic or international carbon emissions trading?
        If so, please provide by April 1, 2000: (a) the names of the
    organizations or individuals receiving the grant; (b) the amount of the
    grant; (c) the documents describing the initial scope of the project;
    (d) the dates of initial contact and project initiation; and (e) copies
    of these reports or preliminary drafts.
        Also, please provide the Agency's statutory basis for pursuing
    these studies.
        Answer. Please see attached information on EPA funding (since
    October 21, 1998) for studies of the design of carbon emissions trading
    systems. These documents could not be provided by April 1, 2000,
    because the questions were not received by the Agency until after the
    deadline.
        EPA is authorized to pursue these studies under the following
    statutory provisions:
      --Clean Air Act, 42 U.S.C. 7401 et seq.--sections 103(a), (b), (g)
      --National Environmental Policy Act, 42 U.S.C. 4321 et seq.--section
            102(2)(F)
      --Global Climate Protection Act of 1987, 15 U.S.C. 13101 et seq.--
            section 1103

                         CLIMATE CHANGE: USE OF MODELS
        Question. In 1999, Tim Barnett, Scripps Institution of
    Oceanography, ran 11 models and concluded: ``There is no model that
    consistently agrees well with the observations.'' Is EPA using any
    models to predict the effects of global climate change on a regional or
    local level? If so, what models are being used?
        Answer. EPA's assessments do not make predictions of the effects of
    future global climate change on a regional or local level. EPA uses
    input from climate models to define scenarios of potential climate
    futures. That is, the scenarios are used to understand the sensitivity
    and vulnerability of human and ecological systems to potential future
    global climate change, but not to make actual predictions of future
    conditions. All of the regional assessments being sponsored by the EPA
    as part of the National Assessment effort use state-of-the-art climate
    scenarios generated by the Canadian and British climate modelers (e.g.,
    the Canadian Centre for Climate Modeling and Analysis; the Hadley
    Centre for Climate Prediction and Research). In some cases, the outputs
    of these climate models are used as inputs to Regional Climate Models
    in order to develop scenarios for future climatic conditions at a
    regional level. Also, EPA--and the regional coordinators it is
    sponsoring in the research community--are using the Vegetation/
    Ecosystem Modeling and Analysis Project (VEMAP) model output to
    understand the potential changes in vegetation that may occur as the
    climate changes.
        EPA has conducted one study that assigns probabilities to
    particular future effects of climate change: The Probability of Sea
    Level Rise, which was published in October 1995. This study, conducted
    by the Office of Policy, Planning, and Evaluation, developed
    probability-based projections that can be added to local tide-gauge
    trends to estimate future sea level rise at particular locations around
    the coast of the United States. The Report can be found on the Internet
    at: http://www.epa.gov/oppeoee1/globalwarming/publicatons/impacts/
    sealevel/probability.html.

                    CLIMATE CHANGE: JUSTIFICATIONS OF MODELS
        Question. Since, according to the Hansen paper as well as others,
    models are not capable of predicting natural variability and global
    effects, how can EPA justify using these models to predict effects on a
    smaller, ``microscopic scale'' as planned for the 3 regional
    assessments (Mid-Atlantic, Great Lakes, & Gulf Coast)?
        Answer. EPA's assessments of the potential consequences of climate
    change and variability on the United States rely on a diversity of
    information. Some of the EPA assessment work uses input from climate
    models to define scenarios of potential climate futures. For example,
    all of the regional assessments being sponsored by the EPA as part of
    the National Assessment effort use state-of-the-art climate scenarios.
    All of the regional and sectoral teams for the National Assessment
    worked with two climate models, the United Kingdom's Hadley Center
    Model and the Canadian Coupled Climate Model. These two models were
    chosen for several reasons. First, it was important that all the
    assessments be based on the same models to ensure comparability.
    Second, when the National Assessment began, the Canadian and Hadley
    Models were the only two global climate models that incorporated the
    role of aerosols as off-sets to the warming effects of greenhouse
    gases. These two vary in their interpretation of other factors, and
    therefore differ in their scenarios of future climate.
        It must be emphasized that the climate model output is viewed as
    scenarios, not predictions of future climate. EPA's regional
    assessments do not use models to ``predict'' any particular climate
    future, but rather to develop a range of possible scenarios of future
    climate. The scenarios serve as the basis for assessing the possible
    consequences of climate change--positive and negative consequences. It
    is the possible consequences that will be of use to decision makers,
    and of interest to stakeholders. They are being used to understand the
    sensitivity and vulnerability of human and ecological systems to
    potential future climate change, but not to make actual predictions of
    future conditions.
        It is also important to understand that the regional assessments
    are not limited to scenarios generated by climate models. The
    assessments also use other information to illustrate the potential
    consequences of climate variability and change for human health and
    ecological systems. In addition to climate model output, EPA's
    assessment work also relies on historic data to understand the
    sensitivity of human and ecological systems to change (e.g., changes in
    the profile of the Blackwater National Wildlife Refuge as sea level has
    risen during the past 50 years). Also, plausible ``what if'' scenarios
    are used to illuminate the sensitivity of various systems. These
    sensitivity analyses help to define the potential risks and
    opportunities posed by climate change and variability to human health,
    ecosystems, and social well-being.

                    CLIMATE CHANGE: HEALTH SECTOR ASSESSMENT
        Question. Because of these substantial modeling problems, what is
    the basis for EPA conducting a ``Health Sector Assessment'' in fiscal
    year 2000?
        Answer. The Health Assessment Work Group used a set of assumptions
    and/or projections of future climates developed for all participants in
    the National Assessment of ``The Potential Consequences of Climate
    Variability and Change.'' The output from the climate models was used
    to define scenarios of potential climate futures. It must be emphasized
    that the climate model output was viewed as scenarios, not predictions
    of future climate. The scenarios were used to understand the
    sensitivity and vulnerability of human health to potential future
    climate change, but not to make actual predictions of future
    conditions.
        The Health Sector Assessment focused on understanding the
    relationships between several categories of health outcomes and weather
    and/or climate variables (e.g., temperature-related morbidity and
    mortality; health effects of extreme weather events; air-pollution-
    related health effects). The assessment examined both benefits and
    detriments arising from possible changes in future climate. Their
    analysis was, for the most part, not quantitative because of many
    layers of uncertainties in the data. In fact, the Health Assessment
    Work Group concluded that the levels of uncertainty preclude any
    definitive statement on the direction of change for each of these
    health outcomes, although they developed some hypotheses.
        Projections of the extent and direction of the potential health
    impacts of climate variability and change are extremely difficult to
    make because of the many confounding and poorly understood factors
    associated with potential health outcomes, population vulnerability,
    and adaptation. For example, the relationship between weather and
    specific health outcomes is understood for a relatively small number of
    diseases, with few quantitative models available for analysis. Research
    aimed at filling the priority knowledge gaps identified in this
    assessment would allow for more quantitative assessments in the future.
        The Health Sector Assessment went through an extensive peer review
    process that has been fully documented. Based on the peer review, the
    Assessment meets the highest standards of scientific excellence and is
    scientifically credible, balanced, and unbiased.
        Question. Is the EPA using ``worst case scenarios?''
        Answer. No, EPA is not using ``worst case scenarios.''As noted
    above, to the extent that scenarios of future climate were used, the
    Health Assessment Work Group used a set of assumption and/or
    projections of future climates developed for all participants in the
    National Assessment of ``The Potential Consequences of Climate
    Variability and Change.'' These projections were based on the outputs
    of the Canadian Coupled-Climate Model and the United Kingdom's Hadley
    Centre Climate Model. These two models were chosen for several reasons.
    First, it was important that all the assessments be based on the same
    models to ensure comparability. Second, when the National Assessment
    began, the Canadian and Hadley Models were the only two global climate
    models that incorporated the role of aerosols as off-sets to the
    warming effects of greenhouse gases. These two vary in their
    interpretation of other factors, and therefore differ in their
    scenarios of future climate. Their outputs fall in the middle of a
    range of outputs by a number of climate models.

             CLIMATE CHANGE: U.S. NATIONAL ASSESSMENT PARTICIPATION
        Question. Who from EPA is participating in the U.S. National
    Assessment ``The Potential Consequences of Climate Variability and
    Change'' and what are the specific topical and work group assignments?
        Answer. As part of the U.S. National Assessment effort, EPA is
    sponsoring the Mid-Atlantic Regional Assessment, the Great Lakes
    Regional Assessment, the Gulf Coast Regional Assessment, and the Health
    Sector Assessment. An ``arms-length'' relationship has been maintained
    between EPA and the Work Groups producing the three Regional
    Assessments and the Health Sector Assessment. EPA researchers are
    contributing to the assessments, but the assessments are being managed
    by independent universities throughout the country. These assessments
    are being conducted through a public-private partnership that actively
    engages researchers from the academic community, decision makers,
    resource managers, and other affected stakeholders in the assessment
    process.
        Several EPA researchers have contributed to the EPA-sponsored
    assessments. EPA researchers involved in the Mid-Atlantic Regional
    Assessment include Dr. Catriona Rogers (Office of Research and
    Development), Dr. John McCarty (AAAS Fellow, Office of Research and
    Development), and Dr. Henry Walker (Office of Research and
    Development).
        The Mid-Atlantic Regional Assessment is also a stakeholder-oriented
    process that is actively engaging an Advisory Committee of over 90
    members from the private and public sectors. EPA researchers and
    personnel who serve on the large Advisory Committee include Mr. Thomas
    DeMoss (EPA Mid-Atlantic Integrated Assessment Team), Dr. Ray Lassiter
    (Office of Research and Development), Mr. Ed Linky (EPA Region 2), Dr.
    Joel Scheraga (Office of Research and Development), Dr. Betsy Smith
    (Office of Research and Development), Mr. Eric Walbeck (EPA Mid-
    Atlantic Integrated Assessment Team), and Dr. Janet Gamble (Project
    Officer, Office of Research and Development).
        Ms. Anne Grambsch is one of the 12 Lead Authors for the Health
    Sector Assessment. The other Lead Authors come from Johns Hopkins
    University, Harvard Medical School, the University of Florida, EPRI,
    NOAA, CDC-Division of Vector-borne Diseases, and CDC-Division of
    Environmental Hazards and Health Effects.
        Mr. Jim Titus is an author of the Coastal and Marine Resources
    Sector Team under the U.S. National Assessment.
       climate chance: u.s. national assessment support for participation
        Question. Who is being provided EPA support for participation in
    the U.S. National Assessment and what are the specific topical and Work
    Group assignments?
        Answer. As part of the U.S. National Assessment effort, EPA is
    sponsoring the Mid-Atlantic Regional Assessment, the Great Lakes
    Regional Assessment, the Gulf Coast Regional Assessment, and the Health
    Sector Assessment. The Mid-Atlantic Regional Assessment is being
    conducted by The Pennsylvania State University. The Great Lakes
    Regional Assessment is being conducted by the University of Michigan.
    The Gulf Coast Regional Assessment is being conducted the Southern
    University. The Health Sector Assessment is being conducted by Johns
    Hopkins University.
        The Mid-Atlantic Regional Assessment is analyzing the potential
    effects of climate change and variability on forests, agriculture,
    water, coasts, and human health, as well as additional selected issues
    that cut across these five impacts areas (e.g., ecosystems). The Great
    Lakes Regional Assessment is considering water quality and quantity
    (including lake level and temperature changes), storms and extreme
    events, ecological and natural resources (such as plant life, forests,
    wetlands, aquatic life and agriculture), air quality, health and
    education. The Gulf Coast Regional Assessment is, to varying degrees,
    analyzing the potential effects of climate change and variability on
    ecosystems, farming and forestry, industry, human health, air quality,
    water quality, fisheries, and recreation/tourism.
        The Health Sector Assessment is examining five categories of health
    outcomes that are most likely to be affected by climate change because
    they are associated with weather and/or climate variables: temperature-
    related morbidity and mortality; health effects of extreme weather
    events (storms, tornadoes, hurricanes, and precipitation extremes);
    air-pollution-related health effects; water- and food-borne diseases;
    and vector- and rodent-borne diseases.
        An ``arms-length'' relationship has been maintained between EPA and
    the Work Groups producing the three Regional Assessments and the Health
    Sector Assessment.
        Question. Were any of these individuals involved in the IPCC Second
    Assessment Report?
        Answer. To the best of our knowledge, only three individuals
    involved in the Regional and Sectoral Assessments being sponsored by
    EPA as part of the U.S. National Assessment were involved as Lead or
    Contributing Authors in the 1995 IPCC Second Assessment Report. These
    individuals are Dr. Jonathan Patz (Johns Hopkins University), Dr. Paul
    Epstein (Harvard Medical School), and Dr. Joel Scheraga (EPA Office of
    Research and Development). Dr. Patz is the Co-Chair of the Health
    Sector Assessment. Dr. Epstein is one of the 12 Lead Authors of the
    Health Sector Assessment. Dr. Scheraga is on the Advisory Committee for
    the Mid-Atlantic Regional Assessment.
        Question. If so, please identify the specific roles and
    responsibilities in the Second Assessment Report?
        Answer. Dr. Patz and Dr. Epstein were Principal Lead Authors of
    Chapter 8 of the Working Group II Report of the 1995 IPCC Second
    Assessment. Chapter 8 was entitled, ``Human Population Health.'' Dr.
    Scheraga was a Contributing Author to Chapter 26 (a Technical Appendix)
    of the Workgroup II Report of the 1995 IPCC Second Assessment. Chapter
    26 was entitled, ``Technical Guidelines for Assessing Climate Change
    Impacts and Adaptations.''
        REQUEST: Please provide this list including affiliations and
    locations
        Dr. Jonathan Patz, Department of Environmental Health Sciences,
    Johns Hopkins University School of Hygiene and Public Health,
    Baltimore, MD.
        Dr. Paul Epstein, Center for Health and the Global Environment,
    Harvard Medical School, Boston, MA.
        Dr. Joel Scheraga, National Program Director, Global Change
    Research Program, Office of Research and Development, U.S.
    Environmental Protection Agency, Washington, DC.
              climate change: u.s. national assessment peer review
        Question. What peer review process is used for the science
    contributions prior to submittal to the US National Assessment?
        Answer. All of the EPA-sponsored Regional and Sectoral Assessments
    are being held to the highest standards of scientific excellence. All
    of the Regional and Sectoral Assessment Reports are being subjected to
    an extensive peer review process that has been fully documented to
    ensure that they are scientifically credible, balanced, and unbiased.
    EPA's Global Change Research Program committed to the Congress that it
    would insist upon and maintain scientific excellence, openness, and
    broad-based participation in all of the regional and sectoral
    assessment reports that it sponsors. EPA has fulfilled this commitment
    and aggressively implemented a rigorous peer review process.
        The following guidelines have been established and followed for the
    external peer review of the EPA-sponsored regional and sectoral
    reports:
        Technical Review.--A technical review must be conducted to evaluate
    the accuracy and validity of statements of fact and interpretations of
    data. Each section of the report should be reviewed by independent
    experts with technical expertise in the appropriate subject area. These
    expert reviewers should include persons who are active in relevant
    disciplines or fields of endeavor but who have not participated in the
    assessment process.
        Comprehensive Review.--Experts with broad scientific and technical
    expertise relevant to the particular region or sector should review the
    entire document in a comprehensive manner. These reviewers should not
    have participated in the assessment process.
        Public/Stakeholder Comment.--The report should be circulated for
    comment to a range of interested parties, including the stakeholders
    engaged in the assessment and be available to the public upon request
    during the review period.
        Documentation of Reviews and Responses.--A document should be
    prepared that compiles and summarizes all broad categories of comments,
    and explains the assessment team's responses.
        We also note that the entire assessment process was open and
    predicated on the involvement of stakeholders. The assessments were
    launched with workshops to formulate questions and concerns to be
    addressed by the assessments themselves. A wide range of stakeholders--
    including for example, representatives from industry, state and local
    governments, and environmental groups--were invited to take part in the
    workshops. Those who chose to take part had the opportunity to shape
    the assessment, to participate in it, and to review the assessment
    report.

             CLIMATE CHANGE: U.S. NATIONAL ASSESSMENT PUBLIC REVIEW
        Question. How can the public review this material prior to
    submittal to the U.S. National Assessment?
        Answer. In order to ensure that all of the EPA-sponsored Regional
    and Sectoral Assessment Reports are scientifically credible, balanced,
    and unbiased, EPA established guidelines for a rigorous external peer
    review process that must be followed by the assessment teams. One
    component of this external peer review process includes:
        Public/Stakeholder Comment.--The report should be circulated for
    comment to a range of interested parties, including the stakeholders
    engaged in the assessment and be available to the public upon request
    during the review period.
        Copies of the assessment reports are available to the public upon
    request from the assessment teams during the review period. Also, EPA
    is requiring that each assessment team prepare a document that compiles
    and summarizes all broad categories of comments, and explains the
    assessment team's responses. This document will be made available to
    the public.
        We also note that the entire assessment process was open and
    predicated on the involvement of stakeholders. The assessments were
    launched with workshops to formulate questions and concerns to be
    addressed by the assessments themselves. A wide range of stakeholders--
    including for example, representatives from industry, state and local
    governments, environmental groups--were invited to take part in the
    workshops. Those who chose to take part had the opportunity to shape
    the assessment, to participate in it, and to review the assessment
    report.
        Question. Does EPA maintain a public Internet site that can be used
    to post this material?
        Answer. EPA's Global Change Research Program does not yet have a
    public Internet site that can be used to post this material. However,
    each of the universities responsible for conducting the EPA-sponsored
    Regional and Sectoral Assessments maintain websites. These websites can
    be used to post this material. For example, The Pennsylvania State
    University maintains an excellent website on which is posted their
    Overview document entitled, Preparing for a Changing Climate: The
    Potential Consequences of Climate Variability and Change. The website
    address is: http://www.essc.psu.edu/mara/index.html
        This website also posts documentation of responses to reviewers'
    comments on a draft version of the Overview report.
        Question. Does EPA plan to use this site for public disclosure?
        Answer. EPA's Global Change Research Program is in the process of
    developing a new public website. This website is being developed to
    further fulfill the Global Program's commitment to the Congress that it
    will insist upon and maintain scientific excellence, openness, and
    broad-based participation throughout its program (including in all of
    the regional and sectoral assessments that it sponsors). An important
    purpose of this website will be to disseminate data and information. It
    will provide a portal through which scientists, policy analysts, and
    the public can access research data, documents, project descriptions
    and updates, workshop announcements and proceedings, presentations, and
    analytic tools. It will also provide information produced by the Global
    Change Research Program's intramural and extramural researchers,
    including output from the U.S. National Assessment. EPA expects to be
    able to use this new website for public disclosure.

                    CLIMATE CHANGE: TRANSFER OF INFORMATION
        Question. Has EPA or anyone funded by EPA transferred any of its
    work under the U.S. National Assessment to anyone involved in the IPCC
    Third Assessment Report? If so, provide the following: (a) What
    material was transferred? (b) Who transferred the material? (c) Who
    authorized the transfer? (d) To whom was the material transferred?
        Answer. No. In fact, EPA's Global Change Research Program has
    insisted that all work that it has sponsored as part of the U.S.
    National Assessment go through a rigorous peer review process before it
    is released--including release to anyone involved in the IPCC Third
    Assessment Report.
        The following guidelines have been established and followed for the
    external peer review of the EPA-sponsored regional and sectoral
    reports:
        Technical Review.--A technical review must be conducted to evaluate
    the accuracy and validity of statements of fact and interpretations of
    data. Each section of the report should be reviewed by independent
    experts with technical expertise in the appropriate subject area. These
    expert reviewers should include persons who are active in relevant
    disciplines or fields of endeavor but who have not participated in the
    assessment process.
        Comprehensive Review.--Experts with broad scientific and technical
    expertise relevant to the particular region or sector should review the
    entire document in a comprehensive manner. These reviewers should not
    have participated in the assessment process.
        Public/Stakeholder Comment.--The report should be circulated for
    comment to a range of interested parties, including the stakeholders
    engaged in the assessment and be available to the public upon request
    during the review period.
        Documentation of Reviews and Responses.--A document should be
    prepared that compiles and summarizes all broad categories of comments,
    and explains the assessment team's responses.

                     CLIMATE CHANGE: IPCC EPA PARTICIPATION
        Question. Who from EPA is participating in the U.N.
    Intergovernmental Panel on Climate Change (IPCC) Third Assessment
    Report and what are the specific topical and Work Group assignments?
        Answer. The following EPA personnel are participating in the IPCC
    Third Assessment Report:
        Mr. Bill Rhodes is a Contributing Author on ancillary benefits for
    Chapter 8 of Working Group III of the IPCC Third Assessment Report.
        Dr. Stephen Andersen is the lead author of the Chapter 3 Appendix,
    Options to Reduce Global Warming Contributions from Substitutes for
    Ozone Depleting Substances, under Working Group III of the Third
    Assessment Report.
        Neil Leary is on detail from EPA as the head of the Technical
    Support Unit in Washington, DC for Working Group II of the Third
    Assessment Report.
        John ``Skip'' Laitner is a contributing author to Chapter 5,
    Barriers, Opportunities, and Market Potential of Technologies and
    Practices, under Working Group III of the Third Assessment Report.
        Question. Were any of these individuals involved in the IPCC Second
    Assessment Report?
        Answer. Yes. Neil Leary (EPA, Washington, DC) served as an expert
    reviewer of the Working Group II and III reports of the Second
    Assessment Report.
        Question. If so, please identify the specific roles and
    responsibilities in the Second Assessment Report?
        Answer. Neil Leary (EPA, Washington, DC) served as an expert
    reviewer of the Working Group II and III reports of the Second
    Assessment Report.
        Request: please provide this list including affiliations and
    locations.
        Answer. Neil Leary, Environmental Protection Agency, Washington
    D.C.

                 CLIMATE CHANGE: IPCC SUPPORT FOR PARTICIPATION
        Question. Who is being provided EPA support for participation in
    the IPCC Third Assessment Report and what are the specific topical and
    Work Group assignments?
        Answer. The following people are being provided EPA support for
    participation in the IPCC Third Assessment Report:
        Dr. Terry Root is a Lead Author for the Ecosystems and Wildlife
    chapter of Working Group II. Dr. Root is affiliated with the University
    of Michigan, Ann Arbor, MI.
        Joel Smith is Convening Lead Author for the Synthesis of Climate
    Change Impacts and Adaptation chapter of Working Group II. Mr. Smith is
    with Stratus Consulting Inc., Boulder, CO.
        Dr. Charles Howe is a Lead Author for the Water Resources chapter
    of Working Group II. Dr. Howe is affiliated with the University of
    Colorado at Boulder, Boulder, CO.
        Mr. Bill Easterling is involved in the IPCC Third Assessment
    Report. He is affiliated with Pennsylvania State University in State
    College, PA.
        Jeff Price is a lead author for the IPCC Third Assessment Report.He
    is affiliated with Pennsylvania State University in State College, PA.
        Dr. Sandra Brown is a Convening Lead Author for the IPCC Working
    Group II Chapter 5 on ecosystems and their uses. Dr. Brown is also
    serving as a convening lead author for Chapter 6 of the Land Use, and
    Land Use Change, and Forestry Special Report. Dr. Brown participated in
    the IPCC Second Assessment report. Dr. Brown works for Winrock
    International in Arlington, VA.
        Dr. Jayant Sathaye is a Lead Author for the IPCC Working Group III
    Chapter 5 on barriers and opportunities and market potential of
    technologies and practices. Dr. Sathaye is also serving as a convening
    lead author for Chapter 6 of the Land Use, and Land Use Change, and
    Forestry Special Report. Dr. Sathaye is also a convening lead author
    for Chapter 7 of the Technology Transfer Special Report. Dr. Sathaye
    participated in the IPCC Second Assessment report. Dr. Sathaye works
    for Lawrence Berkeley Laboratories in Berkeley, CA.
        Dr. Brian Murray is serving as a lead author for a chapter of the
    Land Use, Land Use Change, and Forestry Special Report. He did not
    participate in the IPCC Second Assessment Report. Dr. Murray works for
    the Research Triangle Institute, in Research Triangle Park, NC.
        Mr. William Pepper and Mr. Alexi Sankovsky are serving as
    contributing authors to the IPCC Special Report on Emission Scenarios.
    Neither Mr. Pepper nor Mr. Sankovsky participated in the IPCC Second
    Assessment Report. Mr. Pepper works for ICF Incorporated in Fairfax,
    Virginia. Mr. Sankovsky works for ICF Incorporated in Washington, DC.
        Dr. Lynn Price is a lead author for Chapter 3, Technical and
    Economic Potential of Greenhouse Gas Emissions Reduction, under Working
    Group III of the TAR.
        Dr. Mark Levine is a lead author of Chapter 3, Technical and
    Economic Potential of Greenhouse Gas Emissions Reduction, under Working
    Group III of the TAR.
        Dr. Willy Makundi is a lead author of Chapter 4, Technical and
    Economic Potential of Options to Enhance, Maintain, and Manage
    Biological Carbon Reservoirs and Geo-Engineering, under Working Group
    III of the TAR.
        Mr. E. Thomas Morehouse (Institute for Defense Analysis in
    Arlington VA) is a contributing author of the Chapter 3 Appendix,
    Options to Reduce Global Warming Contributions from Substitutes for
    Ozone Depleting Substances, under Working Group III of the Third
    Assessment Report.
        Dr. Devra Davis is a lead author of Chapter 8 under Working Group
    III of the TAR.
        Dr. Hugh Pitcher was provided funds to attend a meeting associated
    with Working Group III of the Third Assessment Report.
        Dr. R.N. Stavins is a lead author for the economics chapter of
    Working Group III of the Third Assessment Report.
        Question. Were any of these individuals involved in the IPCC Second
    Assessment Report?
        Answer. Yes.
        Question. If so, please identify the specific roles and
    responsibilities in the Second Assessment Report?
        Answer. Dr. Lynn Price was a lead author for Chapter 22, Mitigation
    Options for Human Settlements, under Working Group II of the Second
    Assessment Report. Dr. Price is affiliated with the Lawrence Berkeley
    National Laboratory in Berkeley, CA.
        Dr. Mark Levine was the lead author for Chapter 22, Mitigation
    Options for Human Settlements, under Working Group II of the Second
    Assessment Report. Dr. Levine is affiliated with the Lawrence Berkeley
    National Laboratory in Berkeley, CA.
        Dr. Jayant Sathaye was a principal lead author for Chapter 24,
    Management of Forests for Mitigation of Greenhouse Gas Emissions, and a
    lead author for Chapter 27, Methods for Assessment of Mitigation
    Options, under Working Group II of the Second Assessment Report. Dr.
    Sathaye is affiliated with the Lawrence Berkeley National Laboratory,
    in Berkeley, CA.
        Dr. R.N. Stavins was a lead author for Chapter 11, Economic
    Assessment of Policy Instruments for Combatting Climate Change, under
    Working Group III of the Second Assessment Report. Dr. Stavins is
    affiliated with Harvard University.
        REQUEST: Please provide this list including affiliations and
    locations.
        Affiliations and locations provided in the answers above.

                        CLIMATE CHANGE: IPCC PEER REVIEW
        Question. What peer review process is used for the science
    contributions prior to submittal to the IPCC?
        Answer. The IPCC is an independent entity that has its own process
    for producing and peer-reviewing its assessment documents. Lead Authors
    and Contributing Authors for every chapter of the IPCC Third Assessment
    Report were nominated by their respective governments and chosen by the
    IPCC. These authors work together in an independent IPCC process to
    write their respective chapters. All EPA researchers who are Lead or
    Contributing Authors, as well as EPA-sponsored authors, work with other
    researchers from around the world within this independent IPCC process.
    (In other words, chapters are not first written by individual countries
    outside of the IPCC process, peer reviewed, and then submitted to the
    IPCC.)
        Once the chapters of the IPCC Third Assessment Report are drafted,
    they go through a rigorous international scientific review, which
    includes official government reviews. (IPCC Technical Reports go
    through an identical peer review process.) The U.S. Global Change
    Research Program is responsible for coordinating the U.S. government
    review of IPCC assessment documents. The draft chapters are then
    revised and submitted for approval by all governments involved in the
    IPCC process.
        It is important to distinguish between U.S. scientific research
    done for the U.S. National Assessment and research that is done
    specifically for the IPCC process. These are two independent activities
    with their own peer-review processes. EPA's Global Change Research
    Program has insisted that all work that it has sponsored as part of the
    U.S. National Assessment go through a rigorous peer review process
    before it is released--including release to anyone involved in the IPCC
    Third Assessment Report.
        As described in our response to Question #34, all of the EPA-
    sponsored Regional and Sectoral Assessments are being held to the
    highest standards of scientific excellence. All of the Regional and
    Sectoral Assessment Reports are being subjected to an extensive peer
    review process that has been fully documented to ensure that they are
    scientifically credible, balanced, and unbiased. EPA's Global Change
    Research Program committed to the Congress that it would insist upon
    and maintain scientific excellence, openness, and broad-based
    participation in all of the regional and sectoral assessment reports
    that it sponsors. EPA has fulfilled this commitment and aggressively
    implemented a rigorous peer review process.
        The following guidelines have been established and followed for the
    external peer review of the EPA-sponsored regional and sectoral
    reports:
        Technical Review.--A technical review must be conducted to evaluate
    the accuracy and validity of statements of fact and interpretations of
    data. Each section of the report should be reviewed by independent
    experts with technical expertise in the appropriate subject area. These
    expert reviewers should include persons who are active in relevant
    disciplines or fields of endeavor but who have not participated in the
    assessment process.
        Comprehensive Review.--Experts with broad scientific and technical
    expertise relevant to the particular region or sector should review the
    entire document in a comprehensive manner. These reviewers should not
    have participated in the assessment process.
        Public/Stakeholder Comment.--The report should be circulated for
    comment to a range of interested parties, including the stakeholders
    engaged in the assessment and be available to the public upon request
    during the review period.
        Documentation of Reviews and Responses.--A document should be
    prepared that compiles and summarizes all broad categories of comments,
    and explains the assessment team's responses.
        We also note that the entire assessment process was open and
    predicated on the involvement of stakeholders. The assessments were
    launched with workshops to formulate questions and concerns to be
    addressed by the assessments themselves. A wide range of stakeholders--
    including for example, representatives from industry, state and local
    governments, environmental groups--were invited to take part in the
    workshops. Those who chose to take part had the opportunity to shape
    the assessment, to participate in it, and to review the assessment
    report.

       CLIMATE CHANGE: PUBLIC ACCESS TO PEER REVIEW INFORMATION ON U.S.
                              NATIONAL ASSESSMENT
        Question. How can the public review this material prior to
    submittal to the IPCC?
        Answer. As noted in our response to Question #40, it is important
    to distinguish between U.S. scientific research done for the U.S.
    National Assessment and research that is done specifically for the IPCC
    process. These are two independent activities with their own peer-
    review processes.
        IPCC Review Process.--Once the chapters of the IPCC Third
    Assessment Report are drafted, they go through a rigorous international
    scientific review, which includes official government reviews. The U.S.
    Global Change Research Program is responsible for coordinating the U.S.
    government review of IPCC assessment documents. The U.S. government
    review of the IPCC assessment reports is an open and inclusive process.
    Anyone from the public has an opportunity to participate, review IPCC
    chapters, and submit comments. These comments are then incorporated
    into the official U.S. government response to the IPCC.
        Following the international scientific review, the draft chapters
    are then revised and submitted for approval by all governments involved
    in the IPCC process.
        National Assessment Peer-review Process.--EPA's Global Change
    Research Program has insisted that all work that it has sponsored as
    part of the U.S. National Assessment go through a rigorous peer review
    process before it is released--including release to anyone involved in
    the IPCC Third Assessment Report.
        In order to ensure that all of the EPA-sponsored Regional and
    Sectoral Assessment Reports are scientifically credible, balanced, and
    unbiased, EPA established guidelines for a rigorous external peer
    review process that must be followed by the assessment teams. This
    review process includes a public/stakeholder comment period. EPA's
    guidelines specifically requires that ``The report should be circulated
    for comment to a range of interested parties, including the
    stakeholders engaged in the assessment and be available to the public
    upon request during the review period.''
        Copies of the assessment reports are available to the public upon
    request from the assessment teams during the review period. Also, EPA
    is requiring that each assessment team prepare a document that compiles
    and summarizes all broad categories of comments, and explains the
    assessment team's responses. This document will be made available to
    the public.
        We also note that the entire assessment process was open and
    predicated on the involvement of stakeholders. The assessments were
    launched with workshops to formulate questions and concerns to be
    addressed by the assessments themselves. A wide range of stakeholders--
    including for example, representatives from industry, state and local
    governments, environmental groups--were invited to take part in the
    workshops. Those who chose to take part had the opportunity to shape
    the assessment, to participate in it, and to review the assessment
    report.
        Question. Does EPA maintain a public Internet site that can be used
    to post this material?
        Answer. EPA's Global Change Research Program does not yet have a
    public Internet site that can be used to post this material. However,
    each of the universities responsible for conducting the EPA-sponsored
    Regional and Sectoral Assessments maintain websites. These websites can
    be used to post this material. For example, The Pennsylvania State
    University maintains an excellent website on which is posted their
    Overview document entitled, Preparing for a Changing Climate: The
    Potential Consequences of Climate Variability and Change. The website
    address is: http://www.essc.psu.edu/mara/index.html
        This website also posts documentation of responses to reviewers'
    comments on a draft version of the Overview report.
        Question. Does EPA plan to use this web site for full disclosure of
    any material transferred for use by the IPCC?
        Answer. EPA's Global Change Research Program is in the process of
    developing a new public website. This website is being developed to
    further fulfill the Global Program's commitment to the Congress that it
    will insist upon and maintain scientific excellence, openness, and
    broad-based participation throughout its program (including in all of
    the regional and sectoral assessments that it sponsors). An important
    purpose of this website will be to disseminate data and information. It
    will provide a portal through which scientists, policy analysts, and
    the public can access research data, documents, project descriptions
    and updates, workshop announcements and proceedings, presentations, and
    analytic tools. It will also provide information produced by the Global
    Change Research Program's intramural and extramural researchers,
    including output from the U.S. National Assessment. EPA expects to be
    able to use this new website for public disclosure.
        Related answer from previous Question [NOTE: This has not been
    cleared with Department of State or others.]
        IPCC Third Assessment Report.--Public Review.
        Question. How can the public review this material prior to
    submittal to the IPCC? Will this material be posed on EPA's website
    prior to submittal to the IPCC?
        Answer. EPA will not be leading the review of the Third Assessment
    Report and currently has no plans for posting this material on the EPA
    website prior to submittal to the IPCC.
        For the Second Assessment Report, the United States Government
    invited public comment. A Federal Register Notice was published which
    provided information on how to obtain the report from the United States
    Global Change Research Program and a mailing address for comments. A
    team of people then went through all of the comments (from agencies,
    experts and the public) and put together a set of United States
    Government comments, taking into account some of the comments received
    from the public. The United States Government comments were then
    forwarded to the IPCC. In addition, the United States Government
    separately forwarded the public comments received during the review
    process. Individuals can also send comments directly to the IPCC.

                CO2: ANALYSIS OF EMISSIONS REDUCTIONS
        Question. On August 8, 1998 Administrator Browner wrote to Chairman
    Sensenbrenner that ``EPA is not attempting in any way to implement the
    Kyoto Protocol by conducting the multi-pollutant analysis called for in
    the proposed modification [to the settlement]. EPA does not have any
    plan to regulate CO2 from electric power plants.''
        With this statement in mind, please describe the basis for
    including CO2 in the Office of Air and Radiation March 1999
    study ``Analysis of Emissions Reductions Options for the Electric Power
    Industry'' Please provide a full copy of this study and any
    presentation material developed.
        Answer. EPA has the responsibility under the Clean Air Act to
    decide whether to regulate mercury emissions from coal-fired electric
    power plants. Mercury exposure is associated with serious neurological
    and developmental effects in humans. The March 1999 analysis was an
    update to a series of multi-pollutant analyses of utility emissions
    that were first undertaken four years ago. The updated analysis was
    specifically intended to assist EPA in making decisions on mercury. The
    information it generated will be considered in making decisions
    regarding the possible regulation of mercury emissions from electric
    utility steam generating units under section 112 of the Act.
        Multiple pollutant analysis of utility emissions makes sense
    because any effort to reduce any one pollutant affects the others. In
    the March 1999 analysis EPA evaluated how much reduction in mercury
    would result (and at what cost) from various possible scenarios to
    control mercury. Those model runs also estimate the reductions in other
    pollutants (NOX, SO2 and CO2) that
    would result from these possible mercury control scenarios. The
    analysis also provides estimates of mercury reductions that would
    result from possible scenarios that reduce emissions of NOX,
    SO2 and CO2.
        EPA routinely uses a widely-accepted computer model, called the
    Integrated Planning Model (IPM), to undertake these multiple pollutant
    analyses. EPA has conducted analyses like this for electric power
    plants for more than three years with broad stakeholder involvement and
    support. In 1996, EPA conducted the Clean Air Power Initiative (CAPI),
    a stakeholder process involving utilities, fuel suppliers, labor, and
    environmental organizations using the IPM model to look at the
    interaction of control strategies for various pollutants from electric
    power plants. In that process and in subsequent advisory committee
    meetings the inclusion of carbon dioxide in these analyses was
    supported by a broad range of stakeholders including a number of
    utilities, the United Mine Workers, and environmental organizations.
        Multiple pollutant analyses are called for in the Clean Air Act.
    For example, Sec. 103(g)(1) calls for analyses of ``[i]mprovements in
    nonregulatory strategies and technologies for preventing or reducing
    multiple air pollutants, including sulfur oxides, nitrogen oxides,
    heavy metals, PM-10 (particulate matter), carbon monoxide, and carbon
    dioxide, from stationary sources, including fossil fuel power plants.''

            CO2: LEGAL AUTHORITY FOR CAP AND TRADE SYSTEM
        Question. What legal authority does EPA claim for assuming a ``cap
    and trade'' basis in this study for each of the following emissions:
    mercury, NOX, SO2.
        Answer. As the introduction to the study report emphasizes, the
    options that were analyzed were ``hypothetical approaches to emissions
    controls on the electric power industry for each pollutant.'' They do
    not represent an EPA or Administration position on how any of the
    pollutants should or could be reduced. EPA's authority for conducting
    this analysis can be found in sections 103 and 112 of the Clean Air
    Act.

                          MERCURY RULE NRDC SETTLEMENT
        Question. Is the study related in any way with the NRDC settlement
    in April 1998 related to the Mercury rule?
        Answer. An EPA commitment to perform the study was included as part
    of the proposed April 1998 stipulation modifying an existing settlement
    agreement with the NRDC. As discussed in more detail in the response to
    your question, ``CO2 Consent Decree,'' EPA had already
    planned to perform this analysis irrespective of the settlement
    agreement. Including it in the proposed settlement modification helped
    EPA gain NRDC's agreement to give EPA additional time beyond the then-
    applicable deadline of April 15, 1998 to determine whether to regulate
    mercury emissions from electric utility steam generating units.

              CLEAN AIR PARTNERSHIP FUND--AUTHORIZATION OF FUNDS
        Question. For the fiscal year 2000 appropriations, the
    Administration included language in the EPA appropriation for ``State
    and Tribal Grants'' for a ``new'' $200 million program called the
    ``Clean Air Partnership Fund,'' which was not enacted by the Congress
    (see Budget App. p. 930-931). The request said the ``new'' program
    would be carried out under section 103 of the Clean Air Act. The word
    ``new'' is in the Budget explanation. This year the fiscal year 2001
    appropriation language repeats the request at a lower funding level of
    $85 million. In light of the provisions of section 327 of the Clean Air
    Act, why is EPA apparently trying to circumvent the legislative
    committees of Congress in requesting through the Appropriations
    Committees funds for a ``new'' program that appears to be for more than
    one fiscal year 2001? Is this only a 1-year program?
        Answer. Section 103 of the Clean Air Act provides the statutory
    authority necessary for the award of financial assistance to support
    activities that would be undertaken as part of the Clean Air
    Partnership Fund program. Section 103 requires the Administrator to
    establish a ``national research and development program for the
    prevention and control of air pollution.'' As part of this program,
    Section 103(a)(1) requires the Administrator to ``conduct, and promote
    the coordination and acceleration of research, investigations,
    experiments, demonstrations, surveys, and studies relating to the
    causes, effects (including health and welfare effects), extent,
    prevention and control of air pollution.'' Section 103(b)(3) authorizes
    the Administrator to make grants to support the activities listed in
    Section 103(a)(1). The Section 103(b)(3) grant authority thus includes
    the authority to fund demonstration projects, as well as related
    studies and investigations, such as those that would be supported
    through the Clean Air Partnership Fund program.
        Section 327 of the Clean Air Act (the Act) authorized
    appropriations ``to carry out this chapter'' for the seven fiscal years
    commencing after the date of enactment of the Clean Air Act amendments
    or November 15, 1990. This means that there were authorized to be
    appropriated funds to carry out the Act for fiscal years 1991 through
    1997; the section 327 authorization of appropriations expired on
    September 30, 1998. Nonetheless, EPA can continue to implement a
    program whose authorization has expired provided Congress continues to
    appropriate funds for the program. This has been the situation for the
    Clean Air Act. The Comptroller General has recognized that, as a
    general proposition, the appropriation of funds for a program whose
    funding authorization has expired provides a sufficient legal basis to
    continue the program. 65 Comp. Gen. 524 (1986); 65 Comp. Gen. 318, 320-
    21 (1986). The enacted appropriation effectively carries its own
    authorization. See 67 Comp. Gen. 401 (1988); B-219727, July 30, 1985.
        Appropriations are presumed to be available for one fiscal year,
    unless specified otherwise in an appropriation act. The funds
    appropriated in EPA's State and Tribal Assistance Grants account are
    specifically ``to remain available until expended''. With section 103
    of the Clean Air Act serving as the grant authority, the Agency's
    Appropriation Act and the STAG appropriation, enacted after section 327
    of the Clean Air Act, would provide the Agency with the authority to
    carry out a new program with funds made available for the fiscal year
    of the Appropriation Act and with funds that are carried over and
    remain available for obligation until expended in a succeeding year.

         CLEAN AIR PARTNERSHIP FUND--AUTHORITY FOR MULTI-YEAR PROGRAMS
        Question. Section 327 of the Clean Air Act authorizes
    appropriations for the Act for 7 fiscal years after enactment in 1990
    or through September 30, 1998. That authorization has expired. However,
    a February 16, 2000 White House letter to ``Dear Interested Party''
    from Mr. Roger Ballentine, explains that EPA is re-proposing the
    ``creation of a new'' Clean Air Partnership Fund at an $85 million
    level rather than $200 million ``to achieve reductions in both
    greenhouse gas emissions and ground-level air pollutants.'' The letter
    also states that EPA ``will expand its industry partnership programs''
    to ``encourage'' businesses to adopt reduction opportunities for the
    ``most potent greenhouse gases'' listed in the Kyoto Protocol. The
    letter clearly implies that both of these programs are for multi-years,
    not just for fiscal year 2001. If that is right, what is the authority
    for multi-year programs in light of section 327 of the Act? Is EPA
    expecting the appropriation process to provide this authorization
    beyond fiscal year 2001?
        Answer. Section 103 of the Clean Air Act provides the statutory
    authority necessary for the award of financial assistance to support
    activities that would be undertaken as part of the Clean Air
    Partnership Fund program. Section 103 requires the Administrator to
    establish a ``national research and development program for the
    prevention and control of air pollution.'' As part of this program,
    Section 103(a)(1) requires the Administrator to ``conduct, and promote
    the coordination and acceleration of, research, investigations,
    experiments, demonstrations, surveys, and studies relating to the
    causes, effects (including health and welfare effects), extent,
    prevention and control of air pollution.'' Section 103(b)(3) authorizes
    the Administrator to make grants to support the activities listed in
    Section 103(a)(1). The Section 103(b)(3) grant authority thus includes
    the authority to fund demonstration projects, as well as related
    studies and investigations, such as those that would be supported
    through the Clean Air Partnership Fund program.
        Section 327 of the Clean Air Act (the Act) authorized
    appropriations ``to carry out this chapter'' for the seven fiscal years
    commencing after the date of enactment of the Clean Air Act amendments
    or November 15, 1990. This means that there were authorized to be
    appropriated funds to carry out the Act for fiscal years 1991 through
    1997; the section 327 authorization of appropriations expired on
    September 30, 1998. Nonetheless, EPA can continue to implement a
    program whose authorization has expired provided Congress continues to
    appropriate funds for the program. This has been the situation for the
    Clean Air Act. The Comptroller General has recognized that, as a
    general proposition, the appropriation of funds for a program whose
    funding authorization has expired provides a sufficient legal basis to
    continue the program. 65 Comp. Gen. 524 (1986); 65 Comp. Gen. 318, 320-
    21 (1986). The enacted appropriation effectively carries its own
    authorization. See 67 Comp. Gen. 401 (1988); B-219727, July 30, 1985.
        Appropriations are presumed to be available for one fiscal year,
    unless specified otherwise in an appropriation act. The funds
    appropriated in EPA's State and Tribal Assistance Grants account are
    specifically ``to remain available until expended''. With section 103
    of the Clean Air Act serving as the grant authority, the Agency's
    Appropriation Act and the STAG appropriation, enacted after section 327
    of the Clean Air Act, would provide the Agency with the authority to
    carry out a new program with funds made available for the fiscal year
    of the Appropriation Act and with funds that are carried over and
    remain available for obligation until expended in a succeeding year.

     KYOTO PROTOCOL: CLARIFICATION OF PROCEDURES AND MECHANISMS INVOLVING
                   ``BINDING CONSEQUENCES'' UNDER ARTICLE 18
        Question. The Clean Air Report for February 17, 2000 reports that
    the U.S. delegation, which includes EPA officials, negotiating rules,
    guidelines, procedures and modalities for the Kyoto Protocol submitted
    to the Convention Secretariat on January 31 new ideas for enforcement
    of a country's commitment under Article 3 of the Protocol and of the
    Kyoto mechanisms. This includes binding consequences for violations.
        Is it correct that the Kyoto Protocol does not include any
    compliance provisions and that Article 18 provides that any procedures
    and mechanisms involving ``binding consequences'' must be adopted by
    amendment to the Protocol after it enters into force?
        Answer. As this is a matter of treaty interpretation, we requested
    the views of the Department of State, which replied as follows: It is
    not correct to say that the Protocol does not include any compliance
    provisions. The Protocol contains many compliance-related provisions
    such as those for monitoring and reporting emissions data (Articles 5
    and 7), expert review of implementation (Article 8), and dispute
    resolution (Article 19). It is also too broad to assert that the only
    way to adopt binding consequences is through an amendment to Article 18
    after the Protocol enters into force. First, the requirement in Article
    18 for an amendment applies only to procedures and mechanisms ``under
    this Article.'' Second, it applies only to noncompliance with the
    Protocol (as opposed, for example, to not meeting eligibility
    requirements under other Articles). Finally, it would also be possible
    for the Conference of the Parties to modify the Protocol before it
    enters into force. The Parties would then ratify the modified
    instrument, not the original Protocol.

        KYOTO PROTOCOL: U.S. DELEGATION PROPOSAL OF JAN. 31ST RECOGNIZE
                        ADOPTION BY PARTIES TO PROTOCOL
        Question. Does the U.S. delegation proposal of January 31 calling
    for bans on use of the Kyoto mechanisms and other binding consequences
    also recognize that such consequences must await adoption by Parties to
    the Protocol after entry into force of an amendment as provided in
    Article 18 or does the U.S. contemplate some other process for adopting
    such consequences?
        Answer. The Department of State notes that the U.S. submission of
    January 31 did not call for ``bans'' on the use of the Kyoto
    mechanisms. Rather, the U.S., like other Parties, has proposed certain
    linkages between annual emissions inventory and reporting requirements
    and eligibility to use the Protocol's flexibility mechanisms in order
    to assure the environmental integrity of those mechanisms. The U.S. has
    proposed that a Party could lose access to the mechanisms only in the
    case of a failure to meet inventory and reporting requirements so
    egregious as to undermine the environmental integrity of the
    mechanisms. In such a case, access to the mechanisms would be restored
    when the inventory or reporting problem was rectified. Smaller-scale
    inventory problems would be remedied in other ways and not result in
    loss of mechanism eligibility. Eligibility requirements would be part
    of the mechanisms provisions under Articles 6, 12, and 17, not binding
    consequences under Article 18. Eligibility requirements would thus be
    adopted by the Conference of the Parties (in the case of emissions
    trading) or the Conference of the Parties serving as the meeting of the
    Parties to the Protocol (in the case of joint implementation and the
    clean development mechanism).

      KYOTO PROTOCOL: EFFECT OF PROPOSAL ON PREDICTIONS OF COSTS FOR U.S.
                        TRADING WITH RUSSIA AND UKRAINE
        Question. In 1998, the Administration's economic analysis of the
    Kyoto Protocol stressed that it would not be costly because of the
    budget period of 5 years, the mechanisms, and sinks. However, the
    recent submissions by the U.S. delegation appear to undercut the
    benefits of the budget period and the mechanisms by, in essence,
    calling for annual reviews for enforcement purposes of a country's
    inventories, which are merely estimates, and for bans on the use of the
    mechanisms during the five year period if the reviews find deficiencies
    in the inventories or if the monitoring and reporting systems are
    deficient. What will be the effect of that proposal on the predictions
    about the Protocol's costs for the U.S. and on the ability of the U.S.
    to meet its commitment over the budget period through the mechanisms,
    such as trading with Russia and the Ukraine?
        Answer. We do not expect there to be any impact on the
    Administration's cost projections or our country's ability to meet its
    commitment under the Kyoto Protocol, if it is ratified, as a result of
    the proposals to which you refer.
        The Protocol provides for countries to undertake and report annual
    emissions inventories, which are to be reviewed each year. As you may
    know, emissions inventories are already performed and reviewed on an
    annual basis under the United Nations Framework Convention on Climate
    Change (UNFCCC), which was ratified in 1992, and Articles 5, 7, and 8
    of the Protocol build on these existing requirements. Under Article 3
    of the Protocol, a country will be required to show that its cumulative
    emissions over a five-year commitment period (2008-12) do not exceed
    its assigned amount, as increased or decreased due to the Protocol's
    flexibility mechanisms (such as international emissions trading) or its
    sink provisions. Compliance with Article 3 will be evaluated using
    countries' annual inventory reports on the basis of cumulative totals
    at the end of the five-year period.
        As explained in answer to the preceding question, the U.S.
    submissions to which you refer include proposals for certain linkages
    between annual emissions inventory and reporting requirements and
    access to the Protocol's flexibility mechanisms in order to assure the
    environmental integrity of those mechanisms. A Party could lose access
    to the mechanisms only in the case of a failure to meet inventory and
    reporting requirements so egregious as to undermine the environmental
    integrity of the mechanisms. In such a case, access to the mechanisms
    would be restored when the inventory or reporting problem was
    rectified. Smaller-scale inventory problems would be remedied in other
    ways and not result in loss of mechanism eligibility.
        Under these proposals, we expect that countries will be able to
    retain their eligibility to use the mechanisms. As already noted,
    countries are already performing annual emissions inventories under the
    UNFCCC, and while improvements in inventories may be needed if the
    Protocol is ratified and enters into force, there is ample time to make
    such improvements before the first commitment period begins. Thus,
    these proposed linkages would serve as a useful incentive for prompt
    compliance with inventory and reporting requirements without
    diminishing the flexibility offered by the five-year budget period, the
    mechanisms, or sink credits. As a result, we would not expect there to
    be any impact on the Administration's cost projections or the ability
    of the U.S. to meet its commitment.

        KYOTO PROTOCOL: SOURCE AND REASON OF U.S. PAYMENT OF FINES FOR
                                   VIOLATIONS
        Question. Some apparently want the countries to pay fines for
    violations and the Report says the ``U.S. would entertain, but does not
    endorse,'' payment of fines into a fund to assist developing countries.
    Why would the U.S. even entertain such an idea and where would the
    money come from if the U.S. was a violator?
        Answer. The Administration does not support mandatory payment of
    fines for non-compliance.

    CO2 EMISSIONS: STATUS OF PETITION TO REGULATE CO2
                                   EMISSIONS
        Question. What is the status of EPA's consideration of the Oct. 20,
    1999 environmental groups' petition for EPA to regulate CO2
    emissions from new cars and trucks? When does EPA plan to respond to
    the petition?
        Answer. On October 22, 1999, a coalition of 19 groups, headed by
    the International Center for Technology Assessment, submitted a
    petition asking EPA to regulate emissions of carbon dioxide and other
    greenhouse gases from new motor vehicles and engines. EPA has made no
    decision concerning whether to grant or deny the petition. In
    compliance with the Agency's common practice and requests by members of
    Congress, EPA plans soon to publish a notice asking for public comment
    on the petition. The notice will probably provide a 90 day comment
    period. Several comments have already been received and placed in a
    public docket that EPA has established for the petition. See docket
    number A-2000-04. EPA will consider all comments in making a decision
    on the petition.

                KYOTO PROTOCOL: KNOLLENBERG FUNDING RESTRICTION
        Question. Under EPA's reading of the Knollenberg funding
    restriction, the Agency may issue regulations ``for a number of
    purposes, including reduction of greenhouse gas emissions,'' as long as
    the regulation is ``not for the purpose of implementing, or in
    preparation for implementing, the Kyoto Protocol.'' Reducing greenhouse
    gas emissions is the purpose of the Kyoto Protocol. As a practical
    matter, what real difference is there between issuing regulations to
    accomplish the purpose of the Kyoto Protocol and issuing regulations
    for the purpose of implementing the Protocol? Isn't EPA's reading of
    Knollenberg permissive rather than prohibitive or restrictive?
        Answer. The Clean Air Act authorizes (and, in places, requires) EPA
    to take a variety of actions to address air pollution problems entirely
    unrelated to climate change. As elaborated below, some of these actions
    can also have the indirect effect of reducing greenhouse gas emissions,
    depending on the sources that are controlled and the types of pollution
    reduction measures sources elect to use. In addition, certain
    provisions of the Clean Air Act authorize regulatory actions that
    directly address emissions of greenhouse gases. These provisions pre-
    date the Kyoto Protocol and action taken under them carries out
    purposes articulated in the Clean Air Act itself and does not implement
    or prepare to implement the Protocol. EPA does not believe that the
    Knollenberg language bars, or was intended to bar, either of these
    types of regulatory action under the Clean Air Act.
        The Knollenberg language covers EPA's proposal or issuance of a
    rule, regulation, decree, or order for the purpose of implementation,
    or in preparation for implementation of the Kyoto Protocol. EPA's
    regulatory activities implementing the requirements of the Clean Air
    Act are for the purpose of implementation of those particular
    requirements of the Clean Air Act, not the Kyoto Protocol.
        As noted above, many EPA activities authorized under the Clean Air
    Act are entirely unrelated to climate change, but have various indirect
    effects, including reduction of greenhouse gas emissions. For example,
    control of sulfur dioxide for the purpose of reducing acid rain, or
    control of nitrogen oxides for the purpose of reducing tropospheric
    ozone, may have the indirect effect of reducing greenhouse gas
    emissions, depending upon the sources controlled and the types of
    abatement measures they elect to use. Protecting human health and the
    environment from ozone pollution and from acid rain are major goals of
    the Clean Air Act. The Knollenberg language does not on its face bar
    expenditures on such activities and it would be unreasonable to assume
    that Congress intended such an interpretation.
        Other provisions of the Clean Air Act authorize regulatory actions
    that directly address emissions of greenhouse gases, but do not
    implement or prepare to implement the Kyoto Protocol. For example,
    Title VI of the Clean Air Act, enacted in 1990, provides for EPA to
    take certain actions regarding the health and environmental risks of
    substances that serve as replacements for ozone-depleting chemicals.
    Section 612 directs EPA to place limits on the use of particular
    replacement chemicals if the agency determines that other existing
    alternatives ``reduce overall risk to human health and the
    environment.'' EPA believes that a reasonable and common-sense/
    interpretation of the quoted language includes the consideration of
    contribution to climate change. Thus, in comparing the ``overall risk''
    of various substitutes for ozone-depleting substances, EPA considers
    ozone depletion potential, human toxicity, flammability, contribution
    to global warming, occupational health and safety, and effects on water
    and air quality. Actions taken under section 612 of the Clean Air Act
    carry out the purposes of that provision (i.e., ensuring that
    replacements for ozone-depleting substances do not in turn create new
    and unnecessary risks). These actions are not for the purpose of
    implementing or preparing to implement the Kyoto Protocol.

             CCTI TAX CREDITS: COST TO TREASURY IN LOST TAX REVENUE
        Question. As you know, the Administration is requesting $4 billion
    in Climate Change Technology Initiative (CCTI) tax credits over five
    years. What is the cost to the Treasury in lost tax revenue of each of
    those tax credits? In each case, is the cost in lost revenue greater or
    less than $14 to $23 per ton of emissions reduced?
        Answer. As provided in the President's budget, the tax incentives
    are estimated to cost $4.03 billion over five years (fiscal year 20001
    through fiscal year 2005). The 5-year revenue impact of each tax credit
    are as follows: energy-efficient building equipment ($201 million),
    energy-efficient homes ($633 million), solar energy systems ($132
    million), electric, fuel cell, and hybrid vehicles ($2,078 million),
    clean energy ($976 million), and distributed power ($10 million).

     CCTI TAX CREDITS: VOLUNTARY PROGRAM COSTS LESS THAN MANDATORY PROGRAMS
        Question. Last year, the Energy Information Administration (EIA)
    estimated, for very similar proposals, that the average revenue loss
    per ton of carbon reduced or avoided is $133/tonne to $206/tonne. Only
    the utility co-firing tax credit fell within the $14 to $23 range
    estimated by Dr. Yellen as the cost of implementing the Protocol via
    emissions trading and other flexibility mechanisms. In short, all but
    one of the tax credits failed what might be called the ``Janet Yellen
    Test.'' The Kyoto Protocol would create mandatory--legally binding--
    emission reduction obligations. The CCTI tax credit proposals are
    voluntary. Shouldn't voluntary programs cost less than mandatory
    programs, not the other way around?
        Answer. Please see prior response to ``CCTI Tax Credits: Cost to
    Treasury in Lost Tax Revenue.''

         NSR REFORM AND RELATIONSHIP TO UTILITY ENFORCEMENT INITIATIVE
        Question. While there is considerable debate about how to reform
    the New Source Review program (NSR) under the Clean Air Act, it appears
    that almost everyone agrees that this program is overly complex and has
    imposed a high level of uncertainty and unnecessary burdens on States
    and industrial sources. In its 1998 notice of availability of further
    changes to the NSR rules, EPA indicated that its proposed changes would
    be likely to result in NSR applicability to projects at existing
    facilities that ``increase reliability, lower operating costs, or
    improve operational characteristics'' of production equipment.
        Can you explain how reinterpreting your rules to make routine
    efficiency and reliability projects subject to the NSR permitting
    process will help to improve this program and reduce disincentives for
    technology development and deployment?
        Answer. In answering this question, it is important to distinguish
    between two efforts. One is the effort to enforce the existing NSR
    rules. The other is an effort to reform the NSR rules to promote more
    flexibility and certainty, as well as reduce the burdens on states and
    sources, while maintaining at least the same level of environmental
    protection.
        In the context of this first effort, the enforcement action, some
    industry stakeholders have alleged that EPA has reinterpreted its NSR
    rules governing the longstanding NSR exemption for ``routine
    maintenance, repair, and replacement.'' However, the interpretation of
    ``routine'' has remained unchanged. Nothing in the recent EPA
    complaints, notices of violation, or administrative orders indicates
    that EPA has changed its interpretation of this exclusion nor has
    anyone identified the prior interpretation that EPA is alleged to be
    changing. In fact, in a widely publicized 1990 court decision
    (Wisconsin Electric Power Co. vs. Reilly) EPA's historical
    interpretation of ``routine'' was the subject of litigation, and the
    interpretation was upheld by the courts.
        The EPA is hopeful that its effort to reform the NSR rules will
    promote flexibility and certainty in NSR permitting to reduce the
    burden on states and sources and assure an equivalent level of
    environmental protection as the current program. However, the subject
    of what is ``routine'' and the issues raised by the enforcement action
    are not at issue in NSR reform. Thus, not only have the policies on
    ``routine'' not changed in the past, but there is also no proposal to
    do so in NSR reform.
        This question suggests that NSR reform (and specifically the notice
    of availability) will somehow expand NSR applicability to include
    projects that ``increase reliability, lower operating costs, or improve
    operational characteristics.'' As stated earlier, EPA has indicated for
    years that NSR already applies to these types of changes where they
    increase emissions. The sentence you reference illustrates this point
    by stating:

        ``The EPA's experience leads to the conclusion that sources
    generally make non-routine physical or operational changes which are
    substantial enough that they might trigger NSR in order to increase
    reliability, lower operating costs, or improve operational
    characteristics of the unit and do so in order that they may improve
    their market position.''

        Thus, NSR reform will not subject these types of projects to NSR;
    they are already subject if they increase emissions. Many changes which
    a source labels ``efficiency'' changes can increase emissions by large
    amounts, and the Clean Air Act requires review of the environmental
    impacts of these changes. However, if an ``efficiency'' change does not
    increase emissions, NSR does not apply, and there is nothing proposed
    that would cause NSR to apply to a change that does not increase
    emissions.

                      EFFECTS OF NSR ``REINTERPRETATION''
        Question. Don't you think that reinterpreting the law to subject to
    NSR routine projects that neither increase capacity nor emission rates,
    but only improve operations will magnify the burdens of the NSR
    program, increase procedural delays, and further discourage innovation?
        Answer. First, it is important to note that before a modification
    is subject to NSR it must first result in a potential emissions
    increase. Thus, unless a project to improve operations also results in
    an increase in emissions, it would not be subject to major NSR.
    Moreover, as noted above, the EPA is acting consistent with
    longstanding policy as upheld by the courts and is not ``reinterpreting
    the law.'' Indeed, the preamble to the 1992 rule revising the NSR
    regulations applicable to electric utilities specifically states that
    ``changes that improve operational characteristics will be treated in
    the same manner as any other changes'' and thus, when an improvement
    ``is not routine and an emissions increase results from the
    improvement, that portion of the emissions increase resulting from the
    improvement will be considered in determining whether the proposed
    change subjects the unit to NSR requirements'' 57 Fed. Reg. 32314,
    32327 (1992). Because there has been no change in EPA's interpretation
    of this exclusion, no increase in procedural delays or discouragement
    of innovation could have resulted from a reinterpretation.

                   ENFORCEMENT ACTION AND POTENTIAL BROWNOUTS
        Question:. Since EPA's actions could affect potentially thousands
    of projects and even require prior Agency NSR review of projects
    designed simply to prevent a deterioration in efficiency, is EPA
    prepared to accept responsibility for interruptions in service (brown-
    outs)?
        Answer. Again, as stated earlier, a non-routine project designed to
    prevent a deterioration in efficiency would trigger major NSR only if
    it also resulted in a significant increase in emissions. EPA's
    responsibility is to assure that sources comply with the Act by
    obtaining the necessary permits when they increase emissions. Sources
    should plan for obtaining the necessary air permits whenever they
    undertake construction that will increase emissions by a large enough
    amount. Sources also have other options to legally avoid NSR
    permitting. These options include ``netting out'' of NSR or limiting
    the size of the emissions increase to stay below NSR levels. Therefore,
    to avoid interruptions in service and possible brownouts, a source
    should take into consideration its options for compliance with all
    regulatory requirements (including air regulations) as part of its
    normal capital and operational planning activities prior to undertaking
    a construction project that increases emissions. With appropriate
    planning, sources can readily avoid brownouts and other similar
    situations.
        Moreover, as is the usual practice, the EPA intends to resolve the
    violations in the ongoing enforcement action in a manner that will not
    result in brownouts. Indeed, in the settlement with Tampa Electric
    Company, the company has ample time to install the necessary emissions
    control technology and can thus plan the installation so that it
    minimizes any impact on the ability to meet electricity demand.

           NAAQS: AIR ENFORCEMENT DIVISION: APPLICATION OF NEW RULES
        Question. What kind of procedures will be put in place to ensure
    that the Agency's Air Enforcement Division will not become over zealous
    in the application of the new rules?
        Answer. The EPA Air Enforcement Division's priorities are developed
    after discussion with the Air Program Office. In addition, the Regions,
    and representatives of state and local air pollution control agencies
    are consulted before enforcement priorities are set. By using objective
    targeting methodologies including analyses of compliance data and
    investigation reports, the Division pursues enforcement cases that
    result in the greatest environmental benefit while optimizing the use
    of available agency resources. The Office of Enforcement and Compliance
    Assurance, which includes the Air Enforcement Division, annually re-
    evaluates its list of ``National Significant Issues'' for enforcement,
    soliciting comment from other offices within EPA. We have also
    publicized existing requirements through widely distributed Enforcement
    Alerts.

                                GREENHOUSE GASES
        Question. What other ``greenhouse gases'' are EPA trying to
    regulate: methane from agriculture, methane from wetlands, water vapor?
        Answer. EPA has no current plans to regulate methane from
    agriculture, methane from wetlands, or water vapor.

    TMDL: NATIONAL POLLUTANT DISCHARGE ELIMINATION SYSTEM (NPDES) PERMITS:
                              FORESTRY ACTIVITIES
        Question. What specific forestry activities has the Environmental
    Protection Agency (EPA) now designated to be point source discharges
    subject to federal National Pollutant Discharge Elimination System
    (NPDES) permits?
        Answer. Currently, 40 CFR 122.27 designates a silvicultural point
    source as any discernible, confined and discrete conveyance related to
    rock crushing, gravel washing, log sorting, or log storage facilities
    which are operated in connection with silvicultural activities and from
    which pollutants are discharged into waters of the United States. EPA's
    August 23, 1999 proposal would, if promulgated, add an authority for
    States and EPA to designate for NPDES regulation, on a case-by-case
    basis, discharges of storm water from additional silviculture
    activities such as road building and harvesting. Under the proposal, a
    State may designate a source only where there is a discharge from a
    discrete, confined conveyance, a ``point source,'' and where the State
    determines that the discharge contributes to a violation of water
    quality standards or is a significant contributor of pollutants. EPA
    could designate a source under these circumstances as well; however,
    its authority would be limited further. EPA could designate a source
    only where there is a point source discharge to a waterbody that is
    impaired, the silvicultural operation is contributing to that
    impairment, the Agency is establishing a TMDL for that waterbody, and
    the Agency believes it is necessary, to designate that source to
    provide reasonable assurance that the source will meet its allocated
    load reductions under the TMDL.

                   TMDL: SILVICULTURAL OPERATIONS REGULATION
        Question. Is this the first time EPA will regulate silviculture
    operations?
        Answer. This is not the first time the Agency would be regulating
    discharges associated with silvicultural operations. The Environmental
    Protection Agency's (EPA) regulations currently require NPDES permits
    for discharges associated with log sorting, log storage, gravel washing
    and rock crushing. (See silviculture regulations at 40 CFR
    Sec. 122.27).

               TMDL: SILVICULTURAL OPERATIONS PERMIT REQUIREMENTS
        Question. Does this proposal automatically and categorically
    subject all silvicultural operations to NPDES permit requirements?
        Answer. This rule would not automatically or categorically subject
    silviculture sources to the NPDES program. If the rule were promulgated
    as proposed, no additional silviculture sources would be required to
    obtain an NPDES permit. The proposed designation authority is
    discretionary, not mandatory, and, under the proposal could be invoked
    only on a case-by-case basis and under the following circumstances.
        A State may designate a source only where there is a discharge from
    a discrete, confined conveyance, a ``point source,'' and where the
    State determines that the discharge contributes to a violation of water
    quality standards or is a significant contributor of pollutants. EPA
    could designate a source under these circumstances as well; however,
    its authority would be limited further. EPA could designate a source
    only where there is a point source discharge to a waterbody that is
    impaired, the silvicultural operation is contributing to that
    impairment, the Agency is establishing a TMDL for that waterbody, and
    the Agency believes it is necessary, to designate that source to
    provide reasonable assurance that the source will meet its allocated
    load reductions under the TMDL.
        Sources located in States with effective and appropriately
    protective forestry programs and which are implementing those programs
    would likely not be affected by this proposal. The intent of this
    proposal was to provide a mechanism to address those that are not
    implementing measures to protect water quality.

             TMDL: FORESTRY ACTIVITIES DEFINED AS NON-POINT SOURCE
        Question. Is it statutory or through regulation that forestry
    activities are defined as a nonpoint source category and thereby not
    subject to point source discharge NPDES permit requirements?
        Answer. The current exemption from NPDES permit requirements for
    certain storm water discharges associated with a silvicultural
    operation is regulatory, not statutory. In other words, there is
    nothing in the CWA that explicitly excludes storm water discharges
    associated with silvicultural operations from NPDES requirements. The
    Agency's regulations currently define certain discharges associated
    with silvicultural activities as ``nonpoint'' source discharges
    therefore, not requiring NPDES permits. These regulations, drafted
    prior to the 1987 storm water amendments, properly prevent the general
    application of the permit requirements to countless discharges of storm
    water from silvicultural operations, the vast majority of which are not
    ``significant contributors'' of pollutants to waters of the United
    States.
        Agency regulations established prior to the 1987 Amendments subject
    some discharges associated with silvicultural activities to NPDES
    permit requirements; namely, those associated with log sorting and
    storage facilities and gravel washing and rock crushing activities. (40
    CFR Sec. 122.27). Facilities conducting these activities are currently
    required to obtain NPDES permits.

             TMDL: SILVICULTURAL OPERATIONS STORMWATER REGULATIONS
        Question. Do the existing storm water regulations enacted after the
    1987 Amendments to the Clean Water Act give EPA the authority to
    designate silviculture as a point source discharge subject to these
    provisions?
        Answer. The 1987 Amendments to the Act created a new storm water
    program and exempted from the Clean Water Act (CWA) permit
    requirements, all ``discharges'' (i.e. a discernable, confined discrete
    conveyance) of storm water except specified discharges (e.g. some
    municipal industrial storm water). These amendments also provided
    discretionary authority to designate specific storm water discharges as
    needing a permit if they contribute to a violation of a water quality
    standard or are ``significant contributors'' of pollution to waters of
    the United States. (See CWA Section 402(p)(2)(E) and implementing
    regulations at 40 CFR Sec. 122.26(a)(v)). Under the proposal, it is
    this discretionary designation authority which would be invoked if and
    when EPA or a State chose to designate a discharge from a silvicultural
    operation as requiring an NPDES permit.

           TMDL: SILVICULTURAL OPERATIONS IMPAIRMENT OF WATER QUALITY
        Question. Does impairment of water quality that might result from
    silvicultural operations provide the Agency with the justification to
    designate forestry operations a point source discharge subject to NPDES
    permits?
        Answer. The August 23, 1999, Federal Register notice of the
    proposed rule explains that for the sources that were categorically
    excluded previously (nursery operations, site preparation,
    reforestation and subsequent cultural treatment, thinning, prescribed
    burning, pest and fire control, harvesting operations, surface
    drainage, or road construction and maintenance), the categorical
    exclusion from the definition of ``point source'' would be removed.
    Instead, on a case-by-case basis, selected sources could be designated
    for regulation under the NPDES program for storm water discharges under
    40 CFR 122.26(a)(v). EPA believes the impacts and potential impacts on
    water quality of silviculture activities, as reported by States, do
    justify this use of case-by-case authority to designate discharges of
    polluted storm water for regulation under NPDES.

             TMDL: SILVICULTURAL OPERATIONS POINT SOURCE DISCHARGE
        Question. How does EPA now claim after almost 30 years of Clean
    Water Act legislation, regulation, and case law that silvicultural
    operations are to be designated as a point source discharge subject to
    NPDES permits?
        Answer. As explained in the August 23, 1999, Federal Register
    notice of the proposed rule, in 1987, Congress directed EPA to focus on
    water quality concerns associated with storm water. One of the types of
    storm water discharges that the Agency identified as appropriate for
    regulatory control under the NPDES program was storm water discharges
    associated with construction activity, including clearing, grading, and
    excavation activities. Storm water discharges resulting from land
    disturbance have significant potential for water quality impairment due
    to excessive sediment loads and other factors. Sediment adversely
    affects aquatic ecosystems by reducing light penetration, impeding
    sight-feeding, smothering benthic organisms, abrading gills and other
    sensitive structures, reducing habitat by clogging interstitial spaces
    within a streambed, and reducing the intergravel dissolved oxygen by
    reducing the permeability of the bed material.
        To date, NPDES regulation of storm water discharges associated with
    construction activity has protected water quality from the runoff
    associated with, for example, the construction of roads. A gap in
    regulatory coverage exists, however, in that the existing NPDES
    regulations categorically exclude silvicultural road construction and
    maintenance as well as run-off from several other categories of
    silviculture activities from the definition of ``point source.''
    Therefore, the current silviculture regulation excludes discharges
    related to all but four categories of silviculture activities (rock
    crushing, gravel washing, log sorting, and log storage facilities) from
    the universe of sources that can be regulated under the NPDES
    permitting program. EPA's August 23, 1999 proposal moved to address
    this gap by enabling EPA and States to designate, case-by-case, point
    sources of storm water for regulation under NPDES.
        In 1998 the National Water Quality Inventory, 32 States identified
    forestry as a source of water quality problems that affect more than
    20,000 miles of rivers and streams; 220,000 acres of lakes; and 15
    square miles of coastal waters.
        Several types of silvicultural activities that are currently exempt
    from NPDES regulation may cause significant adverse impacts on water
    quality. These include, but are not limited to, road construction and
    maintenance, site preparation, prescribed burning, clearcutting, and
    harvesting operations. As mentioned above, the construction and
    maintenance of roads, other than those constructed for silvicultural
    operations, are currently subject to NPDES requirements. The
    construction and maintenance of roads related to silvicultural
    activities, however, are exempt. Studies demonstrate that such road
    construction may create significant water quality problems. Results
    Senator Craig of a study on forest management activities in a small
    watershed indicated that suspended sediment yields increased almost 8
    fold in the first year following road construction, and two-fold
    following logging in the second year.
        Mechanical site preparation by large tractors that shear, disk,
    drum-chop, or root-rake a site may result in considerable soil
    disturbance over large areas and has a high potential to deteriorate
    water quality. Site preparation techniques that result in the removal
    of vegetation and litter cover, soil compaction, exposure or
    disturbance of the mineral soil, and increased stormflows due to
    decreased infiltration and percolation, all can contribute to increases
    in stream sediment loads. Prescribed burning is another method used to
    prepare sites that may also have effects on water quality as a result
    of increased erosion and the altering of soil properties.
        The actual harvesting of timber can also contribute to water
    quality problems. Results from studies have indicated that
    clearcutting, which is often a method used for timber harvesting, can
    have significant effects on the nutrient levels and temperatures of
    nearby waters. The resulting impacts of a logging operation in the Bull
    Rull Watershed of Oregon include increased nitrate-nitrogen levels for
    up to 7 years after the harvest and an increase in annual stream
    temperatures by 2-3 degrees Celsius for the following 3 years after the
    harvest.

             TMDL: FORESTRY COMMUNITY IMPROVEMENT IN WATER QUALITY
        Question. What progress has the forestry community made to improve
    water quality over the last decade?
        Answer. The forestry community has worked hard during the last
    decade to address water quality impacts from silviculture operations.
    Within the last decade, nearly every state has developed and published
    Best Management Practices (BMPs). Most states with significant
    commercial forestry operations routinely conduct assessments of how
    well their nonpoint source control programs are working. For those
    states which have repeatedly measured implementation of BMPs, there is
    an encouraging trend of improving implementation rates. EPA recognizes
    that implementing properly designed forest management plans which
    include appropriate BMPs can result in logging activities that are both
    economically viable and protective of water quality.

               TMDL: FORESTRY PROVISION IN THE CLEAN WATER ACT
        Question. Has Congress specifically regulated forestry in any
    provision of the Clean Water Act?
        Answer. Yes, the Clean Water Act (CWA) addresses forestry
    activities.
        EPA regulates point sources discharges from certain forestry under
    CWA Section 402, the NPDES permitting program. Since 1976, when EPA
    promulgated its regulations, discharges from certain silviculture
    activities (rock crushing, gravel washing, log sorting and log storage
    facilities)have been subject to NPDES permitting based on the
    interpretation of point source in Section 502 of the CWA. Section 502
    does not specifically mention silviculture.
        Section 319 provides for the establishment of State nonpoint source
    management programs to address various categories of nonpoint source
    pollution, including silviculture. Section 319 does not provide any
    Federal regulatory authority; nor does it mandate that States employ
    regulatory approaches. State 319 programs employ a broad range of
    voluntary and/or regulatory programs to address water quality issues
    associated with forestry, including publication of technical guidance,
    provision of technical assistance and financial assistance, conducting
    audits, and implementing State-established regulatory programs. Section
    319 does not specifically mention silviculture, however, states may
    identify silviculture under their State assessment reports.
        Section 404(f) describes exemptions from Section 404 permitting
    requirements for certain agricultural, silvicultural, and mining
    activities that result in discharges of dredged or fill material into
    waters of the United States. Discharges of dredged or fill material
    into waters of the United States typically require a permit form the
    Army Corps of Engineers. However, discharges of dredged or fill
    material associated with normal forestry activities such as harvesting
    and seeding, as well as for forest road construction and maintenance,
    are exempt unless they are recaptured under Section 404(f)(2). With
    respect to forest road construction or maintenance, Section 404(f)
    requires the use of best management practices to minimize adverse
    impacts to the aquatic environment.
    tmdl: forestry community view of forestry activities as nonpoint source
        Question. EPA states they will only designate forestry activities
    as a point source discharge in ``very narrow circumstances,'' as a
    ``last resort,'' and ``extremely rare circumstances.'' How does the
    forest community view these assurances from the federal Environmental
    Protection Agency?
        Answer. The forest community has indicated their belief that the
    rule as proposed would lead to a significant number of forestry
    operations being subject to NPDES permitting requirements. The Agency
    respectfully disagrees with this assertion. Indeed, EPA believes the
    case-base-provisions would only need to be used in the specific
    circumstances described in the proposal as a means to correct water
    quality impairments resulting from silviculture, where no effective
    program to address such impacts is in place.

                TMDL: FORESTRY EXAMPLES OF EPA IMPOSING LAND USE
        Question. Are there current examples of EPA imposing land use
    forestry requirements on states and forest land owners?
        Answer. No, EPA regulations currently require NPDES permits for
    point source discharges associated with log sorting, log storage,
    gravel washing and rock crushing. (See silviculture regulations at 40
    CFR Section 122.27.) These permits regulate discharges from these
    activities, not land use.
       tmdl: authority to require states to develop reasonable assurance
        Question. Does EPA have the authority to require states to develop
    a ``reasonable assurance'' policy to achieve a nonpoint source load
    reduction and submit that policy with a TMDL implementation plan to EPA
    for approval?
        Answer. Yes. The preamble to the proposed rule provides an
    extensive discussion of EPA's authority to require that an
    implementation plan be submitted as part of a TMDL and that reasonable
    assurance be part of that implementation plan. [see pages 46032 through
    46034, Federal Register Vol. 64, No. 162, August 23, 1999].

                      TMDL: FORESTRY ECONOMIC IMPLICATIONS
        Question. What are the economic implications of EPA's proposal to
    designate forestry as a point source discharge subject to NPDES
    permits?
        Answer. The proposed silvicultural designation authority is both
    limited and discretionary and, if invoked, it would be on a case-by-
    case basis. By amending the definition of silviculture point source the
    proposed rule would remove an exemption from the NPDES program for
    discharges from certain activities associated with silviculture. The
    removal of this exemption would not automatically and categorically
    subject any silvicultural operations to NPDES permit requirements. EPA
    estimates that the costs related to this proposed authority would total
    $3.7-$13.2 million annually. The estimates include costs to potentially
    designated silviculture operators for compliance with NPDES permit
    requirements, and States and EPA for administration and oversight. The
    costs reflect that these sources would not be subject to NPDES permit
    requirements unless and until they are designated on a case-by-case
    basis.

              TMDL: BENEFIT-COST ECONOMIC ANALYSIS OF ITS PROPOSAL
        Question. Should EPA be required to conduct a thorough benefit-cost
    economic analysis of its proposal?
        Answer. EPA recognizes that the TMDL program is of interest to a
    wide range of stakeholders, and expects that stakeholders will have an
    interest in understanding the costs and benefits from implementation of
    the TMDL program as well as the direct costs of developing TMDLs. While
    the issues and estimating methods are complex and difficult, EPA is
    working to develop such information. As this work evolves and its
    quality is sufficient to meaningfully inform the public, EPA will make
    it available for public review.

                     TMDL: NEAR A CULVERT--NONPOINT SOURCE
        Question. Is it the position of EPA that any activity that takes
    place near a culvert will be classified as point source pollution? If
    not, how does the EPA determine which ones are? Does EPA intend to
    regulate forestry practices in the headwaters basins when natural
    runoff flows through a drainage culvert in conjunctions with a forest
    road?
        Answer. EPA's August 23, 1999 notice proposed to allow states and
    EPA, in limited cases to designate for NPDES permitting, point source
    discharges of polluted storm water from forestry operations, where
    necessary to address a clear water quality problem. It is EPA's
    position, consistent with its regulations at 40 CFR Section 122.2, that
    a discharge of a pollutant means any addition of any pollutant or
    combination of pollutants to waters of the United States from any point
    source. The definition includes additions of pollutants into waters of
    the United States from surface runoff which is collected or channeled
    by man. A point source means any discernible, confined, discrete
    conveyance, including but not limited to, any pipe, ditch, channel,
    tunnel, conduit, well, or discrete fissure (40 CFR 122.2). EPA's
    proposal envisioned that, where a specific forestry activity such as
    forest road construction and maintenance results in the point source
    discharge of polluted storm water in a manner that causes or
    contributes to excursion of water standards, or is a significant
    contributor of pollutants to waters of the U.S., that point source
    could be required by the state to seek an NPDES permit. EPA could also
    require such sources to seek permits on a case-by-case basis, but only
    where necessary to ensure implementation of an EPA-established TMDL.

                       COMPLETENESS OF THE CALPUFF MODEL
        Question. For FLAG, EPA is requiring long range visibility modeling
    to use a model not completely available to the scientific community--
    the CALPUFF model. Also, the company which has the missing piece of the
    model is not releasing it. Since the model is not completely available,
    EPA cannot hold a workshop to approve the model
        Why is EPA requiring use of a model which is not completely
    available? Why is EPA requiring use of a model not accepted by EPA? Why
    is EPA requiring use of a model of which only one company has complete
    control, creating a monopoly in the modeling community?
        Answer. EPA is not requiring use of any particular model as part of
    FLAG. FLAG is a joint program of the U.S. Forest Service, the National
    Park Service, and the U.S. Fish and Wildlife Service. EPA has been
    included in many of FLAG's discussions in an advisory and informational
    capacity, but is not an active member of the FLAG, nor does it
    participate in the management or direction of the group.
        CALPUFF is, however, part of the Guideline on Air Quality Models
    which EPA has prepared. EPA has prepared changes to Appendix W of 40
    CFR Part 51 that make minor changes to recommendations on visibility
    calculations. The complete set of proposed changes is about to be
    published in the Federal Register for a 90-day public comment period.
    These changes will also will be the subject of the Seventh Conference
    on Air Quality Modeling in Washington, D.C. planned for June 28-29,
    2000. Regarding regional haze, the proposed changes state:

        ``CALPUFF may be applied on a case-by-case basis when assessment is
    needed of reasonably attributable haze impairment due to one or a small
    group of sources. The procedures and analyses should be determined in
    consultation with the appropriate Regional Office, the appropriate
    regulatory permitting authority, and the appropriate Federal Land
    Manager (FLM).''

        Thus, it should be clear that EPA has not required the use of
    CALPUFF for long range visibility modeling or regional haze. The model
    is, and has been, in the public domain and has been subjected to
    scientific peer review. It is available free of charge through an
    independent Internet website which is linked to EPA's website on all
    air quality models that are used for regulatory applications.
        The model (CALPUFF) is, and has been, publicly available through an
    Internet website free of charge. By mutual agreement with EPA, and for
    efficiency purposes, the website from which CALPUFF is obtained is
    managed by the model developer. If this arrangement becomes impractical
    or untenable and the developer can no longer provide access, EPA will
    make the model available on its own website. The version of the CALPUFF
    modeling system currently provided at the independent Internet website
    is dated March, 1999. The firm that produced the CALPUFF modeling
    system (which has had many sponsors, of which the EPA is just one)
    provides beta-test versions of software under development to
    individuals of its choosing. The EPA has requested the company to
    provide timely updates to the modeling system as new advances in
    software are finalized. It is EPA's understanding that the company
    plans a major update prior to EPA's planned Seventh Conference on Air
    Quality Models (an open workshop and hearing), in Washington, D.C. June
    28-29, 2000.

             FLAG: INDUSTRIAL AND SCIENTIFIC COMMUNITY REQUIREMENTS
        Question. Scientists trying to meet FLAG requirements in Colorado
    asked your FLAG member, the National Park Service, in August for
    boundaries of the Rocky Mountain National Park and the Great Sand Dunes
    National Monument. The request was made August 5 and again in late
    December, but to date the scientists have yet to receive the necessary
    boundary information from your FLAG group. How can the industrial and
    scientific community meet your FLAG requirements if you do not provide
    the most basic of information?
        Answer. The Federal Land Managers' Air Quality Related Values
    Workgroup (FLAG) process referred to in this question is managed by the
    three agencies responsible for managing federal lands. They are the:
    National Park Service; U.S. Forest Service; and U.S. Fish and Wildlife
    Service. EPA is not involved in the FLAG process except as a commenter
    on its development and activities and a provider of technical support.
        Information about the FLAG process and underlying technical data,
    such as Park boundaries for Rocky Mountain National Park and Great
    Dunes National Monument is currently available on the National Park
    Service web site: ftp:/ftp.nps.gov/pub/. When you go to this site,
    choose ``park boundaries'' from the list of sub-directories.

                       COEUR D'ALENE: RIFS REPORT AND ROD

        Question. On March 22, EPA announced in Coeur d'Alene that the RIFS
    report and ROD for the Coeur d'Alene Basin would be bifurcated and
    delayed for up to a year. The State did not have any knowledge of this
    action they thought we were all working together. This is a major
    change in direction and could have major impacts on the ability to find
    a solution in the Basin. Could you explain to me EPA's attitude on
    working with states on Superfund and specifically what is going on in
    Coeur d'Alene?
        Answer. EPA is and will continue to be committed to working closely
    with the State of Idaho, the State of Washington, the Coeur d'Alene
    Tribe and all the stakeholders in the Basin to come up with workable
    cleanup solutions. As you know, EPA originally proposed to issue a
    final Record of Decision for the Coeur d'Alene Basin by the end of this
    year, partly in response to concerns for moving the study process
    quickly toward cleanup decisions and cleanup actions. Meeting this
    schedule would require extremely tight deadlines for stakeholder review
    of interim technical documents.
        Early this year, we began hearing concern that this schedule would
    not allow enough time for adequate review of data and documents. When
    Regional Administrator Chuck Clarke traveled to the Basin with Idaho
    Environmental Director Steve Allred during the first week of March,
    stakeholders raised concerns that the RI/FS schedule was moving too
    quickly. During two days of meetings with community members in Coeur
    d'Alene and Wallace, the possibility of either phasing or delaying the
    schedule was discussed. Although several people had questions about a
    schedule change, there seemed to be no opposition to it. By modifying
    the Remedial Investigation/Feasibility Study and Record of Decision
    schedule, and phasing the release of cleanup decision documents, EPA
    believed it was being responsive to stakeholder concerns. EPA also
    believed that doing so was acceptable to Idaho and Washington states,
    the Coeur d'Alene Tribe, and other stakeholders. As soon as EPA decided
    to propose a phasing of the Records of Decision, we immediately
    notified the Idaho Department of Environmental Quality (IDEQ) staff and
    other government agencies. We thought we were doing our best to
    communicate and coordinate with those involved in this decision. We
    sincerely regret if anyone involved did not receive timely information.
    EPA Regional Administrator Chuck Clarke spoke with Idaho Environmental
    Director Steve Allred on March 29, 2000, to discuss important issues
    related to the site. EPA and IDEQ staff are working together to produce
    a schedule that will be workable for both agencies.

                         SRF FUNDING LEVELS FACILITIES
        Question. In many Idaho communities, the systems for ensuring safe
    drinking water and efficient wastewater disposal facilities lag behind
    modern demands. In some cases, the costs associated with meeting
    national standards have outstripped a community's ability to pay for
    necessary upgrades and/or replacement of worn-out or outdated
    facilities. Do you feel the capitalization grant programs for
    wastewater and drinking water are adequately funded to meet these
    concerns?
        Answer. Financing for wastewater infrastructure has been, and will
    continue to be, a partnership between EPA, other Federal agencies,
    state governments, and local communities. By capitalizing the SRF such
    that it will be able to provide at least $2 billion in financial
    assistance to local communities over the long run, the Agency is
    providing a substantial source of financing consistent with historic
    levels of Agency contribution. Over $17 billion has already been
    provided to capitalize the CWSRF, more than twice the original Clean
    Water Act authorized level of $8.4 billion. Total SRF funds available
    for loans since 1987 reflecting loan repayments, state match dollars,
    and other sources of funding are approximately $30 billion, of which
    $26 billion has been loaned to communities ($4.2 billion was available
    for loans as of June 1999).
        The Drinking Water SRF continues to provide an affordable source of
    funding for communities to build and upgrade their drinking water
    facilities to ensure that all public water systems provide drinking
    water that is safe to drink. Since its inception in fiscal year 1997,
    $3.6 billion has been provided to capitalize the DWSRF. EPA expects
    that states will soon make their 1,000th loan under this program
    representing nearly $2 billion in loan assistance to local communities.
    EPA's annual performance goal and measure estimates that 1,800 loans
    will be made and some 450 SRF-funded projects will be initiating
    operations by the end of fiscal year 2001. The DWSRF program is also
    fulfilling the goals of the Safe Drinking Water Act (SDWA) with respect
    to assistance for small systems. Fully three quarters of the loans made
    to date have gone to small water systems that serve fewer than 10,000
    persons. Forty percent of total loan dollars have gone to these small
    systems, well above the SDWA mandate of fifteen percent.
        The Agency acknowledges that needs estimates may be higher than
    previously estimated. Given that, and the fact that we now have a
    better understanding of the water quality challenges that states and
    local governments face, the Administration believes it would be useful
    to have a dialogue with the Congress and the broad range of
    stakeholders on the future funding levels and project eligibilities for
    the Clean Water and Drinking Water SRF programs.

                         BOISE NAAQS/DESIGNATION ISSUE
        Question. Idaho is involved in a comprehensive airshed management
    effort in the Treasure Valley/Boise Area. EPA is currently considering
    reimposing a non-attainment designation over a portion of the area
    which has not had an air quality violation since 1991. The State of
    Idaho feels such a designation would needlessly divert attention and
    resources away from the real issue. The real issue being an airshed-
    wide management program assuring that the health of Idaho's citizens is
    protected. Is EPA intending and will they support the State of Idaho's
    efforts to resolve this issue? If so, by what action?
        Answer. The EPA fully supports the State's efforts to resolve this
    issue, and has been working diligently with all parties in this matter
    to find a solution that benefits the environment and the people of
    Idaho. It is our goal to provide the State of Idaho with as much
    flexibility to implement an airshed plan for the Treasure Valley/Boise
    area as the law allows when we take action to reinstate the PM10
    national ambient air quality standards (NAAQS) in the northern Ada
    County/Boise area. If the State is successful in developing a
    comprehensive air quality management plan that addresses the long-term
    protection of public health and the continued maintenance of the PM10
    NAAQS in the area, including assessment of the impact of transportation
    activities, we will give every consideration to alternative approaches
    available to EPA in lieu of reinstating the nonattainment designation.

                     REGIONAL HAZE: IMPLEMENTATION OF RULE
        Question. How can EPA be implementing the Regional Haze Rule
    despite being directed by Congress to implement it only in conjunction
    with PM/ozone standards?
        Answer. EPA is proceeding with work now that will enable the states
    to coordinate future regional haze implementation plans with any future
    implementation plans for PM2.5 standards. This work is
    consistent with the TEA-21 legislation and fiscal year 2000
    appropriations for regional haze planning activities. EPA has work
    under way to complete a review of the PM2.5 standards by
    2002, to complete deployment of the PM2.5 monitoring network
    to characterize ambient air quality, and to provide funding to the
    states to establish regional planning partnerships for coordinating the
    development of policy and technical analyses for regional haze. If
    PM2.5 standards are in effect upon completion of the
    Agency's review of the standards in 2002, EPA and the states will have
    the necessary monitoring data for designating PM2.5
    attainment and nonattainment areas in the 2002-2005 time frame.
        Consistent with the TEA-21, the regional haze rule links the date
    for submittal of regional haze control strategy State Implementation
    Plans (SIPs) in certain states to the dates for designation of
    PM2.5 attainment and nonattainment areas. Thus, control
    strategy SIPs for regional haze are due in the 2004-2008 time period
    which encompasses the period that control strategy SIPs would be due
    for PM2.5 nonattainment areas.
        Under a specific section of the regional haze rule, certain western
    states have the option to submit regional haze SIPs in 2003. The timing
    for these SIPs would not be linked to the dates for designation of
    PM2.5 areas. This approach is consistent with TEA-21 and was
    included in the haze rule to allow these states to move forward with
    implementing the set of recommended strategies from the Grand Canyon
    Visibility Transport Commission within the framework of the regional
    haze rule.
        In addition, EPA has provided funding to states and regional air
    quality planning organizations to enable them to initiate regional
    planning activities to address the regional haze program. Many of the
    activities and analyses done in support of regional planning for
    regional haze will overlap with implementation of the PM2.5
    standards, thereby, allowing coordination of these efforts. EPA
    believes that by taking the steps outlined above, the Agency will be
    able to ensure coordination of PM2.5 and regional haze SIPs
    as discussed in the preamble to the regional haze rule.

             TIMETABLE FOR IMPLEMENTATION OF OZONE/PM/REGIONAL HAZE
        Question. What specific timetable will EPA use for implementing PM/
    ozone standards which allows the Regional Haze Rule to follow?
        Answer. The timetable for submittal of state implementation plans
    (SIPs) in the regional haze rule is consistent with the TEA-21
    legislation. As noted in the response to the preceding question, the
    TEA-21 links due dates for SIPs for regional haze with the dates for
    designation of PM2.5 attainment and nonattainment areas.
    Regional haze implementation plans for areas designated attainment or
    unclassifiable for PM2.5 are due within 1 year of the
    designation. Regional haze implementation plans for areas designated
    nonattainment for PM2.5 are due within 3 years of
    designation, which is consistent with the time period for submittal of
    plans for PM2.5 nonattainment areas. The regional haze rule
    also allows states the option of participating in regional planning
    groups and submitting regional haze implementation plans for all parts
    of the state at the same time, consistent with the timing for
    PM2.5 nonattainment plans. In addition, as noted above,
    certain western states have the option to submit regional haze SIPs in
    2003 allowing them to implement the set of recommended strategies from
    the Grand Canyon Visibility Transport Commission within the framework
    of the regional haze rule.

                   REGIONAL HAZE RULE: COST/BENEFIT ANALYSIS
        Question. Did EPA conduct a cost/benefit analysis of the Regional
    Haze Rule?
        Answer. Yes. The Regulatory Impact Analysis is available on the OAR
    Policy and Guidance web page at: www.epa.gov/ttn/oarpg/t1ria.html.

            REGIONAL HAZE RULE: SCIENTIFICALLY PROJECTED REDUCTIONS
        Question. What are the scientifically projected reductions in haze?
        Answer. In the Regulatory Impact Analysis (RIA) for the Regional
    Haze Rule, mentioned in the previous question, the Agency estimated
    reductions in regional haze as a result of the rule out to the year
    2015. These estimates in reductions in haze are based on meeting four
    illustrative progress goals applied nationally over a period of time
    (10 to 15 years) and based on whether fugitive dust emissions are
    controlled or not. In summary, 43 to 90 percent of Class I area
    counties (e.g. counties with national parks) achieve the illustrative
    progress goals when fugitive dust emissions are controlled, while 31 to
    84 percent of Class I area counties achieve the four illustrative
    progress goals when fugitive dust emissions are not controlled.

                    REGIONAL HAZE RULE: COST IN CASH OUTLAY
        Question. What will the Rule cost in cash outlay by affected
    emissions sources?
        Answer. In the Regulatory Impact Analysis (RIA) for the Regional
    Haze Rule, the total estimated capital cost (e.g., the costs of
    installing pollution control equipment) to facilities having to meet
    requirements associated with these four illustrative progress goals in
    the projection year of 2015 ranges from $2.8 billion to $15.9 billion
    when fugitive dust emissions are controlled and from $3.2 billion to
    $16.3 billion when fugitive dust emissions are not controlled. The
    total estimated annual cost (e.g. the costs of operating pollution
    control equipment) nationally to facilities having to meet requirements
    associated with these four illustrative progress goals range from $1.0
    billion to $4.4 billion (1990 dollars) when fugitive dust emissions are
    controlled and from $0.8 billion to $3.6 billion (1990 dollars) when
    fugitive dust emissions are not controlled.

                    REGIONAL HAZE RULE: SOCIO-ECONOMIC COSTS
        Question. What are the socio-economic costs?
        Answer. In the Regulatory Impact Analysis (RIA) for the Regional
    Haze Rule, the economic impacts associated with the four illustrative
    progress goals examined for the regional haze rule in the projection
    year of 2015 showed that only 0.02 to 0.04 percent of establishments
    (i.e. facilities or plants) nationwide are expected to have control
    costs of greater than 1 percent of their sales or revenues regardless
    of whether fugitive dust emission controls are considered or not. These
    results suggest that changes in prices of most affected products and
    changes in prices of fuels and electricity from implementation of the
    regional haze rule should be relatively small.

                    DOE PARTICIPATION IN REGIONAL HAZE RULE
        Question. Emissions Limits being set are well below those
    recommended by the Grand Canyon Commission. Also, the Regional Haze
    Rule has a ``regional BART'' rather than the statutory site-specific
    BART. Consequently, the Rule will impose tremendous costs on stationary
    sources, including power plants, which were not identified as a major
    source of haze by the Grand Canyon Commission.
        Since this rule obviously will affect power plants' operations and
    permitting, why was DOE not an active part of developing the Regional
    Haze Rule?
        Answer. Like all EPA rules, the Regional Haze Rule went through the
    interagency review process. The Department of Energy was included in
    this review process for both the proposed regional haze rule and the
    final regional haze rule.

        REGIONAL HAZE RULE: LEGAL AUTHORITY FOR THE FLAG AQRV ``POLICY''
        Question. What is the legal authority for the FLAG AQRV ``policy''?
        Answer. Under the Clean Air Act, the federal land managers have an
    ``affirmative responsibility'' to protect the air quality related
    values (e.g. visibility, ozone impact to terrestrial resources, acidic
    deposition impacts to aquatic and terrestrial resources) in Federal
    Class I areas, and they have specific authority to take part in the
    review of new source permits. The Federal Land Managers' Air Quality
    Related Values (FLAG AQRV) document is guidance, not standards or
    regulations, developed to bring more predictability and uniformity to
    Federal Land Managers (FLM) participation in the permit review process.
    For more information on their authority to convene a work group to
    issue this guidance, we recommend that you contact the federal land
    managers directly (U.S. Department of Interior--National Park Service,
    Air Quality Division, and U.S. Department of Agriculture--U.S. Forest
    Service). We have forwarded a copy of your questions to our contacts in
    the National Park Service and the U.S. Forest Service.

                            FLAG: FLAG AQRV CRITERIA
        Question. Page 27 of the FLAG's draft Phase I Report issued
    October, 1999 states, ``The FLAG recommendation is designed to prevent
    new sources from causing visibility impairment.'' Do FLAG AQRV
    standards affect legal rights and responsibilities of permit
    applicants?
        Answer. No, the Air Quality Related Values (AQRV) criteria
    themselves do not affect the legal rights and responsibilities of
    permit applicants. Applicants are bound by the Clean Air Act and the
    New Source Review (NSR) regulations implemented by EPA, states and
    tribes. These regulations have always required consultation with
    Federal Land Managers during NSR permitting and the Federal Land
    Managers have always had the responsibility to identify AQRVs and
    protect them against adverse impacts. The FLAG AQRV work will simply
    better define what resources in Class I areas are considered AQRVs and
    how they can be damaged by pollution. This should promote more
    predictability in NSR permitting but does not alter any of the rights
    and responsibilities of permit applicants.

           FLAG: FLM'S, EPA, AND NOAA FOLLOWING RULEMAKING PROCEDURES
        Question. If FLAG standards affect legal rights and
    responsibilities, the standards are a rule. Why are FLMs, EPA, and NOAA
    not following rulemaking procedures of the Administrative Procedures
    Act with their FLAG standards? No public hearing has been held--only a
    public ``meeting'' during the holiday season in late 1999 when FLAG
    members gave no answers to questions.
        Answer. Because the FLAG Air Quality Related Values (AQRV) document
    is guidance that has been drafted by the National Park Service and the
    U.S. Forest Service, we recommend that you contact them for a full
    explanation of the procedures followed in developing it. We have
    forwarded a copy of your questions to the National Park Service and the
    U.S. Forest Service.

                     FLAG: DENIED PARTICIPATION SINCE 1995
        Question. I understand the public consistently been denied
    participation in FLAG efforts since at least 1995. Why is this?
        Answer. As noted, the Federal Land Managers drafting the FLAG Air
    Quality Related Values (AQRV) guidance held a public hearing on the
    guidance in December 1999 and provided a public comment period as well.
    We recommend that you contact the National Park Service or U.S. Forest
    Service for more information on these issues. We have forwarded a copy
    of your questions to the National Park Service and the Forest Service.

           FLAG: FLAG AQRV HEALTH-BASED OR NON-HEALTH BASED STANDARDS
        Question. Are FLAG AQRV standards health-based or non-health based?
        Answer. The EPA has been involved in FLAG only from an advisory and
    informational capacity. EPA has not been an active member of the FLAG,
    nor did it participate in the management or direction of the group. We
    have forwarded your questions to the National Park Service and the U.S.
    Forest Service and recommend you contact them directly for more
    information on these issues.

                     FLAG: STATUTORY COST/BENEFIT ANALYSIS
        Question. Did you conduct a statutory cost/benefit analysis on FLAG
    standards?
        Answer. It is our understanding that a cost-benefit study was not
    performed on this guidance. Because the FLAG Air Quality Related Values
    (AQRV) guidance has been drafted by the National Park Service and the
    U.S. Forest Service, we recommend that you contact them with questions
    about this issue. We have forwarded a copy of your questions to the
    National Park Service and the U.S. Forest Service.

                          FLAG: ENVIRONMENTAL BENEFITS
        Question. What are the environmental benefits--the haze reductions
    or other AQRV benefits--you have determined will result from FLAG
    standards?
        Answer. Because the FLAG air quality related values (AQRV) document
    is guidance that has been drafted by the National Park Service and the
    U.S. Forest Service, we recommend that you contact them for an
    explanation of these issues. We have forwarded a copy of your questions
    to the National Park Service and the U.S. Forest Service.

                  FLAG: ``ADVERSE'' IMPACT THRESHOLD FOR OZONE
        Question. Why has FLAG defined an ``adverse impact'' threshold for
    ozone at a level below that which occurs naturally? Doesn't this
    automatically create a tool to block any permit for a new or modified
    source?
        Answer. Because the FLAG Air Quality Related Values (AQRV) document
    is guidance that has been drafted by the National Park Service and the
    U.S. Forest Service, we recommend that you contact them for an
    explanation of these issues. We have forwarded a copy of your questions
    to the National Park Service and the U.S. Forest Service.

           FLAG: MEMBERS DELEGATING OR REQUIRING NON-FEDERAL ENTITIES
        Question. Why are FLAG members (EPA, FLMs, NOAA) delegating or
    requiring non-federal entities, such as permit applicants, to study
    AQRV issues on federal land? Isn't the study of AQRVs of federal lands
    something for which you should be budgeting and coming to Congress for
    appropriations?
        Answer. EPA is not a member of FLAG but participates only in an
    advisory and informational capacity. For additional information on
    these issues, we recommend that you contact the National Park Service
    and the U.S. Forest Service. We have forwarded a copy of your question
    to the National Park Service and the U.S. Forest Service.

                  FLAG: SCIENTISTS NOTED FOR STUDIES OF AQRVS
        Question. Why are scientists noted for their studies of AQRVs
    (ozone, visibility, deposition) and whose work you use to support the
    FLAG standards disputing the use of their work and your alleged
    scientific bases?
        Answer. Because the FLAG Air Quality Related Values (AQRV) document
    is guidance that has been drafted by the National Park Service and the
    U.S. Forest Service, we recommend that you contact them for an
    explanation of these issues. We have forwarded a copy of your question
    to the National Park Service and the U.S. Forest Service.

                          FLAG: FIRES ON FEDERAL LANDS
        Question. Federal lands' fires were identified as a major source of
    western haze by a 1993 National Academy of Sciences study and by the
    eight-state Grand Canyon Commission in which EPA and FLMs extensively
    participated. How does FLAG address federal lands' fires as a major
    source of haze?
        Answer. Since the FLAG air quality related values (AQRV) document
    is guidance that has been drafted by the National Park Service and the
    U.S. Forest Service, we have forwarded a copy of your question to the
    National Park Service and Forest Service and recommend that you contact
    them for an explanation of these issues. As indicated in the response
    to your later question on forest fires, EPA has worked closely with the
    Federal land managers to develop the ``Interim Wildland Fire Policy.''
    This policy outlines EPA's approach to dealing with the impact of
    wildland fire on the PM National Ambient Air Quality Standards. EPA
    expects to work with the same stakeholders in expansion of this policy
    to deal with the impact of fire on regional haze.

              FLAG: COMPLIANCE WITH STATUTES AND THE CONSTITUTION
        Question. Have the FLAG standards complied with:
      --the Unfunded Mandates Reform Act?
      --the Regulatory Flexibility Act of 1980?
      --the Small Business Regulatory Enforcement Fairness Act of 1996?
      --the statutory requirement that no buffer zones are allowed for
            wilderness areas or national parks?
      --the Property Clause of the constitution--federal agencies can have
            oversight of private land use only to the extent federal lands
            are harmed by private land activities?
        Answer. Because the FLAG Air Quality Related Values (AQRV) document
    is guidance that has been drafted by the National Park Service and the
    U.S. Forest Service, we recommend that you contact them for an
    explanation of these issues. We have forwarded a copy of your question
    to our contacts in the National Park Service and the U.S. Forest
    Service.

                  FLAG STANDARDS VERSUS EPA MODELING PROTOCOLS
        Question. Does the visibility component of FLAG standards conflict
    with EPA modeling protocols and requirements?
        Answer. The FLAG guidance was developed by those agencies concerned
    with federal land management so input on this question should be sought
    from them. EPA has acted in a review capacity on the visibility
    component of the FLAG guidance and believes that it is based on models
    and modeling approaches referenced in EPA's Guideline on Air Quality
    Models. To meet FLAG needs, the applications are sometimes extended
    beyond what is specified in that guideline. However, EPA staff have
    reviewed these extended applications and find them consistent with the
    more general EPA guidance.

                         CLEAN AIR ACT: FLAG STANDARDS
        Question. The Clean Air Act requires federal agencies to comply
    with stricter-than-federal state clean air laws. Colorado state statute
    requires a federal agency to factually establish an AQRV impairment
    exists before declaring an impairment. Colorado state statute also
    tracks with cost/benefit analysis required by the federal Clean Air
    Act. The Clean Air Act gives states the authority to define AQRVs. Why
    do the FLAG standards not accommodate state statutory AQRV protection
    programs which comply with federal law?
        Answer. The Clean Air Act (CAA) requires federal facilities to
    comply with state requirements respecting the control and abatement of
    air pollution in the same manner and to the same extent as any
    nongovernmental entity. This provision of the CAA does not apply to
    federal agencies in their regulatory capacity. With respect to
    protecting AQRVs on federal lands, the CAA imposes an affirmative
    responsibility on the FLMs to protect these values. Because the FLAG
    Air Quality Related Values document is guidance that has been drafted
    by the National Park Service and the U.S. Forest Service, we recommend
    that you contact them for further explanation of these issues. We have
    forwarded a copy of your question to the National Park Service and U.S.
    Forest Service.

                       CLEAN AIR ACT: STATIONARY SOURCES
        Question. Why are federal agencies pursuing stationary sources
    (such as forest prescribed burning) not found to be a major source of
    western haze?
        Answer. Section 169A of the Clean Air Act requires states to
    develop implementation plans that provide for reasonable progress in
    remedying existing impairment and preventing future impairment in
    mandatory Class I Federal areas (such as national parks and wilderness
    areas). These plans must include two basic elements: (1) measures
    addressing the best available retrofit technology for a specific set of
    major stationary sources that emit any pollutant that causes or
    contributes to impairment in any Class I area, and (2) a long-term
    strategy for making reasonable progress. The regional haze rule
    acknowledges that many different types of sources contribute to
    visibility impairment and it requires states to address all types of
    sources in the long-term strategy: mobile sources; fire emissions;
    other area sources; and other stationary sources.
        While there are some actions under way by federal and state
    agencies to address stationary sources contributing to regional haze,
    there are many other efforts in place to characterize and develop
    strategies for many types of sources contributing to haze, not just
    stationary sources. For example, these agencies are also working to
    develop smoke management programs that incorporate best available
    control measures to minimize emissions and smoke impacts from wildland
    fires they manage to achieve resource benefits (e.g., prescribed
    fires).

                   CLEAN AIR ACT: REGIONAL HAZE REQUIREMENTS
        Question. What is the difference between what federal land managers
    are willing to do to address haze and what is required of industry?
        Answer. As noted in the response to the above question, state
    regional haze State Implementation Plans (SIPs) need to address a range
    of source categories that contribute to visibility impairment. For
    example, certain major stationary sources may be required to implement
    best available retrofit technology under the rule. The states have the
    flexibility to implement best available control measures to address
    other source categories as well, such as fire emissions from federal,
    state, and private lands.
        The EPA understands that the policy of returning fire to the
    wildlands to address excessive fuel build-up in certain areas is
    expected to provide the benefit of reduced incidence of catastrophic
    wildfires and improved forest health over the long term. It is
    recognized, however, that this policy will result in smoke emissions
    that can impact visibility and the National Ambient Air Quality
    Standards for particulate matter on an episodic basis. EPA understands,
    based on working with high level managers in the U.S. Forest Service
    and the Bureaus of the Department of the Interior, that those agencies
    have agreed to use the best available control measures to minimize
    emissions and smoke impacts from wildland fires they manage to achieve
    resource benefits (e.g., prescribed fires). Federal agencies are
    familiar with several techniques that can be used to minimize emissions
    from prescribed fires including mechanically thinning fuel levels,
    burning when fuel moisture is high, mopping up smoldering embers after
    the fire, and burning on days with proper meteorological conditions.
    Federal agencies will use smoke management techniques to minimize the
    potential impact of the smoke emitted from prescribed fires on
    visibility, regional haze and the national ambient air quality
    standards. Smoke management techniques consider how prescribed fire
    emissions will affect air quality and impact smoke sensitive areas
    under the atmospheric conditions that will exist at the time of the
    fire.

             CLEAN AIR ACT: FEDERAL LAND MANAGERS REDUCTION OF HAZE
        Question. Fires of tremendous heat and excessive emissions result
    from the heavy fuel loading allowed to occur on forest floors (no
    logging, no clearing blowdown, 100 year policy of preventing natural
    burns). What are federal land managers willing to do to reduce haze?
        Answer. It is EPA's understanding that the U.S. Forest Service and
    the Bureaus of the Department of the Interior are committed to
    complying with the National Ambient Air Quality Standards and with
    national visibility goals for mandatory Class I federal areas while
    conducting their wildland fire programs. We believe all the federal
    agencies are committed to using smoke management techniques to minimize
    emissions and mitigate air quality impacts from prescribed fires.

                 CLEAN AIR ACT: FEDERAL AND STATE REQUIREMENTS
        Question. The Clean Air Act requires federal agencies to comply
    with states' stricter-than-federal clean air laws. However, in
    Colorado, FLMs actively worked against legislation requiring them to
    submit emissions inventories, seek permits, and mitigate fire
    emissions. FLMs now are threatening to sue Colorado to ensure their
    emissions are not regulated by Colorado law as allowed by the Clean Air
    Act. Why are the USFS and NPS resisting federal and state clean air
    requirements regarding a major source of western haze and the single
    largest episodic source of haze ``federal lands'' fires?
        Answer. EPA understands that these agencies are prepared to employ
    the best available control measures applicable to prescribed fires
    (i.e., smoke management techniques). However, EPA has not had
    communication with Federal Land Managers regarding their support for
    Colorado's legislation regarding smoke emissions. Therefore, we cannot
    comment on their position.
                                     ______

                     Question Submitted by Senator Jon Kyl

        REVIEW OF PHOENIX'S REVISED SERIOUS AREA PM10 NONATTAINMENT PLAN
        Question. As you are aware, the Phoenix, Arizona, area has been
    struggling with particulate matter air pollution for some time. The EPA
    Region 9 office has been working with Maricopa County, Arizona, to
    address Maricopa Country's failure to attain the PM-10 National Ambient
    Air Quality Standards established in the Clean Air Act. Maricopa County
    is extremely positive about its experience in this effort.
        On December 23, 1999, the Maricopa Association of Governments
    submitted its Clean Air Act Revised Serious Area Nonattainment Plan to
    EPA for review. Again, EPA's Region 9 staff have been cooperative and
    agreed to expedite its review of the revised plan, indicating to county
    officials that the matter should be resolved by April 3, 2000. In the
    interim, sanctions were imposed beginning on March 2, that require 2-
    to-1 offsets for new or substantially modified major particulate
    sources in Maricopa County. Delay in final resolution of this may
    result in additional sanctions.
        What is the status of EPA's review?
        Answer. EPA signed the proposed approval of the revised Phoenix
    serious area PM-10 plan on April 3, 2000. We committed to Governor Hull
    to do everything possible to expedite EPA's review of this plan, which
    was received in draft on January 3, 2000 and officially on February 23,
    2000.
        On April 3, 2000, EPA's Administrator for Region 9 also signed an
    interim final determination which, when published in the Federal
    Register on April 13, stayed the Clean Air Act 2-to-1 offset sanction
    that was imposed on the Phoenix area on March 2, 2000. It also defers
    the imposition of the highway sanctions until EPA takes final action on
    the plan.
        EPA's review of the plan was aided by the efforts of Maricopa
    County Environmental Services Department, the Maricopa Association of
    Governments, Maricopa County Department of Transportation, and the
    Arizona Department of Environmental Quality in revising the plan
    quickly to address the disapproval issues that EPA raised in a November
    9, 1999 letter to Governor Hull.
                                     ______

                   Questions Submitted by Senator Ted Stevens

                    RED DOG MINE PERMIT: AGENCY INVOLVEMENT
        Question. What has the EPA done to address the concerns regarding
    the mine's ability to operate in the future under a state Clean Air
    Permit?
        Answer. EPA is always willing to work with companies to ensure that
    the operation of their facilities is in accordance with the Clean Air
    Act. Unfortunately, despite months of discussions during which most
    issues were resolved, EPA continues to disagree with the State
    regarding whether the Clean Air Act permit for a current expansion
    project at the mine complies with the Act. Thus, EPA took steps to
    ensure both the State and the facility acted in compliance with the
    Act. EPA remains committed to resolving issues with the permit in a
    manner that minimally impacts the operation of the mine's expansion
    project. Recently, we have amended our order so that the Red Dog Mine
    can begin ``water-related'' construction while we attempt to resolve
    our concerns about the need for emission controls. The Red Dog Mine
    will be able to continue to operate in the future so long as they
    remain in compliance with the requirements of the Clean Air Act.

                                CO NAAQS REVIEW
        Question. Will EPA factor in the conditions faced in Northern Tier
    communities in reviewing the CO NAAQS?
        Answer. The EPA has conducted an air quality analysis of northern
    tier cities, including the largest cities of Alaska. The EPA analysis
    has been incorporated into the Air Quality Criteria Document for Carbon
    Monoxide, which forms the scientific basis for the CO NAAQS review and
    is about to be released as a final document. The analysis has also been
    referenced in the air quality section of the CO Staff Paper currently
    being prepared for public and Clean Air Scientific Advisory Committee
    (CASAC) review.

                  CO NONATTAINMENT AREAS: WORKING WITH ALASKA
        Question. Is EPA willing to work with the delegation, the local
    communities, and the State in effort to identify possible solutions to
    the difficulties Alaska has had in reaching CO attainment?
        Answer. EPA will continue to work with the State of Alaska and
    local communities to find ways to reduce carbon monoxide air pollution
    in Anchorage and Fairbanks and welcomes the input of the Alaska
    Delegation. EPA has provided technical and financial support for a
    number of special projects aimed at gathering scientific information
    about the sources of air pollution, their relative contributions, and
    the impacts of various control strategies to abate air pollution
    levels. These EPA efforts have included:
      --vehicle testing in Fairbanks and Anchorage during several winters
            and under different operating conditions, including the use of
            engine block heaters (``plug-ins'');
      --making changes sought by the Alaska Department of Environmental
            Conservation (ADEC) for the national computer model used to
            predict vehicle air pollution levels;
      --studying driver behavior in Anchorage to document typical idling
            times for commuters;
      --approving a substitution to the contingency measures requested by
            ADEC (air pollution control measures that are automatically
            triggered by the failure to attain the national health-based CO
            standard); and
      --conducting CO saturation studies in both Anchorage and Fairbanks to
            better identify where the highest levels of CO air pollution
            are being generated within the boundaries of the official
            nonattainment areas for the communities.
                                     ______

               Questions Submitted by Senator Barbara A. Mikulski

                B. CEPACIA: CONTAINED IN BIO-PESTICIDE PRODUCTS
        Question. Can you please outline for the Subcommittee what steps
    the Agency will be taking with regard to the use of B. cepacia in
    bioremediation and what the timetable will be to address this aspect?
        Answer. B. cepacia may be subject to regulation as a bioremediation
    application under the Toxic Substances Control Act (TSCA) and is
    subject to regulation as a pesticide under the Federal Insecticide,
    Fungicide and Rodenticide Act. EPA is currently examining uses of this
    microorganism that fall under the purview of either statute,
    identifying data needs, assessing risks where possible, and considering
    possible voluntary and regulatory options for addressing risks where
    appropriate. We met with the Cystic Fibrosis Foundation (CFF) on March
    1, 2000 on this issue, and provided a detailed update on our progress
    as part of a professional meeting sponsored in part by CFS on April 8,
    2000. This April 8 update included an examination of the commercial
    products which could contain B. cepacia such as those used for
    bioremediation, specialty chemical production, and drain cleaners.
        While we do not have a definite timetable for any potential
    regulatory action, we are expediently addressing potential risks posed
    by B. cepacia by taking immediate steps within our statutory authority
    when possible (under FIFRA, for example). EPA has a continuing dialogue
    with CFF and, at this time, is attempting to define the issues (with
    CFF's help). Once we have better information on the scope of the issues
    (i.e., exposure and potential risk), OPPT will be able to establish a
    course of action and a timetable for any needed regulatory action.

                            BURKOLDERIA CEPACIA: USE
        Question. Administrator Browner, can you highlight for the
    Subcommittee what the Agency's plans are to improve, label or re-
    classify, or remove existing biopesticide products containing B.
    cepacia?
        Answer. B. cepacia (Burkholderia cepacia) is under review as a
    result of human health concerns. There may be some impact on uses or
    registrations of products containing B. cepacia, but it is too early in
    the process to predict. The FIFRA Scientific Advisory Panel (SAP)
    prepared a report to explain the basis for the risk assessment for
    microbial pesticide products containing B. cepacia and to discuss the
    scientific issues that have informed this risk assessment. The Agency
    is currently working to complete its analysis of the SAP report by July
    2000. Based upon conclusions drawn from that assessment, the Agency
    will take whatever actions are necessary regarding the B. cepacia
    products. EPA is not currently registering any B.cepacia products until
    data gaps can be addressed. In addition, Stine Co. has voluntarily
    withdrawn its registrations, and Agrium, U.S., Inc. recently withdrew
    its application for a product containing B. cepacia.

                        STATUS OF NSR REFORM RULEMAKING
        Question. What is the status of discussions with the complex
    manufacturer stakeholder group on New Source Review (NSR) reform?
        Answer. Some of the members of the group we now refer to as the
    complex manufacturing group have been actively participating in the NSR
    Reform effort since it began. Among other activities, various members
    of this group took part in eight public meetings of the NSR Reform
    Subcommittee of the Clean Air Act Advisory Committee (CAAAC) in the
    1993-94 time frame; commented on a 1994 preliminary draft of the NSR
    Reform proposal; participated actively in several additional meetings
    prior to the 1996 summer proposed rule; commented on the proposed NSR
    Reform Rule that appeared in the Federal Register; testified at a
    public hearing on the proposed rule; provided input at several
    subsequent meetings of the CAAAC Subcommittees; and actively
    participated in another round of meetings that stakeholders requested
    when EPA released a 1998 Notice of Availability updating several issues
    within the NSR Reform rule.
        Then, in late 1998 during discussions over litigation of the rules
    governing NSR applicability for utilities, EPA suggested to industry
    stakeholders to try again to develop a better system for determining
    what is or is not covered by NSR--one that could receive broad
    stakeholder support. At this time EPA indicated a desire to complete
    this last effort in just a few months, given that the NSR Reform
    stakeholder discussions had been ongoing since 1992. We have made a
    special effort since then to seek further input from all stakeholders
    on new approaches that will help achieve this goal. A large stakeholder
    meeting was convened on February 2-3, 1999, and multiple rounds of
    follow-up meetings have been held with stakeholders since then
    including the complex manufacturing group with whom we last met in
    March 2000. The meetings we have held this year with the complex
    manufacturing group have been productive. We are now discussing some of
    the ideas they raised with other stakeholders, such as environmental
    groups and state and local agencies, to get their input as well. Once
    we complete this round of meetings we plan to have an additional
    meeting with the complex manufacturing group.

               SHARING CONTENTS OF FINAL RULE BEFORE PROMULGATION
        Question. What do you plan to include in this final NSR reform
    package?
        Answer. As described in the above question, the EPA has engaged in
    an extraordinarily thorough and inclusive stakeholder process in
    developing the NSR Reform package. We have held hundreds of hours of
    meetings with stakeholders representing a very broad cross-section of
    industry, Federal, state and local governments, and the public. The EPA
    continues to work with all our stakeholders to be sure that we have a
    full understanding of their views on the issues raised. However,
    because the EPA is still involved in stakeholder discussions and
    internal deliberation, it would be premature to discuss the extent to
    which we plan to incorporate any specific provisions in the final rule.

                  NEW SOURCE REVIEW REFORM: ENFORCEMENT ACTION
        Question. I understand that the Agency's enforcement office is also
    involved in the NSR debate. The Agency is pursuing enforcement Actions
    in several sectors: utilities, pulp and paper, refining, the chemical
    industry, etc. Why is EPA targeting these industries?
        Answer. EPA has conducted very extensive targeting analyses of
    various industry sectors to ascertain those industries that should be
    the subject of enforcement initiatives. As a result of those analyses,
    EPA determined that coal-fired utilities, petroleum refineries, pulp
    and paper facilities and the chemical industry are large emitters of
    criteria pollutants, as well as the industries that have high rates of
    noncompliance with the NSR requirements. EPA will continue to evaluate
    its priorities and may select other sectors for future enforcement
    initiatives.
                                     ______

                Questions Submitted by Senator Patrick J. Leahy

            MERCURY MONITORING: FUNDING FOR UNDERHILL, VERMONT SITE
        Question. The uninterrupted monitoring of mercury deposition at the
    Proctor Maple Research Center in Underhill, Vermont is critical to
    national and Northeastern mercury monitoring initiatives. In place
    since 1992, this monitoring station is the longest continuously-running
    monitor of its kind in the Northeast and is invaluable as a long-term
    data collection site for mercury monitoring networks, including EPA's
    Regional Ecological Monitoring and Assessment Program (REMAP), the
    Northeast States for Coordinated Air Use Management (NESCAUM), and the
    National Park Service Air Monitoring Program. Despite its national
    importance, we recently heard that federal funding for the Underhill,
    Vermont site has vanished this year. I would like to know how EPA can
    help this monitoring station in the short-term as well as the long-
    term.
        Answer. EPA's efforts to help the Proctor Maple Research Center
    mercury monitoring site have been many. Since 1992, the Proctor Maple
    Research Center mercury monitoring site has been funded by the Air
    Resources Laboratory of the National Oceanic and Atmospheric
    Administration (NOAA). However, cuts in NOAA's budget over the past
    several years eventually resulted in NOAA ending their funding of the
    site in fiscal year 2000. Aware of the decreasing funding, EPA New
    England began partially funded the Proctor Maple Research Center
    mercury monitoring site with Regional Ecological Monitoring and
    Assessment Program (REMAP) funds during fiscal year 1998 and fiscal
    year 1999. As a part of the EPA Region's mercury monitoring network
    initiative, the Region also leveraged funds from other EPA programs,
    such as the National Estuary Program (NEP), Regional Applied Research
    Effort (RARE), and EPA New England discretionary funds. These funds
    were provided as a ``stop-gap'' and not expected to support routine
    long-term monitoring. In 1999, EPA New England approached the Vermont
    Department of Environmental Conservation (VTDEC) to consider partial
    funding of the Proctor Maple Research Center mercury monitoring site.
    The VTDEC declined to support the site because of insufficient funds.
        Over the next several years, the EPA Office of Air will provide
    additional grant funds to promote state air toxics monitoring programs.
    Federal funds for these programs may be used to support mercury
    monitoring sites such as the Proctor Maple Research Center site. In
    addition, the EPA Office of Research and Development is developing a
    Mercury Research Strategy, expected to be finalized this year, which
    will address research questions in various areas, including human
    health, exposure, ecological effects, transport and fate, and risk
    management. It also will address various research questions for mercury
    deposition.
        In addition, the newly formed New England Governors and Eastern
    Canadian Premiers Mercury Research Workgroup is considering the
    completeness of ambient mercury monitoring New England and maritime
    Canada. EPA New England is a member of this Workgroup and will promote
    the continuation of the Proctor Maple Research Center mercury
    monitoring site.

                   MONITORING MERCURY: EPA'S LONG-TERM PLANS
        Question. In addition, I would like to know EPA's long-term mercury
    monitoring plan for U.S. air, land, and water--especially in the
    Northeastern states.
        Answer. Several important monitoring efforts are underway. In
    particular, EPA recently developed a draft concept paper outlining the
    development of a nationwide air toxics monitoring network (which would
    include air concentrations and deposition). The initial focus of the
    network will be the operation of selected pilot studies in major U.S.
    cities to assist the design of a long-term network that will be used to
    support application of air toxics models and characterize trends in air
    toxics concentrations. The draft concept paper and initial program have
    been guided by a steering committee consisting of EPA and state and
    local agency representatives. The paper has undergone peer review by
    EPA's Science Advisory Board. Mercury is discussed in the draft concept
    paper and mercury monitoring eventually will be brought into the
    national network.
        EPA is also undertaking or supporting various mercury monitoring
    activities, including:
      --the Mercury Deposition Network which maintains sites throughout the
            U.S. to measure mercury deposition as part of the National
            Atmospheric Deposition Network;
      --a National Sediment Inventory established by EPA to provide
            information on sediment quality;
      --EPA's Environmental Monitoring and Assessment Program (EMAP) which
            provides estimates of changes in the nation's ecological
            resources on a regional basis;
      --a National Survey of Chemical Residues in Fish to determine
            methylmercury and other chemical contaminants concentration in
            freshwater fish during the time period from 1999 though 2002
      --the National Health and Nutrition Examination Survey (NHANES) human
            monitoring program which has been expanded to measure mercury
            in blood and hair along with dietary records. This study will
            allow better characterization of exposure of the U.S.
            population to mercury.
        In addition, as part of developing EPA's Mercury Action Plan, we
    are considering additional ways to assist in the coordination of the
    monitoring efforts of various Federal, state and local agencies.
        We will keep you and others in Congress apprised of our mercury
    monitoring plans as we proceed.

             TMDL REGULATION: ASSISTANCE TO FARMERS AND LANDOWNERS
        Question. Through the work of the Lake Champlain Basin Program and
    the Northern Forest Lands Council, we have learned that the conversion
    of forest and farm land to urban/suburban use represents the greatest
    threat to our environment, especially our water quality. Contaminants
    from non-agricultural and non-silvicultural non-point run-off are many
    times greater than farm and forest land run-off on a per acre basis.
    Therefore, we are very concerned with any approach to water quality
    improvement which, however well-intentioned, inadvertently forces
    farmers out of business or encourages the sale and conversion of
    working forests to developed land.
        For this reason, I have authored legislation such as the
    Environmental Quality Incentive Program (EQIP) which provides cost-
    share funding to help farmers and landowners implement water quality
    improvement practices. These include animal waste storage, riparian
    protection and erosion control. These programs have long waiting lists
    of farmers and landowners yet also have woefully insufficient public
    funding. In past years I have specifically included EPA appropriations
    to fund such cost share pilot programs in specific watersheds such as
    Vermont's Lake Memphremagog.
        Can you outline for me how your agency would reconcile its proposal
    regarding TMDL regulation with my concerns? I would like to know
    specifically how EPA would work with states such as Vermont to sustain
    working farms and forests through popular and effective voluntary
    conservation programs--and not unintentionally drive them to sell lands
    for further development.
        Answer. EPA shares your concerns about sustaining working farms and
    forests and supports using popular and effective voluntary conservation
    programs, such as EQIP, to help farmers and landowners implement
    management practices needed to improve water quality.
        As Assistant Administrator J. Charles Fox stated in his April 5,
    2000, letter to the Honorable Bud Shuster, EPA regrets the confusion
    about treatment of diffuse runoff in our August TMDL proposal and wants
    to specifically clarify that EPA remains committed to relying on
    voluntary approaches to reduce runoff from diffuse water pollution
    sources. The proposed rule would not require Clean Water Act permits
    for polluted runoff. In fact, voluntary and incentive-based approaches,
    which are often as you note supported by financial assistance from the
    Federal government, are the preferred way to address these problems.
    EPA has proposed that state grant funds for polluted runoff programs be
    increased from $200 to $250 million in fiscal year 2001 and the
    President has also requested a $1.3 billion increase in authorized
    levels for conservation assistance programs at the US Department of
    Agriculture.

                   MTBE STUDIES: PUBLIC ACCESS TO INFORMATION
        Question. I strongly support the recent announcement by the
    Environmental Protection Agency (EPA) and the United States Department
    of Agriculture (USDA) to significantly reduce or eliminate the use of
    the fuel additive MTBE (methyl tertiary butyl ether) and to increase
    the use of safe, renewable alternatives such as ethanol. I understand
    that studies have been done to measure the quantity and spread of
    Volatile Organic Compounds (VOCs), including MTBE, in the nation's
    ground water and drinking water wells. Has EPA made this information
    available to the public? If so, please let me know how this information
    can be accessed.
        Answer. EPA has entered into a cooperative study with the U.S.
    Geological Survey (USGS), titled the ``12-State MTBE/VOC Drinking Water
    Retrospective.'' This study assesses MTBE occurrence and distribution
    in 12 Northeastern and Mid-Atlantic States. While the release of the
    final report is expected by early Fall 2000, preliminary data from the
    study were presented to a Blue Ribbon Panel in April 1999. This
    information is available at the Blue Ribbon Panel's Internet website
    address of: http://www.epa.gov/oms/consumer/fuels/oxypanel/blueribb.htm

                       ACID RAIN: CAP AND TRADE APPROACH
        Question. As published in the recent ``Progress Report on the EPA
    Acid Rain Program,'' sulfur dioxide emissions and total acid deposition
    have declined in the Northeast since the passage of the Clean Air Act
    Amendments of 1990. However, the decreases in acid precipitation have
    not been enough. High-elevation soils, lakes, and other critical
    habitats throughout Vermont and the northeast continue to receive high
    levels of acid precipitation, from both sulfuric and nitric acid
    components. Environmental scientists agree that ecosystem recovery from
    the damaging effects of acid precipitation may take twenty to fifty
    years at least.
        EPA has often proposed that a cap-and-trade approach to nitrogen
    oxides will help alleviate the northeastern acid rain problem. Please
    outline how this program would work and, based on what is known about
    sulfur dioxide emissions trading patterns and the differences between
    major SO2 and NOX sources (power plants vs.
    vehicles), what decreases you expect in total acid deposition in the
    northeast over the next 10 years of such a program. Also, please
    explain how you will monitor the effect of the acidity trends over time
    in the regional ecosystems that are most affected by acid deposition.
        Answer. With regard to recovery of sensitive ecological systems in
    the Northeast, EPA agrees with observations in the recent GAO study,
    entitled Acid Rain--Emissions Trends and Effects in the Eastern United
    States. Despite significant reductions in sulfur dioxide
    (SO2) emissions, decreases in total sulfur deposition and
    declining surface water concentrations of acid anions, many of the most
    sensitive ecosystems in the Northeast have not demonstrated significant
    recovery. Recent studies attribute lack of recovery to two important
    factors. First, base cations in watershed soils have been severely
    depleted due to many years of leaching caused by acid deposition
    reducing the acid buffering capacity of soils. Second, despite
    reductions in SO2 emissions and sulfur deposition,
    significant reductions in nitrate deposition have not been observed due
    to relatively constant emissions of nitrogen oxides (NOX)
    over the past 20 years. Scientists contend that both further reductions
    in SO2 and significant reductions in NOX
    emissions may be necessary to ensure recovery of the most sensitive
    ecosystems. EPA has been aggressively pursuing NOX
    reductions through the 22 state NOX SIP Call, Tier II/low-
    sulfur vehicle standards, and the Section 126 NOX petitions.
    These rules will reduce 2.3 million tons of NOX annually in
    2010.
        EPA believes that if a national, annual NOX reduction
    effort is developed, a NOX cap and trade program would
    provide the most cost-effective means to achieve reductions. Such a
    program would likely be set up much like the current sulfur dioxide cap
    and trade program, which has been highly successful in providing
    significant, low cost, early reductions resulting in benefits to health
    and the environment. For the first time under the Clean Air Act (CAA),
    in 1994, EPA began collecting actual hourly emissions data
    (SO2, NOX, CO2) from large power
    generating sources through Continuous Emissions Monitoring systems
    (CEMs). There has been 100 percent compliance with the SO2
    emissions reduction requirements for this section of the Clean Air Act.
    Utility SO2 emissions have dropped by over 5 million tons
    annually relative to the 1980 baseline. The first five years of the
    program have produced SO2 reductions in every state and
    beyond the legal requirement in almost every affected state. The
    greatest reductions occurred in the highest emitting areas (Midwest).
    Full implementation will achieve a 10 million ton SO2
    reduction, approximately 40 percent below 1980 levels. Full compliance
    cost is now expected to be about $1 billion per year, based on a
    combination of scrubber installations, coal substitution, fuel
    switching and other approaches, as opposed to the $4 to $7 billion per
    year cost projected in 1990 at the time of enactment.
        Such impressive results achieved under this program have resulted
    in expressed interest in cap and trade as a successful model for
    implementing other pollutant reduction programs. A similar, ongoing
    program modeled on the SO2 program already provides a
    template for a program targeted at nitrogen oxides. The Ozone Transport
    Commission (OTC), composed of 12 Northeastern states and the District
    of Columbia, is implementing a cap and trade program to reduce
    summertime NOX emissions during the ozone season.
    Preliminary results from 1999 (the first summer of operation) indicate
    that the OTC NOX Program is achieving its goal of reducing
    ozone season NOX emissions. There has been a 55 percent
    reduction since 1990 by the eight states currently participating in the
    program. Emissions were reduced 20 percent below required levels and
    NOX allowance costs are well below early estimates. When the
    program is fully implemented in 2003, summertime NOX
    emissions in the Northeast will be reduced by 70 percent (from 1990
    levels), resulting in lower ozone levels and improved health for
    Northeast residents. The OTC NOX Program demonstrates that
    emission cap and trading mechanisms can achieve significant
    NOX emission reductions and improve air quality in the
    United States at a lower cost than traditional command and control
    approaches.
        One important distinction must be made, however, between the
    current OTC NOX budget trading program designed to address
    summertime ozone levels and any program designed to better lead to
    recovery of sensitive ecosystems. In order to address the most
    biologically sensitive time period (spring), it is vital that a program
    achieve annual reductions, rather than seasonal reductions, to ensure
    benefit to ecosystems.
        One crucial means of determining ecological response and recovery
    involves monitoring pollutant concentrations in precipitation,
    deposition of pollutants to land and water, and the response of
    sensitive ecosystems. Efforts to assess the impact of the CAA should
    focus on national and regional long-term monitoring programs such as
    the NADP (National Acid Deposition Program), which monitors wet
    deposition, and EPA's CASTNet (Clean Air Status and Trends Network),
    which monitors dry deposition, rural ozone and other forms of
    atmospheric pollution. In addition, it is important to monitor status
    and trends in sensitive ecosystems in receptor areas through networks
    such EPA's LTM/TIME (Long-Term Monitoring Program/Temporally Integrated
    Monitoring of Ecosystems), which monitors surface water chemistry at
    135 sites in the Northeast (currently 14 in Vermont, reduced from 36 in
    1980 and 24 in the early 1990s). Such regional and national long term
    monitoring programs are essential to understanding the overall impacts
    of the Clean Air Act to the environment, including recovery of
    ecosystems. Although current patterns of SO2 trading have
    produced no negative consequences for sensitive ecosystems, such
    monitoring systems are the best means for measuring performance in the
    future.
        Total acid deposition reduction in the Northeast over the next 10
    years depends on assumptions of additional levels of reduction. Under
    the current Clean Air Act, EPA is expecting an additional 10 percent
    reduction in sulfate and nitrate deposition to Northeast ecosystems.
    Several proposals before Congress call for additional SO2
    and NOX reductions from power generation of 50-60 percent
    and 60-75 percent, respectively. Our experience with cap and trade
    programs and understanding of atmospheric chemistry suggest that
    sulfate and nitrate deposition reductions due to power generation
    emissions would be approximately proportional to these emissions
    reductions. However, it should be noted that power generation currently
    comprises about 65 percent of total sulfur dioxide emissions and about
    30 percent of nitrogen oxide emissions. Therefore, deposition
    reductions would also be affected by the relative proportion of other
    emissions sources. Ascertaining the ecological effects of such
    deposition levels over time depends entirely upon continuing essential
    long-term monitoring programs such as NADP, CASTNet, and LTM/TIME.

       VERMONT SCHOOL ENVIRONMENTAL HEALTH INITIATIVE: AGENCY ASSISTANCE
        Question. The Vermont Legislature is currently considering indoor
    environmental health legislation known as the School Environmental
    Health Initiative. An EPA indoor air quality specialist had been
    detailed to the Vermont Health Department and gathered a great amount
    of data that informed Vermonters about air quality issues in the
    state's schools. Unfortunately, the appointment of this specialist
    recently ended and has not been renewed. Would your agency support an
    extension of this specialist or a similar assignment of an appropriate
    EPA staffer to assist Vermont in its School Environmental Health
    Initiative?
        Answer. The Agency does not support an extension of this specialist
    to assist Vermont in its School Environmental Health Initiative because
    the assignment has reached a successful conclusion. The staffer was
    detailed to the State of Vermont two years ago to pilot test both the
    EPA's Indoor Air Quality (IAQ) Tools for Schools implementation
    strategy and the Agency's approach to training school personnel and
    other stakeholders on improving the indoor environment in schools. This
    appointment worked to the benefit of EPA by: (1) providing the Agency
    with first-hand experience at the local and state level that proved
    invaluable in revising the Indoor Air Quality Tools for Schools kit and
    (2) refining the schools' training and outreach materials.
        EPA's Region I office in Boston, MA, is responsible for providing
    support and technical assistance to the New England states, and is
    particularly active in promoting the voluntary implementation of IAQ
    Tools for Schools. Please do not hesitate to contact our Regional
    Administrator, Mindy Lubber, and advise her of your desire for
    assistance.
                                     ______

                 Questions Submitted by Senator Robert C. Byrd

       NITROGEN OXIDE (NOX) REGULATORY ACTIONS TO ADDRESS AIR
                                    QUALITY
        Question. In November 1997, the Environmental Protection Agency
    (EPA), issued a draft ruling on its regional NOX SIP Call
    which primarily focused on the transport of nitrogen oxide emissions
    discharged from electric power and other manufacturing sources. In
    September 1998, the EPA issued the final NOX SIP Call rule
    requiring stringent reductions of NOX primarily emitted from
    electric utilities and other industrial facilities in the Midwest and
    Southeast. In October 1998, Midwestern and Southeastern states and the
    electric utilities from those states challenged the EPA NOX
    SIP Call rule in the U.S. Circuit Court of Appeals for the D.C. Circuit
    because of its stringency and limited compliance schedule (Michigan vs.
    EPA). On May 25, 1999, the same court issued an indefinite stay on the
    submission of SIP Calls for states until the court ruled on the merits
    of the NOX SIP Call suit. Oral arguments on the SIP Call
    rule were heard by the court on November 9, 1999, and on March 3, 2000,
    the court issued a decision relating to the EPA's September 1998 rule
    on regional NOX SIP Call rule. The court upheld most aspects
    of the SIP Call rule. Given the continued existence of a court stay of
    the states' deadlines to submit their SIP Calls and the year and a half
    delay since first issuing the SIP Call rule, it seems reasonable to
    assume that the schedule for compliance with the rule and installation
    of emission controls on affected utilities and industrial sources
    should also be delayed.
        The EPA has also recently issued a final rule under Section 126 of
    the Clean Air Act directing almost 400 utility and industrial sources
    of NOX to meet a stringent NOX standard by May
    2003, not much more than three years from now. Thus, state
    environmental agencies and the regulated sources may now be faced with
    separate regulatory programs with different compliance schedules
    affecting the same electric and industrial sources.
        The electric utility industry and several states have raised
    concerns about the ability to comply with the stringent NOX
    SIP Call reduction requirements in a very short time frame (by May
    2003) without threatening the reliability of the electrical supply in
    many regions in the affected states. The North American Electric
    Reliability Council and the East Central Area Reliability Council have
    issued two separate reports indicating that a compliance May 2003
    deadline poses a potential threat to reliability. Additionally, the
    Section 126 Petition deadlines do not comport with the NOX
    SIP Call rule if and when the stay is lifted by the D.C. Circuit Court
    of Appeals.
        Administrator Browner, are you considering administratively
    revising the compliance deadlines for the Clean Air Act's Section 126
    Petition sources so that those deadlines will be consistent with the
    compliance schedule established by the NOX SIP Call rule
    once the U.S. Circuit Court of Appeals for the D.C. Circuit rules on
    lifting its stay on the NOX SIP Call? If this is not the
    case, why not?
        Answer. EPA does not see any reason to change the compliance
    deadlines for the sources subject to the action EPA took in December
    1999 when it granted states' petitions requesting relief from pollution
    caused by sources in upwind states. The petitioning states have the
    right under the Clean Air Act to relief and the temporary stay of an
    independent action (the NOX SIP Call) does not deprive these
    states of the relief to which they are entitled. The United States
    Court of Appeals for the District of Columbia Circuit denied
    petitioners request last year to stay the Section 126 action. EPA did a
    careful and thorough analysis that demonstrated that it is feasible for
    the covered sources to comply with the Section 126 action without
    adversely impacting reliability of the power supply.
        Sources regulated under Section 126 and the NOX SIP Call
    need not be subject to separate regulatory programs with different
    compliance dates. If a state submits and EPA approves a SIP revision
    meeting all the requirements of the NOX SIP Call (including
    providing for control measures to be in place by 2003), then EPA will
    withdraw the Federal requirements for sources in that state subject to
    the Section 126 action. Furthermore, as discussed in more detail in
    response to the following question, EPA believes that May 1, 2003, is
    the appropriate compliance deadline for the primary portion of the
    NOX SIP Call.

             NOX SIP CALL: COMPLIANCE DEADLINE REVISION
        Question. The North American Electric Reliability Council and the
    East Central Area Reliability Council have issued two separate reports
    indicating that a compliance May 2003 deadline poses a potential threat
    to reliability. Is the EPA willing to take the necessary steps to avoid
    the possible threat to the reliable supply of electricity as indicated
    by these reliability studies?
        Answer. EPA has taken steps to protect the reliable supply of
    power. Before issuing the NOX SIP Call and taking final
    action on the section 126 petitions, EPA carefully analyzed whether a
    May 2003 deadline posed a potential threat to reliability. (See
    Feasibility of Installing NOX Control Technologies by May
    2003, EPA Office of Air and Radiation, September 1998). EPA projected
    that compliance with the SIP Call will require the installation of
    selective catalytic reduction (SCR) on 72.9 GW worth of coal fired
    capacity. Furthermore EPA believes that past experience in both the
    U.S. and Germany shows that SCR can be installed in outage periods of
    five weeks or less. EPA examined a worse case study where 62.3 GW worth
    of SCR were installed in a one year period and where SCR installations
    required 9 week outages. Even under these extreme conditions, EPA's
    analysis found no threat to reliability. As an added precaution to
    protect the reliable supply of power, EPA included a compliance
    supplement pool in both the SIP Call and the section 126 action. This
    special provision is designed in part to protect the reliability of the
    power supply and assist facilities that cannot install controls by May
    1, 2003, despite their good faith efforts to do so. Under the
    Compliance Supplement Pool as established in the SIP Call, at states'
    options, a total of 200,000 tons of credits would be available that
    facilities could either buy from a facility that reduced its emissions
    early or be given by the state. If states decide to use this pool, it
    could allow some units to delay installation of controls beyond May 1,
    2003.
        EPA believes that the North American Electric Reliability Council
    (NERC) Study supports EPA's analysis. First NERC's study explicitly
    acknowledges that there are fewer concerns about the impact that the
    Section 126 rule will have on reliability. Second, most of the
    scenarios that NERC examined did not indicate reliability problems. For
    example NERC did not find any reliability problems when there were 30
    months available for installation of controls. Additionally, NERC did
    not find reliability problems when 72.3 GW worth of SCR was installed
    in 18 months with 9 weeks required for installation of controls. It is
    only when NERC combined a number of extremely conservative assumptions
    that they found a significant impact on reliability.
        East Central Area Reliability Council's (ECAR's) study predicts
    reliability problems, but it is based on extreme assumptions about the
    availability of electricity and the installation of control equipment.
    ECAR, which is a subregion of NERC, began with the premise that the
    system is on the verge of having reliability problems even without the
    SIP Call. This is not consistent with the assumption NERC used.
    Furthermore, ECAR makes some very conservative assumptions about the
    amount of new electricity generation that may come on line over the
    next several years and the availability of existing power plants. The
    more new electricity generation that comes on line, the less likely it
    is that reliability problems will occur. ECAR assumes that
    approximately 9900 MWs of generation will come on line by 2008. In
    contrast, the Electric Power Supply Association reports that more than
    10,000 MWs of capacity already have been announced to come on line
    before 2003.

                       BEVILL WASTES: REPORT TO CONGRESS
        Question. Administrator Browner, I understand that in March 1999,
    the EPA issued a report to Congress on the wastes from the combustion
    of fossil fuels. In that report, the EPA concluded from its nineteen-
    year technical study that the regulation of these wastes should
    generally remain the responsibility of the states and should remain
    exempt from federal hazardous waste regulations. Is this the case and
    is the EPA preparing a Federal Register notice that is contrary to
    previous findings in its report to Congress?
        Answer. In the Report to Congress, EPA indicated a preliminary
    decision that disposal of coal combustion wastes should remain exempt
    from regulation under RCRA Subtitle C, although we noted that these
    wastes contained levels of arsenic that caused the Agency some concern.
    We also identified specific situations where we had particular concerns
    with the disposition or uses of coal combustion wastes.
        In comments on the Report to Congress, EPA received significant new
    information related to damage to human health or the environment. This
    coupled with the fact that a large fraction of facilities do not have
    basic environmental controls in place (e.g., 62 percent of all utility
    surface impoundments do not employ groundwater monitoring), we became
    further concerned that damage to ground water may be going undetected.
    Ultimately, on April 25, 2000, EPA issued a regulatory determination in
    which we explained that we would continue to exempt coal combustion
    wastes from being regulated as hazardous wastes but we also explained
    that we would develop national regulations under non-hazardous waste
    authority (RCRA Subtitle D) for coal combustion wastes when managed in
    landfills and surface impoundments or when used to fill underground or
    surface mines.
        Question. Can you explain to the Congress and the industry why your
    agency is not prepared to follow the recommendations made by your own
    technical staff, based on nineteen years of study?
        Answer. Ultimately, relying on all of the information that was
    available to us, we determined that the best way to ensure that
    appropriate controls were applied at all coal combustion facilities
    would be to continue to exempt coal combustion wastes from being
    regulated as hazardous wastes and to develop national regulations under
    non-hazardous waste authority (RCRA Subtitle D) for these wastes when
    they are managed in landfills and surface impoundments or when used to
    fill underground or surface mines.

          ENERGY POLICY IMPLICATIONS AND THE EPA'S REGULATORY ACTIONS
        Question. In the past three years, the EPA has promulgated four
    major new regulatory requirements and announced an intention to focus
    on the electric utility industry to achieve improvements in air quality
    goals. These rules include the following:
      --New national ambient air quality standards for ozone;
      --New national ambient air quality standards for fine particulates
            (PM2.5);
      --Regional NOX SIP Call;
      --Section 126 petitions from Northeast states to require stringent
            NOX reductions from specified electric utility and
            industrial sources in the Midwest.
        In addition the EPA is in the process of finalizing a new rule to
    reform the existing New Source Review regulatory program affecting
    existing electric generation sources. The EPA has also, in this regard,
    filed suit against eight electric utilities alleging that these
    companies have illegally modified their older power plants in violation
    of the existing New Source Review regulations.
        Finally, the EPA has reportedly reconsidering nineteen years of
    evidence and a March 1999 report to Congress on how to regulate coal
    combustion waste products by recommending that some yet unspecified
    regulatory action may be warranted.
        Answer. The cumulative effect of these actions is likely to
    significantly drive up the cost of coal-fired electric generation,
    force the retirement of some existing coal-fired power plants, as well
    as encourage the replacement of coal-fired generators with natural gas
    at other facilities. Currently, coal provides fifty-six percent of the
    nation's electricity. It is also the source of an affordable and
    reliable domestic supply of energy. All of these actions are occurring
    at a time that the share of electric generation from nuclear power is
    declining and generation from hydro power is not increasing.
    Additionally, it remains uncertain whether gas and renewable energy
    sources are in a position to completely fill this potential energy gap.
    Finally, the Energy Information Agency reports that the overall demand
    for electricity will continue to rise in the future. At this time, many
    states and the federal government have already taken action or are
    considering restructuring the electric power industry with the
    expressed goal of reducing the cost of electricity to consumers.
        Question. Does the EPA believe its policies and regulations
    regarding ozone, fine particulates, the Regional NOX SIP
    Call, Section 126 petitions, New Source Review, coal combustion wastes,
    and electricity deregulation may be conflicting and dangerous to other
    important energy policy implications?
        Answer. The rules EPA has already issued that regulate the utility
    industry are to address well-recognized and long-standing public health
    and air quality problems. The NOX reductions that will be
    required by either section 126 or the NOX SIP Call are
    necessary to bring areas into attainment with the pre-1997 1-hour ozone
    standard. Before issuing these rules, EPA carefully considered their
    impact on the cost and reliability of the electric power supply. EPA
    found that these NOX reduction requirements will not have an
    adverse effect on electricity system reliability or on electric power
    costs for households or industrial users. EPA also found that these
    NOX reduction requirements will not have a significant
    impact on the use of coal for electrical generation. As the electricity
    generating industry has recognized, over the next ten to fifteen years
    public health and environmental concerns are likely to require
    additional reductions of multiple pollutants from the electric
    generating industry.
        EPA has considered the restructuring of the electric power industry
    in the context of our rulemakings and other Agency actions. EPA
    believes that this transitional period for the power industry is an
    appropriate time to address the environmental responsibility of
    electric generating facilities; in this way, the industry can be
    afforded the most coherent planning framework and the greatest
    flexibility and stability. The Administration believes that
    restructuring will have substantial benefits for consumers, including a
    significant reduction in the cost of electricity which is likely to
    exceed the costs of the environmental safeguards necessary to ensure
    that public health and the environmental are protected.

                   REGULATORY ACTIONS: IMPACT ON USE OF COAL
        Question. Has the EPA done any analyses or commissioned any studies
    to determine the cumulative effect of all of these regulatory and
    agency actions on the use of coal and any unintended electric power
    cost increases from such actions? Does the EPA believe that the
    combination of these regulatory actions, unintended or not, will reduce
    the use of coal for electric generation in the foreseeable future?
        Answer. EPA has not conducted an analysis of the cumulative effect
    of the specific list of policies and regulations listed in your
    previous question. EPA's analysis of changes that will occur in the
    electric power industry due to the NOX SIP call and Section
    126 shows very little reduction of coal-fired capacity. Instead,
    compliance with both regulations will be achieved primarily through the
    installation of emission control technologies such as selective
    catalytic reductions (SCR) and selective non-catalytic reduction
    (SNCR). The Agency estimates early closure by 2007 of, at most, 0.06
    percent of the coal-fired capacity in the SIP call region. We also
    estimated an increase in combined-cycle capacity of between 1,798 and
    4,156 MW. (See the Regulatory Impact Analysis for the NOX
    SIP call, FIP, and Section 126 Petitions, Volume 1: Costs and Economic
    Impacts. EPA Office of Air Quality Planning and Standards, and EPA
    Office of Atmospheric Programs, September 1998). Further, the Agency's
    analysis indicates that there will be less than a one percent reduction
    in total coal demand in the U.S. in 2007 that will result from the
    NOX SIP call. This translates to an anticipated annual
    reduction of approximately 4.6 million tons of coal production in the
    eastern U.S. (See Responses to Significant Comments on the Proposed
    Finding of Significant Contribution and Rulemaking for Certain States
    in the Ozone Transport Assessment Group (OTAG) Region for Purposes of
    Reducing Regional Transport of Ozone, Docket No. A-96-56, U.S. EPA,
    September 1998).
        EPA examined the potential increases that may occur in electricity
    prices under the NOX SIP call and section 126. The Agency
    concluded that these increases will likely result in a 1.6 percent
    increase in the average electricity bill. (See the Regulatory Impact
    Analysis for the Final Section 126 Petitions Rule. EPA Office of
    Atmospheric Programs, December 1999).
        Looking at potential future regulations, EPA released a report in
    March 1999 concerning its investigation of some options for emission
    controls and their impact to the electric power industry and the fuels
    it uses. The report, titled ``Analysis of Emissions Reduction Options
    for the Electric Power Industry,'' presents the results of multiple
    pollutant analyses conducted by EPA regarding the four most significant
    air pollutants from electric power generation: nitrogen oxides, sulfur
    dioxide, mercury, and carbon dioxide. The options presented in this
    report are hypothetical approaches to emission controls on the electric
    power industry for each pollutant and do not represent the EPA or
    Administration position on how any of these pollutants should be
    reduced in the future. The analysis shows that having advance knowledge
    of potential requirements for all four pollutants could lead the
    industry to follow significantly different compliance strategies at
    individual plants, compared with compliance choices made when the
    pollutants are addressed one-by-one. Further, the analysis shows that
    an integrated strategy would have more modest impacts on fuel patterns
    than many other analyses have predicted. In all options investigated,
    coal remains a major fuel in the production of electricity in this
    country. EPA continues to refine these multi-pollutant analyses.

                              SUBCOMMITTEE RECESS

        Senator Bond. Thank you so much.
        [Whereupon, at 11:14 a.m., Thursday, March 23, the
    subcommittee was recessed, to reconvene subject to the call of
    the Chair.]

     DEPARTMENT OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT AND
            INDEPENDENT AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2001

                                  ----------

                            THURSDAY, MARCH 30, 2000

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 9:34 a.m., in room SD-138, Dirksen
    Senate Office Building, Hon. Christopher S. Bond (chairman)
    presiding.
        Present: Senators Bond, Kyl, Stevens, Mikulski, and Leahy.

                  DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

    STATEMENT OF ANDREW CUOMO, SECRETARY
    ACCOMPANIED BY:
            SAUL RAMIREZ, DEPUTY SECRETARY
            GAIL LASTER, GENERAL COUNSEL
            JACQUIE LAWING, DEPUTY CHIEF OF STAFF FOR POLICY AND PROGRAMS
            RHODA GLICKMAN, DEPUTY CHIEF OF STAFF
            HALL DeCELL, ASSISTANT SECRETARY FOR CONGRESSIONAL AND
                INTERGOVERNMENTAL RELATIONS
            CARDELL COOPER, ASSISTANT SECRETARY FOR COMMUNITY PLANNING AND
                DEVELOPMENT
            HAROLD LUCAS, ASSISTANT SECRETARY FOR PUBLIC AND INDIAN HOUSING
            JACKIE JOHNSON, DEPUTY ASSISTANT SECRETARY FOR NATIVE AMERICAN
                PROGRAMS
            WILLIAM P. APGAR, ASSISTANT SECRETARY FOR HOUSING--FEDERAL
                HOUSING COMMISSIONER
            IRA PEPPERCORN, DIRECTOR, OFFICE OF MULTIFAMILY HOUSING
                ASSISTANCE RESTRUCTURING
            GEORGE ANDERSON, EXECUTIVE VICE PRESIDENT, GOVERNMENT NATIONAL
                MORTGAGE ASSOCIATION
            EVA PLAZA, ASSISTANT SECRETARY FOR FAIR HOUSING AND EQUAL
                OPPORTUNITY
            DAVID GIBBONS, ACTING CHIEF FINANCIAL OFFICER
            EDWARD KRAUS, DIRECTOR, ENFORCEMENT CENTER
            DONALD J. LaVOY, DIRECTOR, REAL ESTATE ASSESSMENT CENTER
            JOE SMITH, ACTING ASSISTANT SECRETARY FOR ADMINISTRATION
            DAVID JACOBS, DIRECTOR, OFFICE OF LEAD HAZARD CONTROL
            SUSAN GAFFNEY, INSPECTOR GENERAL

                OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

        Senator Bond. Good morning. The Senate VA-HUD and
    Independent Agencies Subcommittee hearing will come to order.
    We welcome Secretary Cuomo and our other guests from the
    Department of Housing and Urban Development who have joined us
    here this morning to testify on the President's fiscal year
    2001 budget request for the Department of Housing and Urban
    Development.
        The President's budget request for HUD proposes $32.1
    billion for fiscal year 2001, which is an increase of some $5.8
    billion over the fiscal year 2000 appropriation of $26.2
    billion. This includes a request for $120,000 new incremental
    vouchers at a cost of some $690 million as well as nine new
    housing initiatives costing another $200 million. While I have
    significant reservations regarding the creation of these new
    boutique programs, I am pleased the Administration has included
    additional funds for a number of HUD's core programs such as
    public housing, the CDBG program, the HOME program, and Section
    202 elderly housing. In most cases these programs represent our
    most important Federal investment in affordable low-income
    housing and community development initiatives.
        Mr. Secretary, I expect this will be the last time that we
    sit in a hearing to discuss the annual budget for the
    Department of Housing and Urban Development together. I know
    that you have worked hard to make the Department a better
    agency. However, I am disappointed the early promise of your
    energy and commitment has failed to make the necessary reforms
    to ensure the success of HUD's core housing and community
    development programs. I know many of these issues are not sexy
    and probably not especially interesting, but they are important
    to the people who live in housing and want to live there.
        Now, a year ago you were touting the fact that HUD received
    its first clean audit as evidence that HUD has turned the
    corner. This was the first time ever that HUD received an
    unqualified opinion, and you got good press and were
    justifiably proud.
        Unfortunately, this year the books have slid back into
    disarray, so much so that the auditors have been able to
    actually audit them, and that's the report that we have here.
    HUD's reaction? Attack the auditors, call them unprofessional,
    even though they are the same ones who gave you the clean audit
    last year. I think it is not time now, once again, to place the
    blame on others but, rather, admit that HUD's operations
    priorities or internal controls did not get the job done and
    need to be improved.
        Let's be honest. It is HUD's books that needed $17.6
    billion in adjustments to the fiscal year 1998 balances, and it
    is HUD's books that needed to make an additional $242 million
    in adjustments totalling $59.6 billion in the fiscal year 1999
    balances.
        I started my career in Government service as Missouri State
    Auditor, so I know a little about this, and Mr. Secretary, HUD
    has a huge problem on its hands, and you have on yours. In
    fact, if HUD were a private company, the SEC would probably
    have already suspended the trading in its stock.
        Nevertheless, I am more concerned at this moment to be on
    balanced books. We need to have answers to the questions that
    are fundamental to the mission of the Department, namely, how
    is HUD performing its missions, do the programs work, if not,
    why not, and is HUD a good neighbor and partner?
        One of the many frustrations people have with their
    Government is their gut feeling that no one is ever held
    accountable, no one is actually responsible for failures or bad
    ideas. Instead, the political culture comes out with phrases
    such as, mistakes were made, or else rewrites the nature of the
    problem.
        In the case of HUD, the many programs it runs, and the
    millions of people it is supposed to serve, I have noticed an
    alarming pattern:
        ``Leadership quick to place responsibility or blame on
    others, but unwilling to understand or accept its own failings,
    and we have the extraordinary events of just this week, where
    you, Mr. Secretary, issued your fourth report in 4 years
    warning again about the crisis we are facing in affordable
    housing needs and, in discussing the report, you have been
    recorded as saying there was a 4-year hiatus when we went out
    of the housing business.''
        We are now paying for that hiatus, and moreover, from your
    statements you have identified the decision not to fund any new
    vouchers from fiscal year 1994 to 1998 is largely to blame for
    this accelerating housing crisis.
        Based on this, what, of course, you are saying is that
    beginning in fiscal year 1994, with the House and Senate VA
    Appropriations Subcommittees under the leadership of Chairman
    Barbara Mikulski and Chairman Louis Stokes, their decision not
    to fund any new vouchers sowed the seeds for the crisis, and
    when Chairman Bond and Chairman Lewis continued the practice
    over the next few years, as we attempted to dig out of our
    budget quagmire, that we are responsible as well.
        However, your own report states the problem is due to a
    shrinking number of affordable units, and as I have said over
    and over again, these vouchers you are so anxious for have not
    and will not produce one additional unit of affordable housing,
    but you have fixed the blame. It is Congress, Senator Mikulski
    and her leadership, Senator Bond and his leadership.
        But we ask the question about HUD's leadership. Where is
    the discussion of what HUD has been doing over the past 4
    years? Let's look at the record. Just between 1996 and 1998,
    according to the National Housing Trust, we lost over 925
    properties through opt-outs, prepayments involving nearly
    98,000 affordable apartments. The National Housing Trust
    further notes that these lost units have, quote, occurred in
    many prime housing markets, which unfortunately led to the loss
    of affordable housing from neighborhoods with better schools
    and services, close quotes.
        In past years, we asked you to devote your attention to and
    solve the opt-out problem. Last year, this subcommittee became
    so frustrated with HUD's lack of leadership and action to
    preserve the units that we directed you through legislative
    provisions to preserve this housing, as well as provided $100
    million in new funding to get HUD to act.
        According to HUD's 2001 budget summary, the good news was,
    this legislation in 1999 cut the loss of section 8 housing by
    75 percent, so maybe our work is beginning to pay off, but for
    2 years the Majority and Minority on this subcommittee tried to
    get HUD's attention, and the failure to act cost us at least
    100,000 affordable, low-income housing units, and we think that
    HUD's record on section opt-outs was abysmal.
        Second, let us review how HUD has handled the multifamily
    properties in the FHA portfolio. These could be HUD-held, or
    HUD-owned. In both cases, the expectation that most of us have
    is that when HUD steps in, that preserving the housing stock in
    the inventory would be a priority. Unfortunately, what we found
    is just the opposite.
        HUD has lost a significant number of affordable rental
    housing units that could have addressed the worst-case housing
    needs that HUD often cites. In terms of properties that HUD
    owned, then sold, only 14 properties containing 1,538 units
    were maintained as section 8 housing, while 107 properties
    containing 17,877 units were sold during your tenure, and the
    units lost as affordable low-income housing.
        When we looked at HUD-held properties that had been sold by
    HUD, only 10 properties containing 830 units were maintained as
    section 8 housing, while 72 properties containing 8,891 units
    were sold and the units lost from inventory as low-income
    housing. That is a retention rate of less than 10 percent.
        By our overall calculation, Mr. Secretary, that means on
    your watch we have seen the affordable housing inventory
    decline by nearly 125,000 affordable, low-income housing units.
    That, to me, is a record of failure, one that is felt Nation-
    wide.
        In the meantime, Congress, at your request, has provided
    funding over the last 2 years for 110,000 vouchers, vouchers
    which you say are an important step towards closing this
    affordable housing gap. You have stated it is critical for
    working families, because increased housing costs have left
    them less able to afford food, medical care, education, and
    other necessities.
        But of those 110,000 working families who could have been
    helped these past few years, only 3,300 actually have been
    given a voucher. That is just about 3 percent. What is going on
    at HUD that these vouchers are still sitting around? How could
    HUD fail this badly, when people it is supposed to serve have
    needs?
        Of the 125,000 units of affordable housing lost, over
    100,000 vouchers sitting around unused, and yet your reports
    accuse this committee of causing the affordable housing crisis.
    We look forward to hearing your comments, Mr. Secretary, but
    first let me turn to my distinguished Ranking Member, Senator
    Mikulski for her comments. Senator Mikulski.
        [The statement follows:]

               Prepared Statement of Senator Christopher S. Bond

        The Senate VA, HUD and Independent Agencies Appropriations
    Subcommittee will come to order. We welcome Secretary Cuomo and our
    other guests from the Department of Housing and Urban Development who
    have joined us here this morning to testify on the President's fiscal
    year 2001 Budget Request for the Department of Housing and Urban
    Development (HUD).
        The President's Budget Request for HUD proposes $32.1 billion for
    fiscal year 2001 which is an increase of some $5.8 billion over the
    fiscal year 2000 appropriation of $26.2 billion. This includes a
    request for 120,000 new incremental vouchers at a cost of some $690
    million as well as 9 new housing initiatives costing another $200
    million. While I have significant reservations regarding the creation
    of these new boutique programs, I am pleased that the Administration
    has included some additional funds for a number of HUD's core programs,
    such as public housing, the CDBG program, the HOME program and section
    202 elderly housing program. In most cases, these programs represent
    our most important Federal investment in affordable low-income housing
    and community development initiatives.
        Nevertheless, despite rosy scenarios and high expectations caused
    by a balanced budget, this will be another tough year for this
    subcommittee. We have made a commitment to reform social security
    first, and as always, this subcommittee has the responsibility for
    funding a variety of agencies with different missions and priorities.
    It is not easy to reconcile these missions and priorities and we again
    have significant funding increases that must be provided for in VA
    Medical Care as well as the need to address the escalating costs of
    section 8 contract renewals which have been aggravated by the
    Administration's and the Congress' decision to defer $4.2 billion of
    fiscal year 2000 section 8 funding to fiscal year 2001. This funding
    decision will have to be accommodated under our budget caps for fiscal
    year 2001.
        Mr. Secretary, I expect that this will be the last time that we sit
    in a hearing to discuss the annual budget for the Department of Housing
    and Urban Development. I know that you have worked hard to make the
    Department a better agency, but I am disappointed that the early
    promise of your energy and commitment has failed to make the necessary
    reforms to ensure the success of HUD's core housing and community
    development programs. I know that many of these issues are not sexy and
    probably not especially interesting, but they are important.
        Now a year ago, you were touting the fact that HUD received its
    first ``clean audit'' as evidence that HUD has turned the corner. This
    was the first time ever that HUD had received an unqualified opinion,
    and you got good press and were justifiably proud. Unfortunately, this
    year the books have slid back into disarray, so much so that the
    auditors have been unable to actually audit them.
        HUD's reaction? Attack the auditors. Call them ``unprofessional''--
    even though they are the same ones who gave you the ``clean'' audit
    last year. I think that it is time not to always place the blame on
    others but rather admit that HUD's operations, priorities or internal
    controls just didn't get the job done.
        And let's be honest, it is HUD's books that needed $17.6 billion in
    ``adjustments'' to the fiscal year 1998 balances. And it is HUD's books
    that needed to make an additional 242 adjustments totaling $59.6
    billion to the fiscal year 1999 balances.
        I started my career in politics as Missouri's state auditor--so I
    know a little about all this--and Mr. Secretary, you have a huge
    problem on your hands. In fact, if you were a private company, the SEC
    would suspend trading of your stock.
        Nevertheless, I am more concerned at this moment to look beyond
    balanced books. We need to have answers to the questions that are
    fundamental to the mission of the Department; namely, how is HUD
    performing its mission, do the programs work, if not, why not, and is
    HUD a good neighbor and partner.
        First, HUD remains a high-risk area that is considered vulnerable
    to waste, fraud, abuse and mismanagement. It is the only agency
    designated as a high risk area by GAO on an agency-wide basis, and GAO,
    the HUD Inspector General and others continue to raise questions and
    concerns about HUD's capacity and ability to deliver on the promise of
    its programs. This is a key question and concern. As we have discussed
    in the past, as a matter of fiscal responsibility, HUD is one of the
    nation's largest financial institutions, with sizable commitments,
    obligations and exposure. HUD is responsible for managing more than
    $496 billion worth of insured mortgages, $628.4 billion in outstanding
    mortgage-backed securities, and some $106.9 billion in prior year
    unexpended budget authority for which it has future financial
    commitments.
        Despite the magnitude of these responsibilities, HUD has never
    matched its staffing requirements with program needs. This has become
    especially critical as HUD has reduced its staffing from 12,000 staff
    in 1995 to some 9,100 staff today. In addition, many of the key program
    decisions within the Department have been transferred to Community
    Builders, who are not only contract employees but in many cases are
    without the necessary program expertise and knowledge to make
    appropriate program decisions and recommendations. While this program
    is being phased out, I worry about HUD's ability to develop the staff
    capacity and expertise needed to ensure the appropriate delivery of our
    housing and community development programs. In addition, HUD has an
    aging staff with top heavy salaries. So not only does HUD need to
    develop staff expertise and capacity, it needs to reinvigorate itself.
        I also want to be very clear that I do not expect HUD to take
    shortcuts to solving these institutional and systemic problems. We need
    to establish a long-term staffing plan that is tied to program needs
    and requirements. We also need to establish an information system that
    can track funding decisions and integrate information on all HUD
    programs; one that is accurate and dependable.
        One of the frustrations many people have with their government is
    their gut feeling that no one is ever held accountable, no one is
    actually responsible for failures or bad ideas. Instead the political
    culture spews out phrases such as ``mistakes were made'' or else
    rewrites the nature of the problem.
        In the case of HUD, the many programs it runs, and the millions of
    people it is supposed to serve, I have noticed an alarming pattern--
    leadership which is very quick to place responsibility or blame on
    others but absolutely unwilling to understand or accept its own
    failings. And thus we have the extraordinary events of just this week,
    where you, Mr. Secretary, issued your 4th report in 4 years warning
    again about the ``crisis'' we are facing in affordable housing needs,
    and in discussing this report you have been quoted as saying that
    ``There was a 4 year hiatus when we went out of the housing business.
    We are now paying for that hiatus.'' And, moreover, from your
    statements you have identified the decision to not fund any new
    vouchers from fiscal years 1995 through 1998 as largely to blame for
    the accelerating this housing crisis.
        Based on this, what of course you are saying is that beginning in
    fiscal year 1995, with the House and Senate VA/HUD Appropriations
    Subcommittees under the leadership of Chairwoman Barbara Mikulski and
    Chairman Louis Stokes, that their decision to not fund any new vouchers
    sowed the seeds for today's crisis. And that when Chairmen Bond and
    Lewis continued this practice for the next few years, as we attempted
    to dig out of our budget quagmire, that we are responsible as well.
        Moreover, your own report states that the problem is ``due to a
    shrinking number of affordable rental units''. And as I have said over
    and over, these vouchers you are so anxious for--have not, and will
    not, produce one additional unit of affordable housing.
        But you have fixed the blame. It is Congress. It is Senator
    Mikulski and her leadership. It is Senator Bond and his leadership. But
    you have not commented on your own leadership.
        Where is the discussion of what HUD has being doing over the past 4
    years?
        Let's look at the record.
        Just between 1996 and 1998, according to the National Housing
    Trust, we have lost over 925 properties through opt-outs and
    prepayments involving nearly 98,000 affordable apartments. The National
    Housing Trust further notes that these lost units have ``occurred in
    many prime housing markets, which unfortunately led to the loss of
    affordable housing from neighborhoods with better schools and
    services.'' Last year, this Subcommittee became so frustrated with
    HUD's lack of leadership and action to preserve these units that we
    included a number of legislative provisions to preserve this housing as
    well as $100 million in new funding to get HUD to act.
        According to HUD's fiscal year 2001 budget summary this
    ``legislation in 1999 has cut the loss of Section 8 housing by 75
    percent''. So maybe our work is paying off now--but for two years
    democrats and republicans on this Subcommittee tried to get HUD's
    attention and this failure cost us at least 100,000 units.
        Second, let's look at how HUD handles the multi-family properties
    in the FHA portfolio. These can be HUD-held, or HUD-owned. In both
    cases, the expectation that most of us have is that when HUD steps in,
    that preserving the housing stock in the inventory would be a priority.
    Unfortunately, what we found is just the opposite.
        In the case of this HUD multifamily inventory, HUD has lost a
    significant number of affordable rental housing units that could have
    addressed the worst case housing needs that HUD often cites. In terms
    of properties that HUD owned then sold, only 14 properties containing
    1,538 units were maintained as section 8 housing out of 121 properties
    containing 19,415 units that were sold during your tenure. In terms of
    HUD-held properties that have been sold by HUD, only 10 properties
    containing 830 units were maintained as section 8 housing out of 82
    properties containing 9,721 units during this period.
        This means, Mr. Secretary, on your watch, we have seen the
    affordable housing universe of HUD owned and HUD-held multifamily
    housing decline by over 125,000 units. That is simply put, a record of
    failure.
        In the meantime, Congress has provided funding, per your
    insistence, for 110,000 vouchers over the past two years--vouchers
    which you say are ``important step in towards closing this affordable
    housing gap''. You say it is ``critical for working families'', because
    increased housing costs have left them less able to afford ``food,
    medical care, education or other necessities''.
        But of those 110,000 working families who could have been helped
    these past few years--only 3300 have actually been given a voucher.
    That's only 3 percent. What is going on at HUD that these vouchers are
    still sitting around? How could HUD fail this badly, the very people it
    is supposed to serve?
        225,000 units of affordable housing lost, over 100,000 vouchers
    sitting around unused--and you have the gall to accuse Senator Mikulski
    and I of causing this so-called affordable housing ``crisis''.
        In addition, while the FHA Mutual Mortgage Insurance Fund for the
    FHA Single family Mortgage program is presently in good shape, FHA's
    inventory of single family homes that HUD has foreclosed on and taken
    ownership of has more than doubled under your tenure from 24,395 homes
    in 1996 to over 47,000 homes currently, despite the fact that this
    subcommittee has provided significant new tools to move this housing
    into the hands of nonprofits and homeowners. Even more troubling is the
    fact that from between April 1999 and January 31, 2000, the percentage
    of properties in HUD's single family inventory for 6 months or more has
    increased from 30 percent to 41 percent of the inventory, and the
    percentage of properties in the inventory for more than 12 months has
    increased from 10 percent to 17 percent. This is a disaster for
    neighborhoods and sloughing off these properties on local governments
    is not a responsible answer.
        And the bad news is not over, The percent of FHA loans in
    foreclosure has increased from 1.64 percent in 1996 to 2.2 percent in
    1999. FHA's loan delinquencies has also increased from 8.05 percent in
    1996 to 8.57 percent in 1999, whereas the delinquency rate for
    conventional loans is some 2.63 percent. Even more disturbing is KPMG's
    recent audit finding regarding FHA loans that HUD currently holds as
    the mortgagee. KPMG found that FHA could have prevented further losses
    to the fund if it was able to service its loans adequately.
    Specifically, over 2,500 loans, or 22 percent of the portfolio were not
    being actively serviced as of September 30, 1999. Lastly, KPMG found
    that the quality of the portfolio had deteriorated significantly
    between 1996 and 1999.
        Again, when the federal government steps in to take over a property
    from a failing landlord, or becomes the owner of a house down the
    street through foreclosure, we expect that things will start to
    improve; that repairs will be made, lawns mowed, and broken windows
    fixed. What we don't expect is that the housing conditions will
    deteriorate even further, that property values will fall in the
    neighborhood, and that in some instances the property will become a
    HUD-owned crack house.
        What is HUD doing? And if it is true that HUD is running a huge
    surplus in the FHA fund  . . the fund that is used to maintain and
    preserve HUD-owned properties  . . while all these units are being
    lost, it is a fair question to ask what is HUD thinking?
        We look forward to hearing your comments, Mr. Secretary. But first,
    let me turn to my distinguished Ranking Member, Senator Mikulski.

                    STATEMENT OF SENATOR BARBARA A. MIKULSKI

        Senator Mikulski. Thank you very much, Mr. Chairman, and I
    also want to thank you for allowing the VA-HUD Committee to
    hold a very important field hearing in Baltimore on Monday on
    the issues related to the flipping of property, where property
    is bought at one price and then the poor are sold the housing
    at an inflated price, with false information about the buyer's
    credit, false information and deceitful and criminal
    information by the appraiser, and so on, and we will talk more
    about it, but we had an excellent hearing, and I want to thank
    you for authorizing the hearing and for the participation of
    your staff.
        We were joined at that hearing by Senator Sarbanes so that
    he, too, could get insights for corrective action through the
    authorizing.
        Mr. Cuomo, we want to welcome you today for today's
    hearing, and I know this will be your last appearance before
    the committee on the matter of the appropriation. Based on some
    of the things that we've uncovered and discussed with you,
    there might be additional, either a hearing or a roundtable or
    something.
        In our work together I know that you have focused very much
    on the issues that I raised from time to time in hearings, on
    the issues of the consequences of HOPE VI and section 8, are we
    changing vertical poverty to horizontal poverty, your concern
    about the digital divide, your taking on the challenge that I
    raised about the need to look at housing for the elderly, and
    look at the contemporary demands of people aging in place, and
    what we need.
        Ordinarily, those are things that I would go through in
    detail at the hearing, because the appropriations put forth on
    housing for the elderly are a significant increase, and a focus
    on new ground-breaking initiatives and assisted living, and I
    would hope perhaps to have additional conversations with you
    and your staff on that.
        In terms of HOPE VI, I believe it has been one of the most
    successful antipoverty programs we have had. We have not only
    created a new physical infrastructure but a new social
    infrastructure, and I know that you are looking at ways to
    improve the program, and under the leadership of Ms. Elinor
    Bacon, who is in charge of HOPE VI, it was how we could keep
    the momentum going, improve the program, and also make sure we
    are not creating horizontal poverty, and we look forward to
    further conversation on that.
        Within the Senate itself, I have taken on the
    responsibility within the Democratic Caucus to come up with
    initiatives to ensure that there is no digital divide in this
    country. Through extensive conversations with the President,
    the Vice President, and his team, we really do have a
    legislative framework, and one we would like to build on
    lessons learned by bringing computer technology into HOPE VI,
    which meant job-training for adults, after-school activities
    for children, and again, those are areas for further
    conversation.
        But today, I really want to focus on the hearing that I had
    in Baltimore and some of the issues raised prior to the
    hearing, but the hearing confirmed my worst fears.
        Mr. Secretary, you know my background. You know that I came
    into politics to save lives, to save communities, and to save
    neighborhoods.
        When I met with the community in Baltimore several weeks
    ago, with the advocates of a group called Coalition Against
    Predatory Practices, Predatory Real Estate Practices, I was
    horrified to see where the very tools of the Federal
    Government, used to promote home ownership, had become the very
    tools for scamming the poor, actually gouging the poor, and
    that in that process of gouging the poor, forcing them into
    bankruptcy then meant foreclosures, and that very often the
    very HUD inventory itself, of holding FHA mortgages, were
    destroying neighborhoods.
        So in both my meetings with the coalition, and then in our
    hearing, what we found was that HUD itself was a contributor to
    the destruction of dreams, the erosion of neighborhoods--I will
    wait until you finish reading Mr. Apgar's note.
        Mr. Cuomo. Sorry.
        Senator Mikulski. Mr. Apgar, I think you need to hear this.
    I really think you need to hear this, because FHA is only one
    part of what happened in flipping, but it is the one, perhaps,
    that we have the most control over because of the sub-prime
    underissue. I know that HUD did not directly do this, but HUD
    has to know the consequences. HUD has to--perhaps Mr. Apgar--
    has to get out of headquarters and go out and take the same
    tour that I did to see that.
        Now, what we see here is that people are buying and
    reselling property for a 100-percent profit, sometimes within
    the same day. Property-flipping is directly related to the
    problem of predatory lending, scamming them, destroying their
    lives, and ruining entire communities. These communities were
    part of my original city council district. They were part of my
    congressional district, and they are part of both my
    neighborhood, and they are the home, they are literally my
    home, and they are the home of my heart, so I am going to fight
    for those neighborhoods.
        But those neighborhoods are a metaphor, because if I
    thought it was only going on in Baltimore, it would be like the
    Superfund site that we would move in to contain. But it is more
    like a virus, and it is spreading nationwide, in Milwaukee, in
    Chicago, in Buffalo, in my own State, tell-tale signs already
    in Prince Georges County, so it is more like a virus that is
    spreading, and I think we need to jump in and do something
    about it, to do something about the gouging of the poor, home
    improvements scams, crooked appraisers, kick-back to mortgage
    brokers, and then holding the destabilization of neighborhoods.
        I know that you and I talked about this, and I know that
    you have some very important thoughts and recommendations on
    this. I personally want to thank you for taking very
    constructively the results of that hearing and actually meeting
    with the neighborhood people themselves, to leap-frog over our
    staffs, bureaucracies, and going on, and going directly to the
    people.
        On behalf of them, I really want to thank you. They are in
    the audience here today, and we will acknowledge them later on
    in the testimony, but I want to thank you for going directly to
    them to get a sense of the problem, and so today I look forward
    to the solutions about not only what we could do about
    Baltimore, but using Baltimore as the laboratory, because the
    FBI said to me that this was the worst case situation in the
    Nation, and of the 5,000 homes that were sold in Baltimore,
    10,000 homes last year, 5,000 are now into default.
        Now, 50 percent are into FHA default. Something is wrong
    somewhere. Not all are a result of flipping, so I am going to
    stop the crime. I am going to stop the scum from gouging the
    poor in our communities nationwide, and I want to make sure
    that when FHA takes hold of property, we deal with it in a way
    that enhances and builds the neighborhoods. I know that is your
    commitment. Let us work together, and I look forward to hearing
    your testimony.
        Senator Bond. Thank you, Senator Mikulski.
        Senator Leahy.

                     STATEMENT OF SENATOR PATRICK J. LEAHY

        Senator Leahy. Thank you, Mr. Chairman, and Secretary,
    everybody has told you all that may go wrong. Let me say that
    there is a lot of things have gone right, and I think a lot of
    it reflects the hard work you have shown over the last 3 years
    at HUD.
        I recall when you were appointed as Secretary I told you I
    did not know whether to congratulate you or offer you
    condolences, because it is a very difficult area. You are never
    going to have enough money to do all the things you want to do,
    and the things you want to do can almost never be done
    perfectly, because if there could be there would not even be a
    need for HUD to be there. Usually you are facing some of the
    most intractable problems.
        You took over the most overburdened Department in our
    Government, but at the same time you have reduced the size of
    HUD's bureaucracy. The head of the GAO has publicly stated you
    have made incredible progress toward implementing a plan to
    remove your Department from the high-risk designation. You have
    improved the HUD budget to better address the housing needs
    across the country.
        I think you have prepared a strong budget for fiscal year
    2001. I congratulate you for that. The recent release of HUD's
    worst-case needs report illustrates how important it is to
    remain committed to the housing needs of low-income families,
    and the irony is we are in a time of high economic prosperity,
    the best in my lifetime, in this country but we still have some
    real housing needs among low-income people.
        You propose 120,000 new housing vouchers and $1.2 billion
    in homeless assistance grants. I think they need it. They will
    begin to address the real problem of those who are least able
    to afford a place to live.
        I am also encouraged by your commitment to the CDBG and
    HOME programs. These have been two of the most effective
    programs available for financing housing and economic
    development. They have also--I know they have been helpful in
    rural areas like my own State of Vermont, but also in other
    parts of the country, and to risk sounding parochial, something
    that rarely ever happens in the Appropriations Committee and
    almost never here, I did look at a study recently conducted in
    Vermont.
        Now, to put this in perspective, Vermont has about 600,000
    people. It shows on top of the 15,000 families already helped
    by State and Federal programs, nearly 22,000 families still
    need some sort of housing assistance. And 22,000 families is
    not much in California or New York, or Illinois. It is an awful
    lot of people in Vermont, and we have got one of the most
    expensive and tightest housing markets certainly I have seen in
    my lifetime.
        In Chittenden County, one of our 14 counties, but one that
    has about a quarter of our State's population, and Mr.
    Secretary, you have visited that area, and you know many of the
    people there, the residents are currently facing a 1-percent
    vacancy rate, a 1 percent, and housing costs are expensive. The
    middle income families are being left homeless. They can go to
    a hotel. They can go--or just not have homes. And that is
    happening in other parts of the country. I am not suggesting
    that we are unique. Unfortunately it is happening in a lot of
    other parts.
        Now, let me mention New York City and the homeless program.
    I am convinced from all I have read, all I have seen, all my
    staff's been able to see, that HUD acted in the best interest
    of the homeless in New York City. I want to make that very
    clear.
        Legitimate concerns about reduction in grant proposals by
    city officials were identified by a Federal district judge in
    Manhattan, and suggested it was done out of a sense of
    vindictiveness. I think you were correct to take that program
    away from the city until it could be determined that homeless
    funds were being reviewed on their merits, not according to
    some kind of litmus test set up in the mayor's office.
        You know the funds that are awarded through the continuum
    of care program are only as effective as the organization that
    administers them. You can put the money in there, but it has
    got to be administered well, and it has been the homeless
    community in New York City which has been the victim throughout
    this process, and I understand you are working with that
    community and working with city officials.
        I would hope that we can get politics out of it once and
    for all, and I do not particularly care which party is
    controlling HUD, or which party is controlling the city hall
    for the purposes of getting this money out there. It should be
    done where it is going to do the best. We know what we want to
    do. We want to help the homeless, and they were not being
    helped because too many litmus tests were being put for
    whatever reason, but not for reasons that were intended by the
    Congress or by your Department, so you were right to take it
    over.
        So I thank you for that, and I will have some questions
    when we start, but I would also like to say again I enjoy
    working both with the chair and the ranking Member of this
    committee. I do not know two Senators who work harder on their
    budget, go through more frustration, but have more hopes for
    the future than the two of you.
        Thank you. Thank you, Mr. Chairman.
        Senator Bond. Thank you very much, Senator Mikulski, and
    Senator Leahy, we thank you for your faithful attendance on the
    appropriations subcommittees. With so many hearings we have, it
    is difficult to get appropriations members of the committee to
    join us, and you have been a faithful participant. We
    appreciate that.
        Now, Mr. Secretary, we would welcome your opening
    statement. As always, we will make your full statement, the
    budget request and all the information already submitted a part
    of the record and ask you to summarize what you think would be
    the most important parts of the information you have today.

                           STATEMENT OF ANDREW CUOMO

        Mr. Cuomo. Thank you very much, Mr. Chairman, for the
    opportunity to be here again, and thank you, Senator Mikulski
    and Senator Leahy, not just for your attendance at this
    hearing, but for all your good work and help over this past
    year.
        If I might, with the committee's permission, quickly
    introduce the senior officials who are here today, who may be
    responsive to your questions. At the table seated with me, to
    my right, as you know, is FHA Commissioner William Apgar. To my
    left is Deputy Secretary Saul Ramirez. I will ask these people
    to stand quickly. It will also be good exercise.
        Assistant Secretary Cardell Cooper, CPD, Assistant
    Secretary Harold Lucas, Public Housing, Mr. George Anderson,
    Acting President of GNMA, Assistant Secretary Susan Wachter,
    Policy Development and Research, Assistant Secretary Eva Plaza,
    Fair Housing, Gail Laster, General Counsel of the Department,
    Stephen Carberry, Chief Procurement Officer, Joe Smith, Acting
    Assistant Secretary for Administration, Mr. Donald Lavoy, who
    runs the REAC, Real Estate Assessment Center, Mr. Ed Kraus, who
    is a detailee from the FBI and runs the Enforcement Center, Mr.
    Hal DeCell, Assistant Secretary for Intergovernmental
    Relations, Jackie Lawing, Acting Chief of Staff, Dave Gibbons,
    Acting CFO, Douglas Kantor, Deborah Vincent, Deputy Chiefs of
    Staff, Rhoda Glickman, Deputy Chief of Staff, Mr. Fred Karnas,
    who is in charge of the Homeless programs, Deputy Assistant
    Secretary, Jackie Johnson, who is in charge of the Native
    American Programs, and last but certainly not least, Ms. Elinor
    Bacon, who is in charge of the HOPE VI program, which, as
    Senator Mikulski rightly pointed out, has been a real success
    story.
        Senator Bond. Mr. Secretary, we welcome all the members.
    Let me ask all the other representatives of HUD who were not
    introduced, would you stand up as well, please, so everybody
    else who works for HUD, if you would please stand up.
        All right. Well, thank you very much. We feel somewhat
    overmanned. You have more than the combined staff of the entire
    Appropriations Committee here, and we are certainly glad, and
    welcome all of them to participate in the discussions.

                             HUD'S ACCOMPLISHMENTS

        Mr. Cuomo. Thank you very much, Mr. Chairman.
        First let me also thank the committee, as this will be
    probably the last time that I am before you. We have
    accomplished great things in this past 4 years, past 3 years,
    and I believe when they write the history book of housing,
    outside of this political year, these 4 years will be a period
    of great progress.
        We have new section 8 vouchers over this period of time,
    not what the President requested, but at least we are back into
    business. We do have public housing legislation, which has
    reformed public housing, the first legislation that has been
    passed in 7 years. It has made a real difference,
    deconcentrated poverty.
        We have addressed the section 8 issues. Mr. Chairman, I
    recall, I believe in this room at my confirmation hearing, with
    then Senator D'Amato, we put two charts on an easel to my left
    talking about the impending crisis of section 8 and how that
    had to be the focus because we were going to be losing units.
    Literally before I was in office, we identified that as the
    major problem, and I am glad that we have been able to respond
    to that.
        We increased the FHA loan limits. We have made significant
    management progress at the Department, and every non-political
    credible source will confirm that management progress, starting
    with the GAO, which is often referred to by Congress, but also
    a raft of expert private consultants such as Price Waterhouse,
    Booz Allen, Arthur Andersen, et cetera, and we more than
    doubled the homeless assistance budget, and we changed the way
    of doing business there and I think in many ways we are doing
    much more service for those people who need it most, who make
    up the homeless population.
        So I think those are just some of the highlights of what we
    have accomplished. Not that our job is done, certainly. We have
    not reached management Nirvana at HUD. We have further to go.
    We have not addressed the housing problem. It is getting worse
    in the midst, but we have made progress, and we have another
    good year ahead of us.

                               Predatory lending

        Part of our responsibility is to address the changes that
    occur, the challenges that arise on our watch. I think Senator
    Mikulski has put her finger on probably the challenge to
    housing and communities that face the Nation for the next few
    years, and that is the issue of predatory lending.
        The Senator has identified it in the City of Baltimore,
    where it is a significant problem, but it is also a national
    crisis, in my opinion, and it is going to be a priority for us
    at HUD over this coming year. It is just evolving on us, and we
    do not really see the full parameters of it yet, but what has
    happened is, the sub-prime mortgage market has actually
    exploded in growth.
        If you look at the numbers just from 1993, the quote-
    unquote sub-prime market went from about 100,000 loans to about
    900,000 loans, the value of the sub-prime portfolio from $20
    billion to $150 billion, so this has been a market----
        Senator Mikulski. Can you move that? The person doing the
    transcript sees it better than we do.
        Mr. Cuomo. This has been an explosion in sub-prime lending.
    Now, sub-prime lending in and of itself is not bad. It is good,
    bringing credit to people who need it, but it has opened the
    door for abuse of a very vulnerable population. That is what
    has been now recently termed predatory lending.
        National Consumer Law Center estimates 600,000 Americans
    may lose their homes because they were duped into bad loans.
    Now, the predatory lending comes in all types of forms.
    Basically, the forms are excessive up-front fees and high
    interest rates, up-front financing cost of credit life
    insurance, excessive prepayment penalties that trap homeowners
    in high-cost mortgages, and balloon loans that are structured
    to include an extremely high final payment.
        This issue is bigger, frankly, than HUD. It is certainly
    bigger than the FHA. Alan Greenspan said that he is, quote,
    concerned over the unfair and deceptive lending practices in
    the mortgage industry that target the poor and underserved
    communities.
        Mayor Richard Daley sees this in Chicago and says that
    predatory lenders are a new menace to our neighborhoods. These
    people do not wear gang colors and flash hand signals. They
    wear pinstripe suits, and they flash easy cash. But I think
    there is much of the echo, Senator Mikulski, in your sentiments
    in that quote.
        We believe it is the obligation of HUD to rise to this
    challenge. HUD is the housing organization for the Nation. HUD
    is responsible for RESPA, the Real Estate Settlement Procedures
    Act, which is applicable here, and this is primarily a housing
    problem.
        The methodology that we would employ to address this issue
    over these next few months is as follows. First, rather than
    dealing with the problem in the abstract, or as a concept, we
    would deal with the issue as a practical, as it is presented in
    practice.
        The City of Baltimore for a number of factors probably
    presents, in our opinion, one of the worst manifestations of
    all of these phenomena. There is a confluence of circumstances
    in the city that conspire to make this problem of, quote-
    unquote, predatory lending even worse.
        We would use the City of Baltimore as what we call an
    operational laboratory. Let us address these issues as they are
    presented in the city, use the experience then to arm a
    national task force which could have hearings Nationwide to
    make sure what we are seeing in Baltimore is also what we are
    seeing in Chicago, also what we are seeing in Denver, also what
    we are seeing in Los Angeles, and then come up with a report to
    the Congress.
        We would hope to do this in 8 weeks, so that Congress could
    consider legislative changes this year, because we think time
    is of the essence, and that is our plan going forward. We'd
    like to establish a national task force, also a Baltimore task
    force that focuses specifically on Baltimore, designing
    practical solutions and a national policy.
        While Baltimore faces challenges, there are also
    significant opportunities in Baltimore. It has one of the
    strongest networks of CDC's, Community Development
    Corporations, in the Nation in our opinion, very organized,
    grassroots groups who are energized but also sophisticated in
    what they do, and we think that is a significant asset for us
    to build on.
        So that is our proposal. We hope to get this done in 8
    weeks, get a report back to Congress, as well as making the
    practical changes, and hopefully that can amount to legislative
    changes for the Nation, because in the final analysis we will
    need new laws for this new problem.
        FHA has already done its part, and will do more. We have
    started to crack down on lenders who are making bad loans with
    what we call our credit watch program, but basically what this
    does is, it terminates lenders with excessive default or claim
    rates. If you are a lender, and you have an excessive claim
    rate, you are automatically terminated based on the default
    rate.
        We are changing the appraisal process, because the
    appraisal process is very much an element in all of these
    schemes, and we are actually upgrading the appraisal process to
    what we call the homebuyer protection plan, which tested our
    appraisers for the first time, and makes the appraisal a
    submission to FHA and, hence, a submission to a Federal agency,
    and hence, a false appraisal a potential violation of the False
    Claims Act.

                              Property disposition

        We are also working at FHA on expediting the disposition of
    our property. We are selling faster than we have ever sold
    before. You see the numbers coming down from 323 days to 144
    days, and our most critical problem, which is what we call the
    aged inventory, our old properties, we have come up with what
    is in our opinion some very creative ways to sell them, 50
    percent off for a police officer, the officer-next-door
    program--50 percent off for a teacher, to bring a teacher into
    a revitalized community, and a discount for qualified not-for-
    profits.
        We have also gone the next step, which I believe is the
    final solution, if you will, for the aged inventory. If we do
    not sell a home after 6 months on the market, we give it to the
    city for $1, period, and the city will then transfer it to a
    not-for-profit, et cetera. We will do all of these things to
    try to sell the property faster, but we will put--your point,
    Mr. Chairman, about performance--an end point. If none of this
    works within 6 months, rather than have an FHA property that
    might deteriorate, we will give it to the city, period.
        We announced this just a few days ago with Congressman
    Kasich, who is concerned about this issue, and I am very
    excited about that.
        The last point on FHA is, so we do not lose the forest for
    the trees with FHA--FHA is having a banner year.
        Senator Bond. Mr. Secretary, in a kinder, gentler Congress,
    somebody has killed the red light off. It should have gone off
    several minutes ago, but I would like you to wrap up as quickly
    as you conveniently can with hitting the main points you wish
    to hit.

                           Budget request highlights

        Mr. Cuomo. Fine, let me just wrap up in a couple of
    minutes, then, with the chairman's permission.
        FHA has come a long way since we started. When we took over
    it was a negative $2.7 billion. Now it is now $16.6 billion.
    That is where we have identified $5 billion to do more
    affordable housing, which we desperately need, and then we
    have, Mr. Chairman, the overall budget proposal by the
    President, which is the best budget for HUD in 20 years. As you
    pointed out, it goes up $6 million from $26 million to $32
    million. We think we need that increase.
        Affordable housing, which as the chairman pointed out is at
    an all-time high, 5.4 million families need affordable housing.
    We would suggest new vouchers once again, which we have
    proposed in the past. We are not a total solution, but they are
    a big step towards the solution. We propose 120,000 vouchers,
    which would double last year's number, but start to make a dent
    in the backlog of housing needs in the Nation.
        We would also fully fund public housing, increase the HOPE
    VI program, which is a real success story, by $50 million. The
    HOPE VI program, following Senator Mikulski's vision of making
    HOPE VI not just a different community, a better community, but
    also a community of opportunity and lift, and bringing in e-
    villages and closing the digital divide, that has been a
    tremendous success.
        We would also propose a new housing production program,
    because as the chairman has pointed out, vouchers alone do not
    make a housing program, and we also need a production program,
    especially in those areas where vouchers are not working.
        We need more senior citizen housing. We propose another
    7,500 units of mixed income, and flexible use of the FHA
    insurance.
        Within the budget, we would also focus on the economic
    revitalization. The President has made a priority out of the
    quote-unquote, new markets, economic development in areas left
    behind. We have an APIC program, $37 million, which would
    leverage $1.5 billion from Wall Street, more empowerment zones
    and the raise in CDBG, the fair housing, we are looking for 14
    percent more in fair housing money, because we still get those
    complaints daily of racial discrimination, and racism is very
    much alive and well and, finally, the safe and livable
    communities, where we are trying to come up with sustainable
    metropolitan-based solutions that bring the city together with
    the county in planning and action plans rather than dividing,
    and that is a very important piece as we go forward.
        As the chairman pointed out, the affordable housing crisis
    has gotten worse. The vouchers have made a dent. I believe if
    we get a production program and we come up to scale and we use
    this surplus wisely, we can build on what is already a strong
    record, and I thank the committee for having us today.
        [The statement follows:]

                       Prepared Statement of Andrew Cuomo

        Chairman Bond, Senator Mikulski, members of the Subcommittee, thank
    you for inviting me here today to discuss HUD's proposed fiscal year
    2001 budget. It is my pleasure to be here today. This year, HUD's
    budget request is $32.1 billion. That represents a $6 billion increase
    over the amount enacted last year. It's HUD's strongest budget in
    twenty years.
        Mr. Chairman, before discussing the details of this year's budget,
    I would like to take a moment to thank you and this Committee for the
    extraordinary support that you gave us on our budget request last year,
    and for that matter, the year before. We have been able to accomplish
    great things together.
        While we have not always agreed on all of the specifics, by working
    together we have been able to establish a remarkable record of
    bipartisan cooperation. For the past two years in a row we have reached
    unprecedented agreement on HUD's budget requests, with increased
    funding for public housing, economic development, homeownership, and
    rental housing. I look forward to another year of cooperation, and I
    pledge every member of my Department's commitment to that end.
        Mr. Chairman, I believe that this year we are at a crossroads. This
    year, the first year of the new millennium, we must, make a choice.
    That choice is whether we build on our success and take a bold step
    towards once and for all addressing our nation's affordable housing
    needs. This year we have an extraordinary opportunity to set this
    nation on a new course, so that when the historians write the history
    of housing in this century, they will be able to say that this was
    truly the year we made good on the goal of a ``decent, safe and
    affordable home for every American family''.
        And there should be no doubt that we are facing a crisis. It is a
    term that I do not use lightly. The evidence, unfortunately, is clear.
    It is impossible to open the newspaper today without reading reports
    describing the problem in communities in virtually every part of the
    country. Almost every day there are articles about rising rents and the
    lack of affordable housing--both in big cities like San Francisco, Los
    Angeles, Dallas, Miami and New York, as well as in smaller and medium-
    sized like Rochester, Norfolk, and Sacramento.
        It is a cruel irony that while most communities ale doing very well
    in this booming economy, the better they are doing the more acute their
    shortage of affordable housing. Those that are doing the best are often
    also facing the worst shortages. The stronger the economy, the stronger
    the upward pressure on rents. Even some of America's strongest regions
    for business are literally being ``priced out'' of housing by their
    success. In Silicon Valley, the leading companies driving the global
    information age have identified affordable housing as their number one
    backyard concern.
        HUD's new worst case housing needs report, which we released
    earlier this week, gives us a nation-wide picture that confirms these
    local reports. With your permission I would like to enter this report
    into the record. It is entitled Rental Housing Assistance--The
    Worsening Crisis. It's the most in-depth, comprehensive and respected
    analysis of rental housing in the United States.
        There are a number of dramatic findings in this report. I would
    like to highlight three of them today. The first, and most important,
    is that, despite the booming economy, the number of families with worst
    case housing needs has increased to 5.4 million--an all-time high.
    Since the last worst case housing heeds report was released two years
    ago, the number of families with worst case needs has increased by 4
    percent, twice the rate of growth for the U.S. population.
        Households with worst case needs are defined as unassisted renters
    with incomes below 50 percent of the local median, who pay more than
    half of their income for rent or live in severely substandard housing.
        Even more compelling than the record number of worst case needs is
    the increase that we've seen over the past decade. There are now
    600,000 more households with worst case housing needs than there were
    in 1991 when the current economic recovery began--a rate of increase
    that is almost twice as fast as overall household growth.
        A second important finding of this report is that families with
    worst case needs are working harder than ever. While you would expect
    that the poorest families also have the worst case needs, the fact is
    that the number of people who work full-time and have worst case
    housing needs increased by 28 percent from 1991 to 1997--a rate of
    growth that is almost twice as fast as the rate for all other low-
    income renters. People used to think that if you were willing to work
    hard, things would take care of themselves. You would be able to afford
    housing and take care of your family. But that, unfortunately, is not
    always the case any more.
        The third finding I want to highlight is that low-income Americans
    who live in the suburbs, not the cities, are more likely to have worst
    case needs than elsewhere. It disproves the myth that the affordable
    housing shortage in this country is an urban problem. It's the suburbs
    where you're seeing the largest drop-off in the number of affordable
    housing units available. In fact, over one third of all worst case
    households live in the suburbs.
        These findings make a clear and compelling case for greater federal
    attention to our nation's housing needs. With this Committee's support
    and through bipartisan cooperation, we have broken the gridlock and
    affordable housing, when Congress approved new housing vouchers in each
    of the past two years--60,000 last year and 50,000 the year before.
        With worst case needs at record levels, there is now an urgent need
    to strengthen federal efforts to assure adequate supplies of decent,
    safe and affordable housing for America's struggling families.
        That is the need that our fiscal year 2001 budget proposals
    address, Mr. Chairman. That is why we have requested continued support
    from Congress for incremental housing vouchers to help meet the housing
    needs of low-income families struggling with rising rents.
        And that is why the President has asked for an overall $6 billion
    increase over last year's enacted level. It reflects his belief that we
    must squarely address this rental housing crisis, that we must address
    the needs of those people and places left behind in this new economy,
    that we must help working families move closer to job opportunities--
    and that HUD now has the strength to address these challenges
    effectively and responsibly.

                   FISCAL YEAR 2001 BUDGET BUILDS ON SUCCESS
        A few years ago, some would have argued that while the need was
    there, HUD did not have the capacity to address it. I am pleased to
    tell you that that is no longer the case. By virtually any measure, and
    according to every independent expert, HUD today not only has the
    capacity, but is better positioned than ever to help communities take
    on the challenges of the 21st century.
        This year's budget proposal is a direct outcome of the management
    reforms we have put in place over the past three years. I am convinced
    that we now have the tools, the resources, and the capacity to wisely
    and responsibly spend the funds we have requested.
        Our management reforms have succeeded in transforming HUD into an
    agency that puts communities first. Fighting fraud, waste, and abuse,
    our Public Trust Officers are cracking down on those who misuse
    taxpayer dollars. Renewing our commitment to first-class customer
    service, our Community Builders are connecting people to the full range
    of HUD resources. As a result, HUD today is back in business--back in
    the housing business, in the economic development business, and in the
    community empowerment business.
        But nowhere is HUD's turnaround more evident than in the FHA's
    mortgage insurance programs. In 1990 FHA was virtually broke--$2.7
    billion in the red. Despite a six-decade history of providing access to
    mortgage capital, FHA had projected losses from claims on mortgage
    insurance that were far in excess of projected revenue. Thanks to our
    Management 2020 reforms, that's all changed.
        Today, the FHA and its Mutual Mortgage Insurance Fund are the
    healthiest they have been in decades. Last year FHA insured a record
    1.3 million mortgages worth $124 billion. With FHA's help, the nation
    is currently enjoying the highest homeownership rate in history.
        And last month, the new Actuarial Review of the FHA Insurance Fund
    for fiscal year 1999 brought more good news. The review--conducted by
    Deloitte Touche--shows the value of the Fund stands at a record high of
    $16.637 billion. According to the auditors, the value of the Fund is
    $5.3 billion over previous estimates. The President has directed me to
    work with the Office of Management and Budget to develop
    recommendations on how these surplus funds can best be used to
    strengthen federal housing efforts in the years ahead.
        This past year has been a banner year for HUD in other areas as
    well. President Clinton kicked off his New Markets Initiative with
    historic visits to the Pine Ridge Indian Reservation, East St. Louis,
    Los Angeles, the Mississippi Delta, Central Appalachia, and other
    inner-city and rural communities served by HUD. These are the emerging
    markets of the new century. They are the places that will provide the
    consumer and labor markets needed to fuel economic growth in the
    future--and through our economic development programs we will help them
    tap this potential.
        The budget also proposes to expand the successful Continuum of Care
    program for homeless assistance and prevention--a winner this year of
    the prestigious Innovations in Government Award from Harvard University
    and the Ford Foundation. The national survey of homelessness in
    America, conducted by the Census Bureau, showed that we are on the
    right track with the Continuum--which has, so far, helped 400,000
    people move from homelessness to self-sufficiency. But with an
    estimated 600,000 Americans still homeless each night, there is still
    much more to do.
        In the past year we launched a major commitment to address one of
    the key challenges facing us in the new millennium--the graying of
    America. Our budget requests increased funding for HUD's new Housing
    Security Plan for Older Americans--helping seniors stay in their own
    homes as long as possible, increasing funding for the successful
    Section 202 elderly housing program, converting existing elderly
    housing to assisted living, and in 2001, building new assisted living
    facilities.
        We have seen historic, across-the-board gains on the homeownership
    front--70.1 million American families own their homes today, more than
    at any time in our history. With higher loan limits and through
    internal reforms, a revitalized FHA is now on the leading edge of this
    homeownership boom, serving minorities, first-time home buyers, and
    cities in unprecedented numbers. This year's budget request positions
    the FHA to do even more. And we are also investing more than ever in
    our Native American programs to boost homeownership in Indian Country.
        This year we are also proposing to tap the vital skills and
    resources--and the commitment to social justice--of the non-profit and
    faith-based community. Through our Center for Nonprofit and Interfaith
    Partnerships, a $20-million initiative will expand access of community
    and interfaith partnerships to HUD programs and help build new public-
    private partnerships at the local level.
        Finally, we are more committed than ever to building safe, secure
    communities. The dramatic reduction in violent crime has been one of
    the great success stories of this past decade. Our budget contains
    several initiatives to further reduce the scourge of gun and other
    types of violence, both in public housing and in surrounding
    communities. Without safety there can be no prosperity.
        Overall, this new budget affirms this Department's progress. HUD,
    clearly, is back in business. These initiatives will allow America's
    communities to make the most of this unique moment in our nation's
    history. Together, they will put this record prosperity to work for
    everyone, everywhere.
        HUD's fiscal year 2001 budget addresses four major challenges: (1)
    economic revitalization of our nation's communities by investing in new
    markets; (2) increasing affordable housing and boosting homeownership;
    (3) ending discrimination in housing through enforcement of our Fair
    Housing laws; and (4) creating safe and livable communities.

               ECONOMIC REVITALIZATION AND INVESTING NEW MARKETS
        As we enter the 109th month of sustained economic growth--the
    longest our nation has ever known--we have much to celebrate: the
    lowest peacetime unemployment and inflation rates in decades; the
    fastest and longest real wage growth in 20 years; and an all-time high
    homeownership rate, which reflects both economic strength and consumer
    confidence.
        But there is another side to this success. Though most cities are
    doing well, one in six still has unacceptably high levels of
    unemployment; in older suburbs, crime, poverty, and homelessness have
    become more prevalent; and in some parts of rural America, areas
    persist that are virtually untouched by the economic boom.
        In his State of the Union message earlier this year, the President
    addressed these people and places when he said: ``To keep our historic
    expansion going, we need a 21st century revolution to open new markets,
    start new business and hire new workers right here in America--our
    inner cities, poor rural areas, and on Indian reservations.''
        With this fiscal year 2001 budget, HUD is on the front lines of
    this 21st century revolution, building on HUD's successful track record
    of promoting business investment and job creation in underserved
    communities. Over the past seven years, we have retooled our job
    creation and business investment programs, creating hundreds of
    thousands of jobs in both urban and rural communities across the United
    States.
        HUD's economic development initiatives will not only help spur the
    economic revitalization of distressed communities, they will contribute
    to the continued economic growth of the nation as a whole. The goal of
    these initiatives is straightforward: extend the national prosperity to
    people and places left behind in the new economy.
        CDBG.--Last year we celebrated the 25th anniversary of the
    Community Development Block Program. A pioneer of devolution, CDBG has
    developed a proven record as the most flexible federal aid to both
    cities and smaller rural communities. This year's budget request builds
    on 25 years of success, with a request for $4.9 billion, up $119
    million over last year, and $195 million over the past three years.
    However, the real increase for this program is even larger than these
    totals imply. By reducing set-asides, we will increase the effective
    amount of formula funding that that goes directly to communities by
    $250 million, for uses they themselves designate.
        American Private Investment Companies.--Last year, Congress
    appropriated $20 million as an initial credit subsidy for the
    cornerstone of the President's New Markets Initiative: for-profit
    investment funds known as America's Private Investment Companies
    (APIC). APIC will make sorely-needed private capital available to
    larger businesses that are expanding, relocating, or joint venturing in
    low- and moderate-income areas, both urban and rural. We have submitted
    authorizing legislation for this initiative, which must be authorized
    by June 30, 2000.
        As we did last year, HUD is requesting $37 million to fully fund
    APIC. These funds will subsidize and secure $1 billion in privately
    issued, federally-guaranteed loans, which will leverage another $500
    million in private equity commitments, for a total of $1.5 billion in
    new private sector funds that will create an estimated 200,000 jobs.
        EDI and Section 108 Guaranteed Loans.--The Community Empowerment
    Fund streamlines two existing HUD programs that are important tools for
    local communities to create jobs and attract business investment: our
    Economic Development Initiative (EDI) grants and Section 108 guaranteed
    loans. Overall, our budget seeks $1.2 billion in loan guarantee
    authority under Section 108 of the Housing and Community Development
    Act.
        This year, HUD is requesting $100 million in EDI grant funds. The
    $100 million in EDI grants will leverage an estimated $500 million in
    Section 108 guaranteed loans, and create an estimated 73,000 jobs.
    These grants and loans will leverage substantial additional private
    sector commitments. Together, they will be used to create revolving
    loan funds for small businesses, build inner-city shopping centers,
    retain or expand industrial facilities, expand and modernize
    businesses, and support other job creation or welfare-to-work
    initiatives.
        Empowerment Zones.--Over the past five years, led by Vice President
    Al Gore, HUD has helped create Empowerment Zones and Enterprise
    Communities (EZ/ECs) in more than 75 urban communities. In almost all
    of these places, the EZ/ECs have achieved success in leveraging private
    dollars and expanding job creation. The EZs and ECs report that more
    than 30,000 people have been placed in jobs as a result of EZ/EC
    programs, some $10 billion in public and private sector investment has
    been committed to these places, 4,300 businesses have been served by
    capital or credit access programs and another 4,500 businesses have
    received technical assistance.
        In short, EZs and ECs have successfully combined tax credits with
    federal grants and loans along with local resources to attract billions
    of dollars in private sector investments. Accordingly, we are
    requesting $150 million in mandatory funding for the fifteen recently-
    selected Round II Empowerment Zones, under Title XX of the Social
    Services Block Grant program. The Administration is also proposing to
    designate ten additional Empowerment Zones (eight urban and two rural).
    In addition, the President has proposed significant extensions of the
    wage tax credits and other tax incentives for business investment that
    were such an important part Of the success of the original Empowerment
    Zone concept.
        Other Economic Development Initiatives.--HUD will participate in
    the fourth phase of the National Community Development Initiative
    (NCDI), to be funded at $24 million. This highly successful public/
    private partnership will help build the capacity of CDCs and other
    community-based organizations, allowing them to continue their
    impressive track record as engines of economic growth in low-income
    areas.
        In 1998, the Rural Housing and Economic Development Program was
    created to fund innovative strategies for rural housing and economic
    growth. The fiscal year 2001 Budget requests $27 million for this
    program, an increase of $2 million over last year. We will continue to
    work closely with other Federal departments, including Agriculture,
    Commerce, and the Appalachian Regional Commission, to design effective
    responses to the needs of our nation's rural communities.
        In addition, the President's budget supports the Mississippi Delta
    Economic Development initiative, with proposed HUD funding at $22
    million. This is a government-wide effort to jumpstart the economy of a
    significant region of the country that has been left behind by the
    economic boom of the past decade. HUD will work in partnership with
    other Federal agencies to capitalize on our special expertise in
    housing and economic development to help revitalize the region's
    economy.
        We are also requesting an increase in the successful Youthbuild
    program from $42.5 million to $75 million. Youthbuild provides young
    people with training in the building trades, as well as assistance in
    securing high school diplomas. We estimate that the program will help
    over 5,000 disadvantaged youth rebuild their communities at the same
    time as they learn vital job skills.

                    ADDRESSING THE AFFORDABLE HOUSING CRISIS
        At the core of HUD's mission is the charge to provide housing that
    is decent, safe and, affordable to all. As I stated earlier, it is
    actually becoming more and more difficult for low-income American
    families to afford a decent place to live. Rents have soared in many
    regions with strong economies. Worst case housing needs have reached an
    all-time high of 5.4 million households, growing especially fast among
    working families. As a result, there is a greater need than ever for
    HUD's programs.
        Our fiscal year 2001 initiatives build on recent efforts to reform
    and restore public trust in HUD's housing programs. Historic
    legislation created the Mark-to-Market program, which preserves
    project-based Section 8 housing while bringing costs in line with the
    private market. We have cracked down on program abuses. Our Real Estate
    Assessment Center is on track towards meeting our goal of inspecting,
    for the first time, all 40,000 properties in HUD's inventory of public
    housing and multifamily insured or assisted housing. And more than 600
    troubled properties have been referred to the new Enforcement Center,
    with 45 percent of the cases resolved and revenues from fines imposed
    in fiscal year 1999 up five times over the previous year.
        Section 8 renewals and incremental vouchers.--HUD is requesting $13
    billion in new budget authority to renew existing Section 8 contracts,
    covering 2.6 million rental units. In addition, we are requesting $690
    million for 120,000 new vouchers, the largest increase since 1981. Two
    years ago, HUD got back into the housing business with 50,000 new
    vouchers focused on families moving from welfare to work. We topped
    that last year with 60,000. With this year's request, we are taking the
    next step. These new vouchers will be targeted as follows: one half, or
    60,000, will be ``Fair Share'' vouchers, to be used by public housing
    authorities to reduce their waiting lists; 32,000 will be targeted to.
    those moving from welfare to work; 18,000 will be for homeless persons;
    and 10,000 will stimulate new housing production That will be
    affordable to extremely low-income individuals.
        New housing production vouchers.--Our proposal for new vouchers
    includes the first Section 8 housing production vouchers in 17 years.
    For decades, national housing policy has shifted back and forth between
    production-oriented programs (that focus on expanding the supply of
    affordable housing) and income-based initiatives (that provide cash
    assistance to enable lower-income families to afford rental housing).
    As we enter the 21st century, it is clear that both approaches are
    needed if America is to realize the goal of decent housing for all. We
    are proposing 10,000 housing production vouchers that, in tandem with
    the Low Income Housing Tax Credit and FHA insurance, will leverage
    40,000 total units (subsidized and unsubsidized).
        Public housing.--Two years ago, Congress enacted landmark
    bipartisan public housing legislation, that brought working families
    into public housing without sacrificing our historic commitment to low-
    income and very low-income persons. Through our new physical
    inspections system, we have now inspected every property in public
    housing--and the results are in: 84 percent of all public housing
    properties are in sound or excellent condition, and customer
    satisfaction surveys show that 75 percent of all public housing
    residents are satisfied or very satisfied with their housing. That's a
    customer satisfaction rating that beats the banking, the utility, and
    the retail industries.
        HUD's fiscal year 2001 budget continues our efforts to transform
    public housing. We are requesting a $54 million increase in public
    housing operating funds, to almost $3.2 billion, or 100 percent of PFS.
    We also are proposing almost $2.96 billion for the Capital Fund to help
    public housing authorities modernize or rehabilitate public housing
    units that are in need of significant repairs or replacement, an
    increase of $86 million over the fiscal year 2000 enacted level.
        Finally, we are requesting $625 million for HOPE VI, which is
    revolutionizing public housing by replacing obsolete high rises or
    barracks-style projects with new, mixed-income, mixed-use livable
    communities and housing vouchers. Through 2000, the program is expected
    to approve the demolition of 100,000 units. By 2003, our goal is to
    approve 145,000 units for replacement with hard units or with vouchers.
        Home Investment Partnerships Program (HOME).--Since it was created
    ten years ago, the HOME program has become a proven housing
    rehabilitation and production tool in both urban and rural America. We
    are requesting $1.65 billion, a $50 million increase over last year's
    level. This will provide approximately 103,000 units of affordable
    housing for both owners and renters through a combination of new
    construction, rehabilitation, acquisition and tenant-based assistance.
        Homeownership.--Over the past three years we have done more than
    ever to bring homeownership to underserved markets. I'm proud of the
    record homeownership rate of 66.8 percent; but the real success is what
    we've done to close the gap for minorities, first time buyers, younger
    couples, residents of cities. We have increased the affordable housing
    goals of the GSEs from 42 percent to 50 percent. Fifty percent of their
    total purchases must aid low- and moderate-income Americans. With
    higher FHA loan limits enacted by Congress, in fiscal year 1999 we
    boosted FHA loans to a record 1.3 million--40 percent of which were to
    minority buyers. Automated underwriting has dramatically reduced
    underwriting times for applicants. And the process for disposition of
    foreclosed properties has been improved substantially.
        Our fiscal year 2001 budget builds on this record of success. In
    fiscal year 2001, FHA is proposing to develop a new hybrid adjustable-
    rate mortgage product. In the conventional market, hybrid ARMs have
    proven very popular because they offer the security of a fixed-interest
    rate for periods of 3 to 10 years, while they are more affordable than
    30-year fixed-rate mortgages because they carry lower interest rates.
    Adding this product to FHA's lineup should help 55,000 additional
    families become homeowners in fiscal year 2001, and will result in an
    additional $114 million income for the Federal government.
        Native American assistance.--Native American housing needs will be
    served through the Indian Housing Block Grant Program, and the Indian
    Housing Loan Guarantee Program. Overall, HUD's request for Native
    American programs is the largest ever--$730 million, an increase of $37
    million, including an increase of $30 million, to $650 million, for
    Indian Housing Block Grants.
        Homelessness and Special Needs.--Over the past seven years, we have
    made significant progress on homelessness in America. When I first came
    to HUD, the entire Federal government had been spending about the same
    as just the state of New York on homeless assistance. Since then, we've
    more than doubled the amount of federal homeless assistance.
        But this is about more than just the dollars and cents. It is about
    a new, comprehensive approach, the Continuum of Care, that we've put in
    place--a holistic approach aimed at moving people into permanent
    housing and self-sufficiency. According to a study by Columbia
    University, we are now serving 14 times more people than we were in
    1993. This progress was recognized when last year the Continuum won the
    prestigious Innovations in Government Award from Harvard University and
    the Ford Foundation.
        By all measures, the Continuum of Care is working. Accordingly, for
    fiscal year 2001, we are proposing $1.2 billion for homeless
    assistance, an increase of $180 million. We also propose to shift the
    source of funds for Shelter Plus Care contract renewals to the Section
    8 Housing Certificate Fund, creating additional savings for localities
    and homeless service providers. This increase, plus 18,000 new rental
    vouchers to create permanent housing solutions, will address the
    housing needs of the most vulnerable Americans--those making a
    transition from the streets back into homes and community life.
        We are also proposing an increase of $28 million in the Housing
    Opportunities for People with Aids program (HOPWA), to $260 million.
    The Centers for Disease Control estimates that between 650,000 and
    900,000 Americans are living with the HIV infection. In addition to
    renewing all existing programs, the funds requested in fiscal year 2001
    will provide for an additional 5,100 housing units for persons with
    AIDS, bringing the total to nearly 50,000 units nationally.
        Elderly and the disabled.--Our special needs programs also serve
    the elderly and disabled. We are proposing $210 million for the Section
    811 program, which serves persons with disabilities, increasing the
    fiscal year 2000 enacted level by $9 million.
        Recent decades have seen a dramatic shift in America's population,
    with our elderly citizens leading longer, healthier, and more active
    lives--a shift that will only accelerate in coining decades. The
    challenge now is to meet the housing needs of this rapidly expanding
    population of elders. Just as we work to save Social Security, we must
    also work to provide housing security for our seniors.
        Last year, Congress enacted major elements of HUD's Housing
    Security Plan for Older Americans as part of our fiscal year 2000
    budget. This year, we are proposing a total of $779 million for our
    elderly housing programs, an increase of $69 million. We propose to
    increase funding for Section 202 housing to $629 million; $50 million
    to convert existing Section 202 housing to assisted living; $50 million
    for new assisted living facilities; and another $50 million for service
    coordinators. Within Section 202, we are also proposing up to $5
    million to fund a small number of ``Intergenerational Learning
    Centers'', an exciting concept that will tap the skills and energy of
    seniors to help meet the needs of children in daycare centers located
    in Section 202 housing.

                  JUSTICE FOR ALL--ENFORCING FAIR HOUSING LAWS
        The Fair Housing Act prohibits discrimination in the sale, rental,
    and financing of housing based on race, color, religion, sex, national
    origin, disability, or family status. Yet, even at the dawn of the 21st
    century, housing discrimination, in both blatant and subtle forms,
    continues to plague our country. Today's discrimination is often more
    subtle than it was in the past, but it is no less real and no less
    damaging to our social contract as a nation that values equality of
    opportunity for all.
        And now there's an even newer venue for discrimination--the
    Internet. For all the good it can do, the Internet can also be a
    distribution mechanism for hate, prejudice and bigotry. We recently
    filed charges in a recent Fair Housing case that combines all three
    types of discrimination: the old style, graphic discrimination that is
    so shocking and appalling, the newer, institutionalized discrimination,
    and the even newer frontier of cyber-hate.
        So we must do more. Two years ago, President Clinton announced his
    commitment to doubling the number of Fair Housing enforcement actions
    by the year 2000. To help complete this effort, we propose to increase
    the Fair Housing enforcement budget by 14 percent--to a total of $50
    million.
        Our budget request provides for increased funding of both the Fair
    Housing Assistance Program (FHAP) and the Fair Housing Initiatives
    Program (FHIP). In 2001, the focus of FHIP will be on requirements for
    accessibility for people with disabilities, with an emphasis on
    education and outreach programs to housing providers.
        In 2000, Fair Housing Partnerships are being created to form a
    formal links between private Fair Housing groups and state agencies.
    These partnerships will be used in 2001 to provide training and
    technical assistance to builders, developers, architects, building code
    officials, and others on accessibility requirements through a
    nationwide Project for Accessibility Training and Technical Assistance.

                     CREATING SAFE AND LIVABLE COMMUNITIES
        Our communities face a number of threats to sustainable
    development, from uncontrolled growth to crime and drug abuse, from
    environmental hazards and a lack of energy efficiency in housing to
    blight and under-investment in vital community infrastructure. Many of
    these challenges call for cooperative regional solutions that span
    jurisdictional lines.
        Promoting Livable Communities.--Congestion, hours-long commutes, a
    decrease in the amount of open space, pollution, and other
    environmental issues all have a detrimental effect on the livability of
    American communities. HUD recently convened a two-day conference,
    called Bridging the Divide, to focus on how cities, suburbs, and the
    federal government can work together to achieve more livable,
    sustainable communities. More than 200 state and local government
    officials and civic, community, and business leaders participated. A
    key theme that emerged from the conference was the importance of
    revitalizing the core of our of central city areas in order to decrease
    the negative effects of suburban sprawl.
        We are proposing a $25 million Regional Connections initiative as a
    key part of the Administration's livability initiative. These funds may
    be used by states, partnerships of local governments, businesses and
    civic groups to develop and pursue smarter growth strategies that cut
    across traditional municipal lines.
        We also propose to double the funding for the Brownfields
    Initiative, to $50 million in fiscal year 2001. This will accelerate
    the Administration's previous commitment to a four-year, $100 million
    program.
        Because of an increased effort on the part of the Federal
    government to reduce the exposure of children and their families to
    lead poison, we are requesting $120 million for HUD's Lead-Based Paint
    Hazard Control grant program, a 50 percent increase. As part of a new
    national strategy and by leveraging private funds, the goal is to
    eliminate childhood lead poisoning--including eliminating lead hazards
    in approximately 2.3 million units of housing by the year 2010.
        Promoting Safe Communities.--Despite the extraordinary success we
    have achieved in reducing crime rates in public housing and elsewhere,
    crime and gun-related violence poses a major threat to HUD's obligation
    to help ensure ``a decent home and a suitable living environment for
    every American family.''
        Funds from a variety of HUD programs--including the Community
    Development Block Grant program--have long been available to help make
    areas in and around communities HUD serves safer. This year, however,
    HUD plans a particular focus on improving the safety of America's
    neighborhoods.
        A recent HUD report, In the Crossfire, specifically looked at the
    problem of gun violence in public housing. It found that public housing
    authorities have made extraordinary progress in reducing crime of all
    kinds, in some cases by as much as 70 or 80 percent. That is a result
    of strong local initiatives, the Administration's community policing
    and crime prevention efforts, and the added resources HUD has made
    available to public housing authorities through the streamlined Drug
    Elimination Grant program and other programs.
        At the same time, our report showed that, according to reliable
    data from the Department of Justice National Crime Victimization
    Survey, public housing residents are still two and a half times more
    likely to be victims of gun violence than the population at large. That
    is a statistic that cannot be ignored, and HUD's fiscal year 2001
    budget addresses it directly.
        The fiscal year 2001 budget proposes $345 million in Public Housing
    Drug Elimination Grant funds to support efforts to reduce drug use and
    related activity and other crime in and around public housing. Of the
    total, HUD has requested $30 million for a Community Gun Safety and
    Violence Reduction Initiative, which will help address the critical
    issue of gun violence in and around the communities HUD serves.
        Strengthening community partnerships.--A key component of strong
    communities is the strength and capacity of their organizations.
    Because of the trust they build and the strong connections they forge,
    community and faith-based institutions can be uniquely placed to help
    bring about community change. We are proposing to support the work of
    our Center for Interfaith and Community Partnerships with a $20-million
    initiative to help community and faith-based organizations expand their
    capacity to supply affordable housing, create economic opportunity, and
    increase their use of HUD programs.
        We are also proposing $69 million in Section 107 technical
    assistance, including $37 million for colleges and universities to
    carry out community and economic development activities in their local
    communities. This will include grant funds for several successful
    initiatives, including Community Outreach Partnerships (COPC), and New
    Markets University Partnerships in ``new market'' areas. Another $5
    million is proposed for new Tribal College Partnerships.
                                   conclusion
        HUD's fiscal year 2001 budget reflects the progress that HUD has
    made over the past three years. It does more than add funds to
    programs: it's a budget that contains innovative, smart, and creative
    proposals for addressing the new challenges of the 21st century.
        This budget gives those people and places left behind a unique
    opportunity to share in this nation's overall success--not with bigger
    government, but with smarter government. Not just with additional
    resources, but by more effective use of the resources we have. Not by
    top-down mandates, but through menus of opportunity. And not by
    displacing private markets, but by clearing the way for them to invest.
        HUD today is leaner, smarter, more effective than ever. The nation
    is prospering economically and at peace in the world. Our cities and
    rural areas, once lagging behind, are doing better than they have in a
    decade. Now it's time to build on this extraordinary success--time to
    bring this prosperity to every corner of America.
        I look forward to working with this Committee, and with the Senate,
    to make this vision a reality, not just for HUD, but for all Americans.

                             NBC REPORT ON HOUSING

        Senator Bond. Thank you very much, Mr. Secretary.
        To go back to the questions I raised in my opening
    statement, put a human face on the issue of HUD's failure to
    act as a good neighbor and a good landlord, over a year ago NBC
    ran a piece on fleecing of America, on FHA's failure to manage
    its inventory of single family properties. In that segment,
    Commissioner Apgar challenged the finding and remarked how FHA
    had instituted new controls and procedures to improve its
    management and sale of homes, but as I have seen in Missouri,
    and I am sure you are aware from Senator Mikulski's concerns in
    Baltimore, it is questionable whether the evidence has showed
    things have improved. Since the airing of the NBC report, the
    inventory has grown by 10,000 homes, and HUD has foreclosed
    over 70,000 homes.
        To illustrate the problems of what happens when HUD is in
    the position of preserving an affordable rental housing
    complex, I want to air a video of a couple of these news
    segments, and then I will ask a question related to them.
        [The information follows:]

                   [From NBC Nightly News, February 25, 1999]

                               HUD as a Landlord

        Voice. The Department of Housing and Urban Development in
    Washington owns a lot of housing across this country. It can represent,
    all that housing, a great deal of value if it is kept up, but for an
    agency that specializes in dealing with housing problems, critics say
    there are some big holes in its oversight responsibilities. NBC's Bob
    Faw tonight on the fleecing of America.
        Mr. Faw. Imagine the house next door is an eyesore, and the owner
    is Uncle Sam, in this case the U.S. Department of Housing and Urban
    Development.
        Ms. Johnson. They said they were going to do something about it,
    but they never did.
        Mr. Faw. Bad as these properties look outside, inside they are even
    worse. In here it is absolutely overwhelming, and according to the most
    recent Government data, published a year ago, this is just one of 800
    foreclosed properties which HUD owns in Chicago, many, say critics, in
    shambles.
        Our organization said the same pattern exists in Indianapolis, in
    Buffalo, and in Cleveland. Foreclosed homes which HUD pays private
    contractors to maintain are collapsing.
        Voice. Bad housing isn't nice.
        Mr. Faw. For 30 years she has complained that Washington has
    fleeced homeowners, letting abandoned homes deteriorate, wrecking
    property values in neighborhoods. Today she says the situation is just
    as bad.
        Ms. Cincotta. Now we have our Government, FHA, HUD being the
    biggest slum landlord in the United States.
        Mr. Faw. HUD says the charges are outrageous, insists scenes like
    this are misleading and represent just a handful of its national
    inventory of 40,000 properties.
        Mr. Apgar. I think our programs are well-run. We've been engaged in
    extensive reforms to improve our monitoring and oversight of our home-
    selling process over the last several years.
        Mr. Faw. But the Government's own watch-dog, the independent
    General Accounting Office, strongly criticizes how HUD manages
    property. No taxpayer money is involved, but for mortgage payments of 7
    million FHA homeowners HUD spends $1 million every day to maintain
    properties like this.
        Ms. England-Joseph. I would say they aren't doing a very good job.
    HUD is not providing the kind of contract management that it needs to
    protect the Government's interest.
        Mr. Faw. In its survey they found that 37 percent of the HUD
    properties inspected in Illinois contained imminent hazards, and in
    Boston it found continuing evidence of problems which the GAO that
    could threaten the health and safety of neighbors and potential buyers.
        Mr. Apgar. It is an old report that does not reflect where we are
    today.
        Mr. Faw. HUD maintains it does not permit situations like this, but
    the GAO remains skeptical.
        Ms. England-Joseph. They don't know how bad it is. Not a lot has
    really happened to change, to improve the problem that we identified.
        Mr. Faw. Certainly not the kind of problems some of our neighbors
    want fixed.
        Voice. I don't care for them, not really, because they don't do
    their job.
        Mr. Faw. Even where their job is costing millions.
        Bob Faw, NBC News, Chicago.

        Senator Bond. Mr. Secretary, to illustrate how things have
    not improved, these are some still photos of dilapidated HUD
    homes in Independence and Kansas City, Missouri.

                             Oak hollow apartments

        This is a news clip from Dallas TV on the Oak Hollow
    Apartments.

        Voice. From last month's news, that HUD was taking over the Oak
    Hollow Apartments to clean them up was like a gift from above to
    residents like Takulah Robinson.
        Ms. Robinson. Over here, they gave me a new stove, a new sink, and
    a new refrigerator.
        Voice. But now she's losing it all. Today, HUD held a meeting to
    tell residents how they were going to help pay for them to leave the
    apartments they had just fixed up, because they are tearing them down,
    leaving many tenants with the question----
        Voice. So why can't HUD fix our homes up so we can continue to stay
    here?
        Voice. HUD now says that it would be too expensive to completely
    rehab Oak Hollow.
        Mr. O'Brien. HUD is tearing down a lot more affordable housing than
    they are building.
        Voice. Tom O'Brien of the Dallas Tenants Association said HUD
    watched this property deteriorate for 20 years, and it's throwing in
    the towel.
        Mr. O'Brien. Really, when they start improving HUD housing the same
    thing is going to happen over and over again.
        Voice. HUD officials told the displaced tenants they can use
    vouchers to move to better properties, but some of them don't believe
    they'll be moving up at all. Some tenants who have been moved before
    said the shortage in affordable housing could put them in another bad
    situation.
        Voice. It's no better across the street than over here. I don't
    want to move from one to another HUD.

        Mr. Secretary, 100 residents have been displaced. Five
    families remain. They have filed a lawsuit to block HUD's plans
    to demolish it.
        I know that Senator Mikulski is going to ask some questions
    about single family problems, so I will not go into that, but I
    am troubled about what we saw on the tape about Dallas, and I
    understand it is not an isolated case. We have heard about
    similar complaints from tenants evicted by HUD in Los Angeles,
    New York City, Hartford, Connecticut. They are saying that
    these evictions are HUD policy.
        But what troubles me even more is what occurs in my own
    backyard. I have the pleasure to introduce to you today, and I
    would ask her to stand up, a constituent of mine, Mrs. Lizzie
    Lewis, the elected leader of the Pickwick Plaza Tenant
    Association. Thank you, Ms. Lewis.
        Senator Mikulski. Hi, Ms. Lewis.
        Senator Bond. She resides in a section 8 property in
    downtown Kansas City. She is among 50 elderly, disabled--
    elderly and disabled in the building, which is one block from
    my district office, in an area of economic revitalization. My
    staff reported to me that FHA Commissioner Apgar personally met
    with Ms. Lewis and my staff to talk about the fate of Pickwick,
    and that Mr. Apgar stated that he needed to have legislation
    from us to get HUD to protect Mrs. Lewis from losing her home.
        Mr. Secretary, I thought that was the job of HUD, but I
    would ask you as my one question this segment, do you need us
    to legislate a solution to Ms. Lewis' problem, or can you
    commit today to solve the problem for Ms. Lewis and the people
    of Pickwick?

                              Property disposition

        Mr. Cuomo. Mr. Chairman, obviously, if there is anything we
    can do within our current power to rectify the situation of
    Pickwick, we will, and I would ask the Assistant Secretary,
    William Apgar, who had the meeting, to respond specifically.
        But on the overall point, let me just say this, Mr.
    Chairman. I would agree with the thrust of the pieces. This has
    been a long-term problem. You hear--in both pieces they said,
    in one case they said it has been a 30-year problem, in one
    case there has been a 20-year problem, but I would disagree
    when you say we have not made progress. On this entire issue of
    the run-down portfolio, we have made progress in almost every
    regard.
        The, quote-unquote, aged inventory, the time that we are
    selling homes are coming down, the teacher next door, the
    officer next door, and now the 6-months or out is really in
    many ways the most you can do, which is you are just going to
    give the house away if you cannot sell it.
        It is one of the incumbent problems with the real estate
    business, is when you have foreclosures the homes often get
    run-down, and then you have to dispose of them.
        Also, in conversation with the committee, and I believe
    this was a collaborative effort, and one we are proud of. We
    have now privatized the disposition process, so we have gotten
    HUD out of the business of doing the very things that we saw on
    the video, the maintenance, et cetera, and we have turned it
    over to private contractors.
        We had a problem with one of the contractors which caused
    some of the problems, but I am so sure that the privatization
    was the right way to go, to get HUD out of the business, turn
    it over to private sector firms who do this, who manage the
    real estate, and that was an issue that we discussed jointly,
    and I was proud of that.

                           Pickwick plaza apartments

        But on Pickwick specifically, let me turn it over to the
    Assistant Secretary.
        Senator Bond. Mr. Apgar.
        Mr. Apgar. Yes, thank you. I have met several times with
    Ms. Lewis when I was out in Kansas City last summer, and just
    recently with your staff and our staff in Kansas City has been
    working on this situation.
        Pickwick is a story of HUD's effort to get a recalcitrant
    property owner out of the way so we could come in, secure the
    building, expand the services, and provide what the tenants
    need. As you mentioned, this property has many tenants with
    various sorts of disabilities, and it needs special attention.
    In order to do that, given the fact that the owner was
    incapable of upgrading the property, despite some initial
    efforts, we have begun the foreclosure process. What I
    explained in the meeting to Ms. Lewis, under the foreclosure
    process it is our full intention to preserve that property as
    affordable housing for the residents.
        I might add, in the case of the Oak Grove situation, that
    was still our intention with Oak Grove. The legislation we work
    with, though, requires us to balance both the needs of the
    residents, certainly to consult with them, have preservation as
    an important goal, but also balance the financial interest of
    the fund. You know we can get whacked either way of that
    equation.
        You are aware, perhaps, of the JVC properties in St. Louis,
    where we worked for nearly 12 months in order to secure what we
    think is a terrific outcome that managed to preserve the
    affordable housing, bringing foundation funds and other things
    together, a very good outcome for the residents and for the
    City of St. Louis.
        Our Inspector General, of course, criticized us for waiting
    too long and not moving to the foreclosure sale, and that was
    prominently featured in a recent audit of our Department, so
    while we work with the tenants, there is this competing
    interest, the financial interest. The process will be as it is
    required by law. We will offer the city the right of first
    refusal to take over the building and do what they want to.
    That will happen in the first instance. If that does not
    happen, we can decide that the building will be appropriate to
    be saved and solicit bids through the RFP process.
        Ms. Lewis' group is working with an excellent nonprofit,
    and we anticipate that that bid could be competitive and win
    the day. Only as a last resort do we sell the property off on
    the private inventory.
        I would suggest that your statistics also are misleading in
    the sense that the disposition with section 8 is only one of
    the ways in which we preserve affordability. Many, if not most
    of our properties have long-term affordability contracts and
    protections of the residents without the section 8 voucher, so
    the idea that all the 114 properties that we sold without
    section 8 were lost to affordable housing is just flat-out
    wrong. You can go property by property and show the
    affordability restrictions that are presently on those
    buildings as part of our sales terms.
        Senator Bond. Thank you very much, Mr. Apgar, and I turn it
    to Senator Mikulski for her questions.
        Senator Mikulski. Mr. Chairman, I note that the chairman of
    the full committee is here, and before I go to my questions,
    which will be extensive, I did not know if the chairman has a
    statement and a question or two in the interests of his
    responsibilities.

                        STATEMENT OF SENATOR TED STEVENS

        Senator Stevens. You are very kind. As a matter of fact, I
    do not have any questions. I would like to make a short
    statement, and it is totally provincial.
        Mr. Secretary, I am not one to get involved in too many
    national things with the size of the United States. I have
    enough problems of my own, without getting into that.
        We are going to have a director, a State director I guess
    it is, vacant now, now that Arlene Patton has left, and I would
    urge you to name an Alaskan to fill that position, and here is
    why. We did have a discussion with Mr. Apgar about FHA
    appraising, and I received a letter that said, and I quote,

        ``as a consequence of the unique considerations that
    implementing the process in Alaska brings, we will continue to
    maintain the option for your constituents to ask questions and
    resolve issues related directly to this directly with the FHA
    staff in Anchorage.''

        Now, that is working to a certain extent. However, the home
    ownership centers now are concentrated in Santa Monica,
    California. It is impossible for people in our State to deal
    with Santa Monica, California. They are a different time zone
    and, what is more, they have no understanding whatsoever of
    Alaska conditions.
        On the fair share section 8 vouchers, each region is
    supposed to receive a fair allocation. I am told that Alaska,
    which has one qualifying housing authority, was told to compete
    for vouchers in Alaska. Our allocation was lumped together with
    the State of Washington, and they obviously have a great many
    more people than we do. The net result of that is, is that
    Alaska has received not one single voucher.
        As a matter of fact, I am told there was not one single
    house built in Alaska last year under the Native section of our
    State. There are 227 Native housing centers, housing
    authorities, and they have been in to see me repeatedly this
    year.
        Wyoming, which has a smaller population, considerably
    smaller than our State, had 81 vouchers, and we received some
    welfare-to-work vouchers, but I understand that under the
    lottery system we have never received one single voucher.
        I am here to ask you to review the situation in Alaska. We
    have still got people coming into the 20th Century. We are now
    living in the 21st, and the areas we are talking about are so
    remote that it is just impossible to deal with on a lottery
    system competing with other areas, particularly with Washington
    State.
        I am one of those who fought for statehood for Alaska
    because we did not want to become a county, or remain a county
    of the State of Washington. That lumping with Washington is a
    pill that is a little hard to swallow. Not that we do not love
    our friends to the south, but they are our southern neighbors,
    and they are 900 miles away from us.
        So I would urge you to have someone take a look at the
    Alaska scene. We had a regional authority in Alaska. It was
    going very well. We had an allocation that went directly to the
    State and, as you know, we--it is not political. Our State
    government is in the Democratic Party. We are Republicans here,
    but we are sort of different people in Alaska, and we are
    working very closely with the State government, and the State
    government is as perplexed about this as we are.
        So I really--I have to go to another hearing. I appreciate
    your courtesy, Barbara, in letting me make this statement, but
    I would urge you, have someone take a look at the Alaska scene.
    We just do not deserve to be left out completely in this
    housing program.

                         SECTION 8 VOUCHERS FOR ALASKA

        Mr. Cuomo. Mr. Chairman, I thank you for the comment, and I
    agree that the State, while beautiful, poses many unique
    challenges. With the chairman's assistance I had a great tour
    of the State.
        I do not know the numbers on our production in Alaska. What
    you say troubles me, if the production is that low. I will find
    out, and I will report back to the chairman on exactly what we
    have done in Alaska, and on the State director's position,
    obviously we have civil service guidelines to go through, but I
    think to do that job well you would almost by definition need
    to be from Alaska, otherwise you cannot really appreciate the
    situation, and if there is any way we can do that, we will.
        Senator Bond. Good answer, Mr. Secretary.
        Senator Stevens. Thank you very much.
        Senator Bond. Thank you very much, Mr. Chairman.
        Senator Mikulski.
        Senator Mikulski. Thank you very much, Mr. Chairman.
        In my opening statement I did not acknowledge the role of
    the HUD Inspector General, Ms. Gaffney, in her investigation of
    flipping, and also her recommendations, and I look forward to
    pursuing a line of questioning with you, Ms. Gaffney, and also
    want to thank you, because the Federal law enforcement in
    Maryland I know has been working very closely with your
    inspectors.

                        INTRODUCTION OF ADVOCACY GROUPS

        Mr. Chairman, the Secretary introduced his team. I want to
    introduce my team. In addition to my very able staff, it is
    wonderful networks in Baltimore that really are my advisors,
    and I would like to acknowledge in the room Mr. Ken Straw, the
    president and CEO of the Southeast Community Organization, a
    group that I was one of the founding mothers to save the
    neighborhood from a highway that was going to destroy several
    neighborhoods. Now we are working with SECO to save the
    neighborhood from FHA and predatory lending.
        In addition to that, we have Mr. Vinnie Quayle from St.
    Ambrose Housing, one of the largest groups associated with
    advocacy for home ownership for the poor in Baltimore. Mr.
    Quayle has worked in the community for 32 years.
        Then there is Mr. Ed. Wittowski of the Patterson Park
    Community Development Corporation. This CDC is new, and it came
    in because of the need to prevent what was happening to a
    neighborhood called North of the Park, because of what had
    happened when we tore down Lafayette Housing for HOPE VI the
    housing commissioner took the poor and literally dumped them
    into a neighborhood that was quite fragile, causing
    neighborhood destabilization.
        But rather than turn against the poor, we turned to each
    other and established a very dynamic community development
    corporation, only then to find that the very poor we were
    helping began to be exploited by predatory lending. They have
    outstanding testimony that they gave on Monday.

                               PROPERTY FLIPPING

        I want you, Mr. Chairman and members of the committee, to
    see this chart. See all those little dots? Now, first of all,
    this is not my chart. This is not Barbara Mikulski who takes
    old neighborhoods and puts little red, pink, and blue dots up.
    Every dot, that chart was developed by Southeast Community
    Organization after on their own did labor-intensive searches
    about what was happening to the exploitation of the poor.
        Every dot represents a flipper, a flipper who bought a
    house for 15 grand, bilked a consumer, usually someone moving
    from welfare to work, false appraisals, mortgage bounty hunters
    and up. Each one of those represents that.
        If you looked--and the blue dots represent one major
    investor-flipper, and he is currently under criminal indictment
    in Baltimore. I will not go into his case, because again, legal
    proceedings, but there is heartbreak there. That is really
    heartbreak.
        Senator Bond. What are the red dots?
        Senator Mikulski. Well, the red dots are other flippers,
    and they each represent a particular owner or investor, or
    those that are being under investigation.
        We want to acknowledge the role of the IG Inspector, the
    United States Attorney in Baltimore, and also the FBI, and the
    Post Office Inspectors are involved because of wire and mail
    fraud.
        Now, five more indictments that have occurred in Baltimore,
    and essentially we have the need for two strategies, Mr.
    Chairman, one the prosecutor strategy, in which if you are a
    flipper, you have broken criminal laws, and we are coming after
    you. That is number one. But number two is the preventive
    strategy to prevent predatory lending, and also to deal with
    the results of FHA-held property.
        Now, what I would like to do is ask the Secretary to
    outline in more detail what his solutions are for doing this.
    Mr. Secretary, I will not--because of your responsiveness to
    the Baltimore hearing, I will not go into a set of questions I
    had for your FHA Administrator. I will not go through the
    questions that I had about what did you know and when did you
    know it, and what the hell did you do about it, but I feel that
    I have confidence in you, that you now know about it, and now
    you want to do something about it.
        I am not here to finger-point, but I am here to pinpoint
    solutions. Could you elaborate on the methodology that you want
    to have on the preventive aspects while we are working in
    another dimension for the prosecutions?

                              BALTIMORE TASK FORCE

        Mr. Cuomo. Yes. It would be my pleasure, Senator.
        The challenge, in my opinion, of this predatory lending
    problem is, while we have been very good in the past in dealing
    with isolated parts of this issue, unless we really grab the
    comprehensive situation, we are not going to make the kind of
    progress we should. We have done a lot in piecemeal ways, but
    what predatory lending is saying is, in many ways the entire
    system is corrupted. The sub-prime has opened up this new
    vulnerability, and the predatory lenders have rushed in.
        We want to take the City of Baltimore, which again for a
    number of factors poses, in our opinion, one of the worst
    manifestations in the country, and design a comprehensive
    approach using the City of Baltimore in a working partnership,
    FHA, the full HUD team, the local CDC's, the City of Baltimore,
    literally coming up with a physical strategy on how to fix this
    problem in the City of Baltimore.
        In the meantime, we will have a moratorium----
        Senator Mikulski. Let's just stop with that. So you are
    going to use Baltimore as a laboratory because we are the worst
    case, and I can assure you, with our mayor and our commissioner
    of housing working with you, along with our community groups--
    and I must say the professional realtors have come in, the
    appraisers that want to have a professional relationship.
        So you are going to use Baltimore as a laboratory for your
    solutions while you then pursue a national task force, is that
    right?
        Mr. Cuomo. Exactly, Senator.
        Senator Mikulski. And who will chair that, and when will it
    become operational?
        Mr. Cuomo. It will become operational next week. We want to
    come up with a proposed membership that we could share with the
    Senator's office to see what your opinion is of who should be
    on this, but we will have the full complement of the senior HUD
    staff, because to do it right, we have to do all of it. We have
    to do the public housing piece, the economic development piece,
    the FHA piece, and we would have the senior Assistant
    Secretaries from HUD, because I think this can be a very
    valuable experience for the Nation.
        It will do something practical for the City of Baltimore,
    which we have to do, but it will also be the genesis for
    national policy.
        Senator Mikulski. Very good. Now, let's talk about
    national.
        Mr. Cuomo. Okay.
        Senator Mikulski. Which goes to this thing called RESPA.
        Mr. Cuomo. Yes. The predatory lending, of which FHA often
    gets caught up in it, is beyond FHA, beyond HUD, as we said. It
    deals with truth in lending. It deals with RESPA violations,
    which is the laws and regulations that regulate the real estate
    market, fair lending laws.
        We would, using Baltimore in the practical, then come up
    with a set of proposals which represent what we have learned in
    Baltimore and what we have implemented in Baltimore and
    recommend that to the Congress through a national task force
    which would also be having a series of hearings across the
    country, just to make sure what we have resolved in Baltimore
    answers the questions in the other cities.
        This predatory lending may be a little different in
    different parts of the country. Baltimore is posing almost all
    of the different facets, but it may be a little different in
    Denver, a little different in Los Angeles, so we would have
    hearings in those areas, four, five, six different areas across
    the country before we come up with a full national----
        Senator Mikulski. And I would hope you would look at these,
    following some of these, but not limited to these factors:
        Number one, how best to ensure that buyers have prepurchase
    counseling so that they know what they are getting into, they
    know the full range of this. Because there are two issues here,
    the predators, and the other is that people get into a
    situation, and not know.
        So one, how is a buyer going into this, but how can we
    protect the buyer without needless regulations?
        Two, the appraiser process. Because of the way FHA has
    changed the way it does business, the seller now furnishes his
    own appraiser. Well, that is like Bonnie calling up Clyde to
    see if he wants to be an appraiser, and let's rob the bank
    together, so we do not want Bonnie calling Clyde. We do not
    want Clyde to be an appraiser, and we do not even want Bonnie
    and Clyde any more, so the question is, what do we do about the
    appraisers? Community groups have ideas, et cetera. I know the
    appraiser community has those as well.
        Third, you have to look at the mortgage bounty hunters,
    because there are now bounty hunters on getting mortgages. They
    get commissions. They get fat fees. They do not care. Again, I
    know in my own home town of Baltimore the banks are not
    necessarily the problem, and in fact they have worked with the
    community for the solutions, but there are these mortgage
    bounty hunters--and again, not every mortgage broker is a bad
    guy, and we need to separate that out and how to deal with it,
    so we need to look at that.
        I know that my time is up. I am going to come back for a
    second round of questions, but those are the core issues, and I
    think it is in the national interest for the professional
    associations to work with you, otherwise there are going to be
    50 State laws. My own Maryland General Assembly is already
    working on this, again lessons learned from them, but we either
    have a national framework, or we are going to be dealing with
    50 State laws.
        Senator Bond. Thank you very much, Senator Mikulski, and I
    would just add one thing. Having recently become a condo owner
    within the last couple of weeks, I can tell you that an hour-
    and-a-half of going through forms challenged all the training I
    had in law school and beyond to stay with it, and it has become
    so complex that even with a law degree, we are protected.
        There is a story about the elves who disclosed the location
    of a pot of gold under a tree. When they went back to dig it up
    they found that the elves had put yellow ribbons around every
    tree in the forest and they could not find it, and I have felt
    like the guy walking into the forest with every tree with a
    yellow ribbon around it.
        Senator Mikulski. Well, you see, Mr. Chairman, I concur
    with you. This is also what came out at the hearing. First of
    all, when the appraiser, HUD mandates, FHA mandates a license
    for a certified appraiser for a property over $250,000. Well,
    three cheers for those who can buy that. And we are glad that
    FHA protects people who buy property worth more than $250,000.
    But FHA is not protecting people who buy less than $250,000.
        Second, and this then goes to our own mandates, I think in
    our desire to protect the consumer, we have so many forms that
    tell so many people so much that they really ground in the
    settlement. And when we asked the people who had been bilked
    and really gouged, did you know what was going on at
    settlement, they said no, we were so overwhelmed we relied on
    the seller. Well, again, Bonnie put on her lipstick and said
    everything was okay.
        Senator Bond. Thank you very much, Senator Mikulski. I
    resemble that remark.
        Now I would like to turn to a distinguished member of the
    committee and one who has been a real champion for oversight.
    We appreciate your being here, Senator Kyl.

                                 CUOMO'S TRAVEL

        Senator Kyl. Thank you, Mr. Chairman.
        Before Senator Mikulski leaves, I just have to say that
    nobody puts it in more colorful terms than she does.
        Mr. Secretary, you are well aware of a lot of news reports
    relating to your travel for political purposes, and I wanted to
    give you the opportunity to respond at least in a general way.
    I will give you an example of one of the reports, and then
    would ask that you send us, for the record, a list of all of
    the transportation and related expenses paid by HUD for you to
    attend and participate in political rallies, and also ask that
    you tell us what you have done to comply with the Hatch Act
    requirements for reimbursements.
        [The information follows:]

                                   HATCH ACT

        All transportation and other related expenses associated with the
    attendance of any HUD political appointee at a political rally are not
    paid by HUD, but the organization sponsoring the political event. On
    those rare occasions when a trip taken by a HUD political employee
    includes both political and official activities, our Office of General
    Counsel has established clear guidelines governing the procedures for
    ensuring that HUD is reimbursed in accordance with the Hatch Act for
    any portions of such trips that involve political activity. These
    guidelines are communicated to all HUD political appointees through
    Hatch Act training seminars conducted by the Ethics Law Division of our
    Office of General Counsel.

        Senator Kyl. One of these events was alleged to occur on
    March 3rd of this year in Huntington, New York, reported in the
    Suffolk Life Newspapers and the Long Islanders Record. One of
    the headlines reads: Politics, not housing forum as posted. And
    the concerns expressed by attendees was that the forum was
    posted as an opportunity to come hear you talk about housing
    programs and how people might participate in them, but in fact
    it turns out to be a rally for Vice President Gore.
        Do you recall that particular event, and can you tell us
    what was the purpose of the event? Did HUD pay for any of the
    costs associated with that event, including any travel or
    lodging of food?
        Secretary Cuomo. Thank you very much, Senator, for the
    question. There is a Presidential election going on obviously.
    And I have a preference in that election, which is Vice
    President Gore. And I have campaigned for him. When I campaign
    for him, that is, quote, unquote, a political trip and it is
    paid for by the political committee. And the trip I believe
    that the Senator is referring to was a trip to Long Island to
    campaign for Vice President Gore. And that is what it was. And
    that is what it always was when I am doing campaigning, as any
    other official, Senator, Congressperson, et cetera. I was
    campaigning. I was doing political work, political activity,
    which is different than when I am in the official capacity.
        Senator Kyl. And so that was paid for then by the Gore
    campaign or some other political entity?
        Secretary Cuomo. Yes, sir. Whenever I am on political
    activity, it is paid for by the political committee.
        Senator Kyl. I would suggest that, given the concern
    expressed by at least one of the attendees and backed up by one
    of the area aging representatives that the event was publicized
    as an opportunity to hear you talk about housing matters, and
    with no indication it was political, that you might ask your
    folks to ensure that when word goes out about such an event
    that it is very clear as to whether or not it is an official
    function of HUD as opposed to a political event.
        Secretary Cuomo. Senator, when I go to an event--I think it
    was clear that it was a political event. Unfortunately, people
    still sometimes take the opportunity to pose their HUD-related
    questions even though I am on a----
        Senator Kyl. I am sure about that.
        Secretary Cuomo. Yes. And I wish I could say, oh, no, I am
    sorry, I am not going to talk about that today because I am on
    a political day. So they will often ask a housing-related
    question or a Federal-related question, even though I am there
    for a different purpose. But I am sure everyone experiences
    that.
        Senator Kyl. And certainly people can have different views.
    But I re-initiate my request, because here is a representative
    of the Suffolk County Office of Aging who said that she sent a
    member of her staff to the meeting because she was informed
    that the subject would be senior housing. So I think it is
    important to make sure that people are not misled about the
    subject of those meetings.
        Secretary Cuomo. Senator, if I might just so we are clear,
    I may also talk about housing as an issue when I am doing
    political activity.

                     LOS ANGELES COMMUNITY DEVELOPMENT BANK

        Senator Kyl. That is clearly understood. Let me ask you a
    question about the Los Angeles Community Development Bank. As
    you know, in 1992, HUD funded the bank at over $400 million.
    The idea was to rebuild part of the riot-torn Los Angeles at
    that time. But also, as you know, the bank has been a disaster
    from the beginning. It is barely solvent at this time, I
    understand.
        Most recently, I am informed, the bank lost a $7.2 million
    lawsuit because the court found that the bank directly caused
    the total loss--that is a quotation--of Summit Industries. But
    the administration still continues to push for funding for HUD
    to administer a new program, called America's Private
    Investment Companies, under which HUD would underwrite loan
    guarantees for private businesses, totalling some $1.5 billion
    in private debt and equity.
        When you look at Los Angeles and the fact that HUD contends
    that it has closely monitored the situation--in fact, in an
    answer to a question, the concluding sentence is: HUD will
    continue to closely monitor the City's oversight of the bank.
    Given HUD's obvious inability to closely monitor well, why
    would we ever think that HUD actually has the capacity to pick
    the winners and losers in these kinds of complex economic
    deals?
        Secretary Cuomo. Senator, the Los Angeles Community
    Development Bank was very much an example of the methodology
    that this committee has suggested over the years. This was a
    proposal, the bank, by the local government, the City of Los
    Angeles, which was their proposal, their idea for the best way
    to do economic development in their city. And we at HUD have
    very much respected local government. We do not believe there
    is one size fits all. We do not sit here in Washington and say
    to the City of Los Angeles, let us tell you what to do.
        The City of Los Angeles said, this is what we think we need
    to do. We need to put together a community development bank,
    use it as a model to engender economic development. And they
    requested funds from the Federal Government to do this. They
    came in with a full proposal. We funded their proposal to do
    this community development bank. There has been, obviously, at
    best, fits and starts with the development bank. The City
    government is working very closely with the bank. We have been
    monitoring the situation.
        The City feels, and the bank represents, that they are
    improving--and they have a new business plan and a new CEO--and
    that the situation is going to get better. Obviously if the
    situation does not improve, we are going to have to take
    action. But, whenever possible, we do defer to the local
    governments, the State governments, on the best way to solve a
    problem in their backyard.
        Senator Kyl. I think that is a good principle. But in view
    of the fact that my time is up, let me just make the comment
    that this whole business of underwriting and the APIC proposal,
    to me, suggests, and what has occurred in Los Angeles, suggests
    the danger of trying to pick these winners and losers with this
    kind of federally funded kind of programs.

                                      APIC

        Secretary Cuomo. I understand, Senator. Just so we are
    clear, APIC is a different model, however.
        Senator Kyl. Well, it may be a different program, but it
    does require the picking of the winners and losers from an
    economic point of view, in who you are going to lend the money
    to.
        Secretary Cuomo. No, I am sorry, Senator. Under APIC, we
    would have a private capital firm do that. We know what we are
    not good at. And under APIC, it says we bring in a private
    firm, let them do the underwriting, let them make the
    decisions, because they are in a better position to do that
    than HUD.
        Senator Kyl. Well, since my time is up, I will not pursue
    that.
        Secretary Cuomo. Thank you.
        Senator Kyl. Thank you, Mr. Chairman.
        Senator Bond. Thank you very much, Senator Kyl.
        I am going to impose on the very good nature of my friend,
    Senator Leahy, because I have some good news and bad news for
    you, Mr. Secretary. The bad news is that I have to leave here
    at 11 o'clock, so I will not be able, at least for the next
    half hour or 45 minutes, to participate in the questioning, and
    I want to have one more round of questioning, turn it over to
    Senator Leahy.
        Senator Mikulski. But I will be here.
        Secretary Cuomo. Is that the good news?
        Senator Bond. That is the good news.
        Senator Mikulski. That is the good news.

                                  PRESERVATION

        Senator Bond. The other good news is I have to be in the
    budget committee to vote out a budget, which will get us the
    money that we need here. We feel we need at least $6 billion
    for the expiring section 8 contracts alone. So I go forward
    with a mission that I think we could all agree on.
        But let me go back to some of the questions and statements
    made about the video. You discussed the need to create a
    production program, suggesting using FHA single-family default
    reserves as a way to leverage funding for low-income,
    multifamily housing. However, HUD's stated policy for its HUD-
    owned and HUD-held properties is to voucher out all families,
    even the elderly and disabled. This means that we are likely
    losing these units for low-income use and certainly for very
    low-income use.
        For the record, I include a property disposition memorandum
    for Gary Eizerman, Deputy Assistant Secretary for Housing, that
    compels the vouchering out of these properties and replaces
    existing handbook requirements. Mr. Apgar, you mentioned that
    HUD preserves its HUD-owned inventory through other means
    besides section 8. But I understand that you only do this by
    setting ceiling rents at levels often that are not affordable
    to very poor people.
        In fact, the folks in Dallas told us that these ceiling
    rents for Oak Hollow would be above the real market rent. So
    that does not sound like affordable housing to me. How would
    you square this policy with your acknowledgment that we need to
    produce additional affordable, low-income housing?
        Secretary Cuomo. Thank you, Mr. Chairman. In general, as I
    said in the previous question, this has been--and as the video
    said--a 20- to 30-year challenge for HUD. My point was we are
    making more progress on this issue today than we have at any
    time certainly in the past 7 years. The numbers, the arrows are
    headed in the right direction. There is further to go, but the
    arrows are headed in the right direction.
        Also, we have undertaken, again, in coordination with the
    committee, the first physical inspection of all HUD properties
    in the country. Before, HUD never knew the condition of their
    physical properties. We literally would ask the owners, what is
    the condition of the building? But we did not have an
    independent physical inspection. We have completed, for the
    first time ever, physical inspection of every property. So now
    we can say, if it is rundown, if it is a slum, we are not going
    to continue to subsidize a slum. The Federal Government should
    not be in that business. And I am very proud of that also. And,
    again, in coordination with the committee.
        Let me ask Assistant Secretary Apgar to respond to your
    specific question.
        Mr. Apgar. Well, of course, the Department's policy is to,
    with every instance, preserve the affordable housing. That is
    why we launched our mark-to-market initiative last May, and we
    are preserving a significant number of housing through that.
    That is why we work with the authorizing committee to produce
    new authorities to allow us to preserve the aging 236
    inventory. And that is having a dramatic effect.
        So it is not our policy to voucher out all HUD properties.
    The memorandum you refer to is simply clarifying how we finance
    the funding of the property during the period in which HUD
    holds the property. The properties typically have been getting
    section 8 funding prior to that. And while HUD is in possession
    of the mortgage or in the process of moving the owner out, we
    continue to fund the property through access to the vouchers.
    And so that simply was a reminder of how to go about the
    mechanism of funding the property during the period of HUD
    holding.
        Again, with respect to Oak Hollow, we are awaiting a
    response from our offer to sell the property. And we anticipate
    there will be a number of development proposals that will use
    various resources in order to produce affordability in that
    development. So we still are looking for a good outcome in Oak
    Hollow.
        Senator Bond. Do you provide section 8 funding on
    disposition?
        Mr. Apgar. Not always. In selected instances, for the
    project-based funding of section 8. We always provide resident-
    enhanced vouchers, which is of course the law. And the
    vouchers, in most instances, work. And if it is a tough
    situation, we bring relocation specialists in, and others. As
    you are aware, we did that in the Kansas City case, where we
    had to relocate residents out of the Brush Creek development,
    where there were families and other folks that needed special
    assistance in order to relocate.
        Secretary Cuomo. Mr. Chairman, just so we are clear, we run
    into the issue which you have raised repeatedly, which is
    sometimes you are in an area where the section 8 voucher does
    not work especially well because the market is so hot and the
    market is so tight that you cannot find the unit that you can
    afford with a voucher. And it is in those areas, as the
    chairman has pointed out correctly so I think, that we need to
    talk about production, because vouchers are not doing the
    trick.
        Senator Bond. How will you solve the problem Mrs. Lewis and
    her neighbors have?
        Mr. Apgar. How are we going to solve it?
        Senator Bond. Yes.
        Mr. Apgar. Under our current authority, of course, we are
    working with the State to make sure the residents are provided
    appropriate social services. The city has the right of first
    refusal to purchase the property and do what it can in terms of
    bringing in affordable housing. We have a decision to make as
    to whether or not we are going to go the negotiated sales
    route, in which we would put the property forth for an RFP
    competition. And, again, that would allow the residents to form
    a nonprofit group and purchase the property, as was done in
    many instances.
        If it turns out that the property is judged to be too far
    gone--and this is one of the worst properties in the inventory,
    probably in the lowest 2 percent in terms of overall physical
    condition--it may require so much resources that the decision
    is that it is not able to financially secure a preservation
    outcome, in which case we may not be able to go that route. And
    then a sale on the open market is the final and last choice.
    Believe me, our goal is to preserve every property we can
    through as many means as we have.

                              SMALL CITIES PROGRAM

        Senator Bond. Mr. Secretary, we will be watching. And let
    me conclude by saying that last year's appropriations bill
    transferred the administration of the CDBG Small Cities Program
    from HUD to New York. I assume the transfer is complete. Could
    you give me assurances that that is done?
        Secretary Cuomo. Yes, sir.
        Senator Bond. Thank you.
        Now it is with great regret that I leave, turn the gavel
    over, and call on Senator Leahy to continue the questioning.

                             NBC REPORT ON HOUSING

        Senator Leahy. Thank you, Mr. Chairman.
        I watched with interest the NBC piece. And I rarely ever
    watch television news, but I seem to recall that one. And I am
    told that that was actually aired over a year ago and used data
    from 2 years ago. I assume that there has been a great deal
    that has gone on in the past 2 years since that. Am I correct
    that the gross sales price per property has increased over the
    last year and the average time homes are held in the inventory
    has decreased?
        Secretary Cuomo. Yes, Senator, your observation is exactly
    correct. First, the piece was dated. Also, the piece was, in
    our opinion, overly sensationalized. The pictures in that video
    in no way reflect the HUD inventory. The average home sale for
    an FHA home is $70,000. Those were not $70,000 homes that we
    were looking at obviously. As a matter of fact, with that NBC
    piece, some of the homes that have been shown, we did not even
    own. And we went back and we demonstrated that to NBC.
        And NBC corrected, on air, that piece, which was not shown
    in the video, the NBC correction. But they were fed, obviously,
    information for different reasons and they were duped, NBC. But
    they corrected it on air, which, as you can imagine, NBC
    Network does not easily correct or admit error, but they did
    off that piece, which was just aired once again.
        As I said to Chairman Bond, we have made tremendous
    progress in this regard, Senator. We have privatized the
    disposition process. The values have gone up. The time to sell
    has gone down. We have done what I consider very creative
    things with the Police Officer Next Door Program, Teacher Next
    Door Program, and then the 6-month sale or $1 disposition to
    the city. You cannot do any more than that. Basically, what you
    are saying is if it takes us more than 6 months, we are going
    to give up, forfeit the value of the home, and turn it over to
    the city.
        So I am confident that we are doing just about all we can
    do with FHA alone. And this piece is in no way representative
    of where we are. That is not to say the entire situation is
    going to be remedied. Because the real problem here is not FHA.
    Senator Mikulski accurately points out that the real problem is
    predatory lending. And the real problem is fraud in the
    appraisal process or the lending process or the sale process
    and victimizing a vulnerable population.
        And that issue has to be dealt with, otherwise this is
    going to be recurring. Because, in some ways, while the piece
    was unfair to FHA and incorrect to FHA, it is worse than the
    piece would suggest. Because it is not just FHA, it is private
    banks all across the country that are falling prey to this
    predatory lending scheme.

                               GAO HIGH-RISK LIST

        Senator Leahy. Am I also correct that the GAO is
    reevaluating HUD's status?
        Secretary Cuomo. Deputy?
        Mr. Ramirez. Yes, sir.
        Senator Leahy. Any indication that the current risk status
    may change?
        Mr. Ramirez. Well, as it was mentioned earlier, Mr. Walker,
    from GAO, has acknowledged that we have made considerable
    progress. We have addressed the issues that have led the agency
    to a high-risk designation, and have made credible progress in
    regard to addressing them, and feel very confident that as a
    result of our HUD 2020 management reform that, by the end of
    this year, when the review will be complete and a report will
    be coming out on all agencies, that we will be prepared to come
    off this high-risk designation, sir.
        Secretary Cuomo. And, Senator, if I might quickly state.
    There is no doubt that this is a political year and there is
    political posturing all around. But on the management of HUD,
    we have come a long way. And GAO, which is always used as the
    credible source of the criticism--and I have been here for 7
    years and I have heard GAO bandied about whenever convenient--
    GAO says we have made credible progress. They say that we are
    on the right track from a management point of view and that we
    have made management progress. And if we can use the GAO to
    criticize, then we should also use the GAO to confirm.

                          SMITH & WESSON/HUD AGREEMENT

        Senator Leahy. Let me go into another area that has
    probably seen some controversy. HUD and Smith & Wesson, you
    normally do not think of those two in the same sentence, but
    you have gone into an agreement to provide trigger locks with
    all firearm sales, requiring authorized dealers to conduct
    background checks and so on. My understanding is you want to
    keep the guns out of the hands of criminals, but also we all
    know how tragically the results are when they get in the hands
    of unsupervised children.
        You and I, Mr. Secretary, are both gun owners. You have
    young children in your home, and my wife and I now have a young
    grandchild who comes around. And I think we both know how to
    keep weapons out of the hands of children and take all the
    usual steps. Unfortunately, not everybody does.
        I just wanted to clarify some confusion, because I got some
    calls about this from some members of the law enforcement
    community. They were wondering whether the Federal Government
    was mandating the purchase of firearms from only those
    manufacturers that have entered into HUD agreements.
        My understanding, and what I have told them, was that HUD
    is advocating only voluntary preferences to Smith & Wesson or
    any other firearm manufacturer that adopts similar public
    safety measures, but the final purchasing decision is still
    going to be up to State and local law enforcement agencies. Am
    I correct in that?
        Secretary Cuomo. That is exactly right, Senator.
        Senator Leahy. I thought it would be good to clarify that.
    It is amazing--if I might just take a moment, Senator Mikulski,
    on this--because I come from the only State in the Union, as
    near as I can tell, that has no gun control laws, except during
    deer season we limit the number of rounds in a semiautomatic to
    give the deer at least a sporting chance.
        But we also have a real sense of gun safety in our State,
    mainly because most of the, or a large percentage, of the
    households grew up with firearms in the household. But I hear
    from Vermonters across the political stripe that we have got to
    do something to have some area of restriction. And most of the
    gun control measures that have been proposed have been very
    modest.
        We have the juvenile justice bill which Senator Mikulski
    voted for and I voted for. It passed the Senate, I believe, 73
    to 25 last year. And now we are coming up on the anniversary of
    Columbine and it is still sitting, tied up in a conference
    committee because the gun lobby has said it cannot come out.
    And I think that is a mistake.
        Again, as a gun owner, I would say, for whatever it is
    worth, and I have said this in other places, the gun lobby may
    be making the same mistake it made when it opposed a ban on the
    sale of cop killer bullets, that they wanted to allow the cop
    killer bullet sales to continue. A lot of people in law
    enforcement, a lot of people I worked with when I was a
    prosecutor, were pretty upset with that. I think a lot of
    parents are very upset with what is happening now. And I think
    a lot of parents, you are going to find, are going to agree
    with the position you have taken with Smith & Wesson.
        Thank you.
        Secretary Cuomo. Thank you, Senator.
        Senator Mikulski [presiding]. Thank you, Senator Leahy.
        Mr. Secretary, I do want to continue one line of
    questioning, but, before I do, I am going to say a couple of
    things. First of all, the President's request is for $32
    billion in a variety of categories that I want you to know I
    support. And I look forward to working in the appropriations
    process, as the budget committee goes through its analysis, to
    do what I can to ensure the integrity and follow through on the
    President's request.
        I think it is an outstanding request and it does go to
    HUD's core programs. And we can talk about the elderly, HOPE
    VI, increased section 8's, about those things. And I do not
    want them, in this conversation, to get overlooked.
        Secretary Cuomo. Thank you, Senator.
        Senator Mikulski. So I want to assure you of that and look
    forward to working with you and your team on it. Because, under
    President Clinton's leadership, not only has the HUD budget
    been restored, but I think innovations in housing have been. So
    we do not want to have this hearing end without acknowledging
    the significant efforts there and the reforms, the continuum of
    care for the homeless, which continue as your signature issue,
    and so on. So I really do want to say that and acknowledge that
    for the many people who work with you.
        Secretary Cuomo. Thank you very much, Senator.
        Senator Mikulski. Now, just to continue again on our other
    conversation related to flipping and FHA disposal. Senator
    Leahy, in his questions with you, really you were able to cover
    the ground. But, once again, it is in the macro level. So if
    you look at all of FHA, all of FHA is a success. But there are
    these significant Super Fund sites at FHA that need to be
    contained.
        I personally am very enthused about the teacher/cop
    initiative, in which we can have public servants, often who are
    on very spartan income for their contribution to the community,
    often can maybe buy homes in the very neighborhoods we would
    really enthusiastically welcome their presence in. What I see
    in my own hometown of Baltimore, we have three kinds of
    neighborhoods: siege, stress and stable.
        By focusing really one set of strategies on siege,
    hopefully we contain it. But if we focus on stress, which is
    really what we are talking about here, we want to see them go
    to stable and not to siege. And the cops and the teachers are
    just a wonderful tool. We would welcome them in all three of
    our categories, but, still, a very welcome thing. I look
    forward to really being an advocate for the teacher and cop
    program, and I think it is a very innovative one, and also
    rewards public service and teaching and public safety.

                           BALTIMORE FHA DEFAULT RATE

        Let us go back to the FHA. One, there is the predatory
    lending issue, but then there is also the regular consumer
    issue. One of the significant flashing yellow lights in
    Baltimore has been the tremendous default rate with FHA
    housing. Over 50 percent of the houses bought in Baltimore have
    resulted in default on their mortgage payments. Now something
    is wrong somewhere.
        Part of that is the predators, the bums, the scum, that we
    are really going to go after, both preventive and prosecution.
    Remember, we have got our two strategies: prevention and
    prosecution. But I really need either your comments or as part
    of your overall review here to focus on why there was such a
    mortgage rate. We are not laggards in Baltimore. We are not a
    culture that abdicates responsibility. And it is enormously
    troubling that something is wrong somewhere, when people get
    into perhaps housing or buying a mortgage that they cannot.
        Do you have any comments on that?

                               SECTION 8 VOUCHERS

        Secretary Cuomo. Yes, I do, Senator. And if I might just
    quickly make a comment on the Senator's first point, which is
    the overall HUD budget, and clarify for the record a statement
    that the chairman made that suggested that I said that Senator
    Mikulski and Congressman Stokes were responsible for a budget
    that zeroed out vouchers. That was never the case. I never said
    that and it is not a fact.
        The vouchers from 1994 were rescinded by the 1995 Congress.
    And that is the first time the number of vouchers went to zero.
    It stayed that way for 4 years, and then we got back into the
    business. And that is, in my opinion, one of the causes for the
    backlog of affordable housing today. And I understand the
    sensitivity when that number keeps going higher and higher and
    we did so little for that 4-year period. But it was not under
    your leadership or Congressman Stokes.

                           BALTIMORE FHA DEFAULT RATE

        On the overall default rate, the Assistant Secretary is
    going to comment on the FHA default rate, but I think you are
    exactly right, Senator. That is not just a flashing yellow
    light, that should be a flashing red light and a bell and a
    gong. Everything should go off. Because that default rate
    really just shows the total dysfunction of the system.
        It is a bad appraiser or a bad appraiser and a bad lender
    or a bad appraiser and a bad lender and a bad broker. But that
    higher default rate says something is not right. It is the
    calling card of predatory lending, et cetera. It is corruption.
    And a 50-percent default rate, to me, just is so outrageously
    high that it is almost hard to imagine that it has been that
    high a level. But let me ask the Assistant Secretary for his
    comment, if I might.
        Mr. Apgar. Just one point of clarification. There are
    undoubtedly in the neighborhoods--and we were talking to Mr.
    Quayle yesterday--where half of the FHA mortgages are in
    default. And when you factor in the whole city, counting the
    stable neighborhoods and the like, we are still above the
    national average.
        Senator Mikulski. I do not want to hear this.
        Mr. Apgar. But let me tell you----
        Senator Mikulski. I do not want to hear this. I do not want
    to hear about national averages.

                              CREDIT WATCH SYSTEM

        Mr. Apgar. No, no. I said the rest of the city. The
    defaults in the city are 11,000 mortgages that are in default.
    But I agree exactly with what Secretary Cuomo said. And that is
    why we created our Credit Watch System. When we see areas where
    the defaults are higher, we see lenders that are higher, we do
    not go through this lengthy legal process. We bring them in. We
    ask them to explain what is up. We make sure the data is right.
    But if they are way out of whack, we terminate them. That is
    the Credit Watch System.
        You know, much to the cheers of the residents of Baltimore,
    one of our first entities terminated was a Baltimore lender,
    Capital Mortgage. And that system shows that we can quickly go
    in and address people who are generating bad loans through
    defaults. We are also now bringing online this new appraisal
    reform system where, for the first time, starting on March 1,
    all the lenders are required to send information to us about
    their appraisals online. So we can screen the appraisals and
    get a handle on who the bad appraisers are.
        We have kicked 12,000 appraisers off our list. We are stuck
    with this kind of lender-select, Bonnie and Clyde system. That
    was what Congress gave us. But we have been doing a whole lot
    of appraisal reform, saying given that we have to run our
    system that way, we have, for the first time, testing
    requirements for all our appraisers and we have the new
    appraiser guidelines, and we have this new automated appraisal
    fraud system. So, we are on it.
        But there is no excuse in these neighborhoods for these
    high default rates. You are exactly right.
        Secretary Cuomo. And also, Senator, if I may, let me give
    you one of the reasons why we need legislation. We have this
    Credit Watch, which says if you are a lender who has a
    disproportionate default rate, you are out. We had a
    notoriously bad lender who had a disproportionate default rate.
    We said, you are out. They went to court and they are still in.
        Senator Mikulski. Well, let us look at the legislative
    recommendations. But also there is another aspect here which I
    would look at, which is buyers needing really to be prepared to
    enter into home ownership. One of the great successes of
    welfare reform is when these people move from welfare to work
    they want to be homeowners. We heard in our hearing, though,
    that no one told them about, gee, you have to pay property
    taxes. And there are just a whole series of other things. There
    were the gougers and the schemers, but there are people who are
    buying houses that do not really understand that, because they
    look at a monthly payment that seems like that is what they are
    going to pay for the month, until they get in it.
        So I do not want to go over repeating the Baltimore
    hearing. You have the testimony on that. And you will be
    meeting with this Baltimore ops task force that I think will be
    very good.
        The other thing is I am going to refer you to the fact that
    GAO and the I.G. found that there were inadequate controls over
    the real estate assessment management, otherwise known as REAM
    contractors, and that this had resulted in the deteriorating
    conditions in HUD properties. I am going to be discussing this
    with the I.G. in a minute, but I think we really do need to
    take a better look at that.
        The second thing is that in your testimony you said that
    you hope to have a report to Congress in 8 weeks. We understand
    that that is not a magic number because we want you to be
    rigorous and thorough. But we also do not want to process it to
    death. I think there is the mood of the Congress, the chairman
    and I, and so on, who want to do it. So I want to discuss with
    Senator Bond what is the best way to follow up. Should we hold
    another hearing with you? Should we have a roundtable with you
    and some others? Should we have a meeting?
        We will discuss this with Senator Bond and move on, and
    then see how we can really have not only just a report filed.
    Because I do not want a report that goes to the staff and we
    all look at it, and golly, gee whiz. You know there is a
    heightened urgency to move our appropriations. We will be
    moving in June and July. The chairman is committed to moving
    our bill promptly.
        So we want to have whatever we can do through the
    appropriations there and the opportunity to review authorizing
    with Senator Gramm and Senator Sarbanes as to what would be
    appropriate to do through the appropriations process. But
    promptness, so we do not want to make the perfect the enemy of
    the good.
        Secretary Cuomo. Senator, if I might say, I cannot tell you
    how excited we are about this opportunity. And we are going to
    get you the report in 8 weeks, because we do not want to lose
    this moment. It feels like there is an energy about this
    moment. Chairman Greenspan has talked about this. There have
    been numerous newspaper articles about this. And we want to
    seize the moment, if you will. We want to get you the report in
    8 weeks.
        We will make a difference to Baltimore. We will also make a
    difference to the Nation. And with your leadership, Senator, I
    think we can do some of the best work that we have done over
    these 4 years this last year. Because this is the problem, in
    our opinion, that can make a marked difference.

                        NONPROFITS AND PROPERTY FLIPPING

        Senator Mikulski. I really thank you for your hands-on
    approach to this, number one, the attitude and frame of mind to
    really let us get this done. Number two, I really again
    appreciate the hands-on approach that you have taken to that.
    And I know that you will continue this through the process.
    Because there are two other issues I am going to bring. As we
    look at FHA, we really need FHA to approach this and not be
    defensive and not give you any recommendations that are CYA.
        We do not want CYA recommendations and macro this and
    national that and so on. We know macro and national. While we
    knew macro and national, we had this rotting in other areas. So
    we do not want a CYA approach from FHA.
        The other concern that I have--and I would like the
    analysis on this rather than giving my opinion--but I do not
    want HUD to become a flipper to nonprofits in the city.
    Nonprofits do not have, often, any more money than the very
    poor in their own neighborhoods, nor do very strapped city
    governments have this. So I do not want HUD, FHA, to say, we
    will cosmetic our own situation and flip it to a nonprofit or
    flip it to a city that cannot afford to do anything anyway. And
    a Mayor O'Malley or a Mayor Daley or a Mayor Riordan or other
    mayors end up holding the inventory with no money to do
    anything with it again. So let us not become enablers here.
        And I believe my concerns are valid; your solutions might
    be very good. But I think if we are going to turn them over to
    nonprofits and we are going to turn them over to a city, that
    nonprofit in that city is going to need to have the money to
    make the repairs. Because the homes I walked in are in pretty
    bad shape. And whether that movie was a year old, 2 years old,
    still, the conditions have validity. I mean the deteriorating
    conditions.
        So let us really think this through, and do not
    inadvertently create more of a problem, by shifting the problem
    out of FHA and shifting it to a nonprofit and shifting the
    problem to a city. So let us be very careful. Because we like
    to have this nostalgia, oh, let us give it to the community.
    The community is saying, hey----
        Secretary Cuomo. No, thanks. Yes.
        Senator Mikulski [continuing]. We do not have the resources
    either. They are busy. I know the three groups over there are
    always foraging for funds. So we cannot have them foraging for
    funds just because we are going to unload a problem on them.
        Secretary Cuomo. I agree, Senator.
        Senator Mikulski. I want to thank you. And I think for this
    situation this concludes my questions.
        Senator Bond [presiding]. Thank you very much, Senator
    Mikulski.
        Something toward and unusual happened when I arrived at the
    budget committee to vote at 11 o'clock. They finally told me
    they were not going to vote at 11 o'clock. This has never
    happened before. So, fortunately, I am with us for a few more
    minutes, until they decide to start the votes.

                                FNAM/FREDDIE MAC

        Changing the subject, Mr. Secretary, recently I sent a
    letter to Mr. Apgar, the FHA Commissioner, regarding a
    Washington Post article that attributed statements to him that
    Fannie Mae and Freddie Mac's underwriting policies are
    essentially discriminatory by leaving blacks out at a rate that
    is disproportionate to other minorities. I am troubled by this
    statement on several levels.
        First, my view and my experience in my State at least, I
    have seen Fannie Mae and Freddie Mac leaders--being the leaders
    in fact--in making housing credit available to all people,
    regardless of race or any other characteristic. And I wondered
    if that is the view of the Department or if that is only Mr.
    Apgar's views or whether he was misquoted. Could you clarify
    the position of the Department on that?
        Secretary Cuomo. Yes, Mr. Chairman. I will ask Mr. Apgar to
    speak to his comments. The Department's position is this. We
    are the regulators of Fannie Mae and Freddie Mac. They get
    significant public benefits. Some estimates say that Fannie Mae
    gets $6 billion in public benefits. One of the questions is:
    What does the public get back for their $6 billion? How many
    affordable, quote, unquote, loans is Fannie Mae actually doing?
    And how many is Fannie Mae doing compared to the private banks,
    commercial banks, that get no subsidy?
        You will hear many private bankers who say, look, we are
    doing more than Fannie Mae does and we are not getting any
    subsidies. Why is Fannie Mae getting $6 billion to do less than
    we are doing as private lenders?
        We try to balance all of that out. And we set the
    affordable housing goals, which are basically the percent that
    Fannie/Freddie must do to justify their public benefits. We
    just raised those goals from 42 percent to 50 percent. We did
    that in cooperation with them.
        That will, Mr. Chairman, do more to provide affordable
    housing than the entire HUD budget combined over the next 10
    years. So that is a massive contribution to affordable housing.
        But let me refer to Assistant Secretary Apgar to clarify
    his statement.
        Mr. Apgar. Right. And the reason we raised the affordable
    housing goals is because our analysis--a view which is shared
    by Fannie Mae--is that they can do more in these market areas.
        The particular comment in the Washington Post related to
    their lending in African-American communities. And our data
    suggests that Fannie Mae in fact does not lead. This is the
    same as the Secretary was saying. Their record is not as strong
    as other lending institutions.
        In that very same article that you quoted, Frank Raines
    himself conceded that point, by saying, Fannie Mae today does
    not lead in the African-American lending, but we will. Which is
    the partnership we formed with them in order to expand their
    lending and to embrace the higher goals.
        Now, with respect to discrimination, that relates to issues
    that the Department is reviewing relative to a totally
    different set of authorities. We have engaged with Fannie Mae
    to review their automated underwriting system. This is being
    done by Gail Laster, our General Counsel and Eva Plaza our
    Assistant Secretary for Fair Housing and Equal Opportunity.
        Again, Fannie Mae has been cooperative in that. It has been
    a very difficult undertaking, because this involves very
    complicated software and other things that they believe contain
    proprietary secrets. So we have set up a separate division to
    do that in order to protect the confidentiality of their
    information. That review is not completed, and I did not
    comment on that review in the article or anywhere.
        The same article pointed out that HUD officials were
    careful to note that Fannie Mae does not discriminate. And we
    have no evidence that they did or not. The review is underway.
    And it is not a review under my control.
        Senator Bond. Mr. Apgar, the sense I got from that article
    was that you had reached the conclusion that they were
    discriminating.
        Mr. Apgar. I did not reach such a conclusion. I reached the
    conclusion that they were not lending at the same rate as other
    banks in the area; that approximately 5 percent of all the
    loans done in the conventional conforming market are made to
    African-Americans. Fannie Mae, that year that was under review,
    did 3.2 percent of their business. Freddie Mac was even further
    behind at 3 percent. And I simply pointed out the fact that
    they were not serving this community as well as others in the
    marketplace.
        That is the basis. This general need to improve their
    outreach to a variety of underserved communities is the basis
    for expanding the affordable housing goals, as the Secretary
    mentioned.
        Secretary Cuomo. Mr. Chairman, if I might comment. I think
    the difference comes in the inference. It was not Mr. Apgar's
    statement, as I read the statement. The story did say the
    conventional lenders, who get no subsidy, are doing about 5
    percent to the African-American community. Fannie and Freddie
    are doing about 3 percent. Why are Fannie and Freddie doing
    less than the conventional lenders, who are getting no
    subsidies? You could argue they are doing it through CRA.
        And is the reduced amount the result of discrimination is
    the inference, is the hanging question. But no one at HUD said
    that. The exact opposite happens to be true. We announced the
    affordable housing goals cooperatively, and we are doing a fair
    housing review right now. Currently, we have no conclusion, no
    outcome, no opinion.

                      FHA COMMISSIONER'S RESPONSIBILITIES

        Senator Bond. The second part of it that concerns me about
    Mr. Apgar's statement is relating to fair housing and their
    underwriting policies and business decisions. I think HUD has
    acknowledged that the FHA, in fact, acts as a competitor to
    these government-sponsored enterprises. And as a result, since
    FHA, which is in Mr. Apgar's responsibility, runs a competitor,
    HUD decided it was necessary to build a firewall, a formal
    delegation of Mr. Apgar's authority, on all GSE fair housing
    matters to the Assistant Secretary.
        That means that Mr. Apgar should not be reviewing or
    commenting on information that would reasonably be considered
    proprietary business information for Fannie Mae and Freddie
    Mac. So, in a nutshell, what are Mr. Apgar's responsibilities
    with regard to HUD's regulation of Fannie Mae and Freddie Mac?
    And what safeguards has HUD put in place to protect Fannie Mae
    and Freddie Mac's proprietary business information?
        Mr. Apgar. I will be happy to answer these questions, but I
    would like to propose, with your permission, that I enter into
    the record the letter that I sent to you just on Monday which
    gave my full answer to all these questions, which are very
    similar to the letter that you sent me last week.
        Senator Bond. I look forward to receiving it. Thank you.
        [The information follows:]

                          Letter From William C. Apgar

                   Department of Housing and Urban Development,
                                        Washington, DC, March 27, 2000.
    Hon. Christopher Bond,
    United States Senator,
    Washington, DC.
        Dear Senator Bond: Thank you for your letter of March 20, 2000,
    regarding the level of service that the Government Sponsored
    Enterprises (GSEs), Fannie Mae and Freddie Mac, provide minority
    borrowers. As you know, HUD has recently published for comment proposed
    new affordable housing goals for Fannie Mae and Freddie Mac. While
    recognizing the progress that both organizations have made in expanding
    access to capital for low- and moderate-income borrowers and
    underserved communities, the rule proposes that both entities
    substantially expand their efforts in these areas. Indeed, both GSEs
    have broadly endorsed the proposed higher goals and have pledged to
    expand their affordable housing efforts. Although I have already had
    the pleasure of briefing your staff on this rule, I would be happy to
    provide any additional information you request.
        Your letter also references a recent Washington Post article which
    states that, ``Apgar and others said that the two companies' policies
    have had the effect of leaving blacks out at a rate that is
    disproportionate to other minorities, whether intended or not, and has
    been a pattern for years.'' You then say with respect to this quote
    from the article that ``this presumes that these two companies are
    guilty of discrimination in their housing underwriting policies.'' I
    would suggest to you that based upon the facts known today that you
    should not reach this presumption, as I and others at HUD also have not
    done. In fact the paragraph in the article you quote from begins by
    stating that, ``HUD officials have been careful, to avoid the word
    discriminate when talking about the companies' practices because they
    say that would imply that Fannie Mae and Freddie Mac are purposely
    denying blacks access to mortgage loans.''
        First, let me clarify for you that I never said, nor to my
    knowledge does HUD have any evidence that Fannie Mae and Freddie Mac
    are acting in a discriminatory manner, nor to my knowledge has HUD
    charged that the GSEs are operating in a manner that is inconsistent
    with fair lending laws. Rather, as part of HUD's effort to develop a
    proposed rule on new affordable housing goals for the GSEs, HUD
    prepared an assessment of GSE performance in the market place, and an
    analysis of whether or not the GSEs ``lead or lag the market'' in their
    purchases of mortgages from various categories of lending, including
    lending to particular demographic groups. The Post article presented
    information from the rule showing that in terms of home purchase and
    refinance mortgage lending in 1998, both Freddie Mac and Fannie Mae
    purchases failed to match market rates of lending to minorities,
    particularly African-Americans. This is factual information which is
    the basis of HUD's proposed rule requiring the GSEs to be more active
    in this market sector. It in no way supports the presumption which you
    have suggested.
        Fannie Mae disputes HUD's analysis as it relates to all minority
    families, but does not dispute the conclusion as it applies to African-
    Americans. Indeed to Fannie Mae's credit, they recently, announced
    major new initiatives to significantly increase their outreach to
    minorities in general, and African-Americans in particular.
        Your letter also referenced the fair lending review of the GSEs'
    automated underwriting systems and requests information on FHA's role
    in this review. You also state that your concern stems in part from the
    fact that ``FHA is a competitor of these government sponsored
    enterprises.'' As you note, Secretary Cuomo has delegated to the
    Assistant Secretary for Fair Housing and Equal Opportunity the
    authority to review Fannie Mae's and Freddie Mac's underwriting and
    appraisal guidelines, including its automated underwriting systems. And
    as you note, HUD has augmented its usual safeguards by establishing
    internal protocols and ``firewalls'' to protect the confidential
    business and/or proprietary information that may be provided by the
    GSEs. These firewalls are as thorough and complete as both Fannie Mae
    and Freddie Mac required. Indeed, neither Fannie Mae or Freddie Mac
    would turn confidential business and/or proprietary data over to HUD
    until the Department had agreed in writing to the GSEs' respective
    satisfaction that these ``firewalls'' were in place and effective. HUD
    is committed to maintaining these safeguards in accordance with our
    agreements.
        Your letter does not distinguish (as I do), my role in monitoring
    GSE progress in meeting their obligations under the affordable housing
    goals, and the equally important, yet clearly separate, obligations of
    other HUD officials in the area of fair lending and fair housing. At no
    time have I made public statements. concerning any of the details of
    the Department's review of underwriting and appraisal guidelines, other
    than to state that this review is underway. Nor do I have access to any
    proprietary or confidential information received by the Department as
    part of this review.
        In contrast, my public statements concerning the GSEs performance
    focused on market analysis completed as part of the development of the
    affordable housing goals rule. In establishing these goals, among other
    things, I am required by law to consider national housing needs;
    economic, housing, and demographic conditions; the ability of the GSEs
    to lead the market in making mortgage credit available to low- and
    moderate-income families, very low-income families, and families in
    areas underserved by mortgage credit. Accordingly, I am responsible for
    taking into account the housing needs of minorities in relation to any
    shortfall in the GSEs' performance in the purchase of mortgages made to
    African-Americans, Hispanics or other minorities.
        Next, I would like to reassure you that FHA is not a competitor of
    Fannie Mae and Freddie Mac. The GSEs provide liquidity and stability in
    the mortgage market, by purchasing and holding loans originated by
    private lenders. In contrast, the FHA provides mortgage insurance to
    millions of families not able to obtain financing in the private
    market. FHA has an important public mission which is a complimentary
    relationship with the GSEs, not a competitive one. The Congressional
    plan for addressing the Nation's housing needs is that both FHA and the
    GSEs should work side by side in helping more Americans realize the
    dream of homeownership. The ongoing partnership between FHA and both
    Freddie Mac and Fannie Mae to develop and deploy automated underwriting
    systems for FHA loans is a good example of the benefits of cooperation
    between FHA and the GSEs.
        Finally, you request information on HUD's effort ``to ensure
    consumers have full information about how mortgage decisions are made
    by the GSEs.'' In a speech last fall at the University of Virginia,
    Secretary Cuomo challenged the mortgage industry to ``demystify'' the
    homebuying process by helping consumers better understand the decision
    making process. At the same time, he said that FHA should lead by
    example. As a result, FHA is now developing new tools designated to
    increase the transparency of the FHA's underwriting process.
        The Secretary's speech was widely hailed by all segments of the
    mortgage industry, including the GSEs. Indeed, in January, Fannie Mae
    announced its own plans to expand consumer information about their
    underwriting systems. More recently, they have pledged to develop
    underwriting systems that are not dependent on FICO scores, a
    proprietary credit scoring system that has been over the years the
    source of considerable concern among housing advocates.
        My comments on this topic simply reflect my own belief in the
    importance of expanding consumer knowledge and information about the
    homebuying process. As you know, HUD has requested expanded funding for
    our Homebuying Counseling Initiative in our fiscal year 2001 budget
    request to your Committee, a request that I trust you will support. I
    believe in the power of consumer information and education. Despite
    your statements to the contrary, I never said that I intended to
    ``force'' disclosure of trade secrets of the GSEs. As noted earlier,
    HUD has detailed procedures in effect, procedures that were formulated
    after extensive conversation with the GSEs, to protect any proprietary
    or confidential information received as part of HUD's regulatory
    responsibilities.
        In closing, let me once again thank you for your interest in the
    GSE affordable housing goals and the equally important effort to assure
    that the GSEs adhere to applicable fair housing and fair lending
    requirements. I stand ready, along with my HUD colleagues, to provide
    you or your staff any additional information you request.
                Sincerely,
                                              William C. Apgar,
          Assistant Secretary for Housing-Federal Housing Commissioner.
                                     ______

                  FNMA AND FREDDIE MAC PROPRIETARY INFORMATION

        As Congress continues its deliberations in the development of the
    fiscal year 2001 Budget for the U.S. Department of Housing and Urban
    Development (HUD), I would like to express my ongoing willingness to be
    of assistance during this important stage of the legislative process.
    As you know, HUD continues to make great strides in meeting our
    mutually shared goal of helping to build stronger American communities.
    Over the past several years, HUD has made significant progress in
    implementing key management reforms contained in the HUD 2020 Reform
    Plan and in providing states and localities with much-needed assistance
    for affordable housing and economic development activities.
        There is much good news on the state of the nation's housing and
    job markets. A total of $70.7 million American families owned their own
    homes in the first quarter of this year--more than at any time in our
    history--raising the nation's home ownership rate to an all-time high
    of 67.1 percent. In addition, the nation's economic expansion--the
    longest period of peacetime economic growth in U.S. history--continues
    to create new jobs and economic opportunities at a steady pace.
        Despite these encouraging trends, there is still a tremendous need
    for targeted federal investments, particularly for communities that
    have not fully benefited from the nation's unprecedented economic
    growth. For instance, HUD's latest estimates place the number of very-
    low income renters with worst case needs for housing assistance at a
    record-high 5.4 million families. These very low-income families are
    either paying more than half their incomes for rent or are living in
    severely substandard conditions. In addition, a recent study conducted
    by the Urban Institute underlines the need for continued assistance to
    combat homelessness. According to this study, between 2.3 million to
    3.5 million Americans are likely to become homeless at some point each
    year, including 900,000 to 1.35 million children. These are but a few
    examples of why HUD's role will be as vital as ever for the families
    and communities that have been left behind.
        I believe the subcommittee hearings conducted earlier this year on
    the status of the President's fiscal year 2001 budget proposal resulted
    in a constructive dialogue and raised important issues for improving
    Federal efforts to expand affordable housing and spur the creation of
    new jobs and economic development opportunities. What emerged from our
    discussions was a clear consensus on the importance of HUD's mission to
    serve at-risk families and communities. Since then, I have worked
    diligently to see that the particular issues of mutual concern that
    were raised during these hearings are addressed in a timely and
    effective manner. We have continued our efforts to transform public
    housing, to combat homelessness and to improve the operation of key HUD
    programs such as the HOME block grant, the Housing for Persons With
    AIDS (HOPWA), and the Section 202 Housing for the Elderly and Section
    811 Housing for the Disabled programs.
        In addition, HUD has moved swiftly to address other critical
    housing issues such as predatory lending and the impact of deceptive
    and unfair lending practices in specific neighborhoods. The Joint Task
    Force, convened by HUD and the Department of Treasury has held the
    second in a series of regional forums on this important issue. The Task
    Force plans to release a comprehensive report and a list of
    recommendations for possible legislative proposals to ensure that the
    scourge of predatory lending, which has impacted too many of the
    nation's elderly, low-income families, and at-risk communities, is
    stopped.
        I look forward to continuing to work together to strengthen
    American communities and families through sensible government reforms
    and investments in affordable housing and economic development
    activities. As always, please do not hesitate to contact me if I can be
    of further assistance.

        Mr. Apgar. I hope you have received it, since we faxed it
    on Monday. But, if not, we will make sure that you see a copy
    of it.
        Let me just start off by saying that it is our opinion that
    FHA is not a competitor in the sense that you describe it. FHA
    is mortgage insurance. We operate in the primary market. Fannie
    Mae is a secondary market actor. It provides liquidity and
    stability to the secondary market. So we are in different
    businesses. So we do not compete. In fact, Fannie Mae could
    purchase FHA mortgages, and they are doing so today. So we are
    in different businesses.
        We do have this interest in automated underwriting, which
    is central to some of their proprietary interests. We are
    developing our own system. In fact, we are developing our
    system to move us beyond where we started. Fannie Mae and
    Freddie Mac, together, helped us get our first automated
    systems up and running, and now we are developing our own.
        In order to make sure that our work in providing our own
    development of our automated underwriting systems in no way
    benefitted or in no way let information from the automated
    underwriting review move out into the broad universe of people
    concerned about these matters, I was asked not to participate,
    and be firewalled off from that automated underwriting review
    that is happening on the fair housing side.
        With respect to the firewalls, all I can say about that is
    there was extensive negotiations with Fannie Mae and Freddie
    Mac about the firewalls. And based on that information, they
    were able and willing to send over to the Department literally
    thousands and thousands of records of data. Fannie Mae I think
    came to the conclusion that the firewalls were sufficiently
    rigorous--and we can get you more on that if you would like--
    that they were comfortable with going through in the process of
    reviewing the loans. So that is the best I can say. They have
    signed off on the firewalls and I think they are effective.
        Secretary Cuomo. Mr. Chairman, this was somewhat puzzling.
    Fannie Mae requested, in essence, the firewalls. Because they
    wanted to make sure, when they were providing their information
    for this fair housing review, that there was no advantage to
    FHA, which was also developing something called an automated
    underwriting system, where they have secret recipes, we call
    them, secret formulas. So we created the firewalls at Fannie
    Mae's request essentially. They were satisfied. They sent over
    the information. We are now reviewing the information.
        So I do not understand why they would have a problem with
    the firewalls which they requested.
        Senator Bond. I think the question was whether those
    firewalls were being implemented.
        Secretary Cuomo. They are.
        Senator Bond. And that is the question that was raised by
    the comments I saw from Mr. Apgar. But let me ask another
    question.
        Mr. Apgar. The part about my authorities, of course, in
    terms of monitoring the GSE goals, commenting on their
    performance with respect to underserved communities is central
    to my role as the person involved in the goal-setting
    operation. Making comments about different demographic groups,
    different racial groups, how they are faring in the marketplace
    is essential.
        As a matter of fact, our rule, which is now under public
    comment, has extensive comments on how Fannie Mae and Freddie
    Mac's lending is doing in low-income communities generally, in
    Hispanic communities, in African-American communities, in all
    types of communities. That is a congressionally mandated
    obligation of us as we put forth these goals, to look at
    different market conditions, to look at different demographic
    groups. So my comments were well within my authority in the
    goal-setting and had nothing to do with the issues relating to
    the automated underwriting review. And again, I do not
    understand why there would be confusion over my role and
    comments as a goal-setter in the affordable housing arena.

                                 MARK-TO-MARKET

        Senator Bond. Mr. Secretary, let me ask you one last
    question before turning it back over to Senator Mikulski again.
    We appreciated your statement that you acknowledge that the
    mark-to-market legislation we worked on over 2 years ago was a
    need corrective to a serious situation. In this body, though,
    sometimes we forget that passing a law is just the first step
    and that implementing the law is often a bigger challenge. One
    of the complaints that we have heard about HUD's implementation
    of the program has been the failure to use fully the housing
    finance agencies in administering the program as intended by
    Congress.
        I know there have been numerous disputes about
    compensation, conflict of interest requirements, and perhaps
    most troubling, is the objection to the prescriptive nature of
    the program that HUD has designed. Finally, I understand that
    not one mortgage has undergone a complete restructuring yet.
    That means that a significant amount of section 8 savings that
    we had previously anticipated have not yet been realized.
        What is the status on this? And has HUD fully complied with
    the letter and the intent of the law?
        Secretary Cuomo. Yes, Mr. Chairman. As you rightly pointed
    out, this section 8 crisis--the chairman was referring in his
    opening comments by the loss of units--I think one of the
    greatest challenges we faced were these expiring section 8
    contracts, and still today. The mark-to-market was a way to
    deal with it. And Mr. Peppercorn is here. He is the Director of
    the unit called OMHAR that does that.
        This is, as the chairman pointed out, a very difficult
    transaction in general, because you are trying to renegotiate.
    But I believe we have made more progress than the chairman's
    comment would suggest. And I would ask Mr. Peppercorn to give
    you the updated information. I believe we have about $60
    million in savings.
        Senator Bond. If we could make that very brief. I just want
    to know the overview. If you could do that in less than 60
    seconds.
        Mr. Peppercorn. I certainly will. To your first point, I
    have a copy of the GAO report with me which actually says that
    what we did in terms of the negotiations with State and local
    agencies was absolutely within the statutory requirements. In
    terms of what we have completed, I will not go into too much of
    the technical details, but there are actually 122 transactions
    that have been approved by OMHAR.
        These are what are called LITES. They are not
    restructurings. They are rent reductions without
    restructurings. The estimated savings will be $215 million. The
    discounted savings over 20 years are $128 million, against
    $12.2 million that we have spent. In other words, we are saving
    money at a rate, once fully implemented, at ten and a half
    times the cost of doing the deals.
        Senator Bond. Thank you very much. And we will follow up
    with you on those.
        Now I turn the questioning back to Senator Mikulski.
        Senator Mikulski. Mr. Chairman, I have really concluded my
    questions for this phase. I think we now move on to the
    implementation of the excellent methodology presented by the
    Secretary. Mr. Chairman, the Secretary wants to and is going to
    move as promptly as he can on these national and Baltimore
    laboratory task forces, and hopes to have something for us in
    the 8-week, roughly, period. And I would like to then discuss
    with you whether you would want to hold another hearing on this
    or a roundtable or just meet with the Secretary.
        Senator Bond. Let us see what the schedule is. We may be
    asked to move more quickly. We still have a number of hearings
    in the other agencies in this committee.
        Senator Mikulski. Why do not you and I talk.
        Senator Bond. We will discuss this and see whether we can
    take care of all of our responsibilities and come back to a
    hearing on this.
        Senator Mikulski. But I hope you would concur that when the
    Secretary finishes his analysis that we really have a face-to-
    face conversation with him, using whatever is appropriate to
    our schedule.
        Senator Bond. We will, yes.
        Senator Mikulski. I have advised the Secretary that both
    Senator Stevens and Senator Byrd have instructed us to move it
    in terms of moving your bill to the floor in June.
        Senator Bond. And we may have to do a truncated version of
    a hearing to get that done or just set up a meeting.
        Senator Mikulski. To see how to go, okay.
        Senator Bond. Yes, we will hold that open and work with
    you.
        Senator Mikulski. Thank you very much, Mr. Secretary. We
    look forward to working with you, both on this despicable
    situation that we find ourselves in, but also on the HUD core
    programs that I believe are working very well and empowering
    the poor.

                           SINGLE-FAMILY FORECLOSURES

        Secretary Cuomo. Thank you very much. Thank you, Senator,
    again. We are excited by the opportunity that you have given us
    to resolve a national problem. Thank you.
        Senator Bond. Mr. Secretary, while the FHA Mutual Mortgage
    Insurance Fund is presently in good shape, FHA's inventory of
    single-family homes that HUD has foreclosed on and taken
    ownership of has more than doubled under your tenure, from
    24,000 homes in 1996 to over 47,000 homes currently, despite
    the fact that this subcommittee has provided significant new
    tools, including a single-family property disposition program
    as part of the VA-HUD fiscal year 1999 bill to move the housing
    into the hands of nonprofits and homeowners. Why the big
    increase and why have we not seen a decrease in the inventory?

                      NBC CORRECTION TO REPORT ON HOUSING

        Secretary Cuomo. Thank you very much, Mr. Chairman. First,
    as I just mentioned when you were out of the room, the NBC
    video piece which you showed is dated and slightly misleading.
    NBC actually ran a correction on the air about that piece,
    because there were factual errors in the NBC piece. And you can
    imagine how hard it is to get a network to run a correction.
    They do not do that easily, I trust. So there were serious
    flaws in that piece.
        There is no doubt that the long-term HUD problem has been
    this so-called aged inventory and moving those properties. It
    is the challenge of any real estate organization, public or
    private. We have made significant progress. The reason we have
    more homes is we are doing many more loans. The whole FHA
    business has gone through the roof. So we are also having more
    foreclosures.
        But, as I mentioned, the radical privatization which
    changed the entire way we did business is starting to show the
    positive effect. The average resale is up. The average time of
    sale is down. And we are now solidly in keeping with the rest
    of the market. I will ask Commissioner Apgar to respond to your
    specific point.
        Mr. Apgar. Right. The buildup of the inventory has a couple
    of factors. First of all, we came to the conclusion that our
    HUD process, the private sector process, just was not able to
    be up to the task. That is why we brought in the private sector
    contracts. We had built up from 24,000 to almost 42,000. And
    many of those homes had no work being done on them, in the
    sense that they were not appraised, they were not ready for
    sale.
        We brought the new contractors in. There was a period of
    transition. And for the last 6 months, the inventory has been
    coming down steadily. As a matter of fact, today we have almost
    half of those homes that you mentioned in the inventory under
    contract. Somebody is there waiting to close in the next week
    or two to buy them. The number of FHA homes we have available
    for sale--that means are not under contract--is actually down
    over a year ago and is falling rapidly because of the new
    private sector contractors.
        Secretary Cuomo. And one of the problems, if I might
    quickly say, Mr. Chairman, when we went to the privatization,
    one of the contractors who we selected defrauded us. A company
    called In-Town. And that has caused us operational problems
    that we are working through. We are bringing action against In-
    Town. But one of those contractors who we privatized to did
    misperform, did mislead us. We believe we have a legal action.
    But that has caused a delay.
        Senator Bond. Mr. Secretary, I understand that before the
    privatization of FHA management and disposition, the average
    loss on the sale of one of these houses was $31,872. After the
    new program was implemented, I am advised that the loss has
    increased slightly, to $31,940. Is this a widespread problem?
    Are we losing more money under this privatization concept?
        Secretary Cuomo. I have not heard those numbers, Mr.
    Chairman. But between HUD being in the real estate business and
    managing its own properties and privatizing it, the
    privatization is clearly a much better course of conduct. This
    committee made that suggestion to us years ago, and they were
    correct. We should not be boarding up buildings and cutting
    lawns and doing the resale whenever you can privatize the
    function. That is much of the advice that I got from this
    committee.
        Mr. Apgar. Yes, I believe the numbers you are referring to
    relate to an Inspector General audit of this matter. We were
    unable to replicate their methodology. Our own statistics
    suggest that, in fact, our recovery rates are up prior to the
    contract versus now. We are recovering about $4,500 more per
    home. When you multiply that times the 60,000 homes we signed
    onto the new contracting process, that returns over $260
    million of savings. So we are saving money by selling the homes
    faster and at a higher price, as Secretary Cuomo mentioned.
        Senator Bond. Mr. Secretary and Mr. Apgar, my apologies
    again. That is my master's voice calling, and I will turn it
    back over to Senator Mikulski.
        Secretary Cuomo. That is an important vote for all of us.
    Vote twice, Mr. Chairman.
        Senator Bond. Early and often.
        Senator Mikulski [presiding]. We are back to the good news.
        Secretary Cuomo. That is right.

                            HOUSING FOR FIREFIGHTERS

        Senator Mikulski. Mr. Secretary, I think that concludes my
    questions. I think we have had a very rigorous and thorough
    hearing. We look forward to the implementation of your
    methodology and ongoing conversations on the other aspects of
    the HUD budget.
        One of the things I would like you to ponder for when we
    talk again--let us go to the teacher/cop program that I know we
    are mutually bullish on--would you think about expanding the
    part also to firefighters? Because if we think about teachers,
    cops and firefighters in a community, that is really wonderful
    community leadership and so on. Because both are involved in
    public safety. And our firefighters risk their lives every day.
    They truly are on the line of fire--no pun intended. And their
    compensation is often quite modest.
        Secretary Cuomo. Senator, as this is an appropriations
    hearing, I think HUD is going to do a little appropriating of
    many good ideas--this idea of the firemen next door program, I
    think I now hear it being called. We had a meeting yesterday
    with Mr. Quayle, who had some good ideas. We are going to
    appropriate those also. So, yes, there is a lot we can do
    together. And I think the firemen next door program has a nice
    ring to it.

                          IG EFFORTS IN HOUSING FRAUD

        Senator Mikulski. Thank you very much. This phase of the
    hearing is concluded and we look forward to working with you.
        We now turn to the HUD I.G., Ms. Gaffney. Thank you very
    much.
        Secretary Cuomo. Thank you very much. Thank you for having
    us.
        Senator Mikulski. Ms. Gaffney is next. Could I have some
    order here. I know the enthusiasm you all want to share with
    each other. We can do that out in the hall.
        I understand Ms. Gaffney is not scheduled to testify
    formally. But, Ms. Gaffney, would you take the witness table,
    because I would like to say a few things, please.
        Anybody who would wish to be enthusiastic in their
    conversation, we love enthusiasm, but we need to hear the
    witness.
        Ms. Gaffney, first of all, I know you are not prepared to
    give testimony.
        Ms. Gaffney. No, Senator.
        Senator Mikulski. But I would like to just review a few
    things with you, if I might.
        Ms. Gaffney. Please.
        Senator Mikulski. First of all, thank you, thank you. I
    know that, on a bipartisan and a bicameral basis, we
    appropriated $18 million to the HUD I.G. for their to be
    respective HUD I.G. audits in key cities. I know you caught a
    lot of grief over that. And that was a melancholy situation in
    which accusations to both you, against you, and also the
    members of the House were unfounded.
        It is my observation that the HUD I.G.'s office and that
    appropriations of funds, along with many other things that you
    have identified, led to really significant work on this
    predatory lending. Am I correct in that?
        Ms. Gaffney. You are correct.
        Senator Mikulski. And I know that there are ongoing
    investigations. I will not ask about those. It would not be
    appropriate to ask about them. But the task force, under the
    aegis of the Baltimore U.S. Attorney, has apprised me of your
    work--meaning your team's work--and we really want to thank you
    for the housing fraud initiative in uncovering these flipping
    issues and also the issues related to FHA disposal, which are
    not criminal.
        So we have got two areas that we are looking at, and we
    invite, as we move along with the Secretary's methodology, your
    advice and insights. I have got your letter to me in response
    to my questions.
        And there are two issues that I am deeply concerned about.
    One, how we can prevent predatory lending and any insights you
    have on preventing well-intentioned people getting in over
    their head and thus contributing to the default rate of FHA.
    But predatory lending is the number one issue. So we welcome
    your insights that will come out of your task force work on
    what we can do to prevent this virus, and essentially giving
    too many Bonnie and Clydes too many opportunities to rob the
    taxpayer and gouge the poor.
        The other is what we would call the prosecution part. And
    whatever tools the I.G. needs to continue their housing fraud
    initiative, the committee would like to be aware of, to be able
    to continue investigations and work with appropriate law
    enforcement for both investigation, which will, for those that
    are criminals, lead to indictments and prosecutions. I must say
    that your presence and the vigorous response by the U.S.
    Attorney in Baltimore, and other U.S. Attorneys, and the
    acknowledgement of that--not going into the details of
    investigation--by the press has already had a chilling effect
    on the flippers.
        Because, you see, they know you are coming. They know the
    FBI is coming. They know the postal inspectors coming. They
    know the HUD I.G. is coming. Really, it is like Silverado, with
    you coming over the hills. And the fact that they know that you
    are coming, you--literally, you, meaning the HUD I.G.--but the
    full muscular, vigorous weight of the Federal law enforcement
    coming after the flippers and the chain of gougers who are
    committing criminal offenses has had a chilling effect. Because
    they know prosecutions could very well lead to convictions. And
    as you know, under our current Federal statutes, these would be
    sentences without parole.
        So for all those white collar criminals, we have already
    said, if you are a flipper, pack it up and go away, because we
    are coming and we are here to stay. And if you are thinking
    about being a flipper, do not even go there, because we are
    coming, all of us are coming.
        So I want to thank you for the professionalism of your
    team. I think, for all the pretty vitriolic criticism directed
    at you in some local quarters, I think both you, the work of
    the housing fraud initiative and your vigorous team, I think
    you have truly been vindicated. And today I think the beginning
    results speak for themselves.
        So I would like to thank you for staying the course and
    bringing us such a professional team to our own community and
    many other communities.
        Ms. Gaffney. Thank you so much.
        Senator Mikulski. So we look forward to hearing from you
    what other tools, financial or whatever, to be able to continue
    to stay the course on the housing fraud initiative. And I am
    going to wrap up by saying we are here.
        Ms. Gaffney. Okay.

                         ADDITIONAL COMMITTEE QUESTIONS

        Senator Mikulski. We are here. We are going to stay here.
    This is directed at the gougers. We are here and we are going
    to stay here until you go away.
        Ms. Gaffney. We will be there, too.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]

               QUESTIONS SUBMITTED BY SENATOR CHRISTOPHER S. BOND

                    DISCRIMINATION IN NEWSPAPER ADVERTISING
        Question. Mr. Secretary, it has come to my attention that a number
    of newspapers have been subject to risk of fine or other penalty under
    the Fair Housing Act in cases where a newspaper may have run an
    advertisement that is later determined to have a discriminatory effect.
    Several news organizations have raised concerns that they want to do
    the right thing but that there are no set or established standards. It
    has also been suggested that a better approach would be to allow
    notification to newspapers where there is an issue of discrimination
    and then allow the newspaper an opportunity to remedy the issue before
    there is a risk of penalty. This would promote dialogue on issues of
    discrimination, protect innocent parties and allow for the development
    of standards that everyone could rely upon. How would you look at this
    type of system as a way to promote dialogue rather than litigation and
    what steps would HUD be willing to make to implement such a system?
        Answer. Typically, the complaints HUD receives regarding allegedly
    discriminatory advertising come from private parties who allege that
    such advertising has resulted in lost housing opportunity. HUD, itself,
    has not initiated such a case in over 5 years. When HUD receives a case
    from a person who alleges an advertisement is discriminatory and has
    caused that person harm, HUD, as a neutral fact-finder, must
    investigate the complaint. The HUD administrative process, however,
    affords the parties the opportunity to resolve the matter before HUD
    makes a determination on whether discrimination has occurred. HUD
    participates in that process and assists the parties in arriving at a
    reasonable resolution. Parties have resolved matters alleging
    discriminatory advertising with the publisher agreeing to cease
    publication of the subject advertisement.
        Individuals also have a private right of action under the Fair
    Housing Act. HUD is not involved in cases filed directly in court. HUD,
    however, has provided guidance on how it believes the Act's provisions
    regarding advertising should be interpreted. This guidance provides a
    reasonable common sense approach. It recognizes that advertisers and
    publishers are in very different circumstances. At one time, there was
    much misinformation circulating among the housing industry and
    newspaper publishers. For example, there was a belief that the Fair
    Housing Act prohibited the use of certain words and phrases that a
    common-sense reading of the Act or the pertinent case law would not
    have supported. We put out guidance and wrote letters to individual
    parties to clarify our interpretation of the law, which we understood
    addressed most concerns. That guidance is attached.
        HUD is open to further discussion on how to promote common-sense
    enforcement of the Act's advertising provisions. HUD already notifies
    parties of alleged violations prior to taking enforcement action, and
    there is nothing which prevents a private party from contacting a
    person who has published a discriminatory advertisement before taking
    legal action.

                                   Attachment

    MEMORANDUM FOR: FHEO Office Directors, Enforcement Directors, Staff,
            Office of Investigations, Field Assistant General Counsel
    FROM: Roberta Achtenberg, Assistant Secretary for Fair Housing and
            Equal Opportunity,
    SUBJECT: Guidance Regarding Advertisements Under Sec. 804(c) of the
            Fair Housing Act

        The purpose of this memorandum is to provide guidance on the
    procedures for the acceptance and investigation of allegations of
    discrimination under Section 804(c) of the Fair Housing Act (the Act)
    involving the publication of real estate advertisements.\1\
    ---------------------------------------------------------------------------
        \1\ This memorandum does not address fair housing issues associated
    with the publication of advertisements containing human models, and
    does not address 804(c) liability for making discriminatory statements.
    ---------------------------------------------------------------------------
        Recently, the number of inquiries involving whether or not
    potential violations of the Act occur through use of certain words or
    phrases has increased, and these issues cannot, in some situations, be
    answered by referring to decided cases alone. In some circumstances,
    the Advertising Guidelines, published at 24 C.F.R. Part 109, have been
    interpreted (usually by persons outside of HUD) to extend the liability
    for advertisements to circumstances which are unreasonable.
        This guidance is meant to advise you of the Department's position
    on several of these issues.
        Previous guidance already requires that Intake staff review a
    potential complaint, gather preliminary information to ascertain
    whether the complaint states a claim under the Act, and consult with
    counsel on any legally questionable matters before the complaint is
    filed. Likewise, jurisdictional issues such as standing and timeliness
    should also be established prior to filing.
        If the Advertising Guidelines, this memorandum, or a judicial
    decision clearly indicate that the language used in the advertisement
    is a potential violation of Section 804(c) and the criteria for
    establishing jurisdiction are met, the complaint should be filed and
    processed. Any complaint concerning an advertisement which requires an
    assessment of whether the usage of particular words or phrases in
    context is discriminatory, requires the approval of Headquarters FHEO
    before a complaint is filed. If the advertisement appears to be
    discriminatory, but the Advertising Guidelines, this memorandum, or a
    judicial decision do not explicitly address the language in question,
    supervisory staff must also obtain approval of Headquarters FHEO before
    the complaint is filed. Potential complaints regarding advertisements
    which do not meet the above descriptions should not be filed.
        Where there is a question about whether a particular real estate
    advertising complaint should be filed, relevant information regarding
    the factual and/or legal issues involved in the complaint should be
    gathered, and counsel should be consulted prior to contacting the
    potential respondent publisher. The matter should then be referred to
    the Office of Investigations for review. Such referrals may take the
    form of a short memo, reciting the applicable advertisement language,
    and any factual or legal analysis which is appropriate.
        Section 804(c) of the Act prohibits the making, printing and
    publishing of advertisements which state a preference, limitation or
    discrimination on the basis of race, color, religion, sex, handicap,
    familial status, or national origin. The prohibition applies to
    publishers, such as newspapers and directories, as well as to persons
    and entities who place real estate advertisements. It also applies to
    advertisements where the underlying property may be exempt from the
    provisions of the Act, but where the advertisement itself violates the
    Act. See 42 U.S.C. 3603(b).
        Publishers and advertisers are responsible under the Act for
    making, printing, or publishing an advertisement that violates the Act
    on its face. Thus, they should not publish or cause to be published an
    advertisement that on its face expresses a preference, limitation or
    discrimination on the basis of race, color, religion, sex, handicap,
    familial status, or national origin. To the extent that either the
    Advertising Guidelines or the case law do not state that particular
    terms, or phrases (or closely comparable terms) may violate the Act, a
    publisher is not liable under the Act for advertisements which, in the
    context of the usage in a particular advertisement, might indicate a
    preference, limitation or discrimination, but where such a preference
    is not readily apparent to an ordinary reader. Therefore, complaints
    will not be accepted against publishers concerning advertisements where
    the language might or might not be viewed as being used in a
    discriminatory context.
        For example, Intake staff should not accept a complaint against a
    newspaper for running an advertisement which includes the phrase female
    roommate wanted because the advertisement does not indicate whether the
    requirements for the shared living exception have been met. Publishers
    can rely on the representations of the individual placing the ad that
    shared living arrangements apply to the property in question. Persons
    placing such advertisements, however, are responsible for satisfying
    the conditions for the exemption. Thus, an ad for a female roommate
    could result in liability for the person placing the ad if the housing
    being advertised is actually a separate dwelling unit without shared
    living spaces. See 24 CFR 109.20.
        Similarly, Intake staff should not file a familial status complaint
    against a publisher of an advertisement if the advertisement indicates
    on its face that it is housing for older persons. While an owner-
    respondent may be held responsible for running an advertisement
    indicating an exclusion of families with children if his or her
    property does not meet the ``housing for older persons'' exemption, a
    publisher is entitled to rely on the owner's assurance that the
    property is exempt.
        The following is policy guidance on certain advertising issues
    which have arisen recently. We are currently reviewing past guidance
    from this office and from the Office of General Counsel and will update
    our guidance as appropriate.
        1. Race, color, national origin.--Real estate advertisements should
    state no discriminatory preference or limitation on account of race,
    color, or national origin. Use of words describing the housing, the
    current or potential residents, or the neighbors or neighborhood in
    racial or ethnic terms (i.e., white family home, no Irish) will create
    liability under this section.
        However, advertisements which are facially neutral will not create
    liability. Thus, complaints over use of phrases such as master bedroom,
    rare find, or desirable neighborhood should not be filed.
        2. Religion.--Advertisements should not contain an explicit
    preference, limitation or discrimination on account of religion (i.e.,
    no Jews, Christian home). Advertisements which use the legal name of an
    entity which contains a religious reference (for example, Roselawn
    Catholic Home), or those which contain a religious symbol, (such as a
    cross), standing alone, may indicate a religious preference. However,
    if such an advertisement includes a disclaimer (such as the statement
    ``This Home does not discriminate on the basis of race, color,
    religion, national origin, sex, handicap or familial status'') it will
    not violate the Act. Advertisements containing descriptions of
    properties (apartment complex with chapel), or services (kosher meals
    available) do not on their face state a preference for persons likely
    to make use of those facilities, and are not violations of the Act.
        The use of secularized terms or symbols relating to religious
    holidays such as Santa Claus, Easter Bunny, or St. Valentine's Day
    images, or phrases such as ``Merry Christmas'', ``Happy Easter'', or
    the like does not constitute a violation of the Act.
        3. Sex.--Advertisements for single family dwellings or separate
    units in a multi-family dwelling should contain no explicit preference,
    limitation or discrimination based on sex. Use of the term master
    bedroom does not constitute a violation of either the sex
    discrimination provisions or the race discrimination provisions. Terms
    such as ``mother-in-law suite'' and ``bachelor apartment'' are commonly
    used as physical descriptions of housing units and do not violate the
    Act.
        4. Handicap.--Real estate advertisements should not contain
    explicit exclusions, limitations, or other indications of
    discrimination based on handicap (i.e., no wheelchairs). Advertisements
    containing descriptions of properties (great view, fourth-floor walk-
    up, walk-in closets), services or facilities (jogging trails), or
    neighborhoods (walk to bus-stop) do not violate the Act. Advertisements
    describing the conduct required of residents (``non-smoking'',
    ``sober'') do not violate the Act. Advertisements containing
    descriptions of accessibility features are lawful (wheelchair ramp).
        5. Familial status.--Advertisements may not state an explicit
    preference, limitation or discrimination based on familial status.
    Advertisements may not contain limitations on the number or ages of
    children, or state a preference for adults, couples or singles.
    Advertisements describing the properties (two bedroom, cozy, family
    room), services and facilities (no bicycles allowed) or neighborhoods
    (quiet streets) are not facially discriminatory and do not violate the
    Act.
        Please contact Sara K. Pratt, Director, Office of Investigations or
    Susan Forward, Deputy Assistant Secretary for Enforcement and
    Investigations, for further information.

                         SECTION 8 FAIR SHARE VOUCHERS
        Question. Mr. Secretary, HUD recently published on March 10th the
    regulations that will govern the award of fair share vouchers. How do
    these requirements differ from how HUD used to award fair share
    vouchers?
        Answer. In order to underscore the importance the Department places
    upon effective and efficient management of the Section 8 programs by
    Public Housing Authorities (PHA), the fiscal year 2000 Notice of Fund
    Availability (NOFA) established more stringent threshold requirements
    that PHAs with an existing program must meet in order to be eligible to
    submit an application. These threshold requirements are a prerequisite
    to a PHA reaching the review stage where its application would then be
    rated under the NOFA's rating criteria. Examples of the more stringent
    threshold requirements in fiscal year 2000 NOFA versus the ``fair
    share'' NOFA in 1994 include an increase in the required certificate
    and voucher lease-up rate from 85 percent to 90 percent, and automatic
    disqualification of the application if the applicant has been debarred.
    With this lone exception, the fiscal year 2000 NOFA, as amended on May
    18, 2000, is substantially similar to the last ``fair share'' NOFA
    published in fiscal year 1994.
        Question. How were these new regulations and requirements developed
    and what is the reason for any differences from prior requirements?
        Answer. The more stringent threshold requirements imposed in this
    year's Notice of Fund Availability (NOFA) arise from the Department's
    continuing oversight and experience with the program, and concerns
    noted by both the Department and the Congress regarding the incidence
    of Public Housing Authority (PHA) program under-utilization. As noted
    above, the fiscal year 2000 NOFA closely adheres to the 1994 ``fair
    share'' NOFA.
        Question. In particular, we understand that this new award formula
    has reduced the emphasis on ``need'' as a criteria for making an
    allocation of incremental vouchers. Were outside comments collected and
    considered, and if so, to what extent?
        Answer. ``Housing needs'' in this year's Notice of Fund
    Availability (NOFA), as amended, are afforded the same weight as the
    fiscal year 1994 Fair Share NOFA. This weighting was increased in the
    May 18th NOFA amendment to parity with the 1994 NOFA as a result of
    comments received from Congressional representatives, Public Housing
    Authorities (PHA), and an organization representing PHAs.
        Question. Also, please provide a chart of the proposed allocation
    under the new regulations as compared to the last 3 years in which the
    previous fair share requirements were used?
        Answer. A comparison of the fiscal year 2000 fair share
    distribution with the most recent three fair share distributions is
    provided for your information as requested. During 1992-1994, the fair
    share funds were allocated to each of the field offices where the
    application review and selection process was conducted. Starting in
    fiscal year 1999, this process is centralized in the Grant Management
    Center and the available funds are now fair shared to the HUD State
    offices for suballocation.

                                                  SECTION 8 ALLOCATION
    ----------------------------------------------------------------------------------------------------------------
                                                                              Fiscal years--
                       HUD Office                    ---------------------------------------------------------------
                                                           1992            1993            1994            2000
    ----------------------------------------------------------------------------------------------------------------
    Boston, Massachusetts...........................     $27,333,770     $40,283,741     $38,398,961     $12,456,208
    Hartford, Connecticut...........................      10,938,225      17,682,339      16,854,723       4,676,595
    Manchester, New Hampshire.......................       7,647,715       9,884,600       9,421,767       1,162,548
    Providence, Rhode Island........................       3,126,325       5,516,955       5,258,799       1,753,494
    Maine...........................................  ..............  ..............  ..............       1,304,156
    Vermont.........................................  ..............  ..............  ..............         771,380
    Buffalo, New York...............................      14,343,710      22,050,566      21,018,739  ..............
    New York, New York..............................      86,396,880     145,990,084     139,158,680  ..............
    New York........................................  ..............  ..............  ..............      57,048,507
    Newark, New Jersey..............................      28,872,470      49,116,756      39,029,408      12,981,233
    Delaware........................................  ..............  ..............  ..............         663,416
    Baltimore, Maryland.............................       8,700,130      14,246,528      13,579,882  ..............
    Maryland/D.C....................................  ..............  ..............  ..............       7,250,808
    Charleston, West Virginia.......................       3,435,150       4,326,916       4,124,446       1,430,622
    Philadelphia, Pennsylvania......................      19,425,085      31,952,008      30,456,864  ..............
    Pittsburgh, Pennsylvania........................       7,605,025      11,758,164      11,207,956  ..............
    Richmond, Virginia..............................       8,576,665      12,563,658      11,975,758       5,404,073
    Washington D.C..................................      12,574,955      21,298,947      20,302,293  ..............
    Pennsylvania....................................  ..............  ..............  ..............      14,791,053
    Atlanta, Georgia................................      12,132,235      17,512,207      10,092,747       6,522,548
    Birmingham, Alabama.............................       6,259,470       9,179,087       8,749,565       2,998,660
    Carribean Office................................       5,509,880       8,295,312       7,907,138       2,902,466
    Columbia, South Carolina........................       4,925,230       6,918,479       6,594,738       2,713,819
    Greensboro, North Carolina......................      10,164,280      13,979,053      13,324,927       5,908,423
    Jackson, Mississippi............................       4,661,515       5,500,811       5,243,399       1,894,043
    Jacksonville, Florida...........................      22,061,785      38,059,737      36,278,784      13,396,457
    Louisville, Kentucky............................       6,341,045       8,455,756       8,060,077       3,003,250
    Knoxville, Tennessee............................       2,716,360       4,053,689       3,864,000  ..............
    Nashville, Tennessee............................       5,352,405       8,043,878       7,032,006  ..............
    Tennessee.......................................  ..............  ..............  ..............       4,026,565
    Chicago, Illinois...............................      34,212,580      55,942,844      53,325,075      16,635,009
    Cincinnati, Ohio................................       5,014,945       7,904,856       7,534,960  ..............
    Cleveland, Ohio.................................       9,732,400      15,677,798      14,944,178  ..............
    Columbus, Ohio..................................       4,975,880       7,313,556       6,970,378  ..............
    Ohio............................................  ..............  ..............  ..............      12,346,480
    Detroit, Michigan...............................      11,335,885      18,362,838      17,503,578      10,673,680
    Grand Rapids, Michigan..........................       5,158,135       7,313,277       6,970,492  ..............
    Indianapolis, Indiana...........................       8,099,740      12,258,621      11,684,997       4,820,548
    Milwaukee, Wisconsin............................       8,486,820      14,522,144      13,842,595       6,178,218
    Minneapolis, Minnesota..........................       8,513,845      12,870,342      12,268,096       4,248,602
    North Dakota....................................  ..............  ..............  ..............         584,150
    South Dakota....................................  ..............  ..............  ..............         729,568
    Fort Worth, Texas...............................      15,355,330      23,459,608      21,273,603  ..............
    Houston, Texas..................................       7,503,520      12,426,209      11,844,738  ..............
    Little Rock, Arkansas...........................       3,868,995       4,933,989       4,703,102       1,685,154
    New Orleans, Louisiana..........................       8,961,110      12,649,543      12,057,626       4,117,360
    Oklahoma City, Oklahoma.........................       4,694,415       6,161,940       5,873,603       2,370,698
    San Antonio, Texas..............................       7,390,955      11,234,597       9,295,150  ..............
    New Mexico......................................  ..............  ..............  ..............       1,276,507
    Texas...........................................  ..............  ..............  ..............      18,465,474
    Des Moines, Iowa................................       5,059,970       6,598,054       6,289,307       2,636,009
    Kansas City, Missouri...........................       6,888,030      10,124,217       9,650,470       4,419,025
    Omaha, Nebraska.................................       2,615,555       3,513,222       3,348,910       1,509,926
    St. Louis, Missouri.............................       5,250,360       7,750,766       7,388,082  ..............
    Idaho...........................................  ..............  ..............  ..............         790,875
    Kansas..........................................  ..............  ..............  ..............       1,964,068
    Montana.........................................  ..............  ..............  ..............         799,469
    Wyoming.........................................  ..............  ..............  ..............         349,048
    Denver, Colorado................................      13,553,495      19,152,407      18,255,790       4,344,651
    Utah............................................  ..............  ..............  ..............       1,525,394
    Honolulu, Hawaii................................       5,246,810       8,137,064       7,756,300       2,395,085
    Los Angeles, California.........................      76,242,830     119,271,894     121,397,995      59,653,051
    Phoenix, Arizona................................       5,440,360       7,500,192       7,149,233       3,891,871
    Sacramento, California..........................       5,417,265       8,687,681       8,281,153  ..............
    San Francisco, California.......................      38,790,070      64,197,064      61,193,051  ..............
    Nevada..........................................  ..............  ..............  ..............       1,611,636
    Anchorage, Alaska...............................       1,107,395       1,520,386       1,449,244  ..............
    Portland, Oregon................................       9,281,635      12,953,101      12,346,978       4,050,157
    Seattle, Washington.............................      10,373,565      15,974,473      15,226,969       7,431,525
                                                     ---------------------------------------------------------------
          Total.....................................     647,672,205   1,015,081,954     957,761,310     346,563,562
    ----------------------------------------------------------------------------------------------------------------

          INCREASED HUD INVENTORY OF SINGLE FAMILY FORECLOSED PROPERTY
        Question. While the FHA Mutual Mortgage Insurance Fund is presently
    in good financial condition, FHA's inventory of single family homes
    that HUD has foreclosed on and taken ownership of has more than doubled
    under your tenure from 24,395 homes in 1996 to over 47,000 homes
    currently, despite the fact that this subcommittee has provided
    significant new tools, including a Single Family Property Disposition
    program as part of the VA/HUD fiscal year 1999 Bill, to move this
    housing into the hands of non-profits and homeowner.
        Answer. HUD has in fact reduced the rate at which it acquires
    foreclosed properties (a 7 percent decline over last fiscal year). This
    drop reflects both an improved economy, enhancements to the
    Department's underwriting standards, and the very positive effect of
    HUD's explosive loss mitigation program, which supports foreclosure
    avoidance actions by borrowers and lenders.
        There is no doubt that poor housing market conditions in the late-
    1990s adversely impacted many homeowners, especially the lower income
    families which FHA serves. The increase in defaults, foreclosures and
    new HUD home acquisitions in the late-1990s was similar to a trend in
    the late-1980s, when HUD's inventory of foreclosed homes increased from
    26,000 in 1985 to 54,000 in 1989. What has differed is the
    effectiveness of HUD's response in addressing both individual and
    community needs.
        New property disposition tools are designed to use private sector
    skills to improve disposition approaches once properties are acquired.
    Remarkably, under HUD's new Management and Marketing (M&M) strategy
    this recent growth in the portfolio due to higher acquisition rates has
    been swiftly addressed, and through August 2000 the Department had
    reduced its inventory to 35,000 homes. A similar reduction in inventory
    in the early 1990s took 2\1/2\ years to accomplish, while the same
    reduction was realized in nearly half the time thanks to HUD reform
    measures.
        While accomplishing this inventory reduction, HUD has been careful
    to meet its fiscal responsibilities and employ Congressional
    authorizations for community reinvestment. The Department invests an
    average of $10,000 per property in holding costs over a 5-month
    period--it's average time in inventory. In the first 6 months of fiscal
    year 2000, HUD recovered 65 percent of the insurance claim paid to
    acquire a property. Through PD Reform measures, recoveries on claims
    paid have increased an average of $4,000 per property over the prior
    12-month period. As the portfolio of HUD-held properties declines, the
    Department has made inroads in disposing of its hard-to-sell
    properties, reducing its homes in inventory for more than 6 months by
    12 percent.
        Question. Why the big increase in foreclosures and why has HUD
    failed to implement effectively the Single family Property Disposition
    program?
        Answer. The surge in foreclosures which was experienced last year
    resulted to a great degree from a loss of home equity in certain parts
    of the country, most notably southern California and the New England
    states. The Department provides a broad safety net to help more
    homeowners avoid foreclosures, even in less than favorable market
    conditions. Further, the Department has employed new tools and new
    approaches to dramatically reduce the inventory of HUD-held homes.
        FHA has taken steps to tighten lax underwriting standards existing
    prior to 1996, most particularly regarding adjustable rate mortgages.
    The Department is now beginning to realize the benefits of this change,
    as default and foreclosure rates decline. Further, the success of FHA's
    loss mitigation program has been proven by the ability this program has
    had in avoiding foreclosures and helping to keep homeowners in their
    homes. During fiscal year 1999, FHA paid over 26,000 loss mitigation
    claims, nearly 2\1/2\ times the number paid in the previous fiscal
    year. Through August 2000, fiscal year to date loss mitigation activity
    has increased by 35 percent, and the number of foreclosure avoidance
    actions is expected to exceed 35,000 for fiscal year 2000. Over 85
    percent of all of FHA loss mitigation actions not only help homeowners
    avoid foreclosure, it enables them to remain in their home while these
    families work to overcome the financial difficulty which caused them to
    default on their mortgage.

                      HOLDING PERIOD FOR HUD-OWNED HOUSING
        Question. Mr. Secretary, it is very troubling that from between
    April 1999 and January 31, 2000, the percentage of properties in HUD's
    single family inventory for 6 months or more has increased from 30
    percent to 41 percent of the inventory, and the percentage of
    properties in the inventory for more than 12 months has increased from
    10 percent to 17 percent.
        This HUD failure is a disaster for neighborhoods. In particular,
    when the Federal government steps in to take over a property from a
    failing landlord, or becomes the owner of a house down the street
    through foreclosure, we expect that through foreclosure, we expect that
    things will start to improve; that repairs will be made, lawns mowed,
    and broken windows fixed. What we don't expect is that the housing
    conditions will deteriorate even further, that property values will
    fall in the neighborhood, and that in some instances the property will
    become a HUD-owned crack house. It is this failure to maintain and
    dispose of its foreclosed inventory in the 1980s on the part of HUD
    that destroyed a number of neighborhoods throughout the country--a
    number of these neighborhoods remain distressed even today. I also know
    that you saw examples of these failures at the field hearing in
    Baltimore on Monday.
        What is the average cost to the Federal government to hold a
    property for 6 months? What is the average cost to the Federal
    government to hold a property for a year? What was the total in holding
    cost for each of fiscal years 1997, 1998, 1999 and the first half of
    2000?
        What is the average loss in value to a house that is held by HUD
    foreclosed properties to local jurisdictions. While it sounds good, it
    looks like HUD is merely clearing its books while passing on troubled
    properties to jurisdictions. Why can't HUD take care of its own
    responsibilities and problems?
        Answer. As stated above, the time a property is held in HUD's
    inventory has decreased by 13 percent over the past 12 months. Of HUD's
    current inventory, 49 percent is currently under a sales contract. In
    May 2000, HUD acquired 5,164 properties and placed 10,481 under a sales
    contract. The appraised value of HUD homes has increased by 12 percent
    from the previous year, with a net recovery rate increase of 4.6
    percent. The value the real estate market places on HUD homes is the
    best indicator of overall improvements in the condition of HUD homes.
    These homes are often in poor condition when HUD acquires them, but
    aggressive maintenance and repair efforts under PD Reform are helping
    to swiftly transform the tragedy of foreclosure into the opportunity of
    homeownership.
        To accomplish this objective FHA invests an average of $10,267 per
    property in holding costs over a 5-month period--it's average time in
    inventory. FHA currently recovers 65 percent of the insurance claim
    paid to acquire a property. Through PD Reform measures, recoveries on
    claims paid have increased an average of $4,000 per property over the
    prior 12-month period.
        Before FHA dramatically reduces prices on its hard-to-sell
    properties, it wants to offer a partnership with local governments in
    transforming a house acquired from the tragedy of foreclosure into a
    home and a community asset. Local governments are better positioned to
    ensure that communities not only find a new neighbor to occupy a vacant
    home, but a good neighbor. This can mean specific uses for homes such
    as community centers, or police sub-stations, or rehabilitated
    properties consistent with local standards. If local governments are
    not interested in purchasing a house because of its poor condition, FHA
    will also consider demolishing the home, and offer the land to local
    governments, for use as parkland or to meet similar community needs.
    FHA estimates that sales to local governments will make of 1 percent of
    its overall sales. An estimate of 10 percent of HUD home sales will
    fall into the Good Neighbor program, 1 percent of which is estimated to
    go to local governments.

                      FHA SINGLE FAMILY FORECLOSURE RATES
        Question. Mr. Secretary, the percent of FHA loans in foreclosure
    has increased from 1.64 percent in 1996 to 2.2 percent in 1999. FHA's
    loan delinquencies has also increased from 8.05 percent in 1996 to 8.57
    percent in 1999, whereas the delinquency rate for conventional loans is
    some 2.63 percent. Why are these delinquency and default rates so high?
    What is HUD doing to lower them?
        Answer. The FHA claim rate is quite lower than the 2.2 that is
    often cited. The rate has remained relatively unchanged at
    approximately 1.1 percent over the last 2 years, according to
    information from the Mortgage Bankers Association.
        The figure of 8.57 percent rate reflects a 30-day rate. Most
    independent industry analysts focus primarily on 90-day defaults in
    evaluating performance. Independent analysts of FHA activity focus on
    the more serious 90-day default figures, which indicate a default rate
    of between 3 and 3.5 percent over the last several years. FHA's default
    rate has been steadily declining during this entire fiscal year--as of
    April 30, the default rate stood at 3.3 percent. That equals a 4
    percent reduction from 1 year ago, when the rate stood at 3.46 percent.
        Question. In addition, I have a huge concern that we are in a
    policy mode of putting families in homes without regard to whether they
    can afford to maintain the home. Isn't it likely that we are going to
    see a lot of families lose their homes if there is a downturn in the
    economy, and that this will destroy the credit of these families? What
    policies does HUD have in place to address this potential set of
    problems?
        Answer. HUD seriously considers the likelihood of a person's
    ability to maintain a home when someone applies for an FHA loan. The
    criteria are fairly straightforward but serve as qualifications or
    indicators. They are: having the income HUD believes to be necessary to
    support the mortgage payment and pay other obligations; having an
    acceptable (if not perfect) credit history that indicates a willingness
    to repay obligations. A downpayment of at least 3 percent of the sales
    price is also considered a sign of the ability to maintain the
    household.
        It is difficult to speculate about a possible economic downturn,
    but there are loss mitigation tools that can assist a mortgage holder
    who may have difficulty making payments. These tools are designed for
    lenders to use to maintain ownership when families have a change of
    circumstance. There are three tools that are particularly helpful for a
    family that is trying to avoid foreclosure while retaining possession
    of their home. They are:
      --Special forbearance.--Written repayment agreement between a lender
            and a mortgagor which contains a plan to reinstate a loan that
            has been delinquent--FHA reduced its minimum delinquency
            requirement from 4 months to 90 days to make this option more
            attractive for lenders. This option provides the family the
            chance to repay the money owed while allowing the borrower to
            recover from the cause of the default.
      --Loan modification.--A permanent change in one or more of the terms
            of a borrower's loan which, if made, allows the loan to be
            reinstated and results in payment the borrower can afford.
            Modifications may include a change in the interest rate;
            capitalization of delinquent principal, interest or escrow
            items; extension of time available to repay the loan; and/or
            re-amortization of the balance due.
      --Partial claim.--A lender will advance funds on behalf of a borrower
            in an amount necessary to reinstate a delinquent loan(not to
            exceed the equivalent of 12 months PITI). The borrower, upon
            acceptance of the advance, will execute a promissory note and
            subordinate mortgage payable to HUD.
        There are two options for the family that is unable to use the
    three tools described above, but who is looking for an option less
    harmful to its credit rating than a foreclosure. The first of these is
    the pre-foreclosure sale, which allows a borrower in default to sell
    his or her home and use the sale proceeds to satisfy the mortgage debt
    even if the proceeds are less than the amount owed. This option is
    appropriate for borrowers whose financial situation requires that they
    sell their home, but who are unable to sell without FHA relief, because
    the value of the property has declined to less than the amount owed on
    the mortgage.
        Borrowers must make a commitment to actively market their property
    for a period of 4-to-6 months, during which time the lender delays
    foreclosure action. Owner-occupant borrowers who successfully sell to a
    third party within the required time, are paid a cash consideration up
    to $1,000. Lenders also receive a $1,000 incentive for successfully
    avoiding the foreclosure. Since the pre-foreclosure sale was introduced
    in 1994, it has helped thousands of borrowers in default avoid
    foreclosure and make a smooth transition to more affordable housing.
        If the property does not sell, borrowers are encouraged to convey
    the property to FHA through a deed-in-lieu of foreclosure. Deed-in-lieu
    of foreclosure (DIL) is a disposition option in which a borrower
    voluntarily deeds collateral property to HUD in exchange for a release
    from all obligations under the mortgage. Though this option results in
    the borrower losing the property, it is usually preferable to
    foreclosure because the borrower mitigates the cost and emotional
    trauma of foreclosure and is eligible to receive borrower's
    consideration of $500. Also, a DIL is generally less damaging than
    foreclosure to a borrower's ability to obtain credit in the future. DIL
    is preferred by HUD because it avoids the time and expense of a legal
    foreclosure action, and due to the cooperative nature of the
    transaction, the property is generally in better physical condition at
    acquisition.

                                   FHA STAFF
        Question. Please identify the HUD staff assigned to the FHA single
    family and multifamily housing programs by program, function and salary
    for fiscal years 1992 through 2000. Please identify all contracts,
    including individual contractors, for activities under the FHA single
    family and multifamily housing programs by program, activity and cost
    for fiscal years 1992 through 2000. Please identify all contracts that
    were not competitively bid during this period.
        Answer. The Department has assembled payroll and contract data in
    response to this request which will be transmitted to the Committee.

                                  HUD STAFFING
        Question. Mr. Secretary, HUD has a very old and expensive workforce
    which has gone from 12,000 employee in 1995 to 9,100 today. In 1995,
    the average cost per FTE was $58,000. The cost per FTE then rose to
    $78,000 by the end of 2000.
        Mr. Secretary, I think you know how unhappy I am with HUD's lack of
    capacity to administer its programs. I also believe there is a
    tremendous need to ensure that staff capacity is tied to program needs.
    Please identify the specific components which make up the growth in FTE
    costs in each fiscal year from 1995 through fiscal year 2000.
        Answer. Like most Federal agencies, HUD has undergone increased FTE
    costs due, in part, to natural changes in the workforce. The Agency has
    incurred increased costs as a result of the following responsibilities
    and obligations as a Federal employer:
    Employee Benefits
        Cost of Living Adjustments.

                                                                     Percent
    1995..............................................................    2
    1996..............................................................    2
    1997..............................................................   2.3
    1998..............................................................   2.3
    1999..............................................................   3.1
    2000..............................................................   3.8

        Spending for health benefits continues to grow.
        Increasing numbers of HUD's staff are covered under the Federal
    Employees Retirement System (FERS). These costs to the Agency are more
    significant due to the 1 percent agency contribution and the government
    matching funds for employee contributions to the Thrift Savings Plan
    (TSP).
        Employee Transit Subsidy.
        Quality Step Increases for employee recognition.
        In general, employees are working longer.
    Legislative Mandate for Office of Multifamily Housing Assistance
            Restructuring (OMHAR)
        As of May 2000, OMHAR has 82 staff onboard. Pay is Administratively
    Determined (AD) at a rate that is significantly higher than the General
    Schedule.
        Question. What does HUD plan to do to address the growing costs of
    FTE's at HUD as well as the need to develop a young infrastructure of
    staff that will grow with HUD's programs?
        Answer. We have established and implemented a Departmental
    Succession Plan which focuses heavily on targeting critical position
    needs and filling those positions with available qualified staff from
    within, utilizing in particular, staff in developmental programs. We
    are encouraging managers and supervisors to identify more positions for
    developmental opportunities so that aspiring employees, demonstrating a
    potential for more challenging assignments, may advance to address the
    Department's future critical needs. We are using more targeted
    recruitment for external hiring. We also are encouraging managers to
    examine and reengineer positions to capture the most essential job
    elements and maximize the performance of the work at the lowest grade
    levels. We are continuing to support the Agency's ability to exercise
    the Voluntary Early Out Retirement Authority, as well as, reconsidering
    the benefits of another Buyout Program.
        To ensure that the appropriate talent exists to carry out HUD's
    revitalized mission, well into the future, executives, managers, and
    supervisors have examined the human potential of their organizations.
    We are actively developing an increased capacity by utilizing several
    key programs and staffing activities. A majority of the candidates for
    these programs represent a developing younger infrastructure of staff
    within the Department.
        For entry level positions, the Welfare to Work Program has yielded
    over 200 hires (Worker Trainees). Immediately, these hires were
    assigned to fill much-needed clerical support positions and placed in
    an extensive training and development program. By providing high
    quality training and skills development opportunities, we expect these
    employees will build their skills and be committed to working for the
    Department well into the 21st century.
        Also, to ensure a steady recruitment source of candidates for
    worker trainee positions, HUD supports a strong Work Experience
    Program. Under this program, candidates volunteer to work in the
    Department to gain experience in various clerical and office management
    functions. These volunteer opportunities prepare them to compete for
    entry level positions. This program has attracted a younger cadre of
    interested candidates, many of whom have subsequently joined the HUD
    staff as permanent hires.
        The Bridge Positions Program provides advance opportunities for
    employees who have completed the Worker Trainee Development program.
    Through merit staffing, this program offers career progression from GS-
    4 into one-grade interval positions at GS-5/6/7. Typical positions
    include office automation assistants; management assistants; program
    assistants; and personnel assistants.
        The Professional Development Institute for HUD Assistants provides
    opportunities for HUD Assistants and other staff in developmental
    positions to gain technical skills for advancement into non-clerical
    technical positions. Established in 1997, this program has been both
    successful and rewarding for 1,215 employees who were committed and
    motivated for advancement (815 Assistants; 200 Upward Mobility
    candidates; and 200 Worker Trainees).
        The Upward Mobility Program provides opportunities for existing
    staff with clerical and technical one-grade interval positions to move
    into more responsible two-grade interval positions. Since 1998, HUD has
    filled 209 upward mobility positions and 73 candidates have graduated
    the program into targeted positions.
        The Leadership Development Program for executives, managers and
    supervisors strengthens their ability to lead and manage in an agency
    undergoing dynamic and constant change as a result of HUD 2020 reforms.
    This program also contains a module for aspiring managers and
    supervisors. It allows eligible employees, with leadership potential,
    to develop core competencies and team building skills.
        The new Senior Executive Service Candidacy Program will prepare a
    cadre of managers for executive level assignment in HUD's most
    responsible career positions.
        The current Staffing 2000 Initiative is a major recruitment effort
    to attract highly qualified candidates for permanent employment with
    the Department. Approximately 700 full time positions, in a wide range
    of administrative and professional series occupations, will be filled
    throughout the Department. The recruitment outreach was very broad, and
    it is likely that these employment opportunities will draw more staff
    for a younger infrastructure.
        Finally, as part of succession planning, using the above training
    programs, HUD is developing career paths for qualified employees to
    move from entry level positions into responsible specialist and
    leadership positions. These career development opportunities will be
    very attractive for workers who are far from retirement and seeking
    both permanence and longevity in a Federal career.
        Question. Also, for the record, please provide a 5 year comparison
    of staffing by GS level, salary, office and job responsibility.
        Answer. An attachment has been provided that provides a 5-year
    comparison of staffing by GS level, salary, office and job
    responsibility.

                     MCKINNEY HOMELESS ASSISTANCE PROGRAMS
        Question. Mr. Secretary, there are a lot of issues that we need to
    look at in the McKinney Homeless Assistance programs over the next few
    months. I have serious concerns over how well continuums of care work
    as well as concerns about HUD's oversight of the homeless assistance
    programs. A number of homeless assistance programs also face serious
    funding problems.
        As you know, HUD funds local McKinney Homeless Assistance programs
    through a block grant funding formula allocation that is not authorized
    under the Supportive Housing program or the Shelter Plus Care program.
    This approach depends on local convenors to identify local homeless
    priorities through a continuum of care but the funding formula itself
    uses no indicators of need that are associated with homeless issues and
    concerns. How does HUD justify this approach outside the argument that
    the formula is already used for Emergency Shelter Block Grant program?
        Answer. HUD does not fund McKinney Homeless Assistance programs
    through a block grant formula, but rather a competition which uses the
    Emergency Shelter Grant formula as the basis for determining relative
    need to ensure a more equitable distribution of dollars to those
    communities which successfully compete for funding. The actual
    determination of who receives funding is based on various selection
    criteria mandated by Congress, including: capacity of the applicant,
    the extent of supplemental resources provided by the applicant, the
    cost-effectiveness of the project, the extent to which the applicant
    has demonstrated coordination with other entities, and the need for the
    project.
        You raised a concern that the formula used to assign need uses no
    indicators associated with homelessness. There is no precise measure of
    homeless need because homeless persons are difficult to regularly
    enumerate. As such, HUD looked to Congress for direction on how best to
    reflect need in selecting projects. The McKinney Act requires that the
    allocation of Emergency Shelter Grant Program (ESG) funds shall be made
    using the Community Development Block Grant (CDBG) formula factors. The
    factors are population, poverty, housing overcrowding, growth lag, and
    age of housing. Given that Congress directed HUD to use these factors
    in allocating ESG funds for homeless persons, the Department chose to
    follow this lead and use these same factors in assigning need for the
    HUD's competitive McKinney programs.
        Question. What oversight procedures does HUD have in place to
    ensure that the continuum of care approach provides appropriate
    decisionmaking?
        Answer. Several components of the continuum of care process
    facilitate appropriate decision making at the community level. First,
    each community must include, in their funding application, a list of
    the names and types of organizations that were part of their planning
    process. This list includes the populations served by each organization
    and the level of participation of each entity. Second, communities must
    provide a description of the process and rationale used for
    establishing the community's priorities. Finally, a description must be
    included that shows how the project selection process was fair and gave
    equal consideration to projects proposed by nonprofit organizations.
    These components are evaluated, as part of HUD's review of
    applications, and communities that do not address these components may
    not receive funding.
        Question. What oversight procedures does HUD have in place to
    ensure that funds are being used appropriately?
        Answer. The Department does a number of things to ensure that funds
    are being used appropriately. First, grantees receive funds through an
    automated voice response letter of credit system. The system contains
    checks and balances so that payments are made only after certain
    requirements are satisfied. Each grantee must submit an Annual
    Performance Report (APR) to HUD. If the APR is not submitted after 110
    days, the letter of credit system is edited so that grantees may not
    draw down funds. The APR is reviewed at the field office and
    Headquarters levels.
        Both on and off-site monitoring is a critical part of grant
    oversight. Field office staff perform the monitoring, using written
    standards and procedures. Results of monitoring are issued in writing
    to the grantee, and the monitoring process includes follow-up.
        Expert technical assistance is available to grantees that may be
    having specific problems in implementing their projects. The Department
    oversees the provision of technical assistance by subcontractors.
        Grantees applying for renewal funding must meet threshold
    eligibility and capacity standards. Monitoring results, audits, general
    oversight and other information are taken into account in determining
    whether a renewal grantee meets these threshold standards.
        Question. Please identify for each of fiscal years 1998, 1999 and
    2000 all HUD staff (by name, title and responsibility) that are
    responsible for the oversight of McKinney Homeless Assistance funds in
    each HUD region and at headquarters.
        Answer. The following is the listing of Headquarters employees and
    the geographic areas for which they are responsible in administering
    HUD's homeless assistance programs.
        Attached is ``Report 1'' which details the staffing for each CPD
    Field Office with responsibility for McKinney Homeless Assistance
    programs. There are 233 CPD staff in Field Offices working on homeless
    assistance programs. Their titles are provided. However, it is
    important to note that CPD Field Office staff are generalists. CPD
    staffers that work on McKinney Act programs also have numerous other
    responsibilities. While CPD Field Office staff are not dedicated solely
    to McKinney Homeless Assistance programs, each of the persons listed
    below has considerable experience in these programs and maintains
    personal responsibility for various grants.

                                      SNAPs HEADQUARTERS STAFF AND RESPONSIBILITIES
    ----------------------------------------------------------------------------------------------------------------
                                                                                     Fiscal years--
                Region/State                Current (fiscal year   -------------------------------------------------
                                                   2000)                      1999                     1998
    ----------------------------------------------------------------------------------------------------------------
    New England:
        MA.............................  Robin Raysor.............  Robin Raysor...........  Robin Raysor.
        RI.............................  Betty Nola...............  Betty Nola.............  Betty Nola.
        ME.............................  Gloria Montgomery........  Robin Raysor...........  Robin Raysor.
        VT.............................  Gloria Montgomery........  Robin Raysor...........  Robin Raysor.
        NH.............................  Gloria Montgomery........  Robin Raysor...........  Robin Raysor.
        CT.............................  Marian Jones.............  Marian Jones...........  Marian Jones.
    New York, New Jersey:
        Buffalo, NY....................  Marian Jones.............  Marian Jones...........  Marian Jones.
        NYC............................  Allison Manning..........  Michelle Smith.........  Michelle Smith.
        NJ.............................  Tonya Johnson............  Tonya Johnson..........  Susana Limon.
    Mid-Atlantic.......................
        Washington, DC.................  Robin Raysor.............  Robin Raysor...........  Robin Raysor.
        Alexandria; Arlington, Fairfax,  Tonya Johnson............  Tonya Johnson..........  Susana Limon.
         Prince George's, Montgomery,    Robin Raysor.............  Robin Raysor...........  Robin Raysor.
         Loudoun, Prince William                                                             Mary Douglas.
         Counties, Southern VA.
        MD.............................  Alma Thomas..............  Alma Thomas............  Alma Thomas.
        PA, DE, WV.....................  Rebecca Wiley............  Rebecca Wiley..........  Rebecca Wiley.
    Southeast:
        MS.............................  Vanessa Barnard..........  Vanessa Barnard........  Alma Thomas.
        SC.............................  Vanessa Barnard..........  Vanessa Barnard........  Alma Thomas.
        FL.............................  Alma Thomas..............  Alma Thomas............  Alma Thomas.
        NC.............................  Kathy Burruss............  Kathy Burruss..........  Kathy Burruss.
        AL.............................  Kathy Burruss............  Kathy Burruss..........  Kathy Burruss.
        GA.............................  Kathy Burruss............  Kathy Burruss..........  Kathy Burruss.
        KY.............................  Gloria Montgomery........  G. Montgomery..........  G. Montgomery.
        TN.............................  Gloria Montgomery........  G. Montgomery..........  G. Montgomery.
    Caribbean: Puerto Rico, VI.........  Susana Limon.............  Susana Limon...........  Michelle Smith.
    Midwest:
        IL.............................  Mike Roanhouse...........  Mike Roanhouse.........  Mike Roanhouse.
        IN.............................  Susana Limon.............  Susana Limon...........  Susana Limon.
        OH.............................  Delores Randall..........  Delores Randall........  Delores Randall.
        MI.............................  Elaine Braverman.........  Elaine Braverman.......  Mike Roanhouse.
        WI.............................  Mike Roanhouse...........  Mike Roanhouse.........  Mike Roanhouse.
        MN.............................  Larry Blume..............  Larry Blume............  Alexa Mitrakos.
    Southwest:
        Southern TX (San Antonio)......  Vanessa Barnard..........  Mary Douglas...........  Mary Douglas.
        Northern TX (Fort Worth).......  Susana Limon.............  Mary Douglas...........  Mary Douglas.
        OK.............................  Susana Limon.............  Mary Douglas...........  Marv Douglas.
        NM.............................  Susana Limon.............  Mary Douglas...........  Mary Douglas.
        AR.............................  Delores Randall..........  Betty Nola.............  Betty Nola.
        LA.............................  Elaine Braverman.........  Betty Nola.............  Betty Nola.
    Great Plains:
        KS.............................  Marian Jones.............  Marian Jones...........  Marian Jones.
        NE.............................  Marian Jones.............  Marian Jones...........  Marian Jones.
        IA.............................  Marian Jones.............  Marian Jones...........  Marian Jones.
        MO.............................  Elaine Braverman.........  Elaine Braverman.......  Marian Jones.
    Rocky Mountain:
        Denver, CO.....................  Polly Cooper.............  Polly Cooper...........  Polly Cooper.
        CO.............................  Polly Cooper.............  Alexa Mitrakos.........  Alexa Mitrakos.
        MT.............................  Polly Cooper.............  Alexa Mitrakos.........  Alexa Mitrakos.
        ND, SD.........................  Polly Cooper.............  Alexa Mitrakos.........  Alexa Mitrakos.
        UT, WY.........................  Polly Cooper.............  Alexa Mitrakos.........  Alexa Mitrakos.
    Pacific, Hawaii:
        Northern CA, HI................  Allison Manning..........  Allison Manning........  Allison Manning.
        Southern CA....................  Beverly Moore............  Beverly Moore..........  Beverly Moore.
        AZ, NV.........................  Susana Limon.............  Susana Limon...........  Susana Limon.
    Northwest, Alaska:
        WA, AK.........................  Larry Blume..............  Larry Blume............  Larry Blume.
        OR, ID.........................  Mildred Bush.............  Mildred Bush...........  Mildred Bush.
    ----------------------------------------------------------------------------------------------------------------

                         REPORT 1.--MCKINNEY HOMELESS ASSISTANCE INFORMATION FOR SENATE REQUEST
    ----------------------------------------------------------------------------------------------------------------
              Field Office                     Continuum of Care Staff            Number Fiscal Year 1998 Monitoring
    ----------------------------------------------------------------------------------------------------------------
    Alabama........................  Beverly Gosnell, Public Trust Officer.....  Huntsville/Madison County.
                                     Ed Coberly, Public Trust Officer..........  New Futures.
                                     Charles Franklin, Public Trust Officer....  City of Huntsville.
                                     June Franklin, Public Trust Officer.......
                                     Steve Hand, Public Trust Officer..........
                                     Dale Richards, Public Trust Officer.......
                                     David Roarke, Public Trust Officer........
    Alaska.........................  Andrew Smith, Senior CPD Rep..............  None.
                                     Kim Davis, CPD Rep........................
    Arkansas.......................  Anne Golnik, Director.....................  None.
                                     Charles Blevins, Senior CPD Rep...........
                                     Danny Carter, Senior CPD Rep..............
                                     Freida Nunez, CPD Rep.....................
                                     Rhonda Shannon, CPD Rep...................
    Buffalo........................  James Bates, CPD Rep......................  None.
                                     Tom Perl, CPD Rep.........................
                                     Barbara Barksdale, CPD Rep................
                                     Gary Kerr, Financial Analyst..............
                                     Ken Naples, Financial Analyst.............
                                     Linda Moore, CPD Rep......................
                                     Robert Guadagno, CPD Rep..................
                                     Cheryl Sullivan, CPD Rep..................
                                     Nancy A. Peacock..........................
                                     Alex Vilardo, CPD Rep.....................
                                     Nancy Lesakowski, CPD Rep.................
                                     Rosemarie Canestro, CPD Rep...............
                                     Eilene Krasselt, CPD Rep..................
                                     Peggy Meinl, CPD Rep......................
                                     Jan Galena, CPD Rep.......................
    California.....................  Millie D. Dusha, Senior CPD Rep...........
                                     Mary Bandiera, CPD Rep....................  Center for Employment Training.
                                     Rafael Cedillos, Senior CPD Rep...........  Emergency Housing Consortium.
                                     Maria Cremer, Program Manager.............  Phoenix Programs, Inc.
                                     Michael Dawe, CPD Rep.....................  Resources for Community
                                                                                  Development.
                                     John Enos, CPD Rep........................  Transitional Living and Community
                                                                                  Support.
                                     Lou Kislin, Senior CPD Rep................  ...................................
                                     Evelyn Lam, Financial Analyst.............
                                     Dan Louie, Financial Analyst..............
                                     Marty Mitchell, Program Manager...........
                                     Winston Moy, CPD Rep......................
                                     Lorraine Perez, Financial Analyst.........
                                     Sandy Peters, Senior CPD Rep..............
                                     Jimmy Prater, Deputy Director.............
                                     Lillian Pyne, CPD Rep.....................
                                     Ron Pagusa, Financial Analyst.............
                                     Steven B. Sachs, Director.................
                                     Yvonne Swift, Senior CPD Rep..............
                                     Cathy Thrash, CPD Rep.....................
                                     Angelo Tom, Program Support Director......
                                     Larry Wuerstle, Senior CPD Rep............
    Caribbean......................  Michele K. Smith, Senior CPD Rep..........  None.
                                     Elinson Acosta, Senior CPD Rep............
                                     Frances Arroyo, Senior CPD Rep............
                                     Maria Guzman, Senior CPD Rep..............
                                     Jose R. Rivera, Program Manager...........
                                     Carmen R. Cabrera, Director...............
    Colorado.......................  Edward Atencio, CPD Rep...................  None.
                                     Karen Clark, CPD Rep......................
                                     Ramona Elizalde, CPD Rep..................
                                     Susan Hermanson, CPD Rep..................
                                     Dave Jacops, CPD Rep......................
                                     Jade Santoro, CPD Rep.....................
                                     Loretta Tinkum, CPD Rep...................
                                     Mary Ann Geissel, CPD Rep.................
                                     Lyle Konkol, CPD Rep......................
                                     Judy Padgett, CPD Rep.....................
                                     Jade Santoro, Program Manager.............
                                     Charles Kreiman, Program Manager..........
    Connecticut....................  Mary Ellen Morgan, CPD Director...........  None.
                                     Caroline Carlson, Program Manager.........
                                     John Carella, CPD Rep.....................
                                     Gary Reisine, CPD Rep.....................
                                     Peter Blomstrom, CPD Rep..................
                                     Karen Davis, CPD Rep......................
    Florida........................  Ann Chavis, Program Manager...............  None.
                                     Rafael Portuondo, CPD Rep.................
                                     Jack D. Johnson, Director.................
    Georgia........................  John Perry, CPD Director..................  Cobb Family Resources, Inc.
                                     Russell Douglas, Program Manager..........  Metro Atlanta Task: Southside
                                                                                  Healthcare.
                                     Earl Mecham, CPD Rep......................  Metro Atlanta Task: Housing
                                                                                  Initiatives.
                                     Alma Cooper, CPD Rep......................  Alternate Life Paths Program, Inc.
                                     Mary Presley, Senior CPD Rep..............  Our Common Welfare, Inc.
                                     Stella Taylor, CPD Rep....................  Metro Atlanta Task: Fulton Atlanta
                                                                                  Comm.
                                     Hak-Keun Chang, CPD Rep...................  Calvary Refuge, Inc.
                                     Charles Greenfield, CPD Rep...............  House of TIME.
    Hawaii.........................  Mark A.Chandler, Senior CPD Rep...........  None.
                                     Richard L. Knight, CPD Rep................
                                     Marsha E. Ito, CPD Rep....................
                                     Robert Zurowski, CPD Rep..................
    Illinois.......................  Ray Willis, Program Manager...............  South Side Office of Concern.
                                     Perry Vietti, Program Manager.............  Human Service Center.
                                     Darlene O'Keefe, CPD Rep..................  City of Urbana.
                                     Ray Canchola, CPD Rep.....................  CEFS.
                                     Valton Nunn, CPD Rep......................
                                     Roger McMurray, CPD Rep...................
                                     Wivina Stremel, CPD Rep...................
                                     Winston McGill, CPD Rep...................
                                     Darrel Bugajsky, CPD Rep..................
                                     Belinda Twitty, CPD Rep...................
                                     City of Rockford (SHP)....................
                                     City of Rockford (SPC)....................
                                     Community Mental Health...................
                                     Peoria YMCA...............................
                                     Crittenton Care...........................
                                     Julian House..............................
    Indiana........................  Robert F. Pofenberger, CPD Director.......  City of Gary/The Ark.
                                     Dolores Koziol, Program Manager...........
                                     Jeanne Meggs, Program Manager.............
                                     John Dorgan, Senior CPD Rep...............
                                     Karen Bishop, Financial Analyst...........
                                     Brent Isaacs, CPD Rep.....................
                                     Patrick Phillips, CPD Rep.................
    Jacksonville...................  James N. Nichol, Director.................  None.
                                     Linda Dresdner, Public Trust Officer......
                                     Duane Gilliland, Public Trust Officer.....
                                     Sybil Grissett, Public Trust Officer......
                                     Lance Folsom, Public Trust Officer........
                                     Phil Tallon, Public Trust Officer.........
                                     Kathy White, Public Trust Officer.........
                                     Sandra Huey, Public Trust Officer.........
                                     Larry Gordon, Program Manager.............
                                     Gary Cuasey, Program Manager..............
                                     Marion Guilford, Public Trust Officer.....
                                     Susan McGeHee, Public Trust Officer.......
                                     Lugia Milanese, Public Trust Officer......
                                     Dan Shargas, Public Trust Officer.........
                                     Linda Shively, Public Trust Officer.......
                                     Debra Dye, Public Trust Officer...........
                                     Elizabeth Dixon, Public Trust Officer.....
    Kansas.........................  William Boyd, Director....................  None.
                                     Tom Corwin, Financial Analyst.............
    Kentucky.......................  Ben A. Cook, Director.....................  Commonwealth of KY (KY Housing
                                                                                  Corp.).
                                     Barbara Cottrell, Senior CPD Rep..........
                                     Carol C. Beeler, CPD Rep..................
                                     Louise D. Thompson, CPD Rep...............
    Los Angeles....................  William K. Barth, Director................  None.
                                     Sara Hunley, Senior CPD Rep...............
                                     Jana Bickel, Senior CPD Rep...............
                                     Juanita Villalobos, Public Trust..........
                                     Harold Butler, CPD Rep....................
                                     Sandra Taylor, CPD Rep....................
                                     Wayne Itoga, Act., Program Manager........
                                     Faye Barnes, CPD Rep......................
                                     Salim Rahemtulla, CPD Rep.................
                                     Chin Woo Choi, Program Manager............
                                     Jean Prohoroff, CPD Rep...................
                                     Joseph Lisante, CPD Rep...................
                                     John Cook, Senior CPD Rep.................
    Louisiana......................  Gregory J. Hamilton, Director.............  None.
    Maryland.......................  Joseph O'Connor, Director.................  None.
                                     Ann Schenning, CPD Rep....................
                                     Bob Cummings, CPD Rep.....................
    Massachusetts..................  Richard L. Hatin, Program Manager.........  None.
                                     Katherine Baumgardner, CPD Rep............
                                     Nicholas Kallan, Financial Analyst........
                                     James Joyce, Rehab. Mgmt. Spec............
                                     Mary Ann Martel, CPD Rep..................
                                     Edwin Gleba, Reloc. Acq. Spec.............
                                     Darlene Xintras, Program Support Spec.....
    Michigan.......................  R. Perry, Director........................  None.
                                     M. Sykes, CPD Rep.........................
                                     K. Kiihr, CPD Rep.........................
                                     C. Patrick, CPD Rep.......................
                                     G. Carter, CPD Rep........................
                                     J. Roney, CPD Rep.........................
    Minnesota......................  Thomas Koon, Program Manager..............  Gardner, Martin Hotel.
                                     Doug Olson, CPD Rep.......................  Mary Hall.
                                     Dennis Williams, CPD Rep..................  YWCA.
                                     Mary Burbank, CPD Rep.....................  The Heritage.
                                     John Swanson, Program Manager.............  Human Dvlpt. Ct. and Range Mental
                                                                                  Hlth.
                                     Cindy Behnke, Senior CPD Rep..............  Churches United in Ministry.
                                     Maria Paulson, Senior CPD Rep.............  Life Housing Harbor House.
                                     Ruth Drolsum, CPD Rep.....................  St. Louis County.
                                     Gerald Patiuk, CPD Rep....................  Range Transitional Housing.
                                                                                 American Indian Housing
                                                                                  Organization.
                                                                                 Women's Transitional Housing of
                                                                                  Duluth.
                                                                                 Arrowhead Economic Opportunity
                                                                                  Agency.
                                                                                 Violence Intervention Project.
    Mississippi....................  Donna Keshel, CPD Rep.....................  None.
                                     Linda F. Tynes, Senior CPD Rep............
    Nebraska.......................  Greg A. Bevirt, Director..................  None.
    New Jersey.....................  Kathleen A. Naymola, Director.............
                                     Richard Kotuski, Program Manager..........  Bayonne.
                                     Nelson Diamond, CPD Rep...................  Newark.
                                     Elizabeth Williams, CPD Rep...............
                                     Pa-Kota Cobb, Program Assistant...........
    New Mexico.....................  Thomas Walker, Program Manager............  Town of Taos Community Against
                                                                                  Violence.
                                                                                 St. Elizabeth's Shelter.
                                                                                 Mesilla Valley Homeless Shelter.
                                                                                 Albuquerque Health Care for the
                                                                                  Homeless.
                                                                                 Catholic Social Services.
    New York City..................  Kathy J. Mullins, Director................
                                     Michael Litvin, CPD Rep...................  Westchester County.
                                     Bob Biegen, CPD Rep.......................  Mount Vernon.
                                     Lois De Poalo, CPD Rep....................  Rockland County.
                                     Seth Margolies, CPD Rep...................  Yonkers.
                                     Melissa Lockley, CPD Rep..................  Islip.
                                     Kevin Crean, Program Manager..............  Nassua County.
                                     Stefanie Chait, CPD Rep...................  Suffolk County.
                                     Vincent Hom, CPD Rep......................
                                     Barbara Maultsby, CPD Rep.................
                                     Robert Cooper, CPD Rep....................
                                     Nicholas Andreo, CPD Rep..................
    North Carolina.................  Libby G. Stanley, Program Coordinator.....  Hope Haven.
                                     Gary A. Dimmick, Program Manager..........  City of Charlotte.
                                     Charles T. Ferebee, CPD Director..........  Interlace.
    Ohio...........................  Brenda Pinkston, CPD Rep..................  Springfield.
                                     Vicki Miller, Public Trust Officer........  Jefferson County Community (SRO).
                                     Johanna Ryan, CPD Rep.....................  Beatitude House.
                                     David Fekete, Program Manager.............  Youngstown Area Community Action
                                                                                  Coun.
                                     Kaye Smith, CPD Rep.......................  Potential Development Programs,
                                                                                  Inc.
                                     Rich Hendershot, Program Manager..........  The Greater Youngstown Point
                                     Cheryl Andrews, CPD Rep...................  YWCA of Youngstown.
                                     Rob Milburn, Public Trust Officer.........  City of Cincinnati.
                                     Larry Goodwin, Public Trust Officer.......  Jefferson County Community (SHP).
                                     Jorgelle Lawson, Program Manager..........  Metropolitan Residential Services.
    Oklahoma.......................  Ivan Wisley, CPD Rep......................  None.
                                     Richard McConahay, CPD Rep................
                                     Will Williamson, Senior CPD Rep...........
    Oregon.........................  Doug Carlson, Director....................
                                     Jan Olson, Financial Analyst..............  Multnomah County.
    Philadelphia...................  Joyce Gaskins, Director...................  Project HOME.
                                     Louis Williams, Deputy Director...........  Drueding Center/Project Rainbow.
                                     Gerard Lester, Program Manager............  Impact Services Corporation.
                                     Mary Anne Bellacima, CPD Rep..............  Penn Foundation.
                                     Mary Lou DeNardo, CPD Rep.................  Travelers Aid Society.
                                     James Keegan, CPD Rep.....................  Valley Housing Development Corp.
                                     Patrick Mulligan, CPD Rep.................  Lehigh County Housing Authority.
                                     Michelle Patterson, CPD Rep...............
                                     Don Polce, CPD Rep........................
                                     Susan Shackelford, CPD Rep................
                                     John Thompson, CPD Rep....................
                                     Christopher McDonnell, Financial Analyst..
                                     Francis Zane, Financial Analyst...........
    Pittsburgh.....................  Lynn Daniels, CPD Director................  None.
                                     James Getsy, Program Manager..............
                                     John Tolbert, Program Manager.............
                                     William Kauffman, Senior CPD Rep..........
                                     Pamela Coll, Senior Financial Ana.........
                                     Roger Allen, CPD Rep......................
                                     John Brennan, CPD Rep.....................
                                     Carl Bryer, CPD Rep.......................
                                     Raymond Hluska, CPD Rep...................
                                     Thom Sumpter, CPD Rep.....................
    San Antonio....................  John T. Maldonado, Director...............
                                     Elva Garcia, CPD Rep......................  Housing Authority of Hidalgo
                                     Estela Garcia, CPD Rep....................   County.
                                     Nathan Ratner, CPD Rep....................  City of McAllen.
    St. Louis......................  Ann Wiedl, Director.......................  St. Louis.
                                     Allen Howard, CPD Rep.....................
                                     Elvira Kollar, CPD Rep....................
                                     Sam McClarney, CPD Rep....................
                                     Sandy Freeman, Senior CPD Rep.............
                                     Jim Geraghty, CPD Rep.....................
                                     Sherman Brazil, CPD Rep...................
    South Carolina.................  Bernard Jenkins, Program Manager..........  None.
                                     C. Noel Morphis, CPID Rep.................
                                     John Suber, CPD Rep.......................
                                     Kirk Van Laan, CPD Rep....................
                                     Jamie Spakow, CPD Rep.....................
                                     Barbara Harris, CPD Rep...................
                                     Brad Evatt, CPID Rep......................
    Tennessee......................  Virginia Peck, Director...................  Buffalo Valley, Inc.
                                     Mary C. Wilson, Program Manager...........
                                     Brenda Therry, Senior CPD Rep.............
                                     Geri Clark, Financial Analyst.............
                                     Susan Miller, CPD Rep.....................
                                     Chris James, CPD Rep......................
                                     Jerry Osbourn, CPD Rep....................
    Texas..........................  Katie Worsham, Director...................  S.E.A.R.C.H. (Houston).
                                     Carlos R. Renteria, Deputy Director.......
                                     Jerry Jensen, Senior CPD Rep..............
                                     Linda Clark, CPD Rep......................
                                     Ellen Melendez, CPD Rep...................
                                     Linda Richards, Senior CPD Rep............
                                     Kristin Hadawi, CPD Rep...................
                                     James M.Johnson, Senior CPD Rep...........
                                     Leona Hutchinson, CPD Rep.................
                                     Elizabeth Herron, CPD Rep.................
                                     Eddie Violette, Program Advisor...........
                                     Johnnie Charles, CPD Rep..................
                                     Debbie Reynolds, Program Assistant........
                                     Art Zavala, Senior CPD Rep................
                                     Brenda Jennings, Financial Analyst........
                                     Julie Lundin, Financial Analyst...........
                                     Betty Domian, CPD Rep.....................
                                     Patricia Jones, Program Assistant.........
                                     Gary Holtberg, Program Manager............
    Virginia.......................  Leroy Brown, Program Manager..............  VMH, Inc.
                                     John Baker, CPD Rep.......................  City of Newport News.
                                     Robert Jennings, Financial Analyst........  Smaritan House.
                                                                                 Judeo-Christian Outreach Center.
                                                                                 Virginia Beach CDC.
                                                                                 Tap.
    Washington.....................  Dana Buckner, Senior CPD Rep..............  LIHI (Seattle).
                                     Julie Bruce, CPD Rep......................  Arion Court (Seattle).
                                     Kaycie Collins, CPD Rep...................  Seattle.
                                     David Foster, CPD Rep.....................  Spokane.
                                     Carol Goodman, CPD Rep....................
                                     Alfred Heston, CPD Rep....................
                                     Thomas Kenny, CPD Rep.....................
                                     Lori Martin, CPD Rep......................
                                     Wil May, CPD Rep..........................
                                     Cristina Yamamoto, CPD Rep................
    Wash., DC......................  Patricia Myers, CPD Rep...................  None.
                                     Millicent Grant, Program Manager..........
                                     Ronald J. Herbert, CPD Rep................
    Wisconsin......................  Donna-Lou Hertz, CPD Rep..................  None.
                                     Marivel Turman, CPD Rep...................
                                     Kathleen Schmidt, CPD Rep.................
                                     Judy Pringle, CPD Rep.....................
    ----------------------------------------------------------------------------------------------------------------
    Total = 294

        Question. Please identify all (non-Inspector General) audits of
    McKinney projects conducted by HUD staff in the last 3 years, including
    the dates of the audits, the staff involved, the activities reviewed
    and the results of each audit in summary.
        Answer. Attached are all of the audits (excluding Inspector General
    audits) of McKinney projects conducted during the last three years. The
    first set of reports is entitled, ``CPD Program Monitoring National
    Totals'' (Reports 2 and 3). These reports provide a summary for fiscal
    year 1999 and fiscal year 2000 of all on-site monitoring visits
    conducted by CPD Field Offices. McKinney Homeless Assistance programs
    are detailed in the reports as ``Continuum of Care.'' The reports
    indicate that 322 on-site monitoring visits were made in fiscal year
    1999 and that, to date, 133 on-site monitoring visits have been made in
    fiscal year 2000. The reports also detail the findings, concerns, and
    sanctions taken by CPD staff. The ``Amount'' is the dollar amount
    requested to be repaid for ineligible activities found during on-site
    monitoring of grantees.
        The second set of reports, ``Field Office Summary Monitoring
    Reports,''(Reports 4 and 5) provides an office by office listing of the
    grants monitored and the concerns, findings, and sanctions associated
    with each review. Also included is a report (Report 6) that provides
    greater detail for each of the findings with associated sanctions. The
    system contains a report on each monitoring that provides the level of
    detail requested.
        The large report entitled, ``Field Office Detailed Monitoring
    Report,'' (Report 7) provides the detailed information on each
    monitoring visit, including the date of the visit, the staff person who
    conducted the visit, the activities reviewed, and a brief summary. The
    report provided is for fiscal year 2000. Because of the extensive
    monitoring activities undertaken by CPD Field Offices, the report is
    large. We selected the fiscal year 2000 report because the fiscal year
    1999 report is approximately 1,000 pages in length. If the purpose of
    the request is to determine the depth of monitoring undertaken
    currently by CPD Field Offices, then we are hopeful that this report
    will meet that purpose. If additional information is required, we will
    provide the larger report.
        Please note that CPD's existing computer systems do not capture all
    the information on the monitoring activities for fiscal year 1998.
    Available information is listed in Report 1. The information is limited
    in nature because there was no standardized reporting requirements at
    the time for Field Office monitoring. The overall level of monitoring
    of these programs was also lower during fiscal year 1998, as the report
    indicates.
        As the information provided indicates, the level of on-site
    monitoring by CPD Field Offices rose sharply in fiscal year 1999 and
    continues at high levels for fiscal year 2000. The Office of Community
    Planning and Development is committed to professional oversight of
    McKinney Homeless Assistance programs as these reports attest.
        [Clerk's note: The reports required can be found by contacting HUD
    due to the fact that the reports were not supplied in format suitable
    for printing.
      --CPD Program Monitoring National Totals, fiscal year 1999 (Report 2)
      --CPD Program Monitoring National Totals, fiscal year 2000 (Report 3)
      --Field Office Summary Monitoring Report, fiscal year 1999 (Report 4)
      --Field Office Summary Monitoring Report, fiscal year 2000 (Report 5)
      --Findings With Sanctions Report, fiscal year (Report 6)
      --(Field Office Detailed Monitoring Report, fiscal year 2000 (Report
            7)]
        Question. Isn't it true that HUD supports the funding of expiring
    rental contracts under the Supportive Housing programs and the Shelter
    Plus Care program that have not been renewed under the local continuum
    of care selection process even where the President's budget does not
    support additional funding?
        Answer. No. HUD's policies are consistent with the President's
    budget. Some Supportive Housing Program renewals have been funded
    outside of the annual competition to ensure that services are not
    disrupted in highly ranked projects, and taxpayer's investment in these
    projects are protected. Such renewals are allowable under the law and
    are always paid for out of the budget for the year their project
    funding expires. In addition, no project is ever funded that has not
    been ranked a priority in the previous year's Continuum of Care
    application by the local community.
        In addition, the Department has never funded Shelter Plus Care
    projects outside of the annual competition. By law, the Department
    cannot fund Shelter Plus Care projects outside of an annual
    competition. The Administration does, however, support funding Shelter
    Plus Care renewals out of the Housing Certificate Fund, and has asked
    that $37 million be made available to do so beginning in fiscal year
    2001.
        Question. Isn't it true that these expiring contracts are not
    funded because they do not rank high enough at the local level in the
    local continuum of care?
        Answer. Grant applications, including expiring grants requesting
    renewal, may go unfunded in a competition for any of three reasons: (1)
    they are part of a Continuum of Care that scores below the national
    funding line; (2) they are not placed high enough on the priority list
    by a funded Continuum of Care; or (3) the renewal project is found to
    be ineligible or of poor quality, or the project applicant or sponsor
    lacks the capacity to continue to operate the project. The standards to
    be used in making the determinations under number 3 are specified in
    the Notice of Funding Availability.
        Question. Should expiring homeless assistance contracts be renewed
    where a local continuum of care does not support the renewal of these
    contracts?
        Answer. No. This question goes to the essence of the Continuum of
    Care concept. The local continuum of care is in the best position to
    determine whether a specific renewal project should be included as a
    priority for funding through its analysis of local needs, understanding
    of the range of resources available in the community, and in-depth
    knowledge of the capacity, efficiency and the role of the sponsoring
    organization in the homeless assistance delivery system.
        Question. Isn't it true that localities, including convenors and
    local homeless assistance providers, know the minimum amount of Federal
    homeless assistance each jurisdiction will receive at the time the
    locality or convenor makes its continuum of care application in each
    fiscal year and therefore know to some degree of certainty whether an
    expiring contract will be renewed?
        Answer. The publicly available information provided to all
    potential applicants as they prepare for the 2000 competition allows
    them, for the first time, to know with confidence the minimum prorata
    need share, adjusted for renewals, that is available to the continuum
    if they are successful in the competition. While they cannot know the
    exact amount (because HUD does not know the exact amount until it has
    determined how many areas of the country did not seek funding and those
    funds are redistributed to the applying continuums), the convenor and
    other participants in the process have sufficient information to
    determine prior to application submission whether a specific project,
    new or renewal, falls within the continuum's prorata need share
    depending upon its placement on the priority list. It should be noted
    that a significant increase in the Fair Market Rents for a community
    published in the Federal Register in October of each year, after the
    submission of applications, would increase the budgets for any Shelter
    Plus Care and SRO project applications submitted and could, therefore,
    result in a project going unfunded that would otherwise have been
    funded under that continuum.

                    HOMELESS ASSISTANCE BLOCK GRANT PROGRAM
        Question. Does HUD support a block grant for states and localities
    to address homeless assistance needs, especially since such an approach
    could rely on local decisionmaking while integrating funding decisions
    with the procedures and decisions associated with the existing HOME,
    CDBG, Public Housing, and Section 8 programs?
        Answer. HUD does not believe it is necessary to implement such a
    legislative change. Current procedures best address the multi-faceted
    needs of the program. Originally, in coordination with the Interagency
    Council on the Homeless, HUD held 17 regional interactive forums across
    the country early in President Clinton's first term in office to
    discuss how the Federal government should proceed to better address
    homelessness. Valuable input was provided from more than 10,000
    representatives of state and local governments, not-for-profit
    providers of housing and services, advocates for homeless people, and
    currently and formerly homeless persons. As a result, HUD made numerous
    changes to how competitive program funds are awarded.
        HUD has continued to improve and refine the competitive award
    process since initial implementation in 1994. In addition to having a
    single application for all three competitive programs, the continuum
    helps assure all parties are given an opportunity to be involved in
    developing the community wide application. Moreover, communities are
    able to prioritize their projects as they would through a formula
    approach. Finally, retaining a national competition helps assure a high
    level of quality and performance that a formula approach might not
    achieve. As a result of the successes we've been able to accomplish
    through the competitive process, HUD no longer deems it necessary to
    implement a legislative change.

                                    HOPE VI
        Question. Mr. Secretary, as you know, I am a big fan of the HOPE VI
    program and have supported the significant funding of this program
    since its inception. Nevertheless, it is a costly program and there
    will come a time in the next few years where we will have taken down
    the worst public housing and replaced it with mixed income public and
    private housing. How should this program evolve?
        Answer. Although HOPE VI has been successful in revitalizing many
    of this nation's most severely distressed public housing developments,
    a significant need still remains that will not be adequately addressed
    by HOPE VI appropriations in the next couple of years.
        Each year, the Department receives four times the number of
    applications than can be funded through annual appropriations.
    Moreover, there are 30,000 units identified under the Section 202
    mandatory conversion provision that have not yet been addressed.
    Finally, a HUD-sponsored study by Abt Associates, completed in April
    2000, estimated that the backlog of unmet capital needs as of June 1998
    was $23 billion and the annual accrual was $2.1 billion. If funding for
    Capital Programs is insufficient to eliminate the backlog, it is
    possible that conditions at under funded developments will worsen.
        Question. In addition, I am very concerned about costs of the HOPE
    VI program and how HUD keeps the costs of this program down. How does
    the per unit costs of HOPE VI projects compare to similar private
    sector multifamily housing?
        Answer. The Department has taken great efforts to ensure that costs
    are in line with relevant industry standards. HUD instituted cost
    control guidelines for soft costs and a stringent TDC policy that does
    not permit exceptions. To oversee this effort, a quarterly tracking
    system has been implemented that monitors data on costs, leveraging,
    construction progress and other management indicators.
      --Total Development Cost.--In a March 1999 notice, the Department
            established Total Development Cost (TDC) and Cost Control
            Policy consistent with the Public Housing Reform Act of 1998.
            The notice established clear cost limits for public housing
            funds used in the three elements of HOPE VI developments,
            namely, housing units, community renewal efforts, and community
            and resident social services. The new Housing Cost Cap (HCC)
            was based on an average of RS Means (Average) and Marshall and
            Swift (Good) regional estimates for housing construction costs
            based on housing type and size. The new cap is higher than the
            prior HCC which was based on Boeckh (Average) and Marshall and
            Swift (Average). The new HCC standard reflects the quality of
            housing needed to attract middle income families into HOPE VI
            developments. Unlike the previous policy, no exceptions from
            the current TDC will be granted. The policy has been in effect
            for 1 year and is now being evaluated. An analysis of changes
            in costs over the years has been conducted, and the findings
            have been discussed with OMB and congressional staff. Based on
            the analysis and input received, the modified guidance is
            expected to be published as a Proposed Rule in the near future.
            Soft Cost Controls--The Department instituted cost control
            guidance that will limit the development of soft costs
            associated with mixed-finance development (e.g., developer
            fees, administration fees, program management fees), and create
            incentives for competitive pricing. The controls include ``safe
            harbors'' and maximum fee ranges that are based on industry
            standards which were developed with input from housing
            authorities, developers and other housing industry
            representatives. If a project is at or below a ``safe harbor''
            standard, no further review is required. If a project is above
            a ``safe harbor'' standard, additional review by, and
            negotiation with, HUD are necessary. These guidelines, ``Cost
            Control and Safe Harbor Standards'' are included in a document
            developed by the program office. This document has been
            distributed to all HOPE VI program sites, and is also included
            in the NOFA application completed by prospective grantees.
      --Competitive Procurement.--HUD requires that developers and program
            managers be competitively procured thereby assuring that costs
            and fees are consistent with the private market. The Department
            reviews and approves developer and program manager procurements
            and contracts to verify that the processes are open and
            competitive.
      --Management Controls.--As noted below, a computerized tracking and
            data collection system for effective program management and
            data retrieval and analysis has been developed. Every quarter
            grantees report data regarding costs, funds obligated/expended,
            construction progress, leveraging, and other management
            indicators. The Department is currently expanding the scope of
            the data collected to document what is happening to the people
            in a HOPE VI site (i.e., how many people gain employment, how
            many in job training, how many receiving case management,
            etc.). The Department has prioritized the receipt of accurate
            and timely information and has instituted a policy that freezes
            receipt of a grantee's HOPE VI funds if reports are not
            submitted within 30 days following the end of the quarter. This
            data tracking system enables more effective oversight by HUD
            grants managers and Public Housing Authority (PHA) staff.
      --HOPE VI Construction Costs as Compared with Private Sector.--Per
            unit construction costs are, by design, comparable to similar
            private sector housing. Because the HCC is based on regional
            industry standards, it ensures that public housing funds that
            are spent on construction do not exceed what the private sector
            would pay for a comparable unit. 1999 grantees reported that
            public housing funds would be used for $58,722 per unit cost
            \1\ to public housing funds associated with a HOPE VI
            construction--well below the average HCC of $88,000 in l999. In
            most cases, the construction cost are supplemented with Low
            Income Housing Tax Credit (LIHTC) funds and other funding. An
            informal survey of HOPE VI developers yielded similar
            conclusions--the per unit hard cost of HOPE VI construction,
            adjusted for Davis-Bacon wages and Section 3 requirements, is
            very comparable with private and subsidized developments.
    ---------------------------------------------------------------------------
        \1\ This figure includes dwelling unit construction and equipment
    and 50 percent of site improvement costs. It assumes that builder's
    overhead and profit are included in dwelling unit construction.

                                            TABLE 1.--AVERAGE PUBLIC HOUSING FUNDS PER PH UNIT RELATED TO HCC BY YEAR
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                   Grant Year                      1993            1994            1995            1996            1997            1998            1999
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    PH $Related to HCC \1\..................    $323,300,312    $226,466,180    $237,755,257    $222,259,707    $261,509,345    $278,428,844    $321,032,692
    Avg. PH $per PH Unit Related to HCC.....          61,558          37,321          39,672          41,865          61,186          45,236          58,722
    Average PH $Per PH Unit Related to HCC
     for All Years..........................                                                      $48,568
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    \1\ PH $'s Related to HCC include the following: Dwelling Unit Construction and Equipment and 50 percent of Site Improvement Costs.

    NOTE: Assumes that builders' overhead and profit is included in Dwelling Unit Construction.
    Source: HOPE VI Quarterly and Baseline Data as of 12/31/99.

                                   TABLE 2.--HCC COST PER UNIT CALCULATIONS BY GRANTEE
                                         [HOPE VI Quarterly Data as of 12/31/99]
    ----------------------------------------------------------------------------------------------------------------
                                                                                                             Public
                                                                                                             Housing
    Award                                                                                           Public  Cost per
     Year              Main City                         Development                  HCC Cost     Housing    Unit
                                                                                                    Units    Related
                                                                                                             to HCC
    ----------------------------------------------------------------------------------------------------------------
     1993 Atlanta                          Techwood Homes/Clark Howell Homes..      $25,382,913      360   $70,508
     1993 Boston                           Mission Main.......................       28,596,695      445    64,262
     1993 Charlotte                        Earle Village......................       20,357,066      294    69,242
     1993 Cuyahoga                         Outhwaite Homes/King Kennedy              33,089,097      503    65,783
                                            (combined).
     1993 Houston                          Allen Parkway Village..............       21,118,346      600    35,197
     1993 Kansas City                      Guinotte Manor.....................       31,389,803      412    76,189
     1993 Los Angeles                      Pico Gardens & Aliso Apartments....       26,057,887      429    60,741
     1993 Milwaukee                        Hillside Terrace...................       27,813,071      456    60,994
     1993 New Haven                        Elm Haven..........................       21,093,297      454    46,461
     1993 Philadelphia                     Richard Allen Homes................       31,626,743      408    77,517
     1993 Pittsburgh                       Allequippa Terrace.................       13,886,600      535    25,956
     1993 San Francisco                    Bernal/Plaza.......................       29,236,491      356    82,125
     1993 Washington DC                    Ellen Wilson Homes \1\.............       13,652,305      129   105,832
                                                                               -------------------------------------
                Subtotal                   ...................................      323,300,312    5,381    60,082
                                                                               =====================================
     1994 Baltimore                        Lafayette Courts...................       11,607,960      311    37,325
     1994 Camden                           McGuire Gardens....................       25,795,888      253   101,960
     1994 Chicago                          Cabrini-Green......................          500,000      700   \2\ 714
     1994 Columbus                         Windsor Terrace....................       24,231,323      372    65,138
     1994 Dallas                           Lakewest...........................       13,698,934      335    40,892
     1994 Denver                           Quigg Newton Homes.................       11,126,593      400    27,816
     1994 Detroit                          Jeffries Homes.....................       28,610,345      537    53,278
     1994 New Orleans                      Desire.............................       23,148,032      433    53,460
     1994 Newark                           Archbishop Walsh Homes.............       29,686,740      498    59,612
     1994 Oakland                          Lockwood Gardens/Lower Fruitvale...       13,651,975      438    31,169
     1994 Puerto Rico                      Cristantemos y Manuel A. Perez.....       13,225,005    1,080    12,245
     1994 San Antonio                      Spring View........................       21,712,237      421    51,573
     1994 Springfield                      John Hay Homes.....................        9,471,150      290    32,659
                                                                               -------------------------------------
                Subtotal                   ...................................      226,466,180    6,068    37,321
                                                                               =====================================
     1995 Baltimore                        Lexington Terrace..................        9,586,865      250    38,347
     1995 Boston                           Orchard Park.......................       15,084,196      380    39,695
     1995 Cuyahoga                         Carver Park........................       13,760,535      471    29,216
     1995 Detroit                          Parkside Homes.....................       27,723,553      462    60,008
     1995 El Paso                          Kennedy Brothers...................       20,729,652      364    56,950
     1995 Indianapolis                     Concord/Eagle Creek................       17,148,599      190    90,256
     1995 Memphis                          LeMoyne Gardens....................       27,879,624      343    81,282
     1995 New York                         Arverne/Edgemere Houses............       29,359,071    1,789    16,411
     1995 Pittsburgh                       Manchester.........................        5,500,000      132    41,667
     1995 San Antonio                      Mirasol............................       24,528,409      500    49,057
     1995 San Francisco                    Hayes Valley (B&C).................       12,962,971      117   110,795
     1995 Seattle                          Holly Park.........................       18,417,524      400    46,044
     1995 St. Louis                        Darst-Webbe........................       15,074,260      595    25,335
                                                                               -------------------------------------
                Subtotal                   ...................................      237,755,257    5,993    39,672
                                                                               =====================================
     1996 Atlanta                          Perry Homes........................       11,668,286      375    31,115
     1996 Baltimore                        Hollander Ridge....................       14,226,891      225    63,231
     1996 Charlotte                        Dalton Village.....................       10,495,145      186    56,426
     1996 Chester                          Lamokin Village....................        8,418,294      150    56,122
     1996 Chicago                          ABLA (Brooks Extension)............       19,547,698      396    49,363
     1996 Chicago                          Henry Horner.......................       15,417,283      376    41,003
     1996 Chicago                          Robert Taylor Homes................       16,288,460      251    64,894
     1996 Cleveland                        Riverview/Lakeview.................        9,991,250      290    34,453
     1996 Detroit                          Herman Gardens.....................       16,814,591      672    25,022
     1996 Holyoke                          Jackson Parkway....................        7,097,788      125    56,782
     1996 Jacksonville                     Durkeeville........................       11,664,000      200    58,320
     1996 Kansas City                      Theron B. Watkins Homes............        7,936,372       99    80,165
     1996 Louisville                       Cotter & Lang Homes................        9,401,715      610    15,413
     1996 New Orleans                      St. Thomas.........................       11,100,000      387    28,682
     1996 Pittsburgh                       Bedford Additions..................       21,273,764      340    62,570
     1996 San Francisco                    North Beach........................       12,412,868      229    54,205
     1996 Spartanburg                      Tobe Hartwell/Extension............        9,279,680      128    72,498
     1996 Tucson                           Connie Chambers....................        2,958,493      200    14,792
     1996 Wilmington                       Robert S. Jervay Place.............        6,267,130       70    89,530
                                                                               -------------------------------------
                Subtotal                   ...................................      222,259,707    5,309    41,865
                                                                               =====================================
     1997 Allegheny County                 McKees Rocks Terrace...............       10,601,385      124    85,495
     1997 Baltimore                        Murphy Homes, Julian Gardens.......       10,555,543      260    40,598
     1997 Buffalo                          Lakeview Homes/Lower West Side.....       10,559,280      545    19,375
     1997 Chester County                   Oak Street.........................        8,750,026      130    67,308
     1997 Elizabeth                        Pioneer Homes, Migliore Manor......        9,633,696      300    32,112
     1997 Helena                           Enterprise Drive...................          801,655       14    57,261
     1997 Houston                          Allen Parkway Village 2............       11,721,030      185    63,357
     1997 Jersey City                      Curries Woods......................       18,156,869      469    38,714
     1997 Kansas City                      Heritage House.....................        6,765,714       79    85,642
     1997 Knoxville                        College Homes......................       14,993,250      144   104,120
     1997 Nashville                        Vine Hill Homes....................        9,672,273      136    71,120
     1997 Orlando                          Colonial Park......................        4,043,603       68    59,465
     1997 Paterson                         Christopher Columbus...............        7,936,799      137    57,933
     1997 Peoria                           Colonel John Warner Homes..........        5,665,221      141    40,179
     1997 Philadelphia                     Schuylkill Falls...................       19,374,797      108   179,396
     1997 Portsmouth                       Ida Barbour Revitalization.........       15,137,500      278    54,451
     1997 Richmond                         Blackwell \3\......................       13,445,300      472    28,486
     1997 San Francisco                    Valencia Gardens...................       16,720,835      246    67,971
     1997 St. Petersburg                   Jordan Park........................       14,418,771      261    55,244
     1997 Stamford                         Southfield Village.................       16,644,279      215    77,415
     1997 Tampa                            College Hill/Ponce de Leon \3\.....       12,848,160      403    31,881
     1997 Washington DC                    Valley Green/Sky Tower.............       13,003,825      282    46,113
     1997 Winston-Salem                    Kimberly Park Terrace..............       10,059,536      152    66,181
                                                                               -------------------------------------
                Subtotal                   ...................................      261,509,345    5,149    50,788
                                                                               =====================================
     1998 Albany                           Edwin Corning Homes................       20,567,888      250    82,272
     1998 Atlanta                          Carver Homes.......................       24,775,489      399    62,094
     1998 Baltimore                        Flag House Courts..................        7,175,000      140    51,250
     1998 Charlotte                        Fairview Homes.....................       19,466,251      330    58,989
     1998 Chester                          McCaffery Village..................        7,259,678      118    61,523
     1998 Chicago                          ABLA Homes.........................       22,258,001      945    23,553
     1998 Cincinnati                       Lincoln Court......................       12,420,865      250    49,683
     1998 Dallas                           Roseland Homes.....................       22,232,707      511    43,508
     1998 Denver                           Curtis Park Homes & Arapahoe Cts...       14,160,409      261    54,254
     1998 Greensboro                       Morningside Homes..................        9,338,561      456    20,479
     1998 Lexington                        Charlotte Court....................        7,132,855      218    32,720
     1998 Los Angeles                      Aliso Village......................       16,071,918      269    59,747
     1998 Milwaukee                        Parklawn Housing Development.......       17,800,250      420    42,382
     1998 New Brunswick                    New Brunswick Homes................        3,984,007       86    46,326
     1998 New York                         Prospect Plaza.....................        7,137,589      284    25,132
     1998 Oakland                          Chestnut Court and 1114 14th Street        6,880,924       95    72,431
     1998 Philadelphia                     Martin Luther King Plaza...........       15,709,884      168    93,511
     1998 Roanoke                          Lincoln Terrace....................        9,100,388      276    32,972
     1998 Seattle                          Roxbury House and Village..........        6,083,477      211    28,832
     1998 Tulsa                            Osage Hills Apartments.............       20,343,911      388    52,433
     1998 Wilmington                       Eastlake Family Public Housing.....        8,528,794       80   106,610
                                                                               -------------------------------------
                Subtotal                   ...................................      278,428,844    6,155    45,236
                                                                               =====================================
     1999 Allegheny County                 FDR & Homestead Apartments.........        1,790,392      230  \4\ 7,78
                                                                                                                 4
     1999 Atlanta                          Joel C. Harris Homes...............       18,571,737      300    61,906
     1999 Atlantic City                    Shore Park/Shore Terrace...........       22,196,379      214   103,721
     1999 Baltimore                        Broadway Homes.....................        9,506,690       84   113,175
     1999 Birmingham                       Metropolitan Gardens...............       21,055,785      420    50,133
     1999 Bradenton                        Rogers Garden Park & Rogers                7,498,832      180    41,660
                                            Addition.
     1999 Cambridge                        John F. Kennedy Apartments.........        3,242,500       50    64,850
     1999 Cincinnati                       Laurel Homes.......................       20,320,994      259    78,459
     1999 Columbia                         Saxon Homes........................       14,547,081      186    78,210
     1999 Dayton                           Edgewood Court, Metro Gardens and          9,208,801      140    65,777
                                            Metro Gardens Annex.
     1999 Decatur                          Longview Place.....................       22,177,622      322    68,875
     1999 Gary                             Duneland Village...................        8,947,489       93    96,210
     1999 Greenville                       Woodland/Pearce Homes..............        9,558,376      129    74,096
     1999 High Point                       Springfield Townhouses.............       11,400,790      160    71,255
     1999 Lakeland                         Washington Park Homes & Lake Ridge        11,547,533      359    32,166
                                            Homes.
     1999 Miami                            Scott/Carver Homes.................       19,090,434      223    85,607
     1999 Miami                            Ward Tower.........................        4,072,500       95    42,868
     1999 Mobile                           Central Plaza Towers...............        2,907,500      100    29,075
     1999 Nashville                        Preston Taylor Homes...............       22,917,642      370    61,940
     1999 New Bedford                      Caroline Street Apartments.........        2,142,415       57    37,586
     1999 Newark                           Stella W. Wright...................       21,408,000      588    36,408
     1999 Oakland                          Westwood Gardens...................        3,533,500       46    76,815
     1999 Raleigh                          Halifax Court......................        5,583,857      122    45,769
     1999 Seattle                          Rainier Vista Garden Community.....       20,866,185      250    83,465
     1999 Washington DC                    Frederick Douglass Dwellings &            18,052,431      370    48,790
                                            Stanton Dwellings.
     1999 Wheeling                         Grandview Manor/Lincoln Homes......        8,887,229      120    74,060
                                                                               -------------------------------------
                Subtotal                   ...................................      321,032,692    5,467    58,722
                                                                               =====================================
                Total--All Years All       ...................................    1,870,752,335   38,518   48,568
                 Sites
    ----------------------------------------------------------------------------------------------------------------
          \1\ Ellen Wilson homes has 129 Cooperative Agreement Units.
          \2\ Cabrini Green's HCC figures are unusually low because the Chicago Housing Authority does not plan to
            build new units, but buy scattered site housing. The HCC does not include acquisition costs which are
            estimated at $33 million. As a result, the HCC figure only reflects the cost of site improvements. If
            acquisition costs were included, hard construction costs would be $47,900/unit.
          \3\ For Richmond--Blackwell and Tampa--College Hill/Ponce De Leon 3/31/2000 unit data was used.
          \4\ Allegheny's HCC costs are low because the housing authority is rehabbing instead of building new
            units. The authority is also leveraging significant resources for the hard construction costs which are
            not reflected in the figures above (only public housing dollars are included). $1.7 million of public
            housing funds and $5.6 million of leverage funds are going towards hard construction costs. If all
            sources are considered, the costs related to HCC average $32,000/unit.

          Notes: HCC cost is estimated as the HOPE VI Dwelling Unit Construction Cost, Dwelling Unit Equipment Cost
            and 50 percent of Site Improvements.
          On a program wide basis, this correlates to the information provided on the HOPE VI TDC Guidance Chart.
          Only 128 sites--Alexandria not required to report this information.

        Question. What accounts for any differences in the per unit costs
    of HOPE VI projects with similar private sector multifamily housing?
        Answer. Because the Housing Cost Cap (HCC) is pegged to regional
    industry standards by housing type, ``vertical'' construction costs are
    comparable with the private sector. However, there are additional
    construction costs associated with HOPE VI projects that increase
    overall development costs and do not similarly impact private
    development projects, as described below.
        1. Demolition and Site Remediation.--The HOPE VI program was
    created to revitalize severely distressed public housing which makes it
    unique when compared to other types of private-sector construction and
    development. Unlike the majority of private-sector multifamily
    developments which are built on environmentally safe, vacant sites,
    many HOPE VI projects incur extraordinary costs to demolish distressed
    buildings and remediate existing environmental hazards that are often
    associated with large-scale urban redevelopment, (e.g., lead and
    asbestos abatement, soil remediation, etc.). Such costs are not
    directly attributable to the cost of new construction, but are
    unavoidable in the HOPE VI revitalization process.
        2. Community Revitalization.--HOPE VI developments also include
    provisions for services and facilities that will revitalize the
    community and help residents become self-sufficient (e.g., community
    facilities, community and supportive services and relocation of
    residents). These costs, not required in traditional private sector
    development, are vital to achieve the intended transformation of
    neighborhoods and the lives of the residents.
        3. Federal Wage and Hiring Regulations.--Compliance with federal
    wage and hiring regulations, including Davis-Bacon wages, Section 3,
    and resident participation requirements, tends to apply upward pressure
    on construction costs.
        Question. Also, how do the administrative costs of this program
    compare with private sector costs and what is the average
    administrative cost (i.e. including attorney fees, etc.) per project?
        Answer. Public Housing Authorities (PHAs) provide a unique link
    between the residents of the local community and the Federal Government
    for both the development and administration of assisted housing. Due to
    this unique role of PHAs, this function has been contracted out to the
    private sector. However, this indispensable role in the process also
    contributes to higher soft costs for HOPE VI than those associated with
    private sector development. Additional costs incurred by the PHAs
    include: administrative costs, program and construction management
    fees, external legal counsel, and other consultants, as well as
    increased coordination and oversight due to complex financing
    partnerships and other business arrangements between the Housing
    Authority and the city, developers, business sector, etc. Since HOPE VI
    began in 1993:
      --PHA's internal administrative costs have averaged 2.79 percent of
            total project costs.
      --Planning and professional services (includes program/construction
            management, external legal counsel, other fees) have averaged
            4.22 percent of total project costs.
      --The impact of these higher HOPE VI soft costs add an average of 7
            percent to the total project costs.
        These additional costs are explained in the following paragraphs:
        PHA Administration.--HOPE VI developments must pay for the PHA's
    overall administrative costs associated with HOPE VI. There is no
    comparable cost in private sector projects.
        PHA Capacity.--Many HOPE VI developments also include costs for
    program management and construction management due to the complexity of
    the program and the lack of in-house capacity. Typical private sector
    developers do not incur these costs since the required skills are
    resident with existing staff.
        Complex Financing.--Virtually all HOPE VI developments involve
    complex financing mechanisms which include multiple funding sources,
    increasing the legal and financing costs of the project. It is
    estimated that the legal costs and time delays for approvals associated
    with mixed-finance closings can increase costs by as much as 10-15
    percent over unsubsidized, non-Federal, privately financed development.

      TABLE 2.--PERCENTAGES OF BUDGETED HOPE VI SOFT COSTS TO TOTAL PROGRAM
                                     BUDGET
    ------------------------------------------------------------------------
                                                   Average        Range
                                                   for all -----------------
                  Soft cost category               HOPE VI
                                                    sites     Low      High
    ------------------------------------------------------------------------
    PHA's Internal Administrative Costs..........     2.79  .......     13.6
    Planning and Professional Services (PM/CM,        4.22  .......     16.7
     Legal Fees, and Other Fees).................
                                                  --------------------------
          HOPE VI Soft Cost Total................     7.01  .......  .......

    ------------------------------------------------------------------------
    Source: HOPE VI Quarterly Data as of 12/31/99.

        Question. Please provide a list of all current HOPE VI projects and
    the per unit costs of each project.
        Answer. See table 2 on page 537.
      hud income verification requirements for public and assisted housing
        Question. As you know, we have been very concerned that each year
    an independent audit of HUD's financial statements indicate that some
    $900 million is lost through improper, illegal or negligent reporting
    of income by tenants in HUD's public and assisted housing programs.
    This is a significant amount of money that could help maintain the
    funding level of HUD programs. This is an important responsibility and
    I would like to know the status of HUD's efforts to implement a system
    that ensures the residents in the HUD's rental assistance programs are
    paying the appropriate level of rent.
        Answer. The tenant income verification process is a state-of-the-
    art fraud prevention system that addresses a long-standing material
    weakness. This system is also designed to ensure that eligible American
    families receive the correct amount of rental assistance. The system
    uses computer matching software to compare tenant reported information
    from HUD systems with income data stored in Social Security
    Administration (SSA) and Internal Revenue Service (IRS) databases.
        Tenants who under report income may have their rental assistance
    reduced or terminated, or potentially face prosecution. Tenants also
    may be required to re-pay any excess rental assistance. However, the
    focus on HUD's efforts this year are on setting correct baseline
    incomes and rents.
        HUD is planning to mail out most, if not all, of the income
    discrepancy letters in June 2000; 230,000 in all. In February 2000,
    about 875 letters were sent to tenants.
        In the interest of fairness to all parties, the Department is also
    addressing over-reporting of income and will soon be mailing letters,
    as part of this initiative, in the near future, to tenants who might
    not have received all of the rental assistance to which they were
    entitled.
        The next steps will be HUD monitoring of progress in the resolution
    of the income discrepancies. This will include:
      --1. an analysis of data that public housing authorities, owners and
            agents (POAs) will submit to HUD on income discrepancy
            resolution;
      --2. visits to some POAs to review progress and techniques employed;
            and
      --3. supplemental training for POAs, as needed.
        Additional training is underway. The Department has also developed
    a fact sheet explaining the tenant income verification process and
    HUD's intent to have eligible tenants pay correct amounts. This fact
    sheet will be provided to approximately 6.1 million tenants occupying
    HUD assisted housing.

                                  Attachment A

        The $900 million underpayment figure calculated by the Inspector
    General is wrong.
      --It is wrong because the IG made very dubious assumptions in
            calculating its figure-sampling indicates that the figure may
            be far lower.
      --The figure does not attempt to calculate the extent of overpayments
            by tenants.
      --The figure does not take into account the fact that many kinds of
            income have been excluded from rent calculations at the
            direction of Congress.
      --Sheila Crowley, President of the National Low Income Housing
            Coalition told Congress ``we believe that a substantial percent
            of the discrepancy between rent certifications and tax returns
            that is identified in the Inspector General's report has
            occurred for one of a number of legal and legitimate reasons or
            is the result of honest mistakes or is rooted in errors on the
            part of housing authorities or property owners.''
      --The underpayment estimate is also misleading because it is not a
            reasonable estimate of the actual amounts that could
            realistically by recovered by the government. In fact,
            verifying income will probably lead to an additional $80
            million.
        --Studies show that, once presented with this information, many
                tenants simply move away.
        --It often costs more to collect the money than the amount the
                tenant owes.
        --Tenants often simply do not have the money for the landlord to
                collect.
        --Verifying tenant income will be most helpful in making sure the
                right people receive assistance. The Department is
                committed to ensuring that only those eligible receive
                assistance and that others be replaced by someone
                languishing on long waiting lists due to the failure of
                Congress to adequately fund the Section 8 program.
        Question. In addition, please advise on the safeguards that HUD is
    putting in place to ensure that the process itself does not become an
    unreasonable burden on PHAs and tenants, and how personal privacy
    rights are protected and respected.
        Answer. The tenant income verification process imposes minimal
    additional requirements on Public Housing Agencies, Owners, and Agents
    (POAs) and tenants. Tenants have always had the obligation to report
    their income completely and accurately and POAs have always had the
    responsibility to verify their incomes. This Program provides a new
    tool to POAs to verify tenant income. The only additional requirement
    for tenants is to resolve discrepancies identified by the income
    matching, and for POAs to report on their resolution of these
    discrepancies.
        Under this program, the personal privacy rights of tenants are
    fully protected and respected. HUD strictly follows Social Security
    Administration (SSA) and Internal Revenue Service (IRS) guidelines
    regarding release of confidential income data. The computer matching
    program provides a high degree of accuracy. Extensive software testing
    has been completed to assure that the computer matching is properly
    conducted. Real Estate Assessment Center (REAC) has developed
    procedures to minimize the ``false positive'' results that may
    sometimes occur and reduce related administrative burdens or other
    adverse effects.
        The following steps have been taken to ensure that tenants do not
    receive erroneous income discrepancies letters were:
      --1. Annualization of income to produce income for the calendar year
            that would be comparable to SSA and IRS data;
      --2. Eliminating residents who did not receive rental assistance for
            the entire calendar year for the match; and
      --3. The use of income thresholds.
        Procedures were also developed to minimize the effects on tenants
    who do receive letters and who have complied with applicable income
    reporting requirements. These include:
      --1. Careful wording of the letter to the tenant;
      --2. Written instructions and training for POAs that describe ways to
            minimize the burden on the POAs and the tenants,
      --3. Establish enhanced grievance procedures for tenants to ensure
            due process, and
      --4. Establish special toll-free phone numbers for tenants and POAs
            to answer all program questions.
          hud policy to voucher out all hud-owned and -held properties
        Question. Mr. Secretary you have discussed the need to create a
    production program, even suggesting using FHA single family mortgage
    insurance default reserves as a way to leverage funding for the
    development of new units of affordable low-income multifamily housing.
    However, HUD's stated policy for its HUD-owned and HUD-held multifamily
    properties is to voucher out all families, even the elderly and
    disabled. This means that we are likely losing these multifamily
    housing units for low-income use, especially very low-income use. In
    addition, many of these multifamily housing projects are designed for
    the elderly or disabled and are hooked into needed services for these
    populations. In other cases, the housing is in better neighborhoods
    where there are good schools, transportation and job opportunities
    which will be lost to these residents. For the record, I am including a
    property disposition memorandum from Gary Eisenman, General Deputy
    Assistant Secretary for Housing, that compels the vouchering out of
    these properties and replaces existing handbook requirements.
        How do you square this policy with your acknowledgment that we need
    to produce additional affordable low-income housing and the request for
    additional, incremental vouchers?
        Answer. The Department shares the Senator's concern for the
    preservation of affordable housing. A careful reading of HUD's
    outstanding guidance to the field shows that we preserve affordable
    housing projects which can and should feasibly be preserved. Given the
    nature of elderly housing, we continue the project based Section 8 when
    they are sold, provided it is needed as elderly housing and is feasible
    to preserve. On family projects, rather than using project based
    Section 8 as the affordability tool, we provide eligible tenants with
    Section 8 Vouchers. With Vouchers, an individual can remain in the
    preserved project, or move to other accommodations. In addition, when
    these properties are sold at foreclosure or from the owned inventory,
    if they need to be preserved as affordable housing, they are sold with
    requirements that they be repaired, and operated as affordable housing.
    These requirements are enforced through land use restrictions that
    generally last at least 20 years. Many purchasers utilize the Low
    Income Housing Tax Credit program, which is another way to maintain
    affordable housing without the use of project-based Section 8.
    Requiring that projects be repaired and remain affordable provides the
    tenants with Vouchers an opportunity not afforded to them if we were to
    sell the projects with project based Section 8. It gives the tenants a
    choice, and an ability to decide whether to stay, or relocate. Many
    choose to stay, and many choose to relocate. Freedom of choice is not
    something found with project-based Section 8.
        HUD also uses its ability to provide Up Front Grants for projects
    that need to be preserved We have sold over 60 projects in the last few
    years with such grants. This is consistent with our policy to preserve.
        Not all projects are needed as continued sources of affordable
    housing, and some that may be needed cannot cost effectively be
    repaired or rebuilt. In those cases, residents are offered Vouchers and
    assistance in finding alternate decent, safe and sanitary housing.
        In addition, the memorandum from General Deputy Assistant Secretary
    Eisenman that the Senator introduced into the record has nothing to do
    with vouchering out properties. Unfortunately, the word ``voucher'' has
    several meanings at HUD. It not only means a Section 8 voucher that can
    be given to a tenant to seek affordable housing, it also means the
    document that is prepared by the owner of a Section 8 project to obtain
    the monthly Section 8 payment; in that instance, its more like a
    monthly invoice. The subject memorandum was simply guidance to HUD's
    field staff that it must voucher (invoice) for Section 8 payments on
    projects in HUD's owned inventory and those for which HUD is Mortgagee-
    in-Possession. While it is true that this memorandum did supersede
    outstanding handbook instructions, the change continues the project-
    based contracts in an active status.
        We are not abandoning affordable housing that needs to, and
    feasibly can be preserved. If preservation is feasible, projects are
    being preserved. Projects can and are being preserved as affordable
    housing using preservation tools other than project-based Section 8
    (except for elderly projects).

                   GNMA AND FHA APPLICATION OF CREDIT REFORM
        Question. Mr. Secretary, for the first time since the enactment of
    credit reform in 1992, the Administration has requested $40 million for
    GNMA administrative contract expenses. This also has become an FHA
    issue with appropriations having to pay for ``non-administrative
    overhead'' for both single family and multifamily mortgage insurance
    programs. Why are these additional costs being charged to the
    appropriations process and what do these additional costs cover? Also,
    please provide a legal analysis on why and how credit reform applies to
    GNMA and FHA activities despite the availability of program revenues
    which should be available to cover all costs? Also, please provide a
    legal analysis on why and how credit reform applies to GNMA and FHA
    activities despite the availability of program revenues which should be
    available to cover all costs?
        Answer. Section 1 of the National Housing Act (NHA) contains a
    permanent indefinite appropriation which permits GNMA to pay
    administrative expenses, including contracting expenses, from revenues.
    Section 209 of the HUD Administrative Provisions printed in the
    Appendix to the President's Budget for fiscal year 2001, if enacted,
    would eliminate such authority for the payment of contracting expenses
    under section 1 of the NHA, and in effect, require that GNMA's
    contracting expenses become an appropriated line item.
        Until the enactment of HUD's fiscal year 2000 Appropriations Act
    (Public Law 106-74), Section 1 of the NHA also permitted FHA to pay
    contracting expenses from revenues. In the fiscal year 2000
    Appropriations Act, Section 212 eliminated FHA authority for the
    payment of contracting expenses under Section 1 of the NHA, while the
    FHA accounts included appropriated amounts for FHA administrative
    contract expenses. Section 209 and the GNMA account language proposed
    in the Administration's fiscal year 2001 budget would establish the
    same funding mechanism for GNMA contracting expenses.
        The proposed changes for GNMA and enacted changes for FHA with
    respect to funding of contracting expenses have not been based on the
    application of the Federal Credit Reform Act (FCRA) to GNMA and FHA as
    a matter of law.
        In fact OMB's general counsel has issued a legal opinion that
    explicitly notes the legal appropriateness and applicability of Section
    1 of NHA. Rather, these amendments have been proposed by the
    Administration solely to make the administration of these GNMA and FHA
    contracting expenses conform with the policies of the Administration
    with respect to the FCRA. It should be noted that GNMA's contracting
    expenses under Section 1 of the NHA are reviewed annually by Congress
    and OMB as part of the President's Budget and are reviewed quarterly by
    Treasury and OMB in the SF 133 Report on Budget Execution.

                                  FHA REVENUES
        Question. Mr. Secretary, you have made a number of statement
    indicating that the FHA Mutual Mortgage Insurance account has an
    additional $5 billion in revenues that could be made available for
    other housing programs, including a new multifamily housing production
    program. What are these funds?
        Answer. These estimates of additional funds were calculated by
    using the results of the 1999 Actuarial Review in the MMI models used
    for the 2001 Budget. New subsidy rates were calculated for fiscal years
    2002-2006 using the 1999 Review data. Then the difference in the
    subsidy rates before and after the 1999 actuarial review was multiplied
    by the dollar value of each year's estimated book of business for 2002-
    2006. The sum of those figures was rounded to $5 billion.
        Question. Are they currently maintained in the FHA Mutual Mortgage
    Insurance account or are they projections of future income subject to
    income rate fluctuations and other market forces?
        Answer. The $5 billion is a projection of additional negative
    subsidy estimated to be generated in fiscal years 2002-2006. Under
    Credit Reform, subsidy rates are calculated on the basis of expected
    performance over the entire life of a particular group of loans; thus,
    any subsidy rate calculation is subject to future market forces. The $5
    billion is based on the most recent data, which was used in the fiscal
    year 1999 Actuarial Review.
        Question. In, addition, are these funds available for spending
    without being subject to offsets or pay-go considerations?
        Answer. The additional $5 billion in negative credit subsidy is a
    offset of both budget authority and outlays and represents budgetary
    resources which could be applied towards critical housing needs of the
    Nation without diminishing the currently projected budget surplus of
    the Government. Whether Congressional budget procedures require
    specification of a discretionary offset, or subject this proposal to
    pay-go requirements for mandatory activities, will depend on the
    applicable Congressional Budget Resolution, and the specific nature of
    the proposal under development by the Administration.
        Question. Please provide a legal analysis on how these funds may be
    made available for non-FHA housing and community development programs?
        Answer. As just indicated, the $5 billion may serve as an offset
    for other spending within the unified Federal budget. These funds are
    deposited into the FHA Mutual Mortgage Insurance Fund and whether
    additional legal authority is necessary will depend on how the funds
    would be utilized (as an offset or a fund source) and on the specific
    nature of the proposed use. Direct use of these funds for non-FHA
    programs would require an amendment to sections 1 and 202 of the
    National Housing Act and/or obligational authority in an appropriations
    act.

                           FHA HYBRID ARM LEGISLATION
        Question. Mr. Secretary, the Administration has proposed a new FHA
    adjustable rate mortgage (ARM) insurance program. What is HUD's prior
    experience in underwriting ARMs, including the default and foreclosure
    rates?
        Answer. As one would expect with a riskier product line such as the
    adjustable rate mortgage (ARM), historically ARMs have had a higher
    default and claim rate than the relatively low risk fixed-rate
    mortgages (FMRs). The performance gap between these two products
    however has narrowed since FHA tightened its underwriting standards for
    ARMs in 1998.
        Question. Why would this new ARM program be less financially risky
    to the Department?
        Answer. The risk of the current ARM program was substantially
    reduced in January 1998 by requiring consideration of the second year
    rate in the underwriting analysis (rather than the entry rate) and by
    eliminating any form of buydowns on these loans that contributed to
    payment shock.
        If the hybrid ARM proposed legislation is enacted, we would
    continue to impose underwriting requirements that mitigate against
    unacceptable risk. Further, the hybrid ARMs would lock in an interest
    rate for several years (rather than just the first year) thus allowing
    those first-time homebuyers borrowers that may (a) need the mortgage
    for only a few years and/or (b) need the lower initial payments to take
    advantage of the program either to acquire some equity, and then sell
    the property and move to a more desirable home or to refinance the
    current home.

                  AMERICAN PRIVATE INVESTMENT COMPANIES (APIC)
        Question. Mr. Secretary, the Department does not have an
    outstanding track record in providing targeted funding for economic
    development, such as APIC. How would APIC work?
        Answer. As configured in the proposed legislation (Title 3, H.R.
    2848 and H.R. 2764), APIC would create a number of companies licensed
    by HUD as for-profit, private venture capital firms. The program would
    provide government guarantees of company debentures, provided the
    licensed APIC's committed at least $25 million in private equity
    capital. Each APIC would be entitled to receive $2 in government
    guarantees of company debentures for every $1 of its private committed
    equity. HUD's debt guarantees cannot, however, exceed $300 million for
    APIC-issued debentures in fiscal year 2000. APICs will invest in a
    broad array of firms and industry sectors. As you know the President
    submitted legislation to authorize the APIC program and this
    legislation is proceeding through Congress. In addition, the President
    and the Congress have focused on a broad community revitalization
    package which would include APIC as an important capital development
    tool.
        Question. Why wouldn't Treasury, the Small Business Administration
    or CDFI be a more appropriate agency to administer an APIC-like
    program?
        Answer. Neither the SBA nor the Treasury can target their resources
    to low-income areas, as HUD is able to. Further, SBA restrictions on
    the size and types of businesses it assists would prevent that agency
    from financing the large-scale businesses and real estate developments
    envisioned that APICs will financially assist in urban and rural low-
    income areas. HUD has the experience in working on such projects
    through the Community Development Block Grant and other economic
    development programs. Nevertheless, the Department of Treasury and the
    SBA will act as program advisors to HUD in development and
    administering the APIC program.
        Question. Wouldn't HUD or intermediaries be picking ``winners and
    losers'' in the APIC program?
        Answer. HUD or intermediaries will be ``picking'' winners and
    losers in the APIC program, only in the sense that some competition
    applications are better than others. The proposed APIC legislation
    enables HUD to competitively select APICs and to license them for
    making equity and credit investments in large scale business
    developments that benefit low-income communities. We will be looking to
    the experience of the Overseas Private Investment Companies when
    structuring our selection criteria and licensing process. The selection
    of award recipients by HUD will be based on sound evaluation criteria.

                               EMPOWERMENT ZONES
        Question. Mr. Secretary, we remain concerned over the HUD's
    inability to provide adequate oversight of empowerment zone funds.
        What procedures does the Department have in place to ensure that
    these funds are being used appropriately and what criteria and
    benchmarks are in place to measure the success and failure of
    empowerment zones and enterprise communities?
        Answer. HUD has adequate controls to ensure taxpayer funds are
    spent according to all laws and regulations as provided in the
    following details. In addition, HUD has a system to adequately measure
    and assess EZ/EC success.
        To ensure compliance with applicable laws and regulations, the
    Assistant Secretary has increased EZ/EC staff, and assigned a Public
    Trust Officer (PTO) to monitor and assess the progress of each EZ/EC.
    The EZ/EC PTO Network works with the EZ/EC Initiative Office at
    Headquarters to help ensure full compliance with HUD's statutory
    monitoring responsibilities for Round I and Round II EZs.
        To ensure EZ/ECs are making adequate progress in implementing their
    strategic plans, the EZ/EC Office has instituted a cutting-edge
    Internet-based performance measurement system called PERMS. HUD
    requires each EZ/EC to keep track and evaluate all the projects and
    programs they are implementing to achieve their local strategic plan.
    The EZ/EC Office developed PERMS to ensure that there is adequate
    information to measure and assess EZ/EC success. The EZ/EC Office and
    the PTOs use PERMS to monitor and evaluate the progress of each EZ/EC.
    Each year the EZ/EC designees use PERMS to submit an annual performance
    report which identifies progress made in achieving project/program
    milestones and output measurements, and which tracks the performance of
    EZ/EC governance boards. PERMS not only cuts down on the paperwork
    burden facing the EZ/ECs, but provides HUD with a low-cost mechanism
    for continually monitoring the progress of each EZ/EC. PERMS also
    provides detailed information on the over 2,500 projects and programs
    the EZ/ECs are implementing to achieve their strategic plans.
        Congress has split oversight of the Urban EZ/EC Initiative between
    the U.S. Department of Housing and Urban Development, the U.S.
    Department of Health and Human Services, the States and the 89 Urban
    Designees. Each plays a different, but important role in ensuring
    program integrity. By statute, HUD is the designating agency for urban
    EZ/ECs. HUD is also statutorily responsible for making a periodic
    determination to ensure each of the 89 designees is making progress.
    HUD's legal responsibility regarding monitoring derives primarily from
    section 1391(d)(2) of the Omnibus Budget Reconciliation Act, which
    provides for the revocation of an EZ's or EC's designation if the
    Secretary determines, among other things, that a designated EZ or EC
    has failed ``to make progress in achieving the benchmarks set forth in
    their strategic plan. This provision applies to both Round I and Round
    II designations, and implies that information must be submitted to and
    reviewed by HUD in order for the Department to make such
    determinations. To further implement this responsibility, the
    Department's regulations at 24 CFR Sec. Sec. 597.400-403 provide for
    reporting, performance reviews, validation of designation and
    revocation of designation under appropriate circumstances. Similar
    provisions apply to Empowerment Zones designated in Round II pursuant
    to 24 CFR Sec. Sec. 58.415-430.
        The U.S. Department of Health and Human Services (HHS) has primary
    oversight responsibility for EZ/EC funds. Section 13761 of the Omnibus
    Budget Reconciliation Act of 1993 amended title XX of the Social
    Security Act to provide funds to the States for designated Empowerment
    Zones and Enterprise Communities pursuant to Round I. Neither the 1993
    legislation nor sections 951 and 952 of the Taxpayer Relief Act of
    1997, which authorize additional EZ designations by HUD, speak to any
    additional monitoring or audit responsibilities of HHS. These statutes
    deal primarily with the designation process, which is HUD's
    responsibility. Therefore, audit and related responsibilities
    concerning EZ/EC SSBG funds are subject to the HHS procedures
    applicable to the parent title XX program. In general, under Title XX,
    HHS delegates oversight responsibilities for the EZ/EC SSBG funds to
    the States. The States are responsible for ensuring program integrity
    just like they are with all Title XX, SSBG funds. The States are
    responsible for monitoring EZ/EC spending to ensure compliance with EZ/
    EC legal requirements.
        For Round II EZs, Congress has approved $100 million in HUD
    funding. HUD uses a process similar to the HUD Community Development
    Block Grant (CDBG) program to distribute the EZ funding. HUD sends its
    funding to the lead locality (city or county) which in turn may
    distribute the funding to a non-profit 501c(3) corporation.

                  OPTIONAL ENTITLEMENT CITIES AND COMMUNITIES
        Question. The Department has suggested that the CDBG program should
    be revised to provide a new class of small cities with entitlement
    funding. What is the justification for this proposal?
        Answer. Last year, the Department considered a proposal to create
    ``Optional Entitlement Communities (OEC)'' that would provide
    consistent Community Development Block Grant funding to meet the needs
    of smaller urbanized areas. To implement this proposal would require
    legislative action.
        The proposal originated not because of any particular failure by
    states to meet the priorities of non-entitlement areas in their states.
    Rather, it came from recognition that some of the larger small
    communities, below the entitlement threshold, could also greatly
    benefit from reliable annual funding to carry out a broader range of
    community development activities to address local priorities
    characteristic of urbanized areas like the entitlement communities.
    Most states set the funding priorities and limit the range of eligible
    community development activities. The proposal follows the same
    bipartisan concept of devolution that created the Community Development
    Block Grant program in 1974--that a single block grant allows cities
    and counties, not the Federal government, to make decisions about the
    community development projects in their neighborhoods. An annual
    formula allocation allows communities more flexibility in determining
    how best to address local community and economic development needs. It
    provides predictable annual funding. It allows the community
    flexibility in carrying out multiyear projects.
        We are reviewing the numerous comments and issues raised to date.
    We are consulting with cities, counties, states, their representative
    interest groups, and other interested parties and, of course, will
    continue to work with you in the legislative process.

                              VOUCHER SUCCESS FUND
        Question. Mr. Secretary, the Administration is recommending $50
    million in fiscal year 2001 for a Voucher Success program. This program
    is designed to facilitate the use of section 8 assistance by voucher
    holders, especially since the Administration is beginning to admit that
    voucher holders are having significant problems in using vouchers as
    well as finding affordable rental housing. However, this appears to be
    a double payment since PHAs already receive administrative fees that
    are intended to compensate PHAs in making the Section 8 program work.
    What are PHAs doing with their administrative fees?
        Answer. Public Housing Authorities (PHA) administer units for the
    owners, and process subsidies for families in the tenant-based
    assistance programs. The fees that they receive covers a broad range of
    ongoing routine program responsibilities, including:
      --marketing, accepting applications, maintaining a waiting list,
            selecting families for admission;
      --verifying eligibility, monitoring income mix, providing outreach to
            owners and fostering owner relations;
      --briefing families on (a) the housing search process, (b) housing
            opportunities, (c) fair market rents, (d) housing quality
            standards (HQS);
      --managing voucher search terms/extensions;
      --approving leases;
      --determining reasonable rent for each unit leased;
      --establishing payment standards, establishing and maintaining
            utility allowance schedule;
      --performing pre-leasing and annual HQS inspections;
      --enforcing HQS and performing HQS quality control inspections;
      --coordinating portability moves & billing;
      --managing the process of family moves within HA jurisdiction;
      --reporting family data;
      --processing annual and special rent increases for each unit leased;
      --terminating assistance and conduct hearings;
      --making monthly housing assistance payments; and
      --maintaining program/project accounts.
        These administrative fees would be both inadequate and
    inappropriate to respond to the types of issues/concerns for which the
    Voucher Success Fund is proposed. The Voucher Success Fund is intended
    to improve lease-up rates in difficult markets, and concomitantly
    reduce recaptures. By design, the funds would be targeted to
    communities running sound programs, but still experiencing problems.
    Some of the activities that are clearly beyond normal program
    operations, and which would be the focus of the Voucher Success Fund
    include:
      --focused technical assistance to local PHAs or communities to
            improve program outcomes;
      --counseling (including mobility counseling) and security deposit
            assistance for families using vouchers; and
      --intensive outreach programs to encourage landlord participation.
        Question. Are these fees too low for PHAs to administer their
    Section 8 Programs?
        Answer. Only in isolated instances have Public Housing Authorities
    (PHA) found the current administrative fees to be inadequate. This is
    mostly true in their attempt to fulfill obligations to administer
    particular unfunded mandates that go beyond usual program operations,
    i.e., Family Self-Sufficiency, Family Unification, and the Mainstream
    Housing Opportunities for Persons with Disabilities Programs. For such
    programs which provide a large influx of vouchers at one time, staff
    time and resources are stretched beyond capacity.
        Question. Please identify all audits and/or studies that review the
    use of administrative fees by PHAs.
        Answer. Only one study of the Public Housing Authority (PHA)
    administrative fees has been conducted during the last decade, namely,
    ``Section 8 Administrative Fees: A Report to Congress,'' prepared by
    the Department's Office of Policy Development and Research in June 1994
    (A copy of the Study is enclosed.) Information derived from that Study
    was used as the basis for the formulation of the Department's policy:
    ``Annual Factors for Determining Public Housing Agency Administrative
    Fees for the Section 8 Rental Voucher and Rental Certificate
    Programs,'' issued January 24, 1995 (copy attached). The policy
    established in that Rule was used to determine PHA administrative fees
    until enactment of the Public Housing Reform Act of 1998, which amended
    Section 8(q) of the 1937 Act.

                  NATIVE AMERICAN HOUSING BLOCK GRANTS PROGRAM
        Question. How well has the Native American Block Grant program met
    the housing needs of the Native Americans?
        Answer. The Indian Housing Block Grant (IHBG), authorized by the
    Native American Housing Assistance and Self-Determination Act (NAHASDA)
    was initially implemented in fiscal year 1998. The number of grantees
    receiving funds since the implementation of NAHASDA represents a
    substantial increase in the number of clients assisted since the
    transition from the programs administered under the U.S. Housing Act of
    1937 (1937 Act). Under the 1937 Act, assistance was provided to
    approximately 200 Indian housing authorities (IHAs). In the first year,
    368 Indian housing plans (IHPs) (representing 552 tribes) were approved
    for allocations from the fiscal year 1998 appropriation of $585
    million. In fiscal year 1999, 356 IHPs representing 527 tribes were
    approved for a share of the $610 million appropriation.
        The IHBG has also increased the number of eligible activities for
    the development of new affordable housing activities. The result has
    been an increase in housing opportunities for many eligible tribal
    families throughout the country. Activities proposed by tribes in their
    IHPs include: down payment and other mortgage assistance, revolving
    loan funds for rehabilitation of housing units, transitional housing,
    spousal abuse shelters, elderly homes and congregate housing. In many
    cases IHBG funds have been used effectively to leverage other funds for
    affordable housing activities.
        Training and technical assistance activities have also increased
    under NAHASDA. The Act required tribes to act either as a direct
    housing provider or to designate a tribally designated housing entity
    (TDHE), as opposed to their prior role providing indirect oversight.
    Consequently, more intensive, hands-on training is needed for Office of
    Native American Programs (ONAP) staff, tribal officials and TDHE
    personnel. A staff training plan was developed during the early stages
    of implementing the Act, and is routinely modified and updated to
    reflect the training conducted, as well as to reflect new needs that
    are identified. The Tribal Training and Technical Assistance Center is
    a vital part of the overall training plan. It is internet-based, and
    provides a centralized repository for training and technical assistance
    products, a calendar of upcoming training sessions, and a mechanism for
    tribes and TDHEs to directly request assistance from ONAP.
        A more in-depth review of NAHASDA was provided in the Department's
    report that was submitted to the House Subcommittee in March 2000. A
    copy of that report is attached.
        The Department remains strongly committed to providing safe, decent
    and affordable housing for American Indian and Alaska Native families.

                                   Attachment

                  DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

           Report to the U.S. House of Representatives Committee on
                  Appropriations, Indian Housing Program Plan

               PREPARED BY THE OFFICE OF NATIVE AMERICAN PROGRAMS
        The following report is respectfully submitted, pursuant to the
    request contained in House Report 106-286, accompanying the fiscal year
    2000 Department of Veterans Affairs and Housing and Urban Development,
    and Independent Agencies Appropriations Act.
        The objective of this report is to share with the Committee our
    performance goals and objectives for the Indian housing programs. We
    also offer detailed background information on these programs to inform
    you of our recent successes, our challenges and how these programs are
    operating. Taken together, this information will provide the Committee
    with a better understanding of how we will achieve our goals and
    objectives.
        Within the Department of Housing and Urban Development (HUD), the
    Office of Native American Programs (ONAP) carries principal
    responsibility for development, delivery and monitoring of programs for
    Native Americans. The authorizing statute for ONAP's primary programs
    is contained in the Native American Housing Assistance and Self-
    Determination Act of 1996 (NAHASDA).
        The performance goals for HUD and ONAP are as follows:
      --to increase the availability of decent, safe and affordable housing
            in all Native American communities
      --to increase homeownership opportunities in Native American
            communities by increasing the number of Section 184 guaranteed
            mortgage loans
      --to increase the availability of affordable rental housing to low-
            income Native American families residing within an American
            Indian and Alaska Native area
      --to create additional housing opportunities by increasing the
            technical expertise of Indian tribes and Tribally Designated
            Housing Entities (TDHEs)
      --to promote self-sufficiency and asset development by poor and
            disadvantaged Native American families and individuals
      --to enhance the development of affordable housing through the use of
            successful, innovative models in the Title VI program
      --to increase access to private capital
      --to further economic growth on Indian reservations and other Indian
            areas
      --to contribute to the overall decline in housing discrimination from
            1989 levels
        The performance objectives which have been established are
    reflective of HUD's Business and Operating Plan and our Annual
    Performance Plan. They are the following:
      --increase the number of Native American families served by the
            Indian Housing Block Grant program by 3 percent in fiscal year
            2001 from the baseline established in fiscal year 2000
      --provide training sessions to tribes, TDHEs and financial
            institutions covering the Section 184 and other mortgage loan
            programs, in order to increase homeownership opportunities
      --provide Section 504 training to a minimum of 20 percent of NAHASDA
            grant recipients in order to help reduce discrimination levels
      --encourage the investment and participation of traditional financial
            institutions that have not served Indian reservations and other
            Native American areas

                BACKGROUND INFORMATION ON HUD'S INDIAN PROGRAMS
    The Indian Housing Block Grant Program
        The Office of Native American Programs (ONAP) has successfully
    completed its second year of reviewing the Indian Housing Plans (IHP)
    submitted by participants in the Indian Housing Block Grant (IHBG)
    Program, as required by section 103 of the Native American Housing
    Assistance and Self-Determination Act of 1996 (NAHASDA). Figure 1
    illustrates client and funding levels for fiscal year 1998 and fiscal
    year 1999. This represents a substantial increase in the number of
    clients that ONAP has assisted since the transition from the programs
    administered under the U.S. Housing Act of 1937 (1937 Act). Under the
    1937 Act, ONAP provided assistance to approximately 200 Indian housing
    authorities.

                                    FIGURE 1
                         [Funds in millions of dollars]
    ------------------------------------------------------------------------
                                           No. of       No. of
                                            plans       tribes       Funds
                                          submitted  represented   allocated
    ------------------------------------------------------------------------
    Fiscal year:
        1998...........................         368          552        $585
        1999...........................         356          527         610
    ------------------------------------------------------------------------

        NAHASDA has provided tribes with the ability to develop new
    affordable housing activities that were not eligible under the 1937
    Act. The result has been an increase in housing opportunities for many
    eligible tribal families throughout the country. Examples of the
    activities proposed by tribes in the IHPs include: downpayment and
    other mortgage assistance, revolving loans funds for rehabilitation of
    housing units, transitional housing, spousal abuse shelters, elderly
    homes and congregate housing. NAHASDA has been used in many cases to
    leverage funds for affordable housing.
        In addition to the review of plans, we have continued to administer
    the IHBG formula developed by the Negotiated Rulemaking Committee. This
    included the successful completion of challenges and corrections to the
    NAHASDA funding formula. In fiscal year 1999, we enlisted the
    assistance of a contractor to assist the Department and our recipients
    in this effort. These challenges and corrections are submitted for the
    purpose of correcting the data used in developing the formula
    allocation for each tribe. See Figure 2.

                      Figure 2.--Indian Housing Block Grant

                                                              No. of formula
                                                                  challenges
    Fiscal year:
        1998..........................................................   120
        1999..........................................................   137

        We also have developed a ``Toll Free'' hotline so that tribes and
    tribally designated housing entities can receive immediate assistance
    with formula allocation questions and problems.
        ONAP will be convening a work group this year to re-examine the
    formula, pursuant to the requirements contained in 24 CFR 1000.306.
    This regulation states that the IHBG formula can be modified by
    developing a set of measurable and verifiable data directly related to
    Indian and Alaska Native housing needs; determining if NAHASDA units
    should be included under Formula Current Assisted Stock (FCAS) or other
    changes that may be needed with respect to funding under the FCAS
    component of the formula; and/or, reducing the Section 8 units by the
    same percentage that the current assisted rental stock has diminished
    since September 30, 1999. The goal of the work group will be to
    determine if the formula should be modified as a result of the data
    uncovered.
    Title VI: Federal Guarantees for Financing for Tribal Housing
            Activities
        Title VI of NAHASDA authorizes HUD to guarantee notes or other
    obligations issued by Indian tribes or TDHEs for the purpose of
    financing affordable housing activities as set forth in Section 202 of
    NAHASDA. Indian tribes, or their TDHEs, leverage IHBG funds to secure
    financial obligations to a maximum of five times their annual grant
    allocation. Current and future IHBG funds are pledged as security to
    the repayment of the Federally-guaranteed financial obligation. In its
    third year of funding, ONAP issued Preliminary Letters of Acceptance to
    seven potential borrowers representing potential loan commitments of
    $34,155,000. With continued training, technical assistance and sharing
    of model loans from those first funded, ONAP expects continued growth
    of the program.
    Section 184 Indian Home Loan Guarantee Program
        The Indian Home Loan Guarantee 184 Program was created under
    Section 184 of the Housing and Community Development Act of 1992, as
    amended by Title VII of the Native American Housing Assistance and
    Self-Determination Act of 1996 (NAHASDA). The Section 184 program gives
    Native Americans access to sources of private mortgage financing by
    providing loan guarantees to lenders. Section 184 covers one-to-four
    family homes located in an Indian or Alaska Native area where the land
    may be tribal trust, allotted individual trust or fee simple land.
        Native American and Alaska Native families, individuals, Indian
    Tribes or Indian Housing Authorities (including TDHEs) may obtain
    Section 184 financing in order to purchase an existing home, construct
    or rehabilitate a home within an Indian area. In the event of a
    foreclosure, only these eligible borrowers may purchase the home from
    HUD.

       SECTION 184 ACTIVITY TO DATE FROM PROGRAM IMPLEMENTATION IN 1994 TO
                                JANUARY 31, 2000
    ------------------------------------------------------------------------
                                                    No. of       Amount of
                   Ownership Type                    Loans         Loans
    ------------------------------------------------------------------------
    Fee Simple..................................         433     $46,966,523
    Tribal Trust................................         185      14,737,222
    Allotted Trust..............................          13       1,093,011
                                                 ---------------------------
          Totals................................         631      62,796,756
    ------------------------------------------------------------------------

                  TRAINING AND TECHNICAL ASSISTANCE SUCCESSES
        The passage of NAHASDA and its implementation through the program
    regulations developed by the Negotiated Rulemaking Committee challenged
    tribes and ONAP staff to create a new atmosphere of consultation and
    coordination. Asking a tribe to adopt procedures to become the direct
    housing provider was vastly different than their prior role as an
    indirect oversight entity. More intensive, hands-on training may be
    needed for ONAP, tribes and their housing entities to meet those
    challenges along with the skillful use of all technological tools to
    reduce costs and maximize the utilization of Federal funds.
        As part of the ONAP reorganization, a Training and Technical
    Assistance Committee was formed consisting of a representative from
    each ONAP field and Headquarters offices. One of the first priorities
    of the committee was to develop a staff training plan. In the past two
    years the training plan has been modified and updated as training has
    occurred and new needs are identified. The committee conducted a staff
    survey in December 1999 and has continued to receive input from the
    local offices.
        In order to meet the committee's mission of achieving the most
    effective and efficient use of training resources, many of the training
    courses are consolidated sessions for grant recipients and ONAP staff.
    In many instances, ONAP uses outside contractors to develop and conduct
    the training sessions; therefore, the annual procurement plan is
    prepared in conjunction with the training plan.
        In the past year, the following training sessions have been held
    for grantees, ONAP staff, financial institutions or all of these
    participants:
      --Indian Housing Plan preparation and submission
      --Environmental Review requirements
      --Grants Monitoring Business Processes
      --NAHASDA Grant Requirements
      --Indian Community Development Block Grant
      --Internal Controls and the Audit Process
      --Section 184 Loan Guarantee Program
      --Homeownership Counseling
      --Homeownership Summit Seminars
      --Low-income Housing Tax Credit Workshops
      --Policy Development Workshops
      --Implementation Skills for Boys and Girls Clubs
      --Boys and Girls Club Executive Directors Training
      --Crime Prevention and Drug Elimination Conference
        The technical assistance plan developed by the committee provides
    for periodic assessment of needs, local Area ONAP involvement,
    evaluation of requests and short- and long-term evaluation. Based on an
    analysis of technical assistance requests, workshops providing hands-on
    technical assistance for small groups of housing or tribal
    representatives are scheduled. The workshop environment allows for a
    more cost effective method of delivering technical assistance while
    providing one-on-one assistance.
        A Tribal Technical Assistance and Training (TTAT) Center has been
    established on the Internet to provide a central location for tribes
    and TDHEs to request technical assistance in program planning,
    development, and management. The TTAT Center maintains a training
    calendar and provides training and technical assistance products.
        Under the Drug Elimination technical assistance program, training
    manuals and newsletters have been developed to support the Boys and
    Girls Club Initiative. Five guidebooks have been developed for the
    Youth Development and Community Leadership program. Under the Community
    Anti-Crime in Indian Country initiative, needs assessments and site
    visits have been conducted by our contractor.
        During fiscal year 1998 and fiscal year 1999, ONAP conducted over
    13 regional training and technical assistance sessions for recipients
    on submission of IHPs. Additionally, we completed numerous sessions
    with ONAP staff, instructing them on how to review these IHPs in order
    to ensure national consistency across the program. ONAP developed a
    National Review Committee, comprised of program staff from throughout
    the country, to assist in the review of IHPs during these first two
    years of NAHASDA implementation. The purpose of the NRC was to ensure
    consistency in the interpretation of NAHASDA and its implementing
    regulations.
        In fiscal year 2000, we continue to work on improving the IHP
    review requirements and open further channels of communication between
    our staff and our grant recipients. Staff training was held in December
    of 1999 with follow-up training provided in January of 2000. Training
    is also scheduled for the third or fourth quarter of this year.
    Sessions on IHP and NAHASDA requirements are also planned for grant
    recipients. We continually work with staff to ensure that the 60-day
    statutory deadline for IHP review is met.
        In order to successfully implement the new Title VI program, HUD
    published a Notice of Funds Availability (NOFA) to provide ``capacity-
    building'' (i.e. the transferring of skills and knowledge) to potential
    borrowers. The purpose of the NOFA was to solicit a qualified technical
    assistance to: (1) strengthen the economic feasibility of projects
    guaranteed under Title VI of NAHASDA; (2) directly enhance the security
    of guaranteed loans; (3) finance affordable housing activities and
    related projects that will provide near-term results; (4) demonstrate
    economic benefits such as homeownership opportunities, increase housing
    availability, housing accessibility and visibility, and job creation
    related to the approved project; and (5) attain Indian Housing Plan
    goals and objectives.
        Thus far, the contractor selected has provided training at
    approximately 20 tribal and association meetings and developed an
    assessment program that screens potential borrowers. The multi-step
    assessment program includes a telephone assessment to determine initial
    qualification and needs, followed by an on-site review to determine the
    extent of technical assistance that may be required. This is
    accomplished by reviewing records, audits, resident accounts,
    maintenance schedules, work orders and other housing activities. Data
    is assembled and a Technical Assistance Plan is custom designed to meet
    the needs of the borrower. The Technical Assistance Plan is then
    submitted to ONAP for approval and Capacity-Building grant funds are
    reserved. Three Technical Assistance Plans have been approved by ONAP
    and another is currently under ONAP review.
        Outreach and training has continued under the Section 184 home loan
    guarantee program. A significant change took place in fiscal year 1999
    in the delivery of this training, as a result of the One-Stop Mortgage
    Center Initiative. In August 1998, President Clinton held an Economic
    Development Summit to focus on Indian country issues. One of the by-
    products of the Summit was the Initiative, co-chaired by HUD and the
    Treasury Department. The goal of the joint committee was to increase
    homeownership opportunities in Indian country through streamlining the
    mortgage loan process.
        HUD and Treasury were requested to put together working groups to
    identify the barriers to mortgage lending in Indian country, and
    develop solutions to those barriers. In the course of this process many
    participants identified the need for education about available loan
    products sponsored by Federal agencies. The result was inter-agency
    training sessions, sponsored by ONAP, which cover not only the Section
    184 program, but also loan programs sponsored by the U.S. Department of
    Agriculture and Veterans Affairs. Speakers from the Bureau of Indian
    Affairs also participate in order to train attendees on land issues.
    Three inter-agency trainings were held in fiscal year 1999 and four
    have been planned for fiscal year 2000. ONAP staff continue to
    participate in conferences around the country, to promote the Section
    184 program.
        ONAP has also developed many technical assistance products which
    have been made available to grant recipients on the Internet or through
    distribution of CD-ROMs. Some of these products include:
        The Side-by-Side Guidebook.--Allows the user to easily refer to
    NAHASDA along with the applicable program regulation(s). The Guidebook
    also includes all regulations and laws included or cross-referenced in
    NAHASDA or in 24 CFR Part 1000.
        The Tribal Legal Code Project.--An outline and illustrative guide
    for drafting tribal-specific housing codes, including representative
    examples of land use, building, and zoning codes. The project utilized
    existing tribal codes and identified best practices.
        The ONAP Online Training Modules.--A web-based training tool that
    allows users to learn whenever they want, at their own pace. The online
    training currently includes basic level modules on housing finance,
    procurement, homeownership, financial management, construction
    management, and property management. Additional topics and intermediate
    and advanced modules will follow.
        The NAHASDA Development Model Series.--Models crafted to help
    tribes and TDHEs design eligible programs using NAHASDA funds. Each
    model includes, where appropriate, an outline of new regulations and
    detailed guidance on program design, implementation strategies and
    effective approaches.
        The Guide to Creating a Nonprofit Homeownership Entity.--A resource
    guide for launching a nonprofit with the mission of promoting
    homeownership opportunities. The guide leads the user through the
    planning stages, the legal creation of an entity, the application
    process for Internal Revenue Service 501(c)(3) status, the development
    of the organization, and program operations.
        The HUD ONAP Community Builders have been actively involved in the
    provision of direct technical assistance to tribes and TDHEs in all six
    Area Offices. Their regular activities include site visits, responding
    to telephone requests for assistance or information, preparation of
    explanatory materials on Federal programs, and conducting workshops and
    training sessions. ONAP Community Builders carried out some of the
    sessions noted above and in addition provided the following technical
    assistance sessions:
      --Muckleshoot Tribal Housing Authority.--Considered different
            financing alternatives including developing their own lending
            firm.
      --Lower Elwha, Jamestown Klallarn and Makah Tribes.--Provided
            information and training on Section 184, tribal programs, and
            tribal employment.
      --Port Madison Tribe.--Explained Title VI, purchase of fee simple
            land, downpayment assistance and the purchase of HUD Acquired
            Properties.
      --Yakama and Port Gamble S'Kallam, Tribes.--Provided examples and
            models of homeownership counseling programs.
      --Coquille Tribe, the Coos, Lower Umqua, & Siuslaw Confederation of
            Tribes, the Silitz Tribe and the Grand Ronde Tribe.--Providing
            training on Section 184, Title VI, and other financing options.
      --Lummi, Tulalip, Quinault and Puyallup Tribes.--Gave training and
            materials on the Title VI program.
      --Santa Clara Pueblo Housing Authority.--Explored establishing
            homeownership programs and utilization of the Title VI program.
      --Jemez Housing Authority.--Provided examples of homeownership and
            rehabilitation programs for the elderly.
      --Santo Domingo Housing Authority.--Provided training on various
            homeownership programs, Title VI and low-income housing tax
            credit project.

    TRAINING AND TECHNICAL ASSISTANCE GOALS AND OBJECTIVES FOR FISCAL YEAR
                                      2000
        Objectives fully or partially completed:
      --Provide job-specific training to 100 percent of the ONAP staff.
        --Job-specific training was provided to over 95 percent of the ONAP
                staff at the first ever all-staff training in December
                1999.
      --Workshops on Low-income Housing Tax Credits, Special Needs
            Assessment, Indian Housing Plans, Policy Development, Project
            Implementation for Rehabilitation and Internal Controls and
            Self-Monitoring, have been held in October and December 1999
            and January and February 2000 in three locations.
      --Issue at least six Dream Catchers; a newsletter offering up-to-date
            program information. The last issue in this on-going series was
            issued December 1999.
        Training and Technical Assistance projects being finalized:
      --Hold training sessions in each region for IHBG recipients and ONAP
            staff on a minimum of five topics.
      --Develop additional modules for the ONAP Online Training.
      --Develop and distribute additional technical assistance products.
      --Maintain quality Internet sites (Code Talk) as a resource for
            tribes.
      --Conduct workshops on at least eight different topics in at least
            six different locations for IHBG recipients.

                           ONAP TECHNOLOGY HIGHLIGHTS
        ONAP utilizes technology to better serve its clients, administer
    its programs, and manage its most important corporate asset--knowledge
    capital. Since 1997, ONAP has provided its clients and the general
    public with improved Internet access to the latest reference
    documentation, frequently asked questions, collaboration forums, and
    grant program assistance information. Additionally, annual plans and
    reports can be submitted via the Internet by grant recipients directly
    to ONAP staff for review, tracking, and approval as part of an
    efficient Lotus Notes workflow system. This system also allows ONAP to
    track work-load by assigning reviewers to plans and reports, as well as
    determining benchmarks for process improvements by capturing specific
    metrics such as how long it takes to review plans and reports.
        ONAP's success in providing information to our clients through the
    use of the internet is proven by examining the number of ``hits'' on
    our various web pages during the months of December 1999 and January
    2000.

                             ONAP Web Site Tracking

                        [December 1999 and January 2000]

                                                             No. of ``hits''
                                                                 to web page
    Web-based Training................................................ 6,083
    Planet Youth......................................................32,600
    Tribal Consultation Information................................... 1,656
    E-Library......................................................... 2,665

        The Planet Youth web site is designed for and primarily used by
    Native American youth. It is the third most popular site among ONAP's
    various web sites. Additionally, ONAP's web pages have proven to be a
    vital and ready source of information. Program information and
    publications such as the Dream Catcher newsletter are frequently
    downloaded, according to tracking information.
        ONAP established a Knowledge Management Committee (KMC) focused on
    standardizing office processes, increasing staff efficiency and
    effectiveness, sharing knowledge, working smarter, and helping ONAP
    achieve its mission and objectives. The KMC also manages ONAP's
    Electronic Library (eLibrary), which is our Front Page for weekly
    messages from the Deputy Assistant Secretary, contact information,
    calendar events, meeting minutes, best practices, and reference
    materials. The eLibrary also allows for electronic dialogue between
    geographically dispersed ONAP staff members through the use of
    discussion databases.
        During fiscal year 2000, ONAP will expand the use of the Internet
    and other leading-edge technologies to continue to lead HUD and the
    Federal Government with Electronic Business. They will continue their
    commitment to grant recipient technology enablement through a new
    initiative designed specifically to help the Native American community
    obtain Internet access. ONAP will provide hands-on, on-site support to
    these groups. The benefits of this initiative include expediting the
    grant allocation process by allowing ONAP staff to review the plans and
    reports on-line. Increasing on-line submissions will enable ONAP staff
    to spend more time assisting grant recipients in developing successful
    housing programs. Additionally, the Recipient Technological Enablement
    initiative helps to shrink the digital divide by providing Internet
    access and skills to geographically remote groups who might otherwise
    be left behind in the new technology-based economy.
        ONAP will continue to promote the KMC and eLibrary. Our plans are
    to reevaluate the roles of the KMC representatives so that they have
    more time and incentive to contribute to its success. An active KMC and
    a well-utilized eLibrary will help reduce paper transactions and rework
    as well as increase ONAPs responsiveness to clients. This initiative
    also supports ONAP's Virtual Office goals by allowing ONAP staff
    located across the country to collaborate, sharing data and ideas.
        During fiscal year 2000, ONAP will also begin development of the
    Native American Economic Development Access Center (NAEDAC), as
    directed by President Clinton. The NAEDAC will provide tribes, Indian-
    owned businesses, the private sector, and non-profit organizations easy
    access to information on a wide range of Federal economic development
    programs and initiatives. The NAEDAC will initially consist of a toll-
    free telephone number answered by ONAP staff, who will direct callers
    to sources of obtain information on federal resources for economic
    development. Ultimately, the Internet and other technologies will be
    used for the Native American community to conduct their own research
    through a single access point on the Internet.

                  MONITORING AND OVERSIGHT OF INDIAN PROGRAMS
        During fiscal year 1999, ONAP created a team of managers, staff,
    and subject-matter experts to develop a business process for the
    evaluation of grantee performance. The outcome of this effort is a
    risk-based monitoring effort wherein the recipients with the highest
    potential for not accomplishing their objectives receive the greatest
    attention, such as closer oversight and access to available technical
    assistance, from the Department. The ONAP recognizes the benefits of
    reviewing all recipients on a regular basis to identify best practices,
    so that they may be shared with other program participants. In addition
    to regular monitoring of the poorer performers, an objective has been
    established to visit at least 20 percent of all program participants
    each year, so that all recipients will be monitored not less frequently
    than every five years. During fiscal year 2000, 116 recipients have
    been scheduled for monitoring with 96 planned for on-site review. This
    level of effort reflects review of approximately 20 percent of all
    active recipients.
        ONAP will extend its use of the Internet during fiscal year 2000 to
    provide the public with access to the schedule of upcoming monitoring
    visits, copies of final monitoring reports on recipient performance,
    and the guidelines and tools used by ONAP in its monitoring efforts.
    The planned monitoring visit schedule is currently posted on the
    ``CODETALK'' website and is updated monthly. This information will
    assist grant recipients in preparing for HUD monitoring of its'
    programs and provide relevant information on what is or is not working
    for other tribes.
        The business process development team created a guidebook to
    provide instruction to HUD staff in monitoring requirements and to
    improve consistency in the application of program requirements among
    all ONAP offices. During fiscal year 2000, ONAP plans to refine and
    expand the contents of the guidebook to incorporate knowledge obtained
    during the monitoring process. The initial guidebook, along with any
    improvements, will be made available to tribes and tribally designated
    housing entities for their information and use via the electronic
    medium.
        During fiscal year 2000, ONAP will constantly review and refine its
    monitoring processes and procedures to improve the efficiency and
    effectiveness of its oversight functions. This will include, as
    mentioned in the previous paragraph, regular updates to its internal
    guidance (self-evaluation), assessment of its performance by outside
    experts to solicit recommendations for streamlining and other
    improvements, assessing the availability for out-sourcing monitoring
    elements such as analysis of physical condition of housing stock,
    financial reviews of recipients and incorporating greater use of
    technology in monitoring.
        ONAP continues to monitor the performance of lenders and individual
    loan performance in the Section 184 program. Loss mitigation options
    are strongly encouraged for servicing mortgagees. When quality control
    reviews of guaranteed loans reveal potential lender problems, on-site
    monitoring reviews will be scheduled.

                                  CONCLUSIONS
        HUD and the Office of Native American Programs, remains committed
    to providing safe, decent and affordable housing for Native Americans
    and Alaska Natives. In order to accomplish our goals and objectives, we
    will maintain a dynamic program of technical assistance and training.
    An aggressive monitoring program will assure quality program delivery.
        Question. How does HUD measure the success of this program under
    the Results Act?
        Answer. The fiscal year 2001 performance goal under Government
    Performance Results Act (GPRA) for the Indian Housing Block Grant
    (IHBG) is to increase the number of Native American families served by
    3 percent over the baseline that will be established in fiscal year
    2000. The Department will accomplish this by analyzing the Annual
    Performance Reports (APRs) which are required to be submitted by grant
    recipients pursuant to sections 403(b) and 404(b) of NAHASDA and its
    implementing regulations at 24 CFR 1000.512-521. The Department's
    Office of Native American Programs (ONAP) staff reviews the APRs to
    determine if the grantee was successful in meeting its stated Indian
    Housing Program (IHP) goals. Staff also monitor each grantee's
    performance and track data submission through on- and off-site
    monitoring.
        Question. What significant reforms need to be made to this program
    to ensure its success?
        Answer. The Office of Native American Programs (ONAP) has been
    deeply involved in consulting with its clients to reach consensus on
    how to improve program operations and delivery. A number of issues have
    been identified for further discussion, including:
      --reviewing the established allocation formula to ensure that it
            meets tribal needs;
      --expanding Native American Housing Assistance and Self Determination
            Act's (NAHASDA) six eligible affordable housing activities to
            include comprehensive planning activities, housing services,
            and certain infrastructure needs when the low-income families
            are residents of housing not developed under NAHASDA (these and
            similar activities are currently prohibited by statute); and
      --resolving problems associated with reaching cooperative agreements
            with local jurisdictions and the tax-exempt status of housing
            units developed with NAHASDA funds.

                         PUBLIC HOUSING OPERATING FUND
        Question. What is the status of the rule making for establishing a
    new operating subsidy formula and when will this new formula be ready
    for implementation?
        Answer. Regulatory negotiations for establishing a new operating
    subsidy formula were completed on March 8, 2000, with the adoption by
    consensus of preamble and regulatory language drafted by the
    established Negotiated Rulemaking Committee. Following internal, OMB,
    and Congressional Committee reviews, the draft material is expected to
    be issued as a proposed rule later this month. The Department will
    consider the public comments received on the proposed rule and, per the
    consensus agreement, issue an interim rule that would govern the
    determination of funding distributions to Public Housing Authorities
    (PHA) under the Operating Fund, until a final rule, reflecting the
    results of a Congressionally requested public housing cost study, is
    developed and published. The interim rule will first be effective for
    PHAs with fiscal years beginning on or after January 1, 2001.

                          PUBLIC HOUSING CAPITAL FUND
        Question. What is the current estimate of unmet capital needs for
    the entire stock of public housing?
        Answer. A major study conducted by Abt Associates for HUD,
    completed in March 2000, concluded that the backlog was approximately
    $23 billion in June 1998. The Study, which also concluded that the
    requirements have an annual accrual of $2.1 billion, was based on
    physical inspections of 684 developments with 229,973 units at 219
    housing authorities. A copy of the referenced Study is enclosed.
        [Clerk's note: A copy of ``Capital Needs of the Public Housing
    Stock in 1998'', formula capital study, can be obtained by contacting
    the U.S. Department of Housing and Urban Development.]
        Question. Should these capital needs be considered as a priority
    among HUD programs?
        Answer. Yes. Public housing developments are a vital source of
    housing for low-income families. Vast improvements have been achieved
    in rehabilitating and integrating public housing into the fabric of the
    community through HOPE VI and Public Housing Capital Fund
    appropriations. To forestall and reverse the deterioration of the
    aging, existing stock, including failing infrastructure, and the
    consequent negative impact on communities, continued funding at
    significant levels for both programs is critical.
        Question. Does HUD have a long-term plan for addressing these
    capital needs?
        Answer. The Department has a three pronged approach for addressing
    the capital needs as follows: (1) Annual physical inspections are
    conducted by the Real Estate Assessment Center (REAC) to document and
    provide a current assessment of the conditions of all public housing
    developments; (2) Based on the annual assessment, Public Housing
    Authorities (PHA) develop long-range strategies in order to target
    capital fund resources and additional assessments of capital needs to
    correct those deficiencies through renovation of viable developments
    and/or demolition of non-viable developments; and (3) HOPE VI funds are
    used in select cases, where the PHA, the local community, the City, and
    private entities are able to form a partnership for a comprehensive
    plan to revitalize a community, and capital funds otherwise would be
    inadequate.
        Question. Has HUD conducted a cost benefit analysis of what is the
    appropriate level of funds needed to meet public housing capital needs
    over the next 10 years?
        Answer. The 1998 Abt Study, commissioned by the Department,
    documented a modernization backlog of approximately $23 billion, and an
    annual accrual of $2.1 billion. The results of this Study (copy
    provided with previous answer) can be used as a guide for the
    appropriators.

           SECTION 202 ELDERLY HOUSING CONVERSION TO ASSISTED LIVING
        Question. Mr. Secretary, the administration is proposing $50
    million for the conversion of section 202 housing to assisted living
    units. What is the status of this new initiative and what is the
    nation-wide need for this type of housing?
        Answer. The Notice of Funding Availability (NOFA), announcing
    fiscal year 2000 funds, was published in the Federal Register on March
    17, 2000 and applications are due July 17, 2000. The number of Section
    202 elderly residents 85 years and older are increasing rapidly. As
    these residents continue to age in place, they are becoming frailer and
    consequently need more accessibility features and more supportive
    services in order to remain independent and not be prematurely
    displaced to nursing homes. In most cases, nursing homes provide the
    primary option for the very low-income frail elderly since most
    assisted living facility are not affordable. As we have been informed
    by the industry, the $50 million for converting existing Section 202
    projects to assisted living facilities allows their residents to remain
    in place and provides their frail elderly residents with an affordable
    option to nursing home placement.

               SECTION 811 HOUSING FOR PERSONS WITH DISABILITIES
        Question. Mr. Secretary, the Department continues to propose
    increased funding annually for the Housing for Persons with AIDS
    housing program (HOPWA) while Section 811 Housing for Persons with
    Disabilities has primarily received flat funding under recent
    Administration budgets?
        Answer. The Department has also proposed an increase in funding for
    the Section 811 program since fiscal year 1999. In fiscal years 1999,
    2000, and 2001, the Department proposed $174 million, $194 million, and
    $210 million respectively. The Department has proposed an increase in
    the HOPWA program to help address growing needs and provide support for
    additional communities that are projected to become eligible for the
    formula. For the Section 811 program, the Department has proposed an
    increase in funding to further address the housing needs of persons
    with disabilities who, as a population, have the worst case housing
    needs.
        In addition to the increased funding the Department is proposing to
    expand the ``earned income disregard'' that is now applicable only to
    HUD's public housing program to the calculation of income for persons
    with disabilities to many of the programs at HUD. HUD has the authority
    to implement the ``earned income disregard'' immediately for the
    following four programs: HOME, Housing Choice Voucher Program, HOPWA,
    and Supporting Housing for the Homeless. For other programs at HUD,
    statutory language change will be required. The language is being
    drafted by the Department at this time. The earned income disregard
    will assist persons with disabilities in obtaining and retaining
    employment, which obtaining and retaining employment, which is an
    important step toward economic self-sufficiency.
        Question. In fact, HOPWA funding receives more annual HUD housing
    funding than Section 811 housing despite the fact that persons with
    AIDS are housed in Section 811 housing?
        Answer. Since 1992, the HOPWA program has been the Federal
    Government's primary targeted response to the pressing housing needs of
    low income persons who are living with HIV/AIDS and their families.
    Although persons with HIV/AIDS are eligible for Section 811 housing, it
    is estimated that only 800 of the more than 16,000 housing units funded
    through the Section 811 program over the past 10 years are for this
    population. Therefore, the funding that the HOPWA program has received
    over the years which covers the cost of a wide array of activities such
    as housing assistance, supportive services and program planning and
    development, is necessary to address the often unique and diverse
    housing needs of a growing population of persons with HIV/AIDS.
        Question. How do you explain the difference in the funding
    priorities by the Administration between these programs?
        Answer. The HOPWA program and the Section 811 program are different
    in many respects. The Section 811 program provides funding for the
    development of new permanent housing for persons with disabilities. The
    HOPWA program is responding to a national epidemic. Although the HOPWA
    program serves one population of persons with disabilities and its
    primary focus is on housing assistance, the assistance is quite
    different than what is provided through Section 811.
        Under Section 811, the majority of the assistance is project-based.
    Of the HOPWA funds used for rental assistance (78 percent of total
    funding), 84 units supported through 57 percent of the HOPWA funds are
    for tenant-based rental assistance and short-term rent, mortgage and
    utilities payments to prevent homelessness. These funds may be used to
    support residents in their existing housing which enables them to
    maintain their independence. Only 16 percent of the units, supported
    with 43 percent of rental assistance funds are for facility-based forms
    of housing assistance. The remaining 22 percent total of HOPWA funds
    are used for supportive services. No Section 811 money can be used for
    supportive services. The above is indicative of the fact that the large
    population of persons with HIV/AIDS in this country has needs that, in
    most cases, are not well served through the project-based Section 811
    program. Funding for HOPWA is essentially based on caseload levels and
    again represents the existence of a national epidemic and the basic
    fact that the number of persons living with AIDS continues to increase.
    In addition, the Department has in recent years requested additional
    Section 811 funding, reflecting growing demand for this program as
    well.
        Question. Should these programs be merged?
        Answer. No, the programs should not be merged because, as described
    in the answer to the previous question, the two programs are very
    different with respect to the types of activities that can be
    implemented. In addition, eligible applicants for the two programs are
    different. Under the Section 811 program, eligible applicants are
    nonprofit organizations with a Section 501(c)(3) tax exemption. Under
    Housing Opportunities for People With Aids (HOPWA), grants are provided
    by formula allocations for 90 percent of the appropriation to States
    and metropolitan areas with the largest number of cases and incidence
    of AIDS, and for 10 percent of the appropriation, by competitive
    selection of projects proposed by State and local governments and
    nonprofit organizations. Both programs have very different legal
    structures. Under HOPWA, funding is provided in the form of a grant
    that must be expended within three years or the funding will be
    deobligated. A grant agreement is used to obligate the funds. Under
    811, however, funding is in the form of capital advances and project
    rental assistance funds for the development and operation of the
    projects. The project must operate for at least 40 years; otherwise the
    Owner must repay a prorated share of the capital advance to HUD. There
    is no grant agreement under Section 811. Instead, there is a capital
    advance agreement and a mortgage note, among other legal documents.

                       LEAD-BASED PAINT HAZARD REDUCTION
        Question. Mr. Secretary, the Administration is proposing a
    significant increase in the Lead-Based Paint Hazard Reduction program
    from $80 million in fiscal year 2000 to $120 million in fiscal year
    2001. What activities will these funds be used for? In addition, I
    understand that HUD funding of remediation far exceeds private sector
    costs for similar activities.
        Answer. Of the proposed $40 million increase, $30 million will be
    used to increase funding for states and local governments to control
    lead-based paint hazards in privately owned low-income dwellings where
    the risk of childhood lead poisoning is greatest. For the past several
    years, HUD has received grant requests totaling over $200 million each
    year; most of these applications demonstrate very real need and
    capacity. The need for funding has consistently exceeded the
    availability of funds. Without a significant increase in funding, low-
    income children will continue to be unnecessarily exposed to lead paint
    hazards.
        Eligible activities under the grant program include lead-based
    paint inspections, risk assessments, correction of detected hazards,
    post-abatement clearance testing (to ensure the work was done properly
    and the property is safe to occupy), blood lead testing (if not
    reimbursable from Medicaid or another source), public education to
    provide parents with the information they need to protect their
    children and to encourage landlords and other property owners to enroll
    in the program, relocation expenses (to ensure children are not exposed
    to hazards during the work), and administration (limited to 10 percent
    of the award). Many local jurisdictions are able to leverage private
    sector funds or set up revolving loan programs with the Federal
    funding. The proposed increase in funding is part of a governmentwide
    strategy to eliminate childhood lead paint poisoning by the year 2010
    (this strategy report was sent to Congress in March 2000).
        Grants are currently active in over 200 cities, but without
    increased funding, many jurisdictions will not have the resources
    needed to eliminate this disease. Funds are also used to provide
    technical assistance to grantees and conduct research to promote
    innovation and drive down hazard detection and abatement costs. Recent
    data from a scientific evaluation of the grant program show that blood
    lead levels have declined by approximately 25 percent in children
    living for at least 1 year in abated housing and that dust lead levels
    have declined by 66 percent over a 3-year period. Updates on the
    evaluation have been provided in reports to Congress each year for the
    past several years, with a major report expected in 2001.
        The remaining $10 million will be used to enforce lead paint
    regulations and to provide compliance assistance. At the Federal level,
    HUD has new responsibility to enforce both the lead paint disclosure
    regulation and a new regulation that consolidates, streamlines and
    modernizes lead paint regulations for all Federally assisted housing.
    The latter will take effect on September 15, 2000. Without increased
    resources, HUD will be unable to provide the necessary training,
    technical assistance and enforcement oversight needed to ensure
    compliance and to ensure that Federal resources are not being used to
    subsidize housing that poisons children. The fiscal year 2000 budget
    provided $70 million for the lead paint grant program, technical
    assistance and research and $10 million for the Healthy Homes
    Initiative.
        See next question for details on HUD versus private sector costs.
        Question. Please provide a comparison of HUD costs as opposed to
    private sector costs for remediation. Explain any differences in costs?
        Answer. There are no data on privately funded abatement costs. As a
    practical matter, most hazard control actions are performed under
    orders of local health departments investigating cases of poisoned
    children, or publicly funded projects through federal state and local
    funding. HUD estimates the average costs of interim controls to be
    approximately $2,500 per unit and $9,000 for permanent abatement.
    However, since most homes do not have lead paint hazards and,
    therefore, will not require treatment, the average cost per unit of the
    regulation is only $196.00. The costs for individual dwellings can vary
    widely, due to differences in size, number and type of surfaces with
    lead hazards, and condition. The costs of lead hazard control are best
    detailed in the Economic Analysis for HUD's lead hazard control
    regulation, available upon request or at www.hud.gov/lea. The Economic
    Analysis relies on the cost data collected from the evaluation of the
    grant program, as well as interviews with private lead hazard control
    contractors. The analysis shows that the cost of complying with the new
    HUD lead paint regulation for federally-assisted housing is $235
    million. The cost of not implementing the regulation (i.e. the benefit)
    is $1.1 billion due to increased medical care, special education, and
    reduced lifetime earnings (due to reduced IQ).
        Question. Please identify the targets and benchmarks for this
    program under the Results Act.
        Answer. Performance indicators are contained in the Department's
    Strategic Objective (1.3.5) of the Annual Performance Plan. They
    include the number of units made lead-safe, the percent reduction in
    dust lead levels in homes treated under the grant program, the number
    of cooperative agreements completed under the Healthy Homes Initiative,
    and the reduction in children's blood lead levels. The target number of
    units treated under the grant program for fiscal year 1999 was 6,000
    units and the actual number was 7,471. The overall cumulative number of
    units treated is currently about 25,000 (which does not include the
    units treated as a result of public education undertaken by grantees).
    The target percent reduction in dust lead levels for fiscal year 1999
    was 25 percent compared to baseline levels before abatement. Actual
    performance was 64 percent. The fiscal year 1999 target for the Healthy
    Homes Initiative was 8 awards; the actual performance was 11 awards.
    The fiscal year 1999 target reduction in blood lead levels for children
    living for at least 1 year in abated housing was 20 percent. The actual
    reduction was 26 percent. Blood lead levels decline more slowly than
    dust lead levels due to body stores of lead in the bone. National blood
    lead levels should be available from the Centers for Disease Control
    and Prevention in 2003 in the next National Health and Nutrition
    Examination Survey.
        Question. How does HUD measure the success of this program?
        Answer. The two chief outcome measures are blood lead levels and
    dust lead levels. Population blood lead levels are measured through
    Center for Disease Control's (CDC) National Health and Nutrition
    Examination Survey and dust lead levels are measured through the on-
    going HUD Evaluation of the Lead Hazard Control Grant Program. The
    report of the President's Task Force on Environmental Health Risks and
    Safety Risks to Children contains new projections of the number of
    children with elevated blood lead levels and the number of housing
    units at risk of lead paint hazards. We estimate that there are about
    250,000 low-income children with lead poisoning living in pre-1960
    housing units. The last estimate from CDC was about 800,000 children
    (from 1991-1994). While this represents enormous progress (due in part
    to the HUD lead paint grant program) it is noteworthy that the
    prevalence of this disease is still very large among certain
    populations. Among low-income children living in older housing, the
    prevalence is 16 percent (compared to 4.4 percent for all children).
    Among African-American children in older housing, the prevalence is 21
    percent. Unfortunately, childhood lead poisoning continues as one of
    the major childhood environmental diseases. The report estimates that
    by the year 2010, unless further actions are taken, about 135,000
    children annually will be poisoned. The proposed expansion of the grant
    program and implementation of the new HUD regulation is designed to
    eliminate this problem over the coming decade. HUD will also complete a
    new national survey of the prevalence of lead paint hazards in the U.S.
    housing stock by December 2000. This will enable HUD to measure
    progress in making housing lead-safe.
        Question. What is HUD's role in remediation efforts in the private
    sector?
        Answer. HUD encourages its grantees to leverage private sector
    funding to augment the Federal resources available. We also play an
    important role in setting standards to create a level, competitive
    playing field that promotes innovation and new technology in the lead
    hazard control industry. For example, HUD produces Performance
    Characteristics Sheets for XRF lead paint analyzers, which has helped
    fuel a new generation of quicker, more accurate and less costly methods
    of lead paint analysis. HUD also enforces the lead paint disclosure
    regulation, which enables new homebuyers to obtain a 10-day opportunity
    to have a lead paint inspection or risk assessment performed. If
    hazards are identified, their correction can be financed through the
    normal mortgage financing systems or through home improvement loans.
    Some jurisdictions are now providing ``lead-safe'' certificates for
    housing found to be lead-safe to encourage property owners to make
    investments in lead-safety, as much as they would any other capital
    improvement or on-going maintenance program. HUD also funds training
    programs for remodeling, renovation, painting contractors, landlords,
    maintenance workers, housing inspectors and the public to promote the
    broad adoption of lead-safe work practices.

                                SYNCHRONIZATION
        Question. HUD staff have indicated that the HUD Budget office is
    pursuing a policy of synchronization of HUD section 8 and public
    housing contracts. What is this policy and program?
        Answer. Synchronization is a concept which was introduced by
    housing industry groups during the negotiated rule-making meetings on
    the Section 8 renewal policy. The term ``synchronization'' means to
    align contract expiration dates for a public housing authority (PHA) to
    occur at the same time. This concept is only applicable to the Section
    8 tenant-based programs.
        Over the years, housing agencies have been awarded numerous funding
    increments through Notice of Fund Availability (NOFA) competition,
    conversions of tenant-based assistance, demonstration programs, etc.
    Each allocation of funding provided by HUD is unique, having effective
    and expiration contract dates based on: (1) the length of the contract,
    (2) the date funding was awarded by HUD, and (3) the execution date of
    the annual contributions contract.
        Currently, although there are only 3,000 PHAs, there are over
    20,000 funding increments with renewal dates occurring throughout the
    year. Given an annual renewal policy with a 1-year term, the process is
    time and staff intensive for both the Department as well as the PHAs.
        Moreover, multiple contracts expiring at different times throughout
    the year increase the complexity of formulating budget projections,
    creates confusion, and has, in fact, contributed to under-utilization
    of the unit inventory by some PHAs. During the negotiated rule-making
    sessions conducted during 1999, the housing industry groups requested
    that the Department realign all contracts for a housing agency to
    expire on the same date, which would result in one contract renewal
    date each year for a housing agency.
        Question. What are the costs associated with it and what is and
    will be the impact of this policy and program on section 8 and public
    housing programs?
        Answer. The realignment of contract expiration dates for each
    housing agency involves both contract extensions as well as
    truncations. The net effect of the realignment results in a cost since
    most contracts need to be extended to a new future date. The current
    estimate to synchronize the increments is a one-time cost of
    approximately $1.8 billion.
        The impact of this policy on the Section 8 program is that both HUD
    and the housing agencies will be able to manage program funds in more
    effectively and efficiently. Budgetary projections will be facilitated,
    and the Department will be able to quickly identify program under-
    utilization, and reallocate unused resources to other housing
    authorities. Recaptures would be minimized.
        Question. Please identify all budget and other documents provided
    to the Congress that identify and discuss this policy and program?
        Answer. As one of the discussion items during the Congressionally
    mandated negotiated rule making session for the development of a
    Section 8 renewal formula, a discussion of the Department's
    ``synchronization'' is included in the Federal Register: ``Renewal of
    Expiring Annual Contributions Contracts in the Tenant-Based Section 8
    Programs; Formula for Allocation of Housing Assistance; Final Rule,''
    published October 21, 1999. A copy of this document is attached for
    your information.
                 [From the Federal Register, October 21, 1999]
    DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

    24 CFR Part 982

    [Docket No. FR-4459-F-03]

    RIN 2577-AB96

    Renewal of Expiring Annual Contributions Contracts in the Tenant-Based
    Section 8 Program; Formula for Allocation of Housing Assistance

    AGENCY: Office of Public and Indian Housing, HUD.
    ACTION: Final rule.
    SUMMARY: This rule specifies the method HUD will use in allocating
    housing assistance available to renew expiring contracts with public
    housing agencies (PHAs) for Section 8 tenant-based housing assistance.
    As required by statute, this rule is the product of a negotiated
    rulemaking, following implementation, as further required by statute,
    of a HUD notice on this subject.

    EFFECTIVE DATE: November 22, 1999.

    FOR FURTHER INFORMATION CONTACT: Robert Dalzell, Office of Public and
    Indian Housing, Department of Housing and Urban Development, 451
    Seventh Street, SW, Room 4204, Washington, DC 20410; telephone (202)
    708-1380. (This is not a toll-free number.) Persons with hearing or
    speech impairments may access that number via TTY by calling the
    Federal Information Relay Service at (800) 877-8339.

    SUPPLEMENTARY INFORMATION:
    I. Background
        The statutory provision that provides the foundation for this rule
    is section 8(dd) of the United States Housing Act of 1937 (the 1937
    Housing Act)(42 U.S.C. 1437(dd)), as added by section 556(a) of the
    Quality Housing and Work Responsibility Act of 1998 (Pub. L. 105-276,
    112 Stat. 2461, approved October 21, 1998) (``Public Housing Reform
    Act''). The new section 8(dd) directs HUD to establish an allocation
    baseline amount of assistance (budget authority) to cover the renewals,
    and to apply an inflation factor (based on local or regional factors)
    to the baseline. The new provision states as follows:

        (dd) Tenant-Based Contract Renewals.--Subject to amounts provided
    in appropriation Acts, starting in fiscal year 1999, the Secretary
    shall renew all expiring tenant-based annual contribution contracts
    under this section by applying an inflation factor based on local or
    regional factors to an allocation baseline. The allocation baseline
    shall be calculated by including, at a minimum, amounts sufficient to
    ensure continued assistance for the actual number of families assisted
    as of October 1, 1997, with appropriate upward adjustments for
    incremental assistance and additional families authorized subsequent to
    that date.

        Section 556(b) of the Public Housing Reform Act required the
    Department to implement section 8(dd) of the 1937 Housing Act through
    notice not later than December 31, 1998, and to issue final regulations
    on the allocation of tenant-based Section 8 annual contributions
    contract renewal funding that are developed through the negotiated
    rulemaking process no later than October 21, 1999.
        On December 30, 1998, the Department issued HUD Notice 98-65 to
    implement the provision, satisfying the requirement of section 556(b)
    to implement the new provision through Notice not later than December
    31, 1998. The Department published a notice in the Federal Register on
    February 18, 1999, advising the public of the provisions of HUD Notice
    98-65. The Department has developed this final rule implementing the
    requirements of section 8(dd) of the 1937 Housing Act through a
    negotiated rulemaking process, in accordance with the statutory
    requirements of section 556.
    II. Negotiated Rulemaking
        HUD convened a negotiated rulemaking advisory committee to assist
    in developing this final rule--the Section 8 Housing Certificate Fund
    Negotiated Rulemaking Committee. (See publication of notice of
    establishment of the Committee on April 26, 1999, 64 FR 20232.) The
    charter for the Committee stated: ``The purpose of the Committee is to
    discuss and negotiate a rule that would change the current method of
    distributing funds to public housing agencies (PHAs) for purposes of
    renewing assistance contracts in the tenant-based Section 8 program.
    The committee will consist of persons representing stakeholder
    interests in the outcome of the rule.'' Records of the advisory
    committee's deliberations can be found at http://www.hud.gov/pih/
    pih.html.
        The members of the advisory committee were as follows:

                                Housing Agencies

        Massachusetts Department of Housing and Community Development,
    Boston, MA
        New Jersey Department of Community Affairs, Trenton, NJ
        Southeastern Minnesota Multi-County Housing and Redevelopment
    Authority, Wabasha, MN
        Oklahoma Housing Finance Agency, Oklahoma City, OK
        Fort Worth Housing Authority, Fort Worth TX
        Minneapolis Metropolitan Council Housing and Redevelopment Agency,
    Saint Paul, MN
        Santa Cruz County Housing Authority, Santa Cruz, CA
        Burlington Housing Authority, Burlington, VT
        Michigan State Housing Development Authority, Lansing, MI
        New York City Housing Authority, NY, NY
        Atlanta Housing Authority, Atlanta, GA
        Cincinnati Metropolitan Housing Authority, Cincinnati, OH
        Housing Authority of the City of Los Angeles, Los Angeles, CA
        Stillwater Housing Authority, Stillwater, OK
        Spokane Housing Authority, Spokane, WA
        Jacksonville Housing Authority, Jacksonville, FL
        Panama City Housing Authority, Bay County, FL
        Alameda County Housing Authority, Hayward, CA
        Housing Authority of New Orleans, New Orleans, LA
        Stustman County Housing Authority, Stustman County, ND

                             Public Interest Groups

        Center on Budget and Policy Priorities, Washington, DC
        New Community Corporation, Newark, NJ
        Disability Rights Action Coalition for Housing
        Section 8 Resident Council of New Orleans, Inc., New Orleans, LA

                  Independent Accounting and Consulting Firms

        Fenton, Ewald & Associates, PC
        IMRglobal--Orion Consulting, Inc.

                       National/Regional PHA Associations

        National Leased Housing Association (NLHA)
        National Association of Housing and Redevelopment Officials (NAHRO)
        Council of Large Public Housing Authorities (CLPHA)
        Public Housing Authority Directors Association (PHADA)

        (Note that 1. Fenton, Ewald & Associates, PC was made an alternate
    due to its representative's time constraints and that the Southeast
    Regional Section Eight Housing Association (SERSHA) was added as a
    member of the Committee)

                               Federal Government

                U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

        The Committee met in Washington, DC, on April 27 and 28, 1999, on
    June 2 and 3, 1999, on June 21 and 22, 1999, on July 19 and 20, 1999,
    on August 19 and 20, 1999 and on September 28 and 29th, 1999. (See
    notices of meetings: 64 FR 26923, May 18, 1999 and 64 FR 30450, June 8,
    1999.) These Committee meetings were led by Larry Susskind and David
    Fairman of the Consensus Building Institute (``CBI''), as facilitators/
    mediators. Tom Fee and Michael Lewis, also of CBI, assisted in the
    facilitation/mediation. Kelly Davenport of CBI provided further
    assistance, taking minutes of the meetings.
        HUD appreciates the active participation in this negotiated
    rulemaking process by such knowledgeable groups. The participants spent
    many days reviewing materials, working with others in small groups to
    prepare draft position papers, attended meetings of the Committee, and
    participated in teleconferences. Ultimately, the members reached
    consensus on the content of this rule. During the course of their
    deliberations, they provided valuable advice to the Department on
    broader issues, not reflected in this rule.
    III. Discussion of Comments
                A. General
        This section provides a brief overview of the most important issues
    discussed in the meetings of the Committee over the course of its
    deliberations. This overview of the issues is not a detailed recitation
    of the more than 12 days of meetings or the multiple additional work
    group meetings/conference calls that took place during the term of the
    Committee's charter but rather highlights the significant issues
    considered by the Committee. In addition to providing HUD with
    recommendations related to this regulation on the methodology for
    allocating Section 8 renewal funding, the Committee also provided
    recommendations on related issues (including policy on ACC reserves)
    that HUD intends to implement through a Federal Register Notice. This
    overview of the discussion of the Committee focuses only on the issues
    related to the regulation itself and not on the issues discussed in
    conjunction with developing separate Notice(s).
                B. Establishing the Baseline
        To initiate discussion of housing assistance allocation methods,
    HUD staff provided background information to the Committee regarding
    the various methods used over time to calculate renewals. An
    explanation of the current renewal funding Notice, PIH 98-65 (HA),
    including the process for setting the baseline and awarding renewal
    funding for Fiscal Year 1998, was reviewed by HUD staff.
        Issue. The Committee discussed specific details regarding
    accounting rules and anomalies of the current method of calculating the
    allocation of renewal funding. Several members expressed concern that
    there was the possibility of discrepancies between historical
    documented unit counts and the unit counts in HUD's data systems.
    Members questioned whether a crosscheck of the data in the HUDCAPS
    system against their own data was possible. Some members felt that the
    October 1, 1997 baseline data were somewhat arbitrary and could
    adversely impact agencies. Members suggested alternative ways to
    setting the baseline units, such as choosing dates other that October
    1, 1997. Concerns about using October 1, 1997 included that this date
    ``freezes'' many inequities among PHAs (e.g., rewarding those who
    continued leasing during the 90-day freeze period declared by HUD). A
    suggestion was made to use October 1, 1998 as the baseline date,
    because at this time all PHAs would have had time to adjust to HUD
    interim rules and guidelines on baseline accounting and renewal
    funding.
        Response. HUD noted that it had confidence that data discrepancies
    in HUDCAPS are minor, and that most of the discrepancies between
    HUDCAPS and PHA data would be attributable to data entry problems, or
    differences in interpretations of unit or project classifications. HUD
    representatives stated that they would check the kinds of information
    that could be shared and how this information could be shared. HUD
    representatives stated that they had revised the baseline determination
    method to ensure that each PHA would receive the higher of the number
    contracted or the number leased on October 1, 1997. HUD indicated that
    the statute required a focus on the state of housing authorities as of
    October 1, 1997 and that using other dates would not satisfy the
    statutory mandate.
        Conclusion: The Committee reached consensus that the baseline
    number of units should be the higher of the number of units leased as
    of October 1, 1997 or the number of units reserved by HUD as of October
    1, 1997. The Department has added approximately 19,000 units to its
    previously reserved number of units as a result of the comparison. This
    increase in the number of units as well as transactions that have taken
    place since October 1, 1997 will be reflected in the baseline
    established as of December 31, 1999, in accordance with the rule. In
    response to the Committee's recommendation, HUD will establish a
    mechanism for PHAs to request an adjustment of the baseline unit number
    assigned to them if they can demonstrate that the number in HUD's
    system is inaccurate.
                C. Unit-Based vs. Dollar Based Funding Allocation
        Issue. The Committee discussed moving from the current ``unit-
    based'' funding system (using units multiplied by an adjusted per unit
    cost as the basis for determining annual funding amounts) to a
    ``dollar-based'' system: A dollar-based system would fund PHAs by
    adjusting their previous year's dollar grant amount to account for
    changes in local rental costs, without considering how many units were
    rented through the program in the previous year. Initially there
    appeared to be a preference for a dollar-based system, for reasons of
    administrative simplicity and ability to serve more households if costs
    are contained. Some Committee members raised concerns regarding
    switching to a dollar-based system, because it might lead to
    significant swings in the number of families assisted year-to-year.
        The Committee extensively explored possible adjustment factors that
    would be applied to PHA's previous year grant amount in a dollar-based
    system. The Committee reviewed data analysis from Andersen Consulting
    Corporation that compared the accuracy of different adjustment factors
    against the actual experience of approximately 400 housing authorities
    over the course of 3 years (1995-1997) for which reliable historical
    data was available. The most reliable predictor of future costs proved
    to be changes in a housing authority's most recent year's actual costs
    in HUDCAPS. The analysis uncovered significant problems in using MTCS
    data for the purpose of calculating renewals at this time.
        Response. HUD indicated that it is cognizant of its obligation to
    protect existing assisted families from losing their assistance due to
    a shortfall in funding. In addition a number of the reasons why per
    unit costs might vary would not be related to the PHA's discretionary
    actions (e.g., the need to meet new income targeting requirements).
        Conclusion: After much discussion, the Committee and HUD reached
    consensus that the Department should have authority to use the current
    unit-based method for the next several years. Given the limitations of
    current data systems and adjustment factors, the unit-based system has
    the best potential to predict fluctuations in per unit costs and to
    ensure reasonably adequate funding to support the reserved number of
    units in a housing authority's inventory.
        Issue. Some members of the Committee, including HUD, expressed
    concern that the current method creates a disincentive for PHAs to
    contain per-unit costs, because the higher a PHA's per-unit costs, the
    higher its funding for the next year. Additionally, the current system
    creates a disincentive for PHAs to lease more than their contracted
    number of units, because their funding allocations are determined based
    on the number of reserved units, not the leased number of units.
        Other members of the Committee asserted that costs are largely
    outside of the control of a PHA. Rents are set by the local market and
    the size of the family. The PHA does not control the local rental
    market and has little control over the family size, because it has to
    follow the waiting list. Tenant contributions are affected for the most
    part by tenant incomes. Again, this factor is largely controlled by
    residents themselves, as well as the local job market. However, in some
    important instances, a PHA can influence the per-unit cost. These
    instances include, but are not limited to, rent reasonableness, subsidy
    standards, and payment standards. (For this purpose, ``subsidy
    standards'' refer to a PHA's policy for determining the appropriate
    unit size for a particular household.)
        Committee members also made the point that PHAs themselves do not
    benefit from an increase in the grant amount for renewals, because
    their administrative fee is not tied to the grant amount used to
    subsidize families. The administrative fee formula actually provides an
    incentive for cost containment, because a PHA would benefit from being
    able to lease more units--which could only be accomplished by lower
    per-unit costs.
        Members of the Committee also emphasized how difficult it would be
    to isolate how much of a change in per-unit costs was attributable to
    actions taken by a PHA as opposed to market/demographic changes totally
    outside the control of the PHA.
        Response. HUD is concerned that the regulation's methodology not
    create an incentive or bias toward higher per-unit costs as a result of
    PHA policies that can affect per-unit costs. Such a bias can result
    both from the current rule's characteristic of adapting to higher costs
    over time without penalty and from its subtraction of funding to
    support additional units that a PHA is able to put under lease because
    of cost saving measures. HUD acknowledged that there are very
    significant difficulties administratively in isolating the effects of
    PHA policies on cost per unit. HUD proposed that the rule give it
    flexibility to put in place checks and balances that would offset the
    impact of PHA policies on per-unit costs and ultimately the allocation
    amount.
        Conclusion: HUD's proposed mechanism for addressing cost
    containment is embodied in paragraph (g) of the rule. Paragraph (g)(1)
    permits HUD to put in place mechanisms to step in to prevent a PHA from
    becoming overextended and exceeding its allocated funding. Paragraph
    (g)(2) gives HUD the ability to act on either a case-by-case or a
    systemic basis. If the Department's analysis of the program costs and
    related factors determines that systemic adjustments, including cost
    containment and other cost adjustments, to the program are necessary
    because of threats to the future availability of funding, HUD has
    agreed that it would consult with PHA representatives and other
    relevant stakeholders before putting such a policy in place. HUD
    further indicated that any such cost adjustment would be consistent
    with the legitimate program goals. These goals are:
        (1) Deconcentration of poverty and expanding housing opportunities;
        (2) Not imposing unreasonable rent burdens on residents;
        (3) Compliance with the income targeting requirements of the Public
    Housing Reform Act;
        (4) Consistency with applicable consolidated plan(s);
        (5) Assuring rent reasonableness;
        (6) Maintaining program efficiency and economy;
        (7) Providing service to additional households within budgetary
    limitations; and
        (8) Providing service to the adjusted baseline number of families.
        Paragraph (g)(3) gives HUD the flexibility to keep PHAs with
    declining per unit costs from losing funding under the regulation and
    to allow additional households to be served if costs are contained.
    Many factors are intersecting to influence per unit costs at this time
    (including the merger of the certificate and voucher program, the
    requirement for income targeting, the requirement that payment
    standards not impose unreasonable rent burdens, the flexibility of
    housing authorities to set payment standards between 90% and 110% of
    FMR on their own as well as the continued implementation of this rule's
    methodology that indexes funding closely to per unit costs). HUD will
    gain program experience as it monitors program costs and analyzes the
    reasons for fluctuations in costs.
                D. Inflation Factors
        Issue: The Committee considered other more up-to-date measurement
    of rents, or weighting the Annual Adjustment Factor so that the most
    recent inflation data count for more than older data. Additionally, the
    Committee recommended that inflation factors be more closely attuned to
    individual PHAs' housing markets: examples included local rents, and
    the use of local government or real estate agency data on rents.
        Response: Based on its program experience, HUD staff advised that
    some of these options could work, but that the smaller the sample area,
    the higher the cost to obtain statistically valid data on costs.
    Sometimes the more accurate the Annual Adjustment Factors (AAFs) could
    produce lower rather than higher inflation factors for some PHAs. A
    review and comparison of the Annual Adjustment Factor and the National
    Inflation Factor were presented.
        Conclusion: The Committee agreed to keep the AAF as it exists in
    the rule for the time being. HUD will examine whether it can get better
    data and more predictable information in the future. At the Committee's
    request, HUD added a provision that will allow it to consider requests
    from PHAs on a case-by-case basis in instances where because of special
    circumstances the AAF is not accurately predicting per unit cost.
    IV. Renewal Funding Level Consideration
        The renewal formula included in this regulation assumes
    continuation of the current system, in which the Department allocates
    sufficient funds to renew 100 percent of the units reserved for a PHA,
    even though many PHAs do not use all of the allocated funds. The
    Department subsequently recaptures funds that PHAs do not use after the
    end of their fiscal years. This system of initially overfunding on a
    national basis and then recapturing, has the advantage of assuring that
    each PHA will have the necessary renewal funds, but it also has created
    some confusion in Congress and elsewhere.
        At the end of the fiscal year 2000 appropriations process, the
    Senate Appropriations Committee raised substantial concerns about the
    tenant-based assistance program that appear to be partly related to
    this system. The Administration is exploring the feasibility and
    desirability of an approach that would minimize overfunding and
    subsequent recapture, while still meeting the basic requirement that
    each PHA have the necessary funding for timely renewals. The evaluation
    and any Administration proposals will be mindful of the consensus
    reached by the negotiated rulemaking committee.
    V. Explanation of Rule Text
                Renewal Units
        This rule revises part 982, governing tenant-based assistance. It
    adds a new defined term, ``renewal units'' to the definitions found at
    Sec. 982.4. This rule also adds a new Sec. 982.102 to outline a multi-
    step process for calculating the number of units that constitute
    ``renewal units.'' The total number of renewal units will be assigned
    to one or more (if applicable) of a housing agency's funding
    increments. Ultimately, the Department will multiply the number of
    renewal units times the adjusted per unit cost to calculate the amount
    of funding a housing agency will receive to renew a given funding
    increment.
                Applicability
        This rule will apply to the renewal of funding increments that
    expire in calendar year 2000 and thereafter (the initial increments
    covered by the regulation would be those that expire on January 31,
    2000). The Department adjusted to a calendar year basis for allocating
    renewal funding in the first quarter of 1999. The Department adjusted
    to a calendar year basis to ensure that it would have adequate time to
    process renewal funding in advance of expirations even if
    appropriations are not finalized until late in a given fiscal year or
    early in a subsequent fiscal year. The regulation also makes it clear
    that it applies to units that a housing agency project bases pursuant
    to regulatory flexibility to project base up to 15% of the tenant-based
    units that are reserved for it.
                Renewal Methodology
        The new Sec. 982.102 outlines the method for calculating renewal
    funding. The Department does have the ability to adjust the amounts
    allocated if the Department's appropriation is not sufficient to fully
    fund all housing agencies pursuant to the regulation.

    Determining the Amount of Budget Authority Allocated for Renewal of an
    Expiring Funding Increment
        The basic calculation the Department performs to determine the
    renewal funding for an expiring increment is multiplication of the
    number of renewal units assigned to the increment by the adjusted per
    unit cost.
        For example, the Department calculated the adjusted baseline number
    of units for the Main Street Housing Authority to be 115 for the year
    2000. It then multiplied the adjusted baseline number of units (115) by
    the final per unit cost ($4979) to calculate the gross amount of
    renewal funding for the housing authority, $572,585.
                Determining the Number of Renewal Units
        The Department will determine the number of renewal units for each
    calendar year as of the last day of the previous calendar year through
    a 3-step process.
        Step 1--The Department will calculate the initial baseline. It will
    be set at the reserved number of units (the number of units awarded to
    the housing agency during the history of the program) as of December
    31, 1999. The statute requires that the Department ensure, at a
    minimum, sufficient funding for the number of families assisted as of
    October 1, 1997. The Department has already compared the number of
    reserved units as of October 1, 1997 with the number of program
    families assisted as of that date. In instances in which the number of
    program families exceeded the reserved units as of October 1, 1997, the
    Department reserved additional units to account for the difference.
    These additional units were awarded to housing agencies in or before
    September of 1999. Because of the actions the Department has taken to
    account for the October 1, 1997 statutory minimum, it believes the
    number of reserved units will already have taken into account the
    statutory October 1, 1997 requirement when it sets the initial baseline
    as of December 31, 1999. In the event the Department has made an error
    in its analysis to ensure adherence to the statutory minimum, the
    Department has the ability to correct for such an error in
    982.102(d)(3).
        For example, on December 31, 1999, the Department's records
    indicated that it had reserved 110 units for the housing authority. The
    Department would set the initial baseline at 110 units.
        Step 2--Each calendar year, the Department will review all of the
    transactions that have altered the number of reserved units since it
    set the initial baseline. The Department will make adjustments to add
    to the initial baseline any additional units awarded to the housing
    authority by the Department supported from additional funding reserved
    since setting of the initial baseline. Adjustments to the baseline
    number of units will include units supported by incremental funding as
    well as other funding such as that awarded to provide continued
    assistance to assisted families pursuant to the conversion of project
    based assistance to tenant-based assistance. The Department also will
    include adjustments for budget authority reallocated from one housing
    authority to others. In this case, the adjusted baseline of the PHA
    whose budget authority is being reallocated would decrease, reflecting
    the decrease in budget authority, and the adjusted baseline of PHAs to
    which the budget authority is being reallocated would increase.
        For example, in calendar year 2000, the Main Street Housing
    Authority received 10 incremental units in the Family Unification
    Program. In 2000, the authority also had 10 units added to its
    inventory as a result of the conversion of a property from project
    based to tenant-based assistance. All 20 of these additional units
    would be added to the initial baseline to calculate the adjusted
    baseline number of units, 130 for the year 2001.
        Step 3--In its final step in determining the number of renewal
    units that will be used to calculate renewal funding, the Department
    will further adjust the baseline number by subtracting the number of
    units supported by contracts that are not scheduled to expire until
    after the end of the calendar year. The baseline number of units
    includes such non-expiring units; however, the Department has
    previously allocated sufficient budget authority to support such units
    beyond the time period for which it is allocating renewal funding.
        For example, the Department's records indicate that the Main Street
    Housing Authority has 15 units in its Initial Baseline number of units
    that are not scheduled to expire until 2002. The Department would then
    subtract 15 units from the Main Street Housing Authority's 130 units to
    revise the Adjusted Baseline Number of Units to 115. Similarly, in the
    event that the Department awarded budget authority for 50 incremental
    units for Welfare to Work in 2000 that would not expire until 2001, the
    Department would subtract the 50 units from the baseline in 2000
    because they would not expire during that year.
                Determining the Adjusted per Unit Cost
        The Department will derive an annual actual per unit cost using a 3
    step process.
        Step 1--The Department will extract the total expenditures for all
    of the housing authority's Section 8 tenant-based assistance programs
    and the unit months leased information from the most recent approved
    year end statement (Form HUD-52681) that each housing authority has
    filed with the Department. The Department will divide the total
    expenditures for all of the housing authority's Section 8 tenant-based
    assistance programs by the unit months leased to derive an average
    monthly per unit cost.
        Step 2--The Department will multiply the monthly per unit cost by
    12 (months) to obtain an annual per unit cost.
        Step 3--The Department will then multiply the result of step 2
    above by the Section 8 Housing Assistance Payments Program Contract
    Rent Annual Adjustment Factors (table 1 amount with the highest cost
    utility included) for the applicable intervening Federal Fiscal Years
    between the time of the last year end statement and the time of the
    renewal to generate an adjusted annual per unit cost.
        For example, the Main Street Housing Authority's 1998 Year End
    Statement (the most recent one approved) indicated that it expended
    $120,000 in its tenant-based Section 8 assistance programs and that it
    achieved 300 unit months leased. The Department would take the total
    expenditure ($120,000) and divide it by the unit months leased (300) to
    calculate the monthly per unit cost ($400) and then multiply the result
    by 12 months to obtain an actual annual per unit cost ($4,800).
        To continue the example, the Annual Adjustment Factors for the Main
    Street Housing Authority were 1.5% in 1999 and 2.2% for 2000. The
    Department would take the original annual per unit cost ($4,800) and
    adjust it by 1.5% ($4,872) and then again by 2.2% to obtain the
    resulting adjusted per unit cost ($4,979).
        Many housing agencies have jurisdictions that cover multiple rental
    markets with separate AAFs. In such instances, the Department will use
    the highest AAF that applies to a portion of the housing agency's units
    and use it as the adjustment factor.
        For example, the Main Street Housing Authority is a regional agency
    that covers a metropolitan area with an AAF for 1999 set at 2.1% and
    for 2000 set at 1.9%. The housing authority's jurisdiction also covers
    several non-metropolitan counties outside of the metropolitan area
    assigned an AAF for 1999 of 1.5% and for 2000 set at 2.0%. In this
    instance, the Department will use the higher metropolitan area AAF for
    1999 (2.1%) and the higher non-metropolitan area AAF for 2000 (2.0%).
                CACC Amendment To Add Renewal Funding
        The Department intends to process renewal funding if possible at
    least a month before a given funding increment is due to expire. A
    normal renewal will extend the expiration date for one year.
                Modification of Allocation of Budget Authority
        The regulation permits HUD to address the issue of cost containment
    through this provision. Paragraph (g)(1) permits HUD to put in place
    mechanisms to step in to prevent a PHA from becoming overextended and
    exceeding its allocated funding. Paragraph (g)(2) gives HUD the ability
    to act on either a case-by-case or a systemic basis. If the
    Department's analysis of the program costs and related factors
    determines that systemic adjustments to the program, including cost
    containment and other cost adjustments, are necessary because of
    threats to the future availability of funding, HUD has agreed that it
    would consult with PHA representatives and other relevant stakeholders
    before putting such a policy in place. Paragraph (g)(3) gives HUD the
    flexibility to keep PHAs with declining per unit costs from losing
    funding under the regulation and to allow additional households to be
    served if costs are contained.
                Ability To Prorate and Synchronize Contract Funding
                        Increments
        Notwithstanding the formula amount that HUD derives pursuant to the
    regulation, the Department is permitted to prorate the renewal of units
    that expire on different dates throughout the year in order to have
    their expiration date match the expiration of other units within the
    housing authority's inventory and/or a given point in time in relation
    to the housing authority's fiscal year. The Department will consider
    using this flexibility in order to merge the multiple sets of units for
    the purpose of allocating renewal funding in the future. The Department
    desires to consolidate increments as much as possible in order to
    reduce the tracking required for thousands of separate increments. The
    Department will endeavor to synchronize and/or merge all increments so
    as to expire 6 months after the housing agency's fiscal year. Such a
    schedule would permit the Department to use a year end statement that
    is less than a year old to calculate current per unit costs at the time
    of the renewal.
        For example, the Main Street Housing Authority has 115 units that
    require renewal on April 1, 2000 and also has 20 units that were
    awarded to it on August 1, 1999 that would require renewal on August 1,
    2000. If the Department decided to merge the two sets of units for
    future renewals, it would have the ability to prorate the renewal of
    the 20 units so that they would expire on April 1, 2001, simultaneously
    with the expiration of the other 115 units. The Department would be
    able to merge the two sets of units into one set of 135 units for the
    purpose of calculating future renewal funding.
                Reallocation of Renewal Units
        This provision gives HUD the ability by Federal Register notice to
    permanently de-reserve units and their associated budget authority from
    a PHA with performances deficiencies (particularly underleasing) and to
    reallocate the budget authority to other PHAs. The reallocation would
    not preclude a PHA from being awarded new units in the future.
    VI. Findings and Certifications
                Impact on Small Entities
        The Regulatory Flexibility Act, 5 U.S.C. 601-612, requires that an
    agency analyze the impact of a rule on small entities whenever it
    determines that the rule is likely to have a significant impact on a
    substantial number of small entities. Most small PHAs do not qualify as
    ``small governmental entities'' under the Act. However, this rule,
    developed in consultation with a negotiated rulemaking committee
    including representatives of small PHAs, will not be likely to have a
    significant impact on a substantial number of small PHAs or on the few
    of them that qualify as ``small governmental entities.'' Therefore, no
    further analysis is required under the Act.
                Environmental Impact
        This final rule does not direct, provide for assistance or loan and
    mortgage insurance for, or otherwise govern or regulate, real property
    acquisition, disposition, leasing (other than tenant-based rental
    assistance), rehabilitation, alteration, demolition, or new
    construction. This rule also does not establish, revise or provide for
    standards for construction or construction materials, manufactured
    housing, or occupancy. Accordingly, under HUD regulations (24 CFR
    50.19(c)(1)), this rule is categorically excluded from the requirements
    of the National Environmental Policy Act of 1969 (42 U.S.C. 4321) and
    is not subject to environmental review under related laws and
    authorities (24 CFR 50.4).
                Federalism Impact
        The General Counsel, as the Designated Official under section 6(a)
    of Executive Order 12612, Federalism, has determined that the policies
    contained in this rule will not have substantial direct effects on
    states or their political subdivisions, or the relationship between the
    federal government and the states, or on the distribution of power and
    responsibilities among the various levels of government. As a result,
    the rule is not subject to review under the order.
                Unfunded Mandates
        The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1532)
    establishes requirements for Federal agencies to assess the effects of
    their regulatory actions on State, local, and tribal governments and
    the private sector. This proposed rule does not impose a Federal
    mandate that will result in the expenditure by State, local, or tribal
    governments in the aggregate, or by the private sector, of $100 million
    or more in any one year.
                Regulatory Review
        The Office of Management and Budget (OMB) has reviewed this
    proposed rule under Executive Order 12866, Regulatory Planning and
    Review, issued by the President on September 30, 1993. Any changes made
    in this proposed rule after its submission to OMB are identified in the
    docket file, which is available for public inspection during regular
    business hours in the Regulations Division, Office of General Counsel,
    Room 10276, U.S. Department of Housing and Urban Development, 451
    Seventh Street, SW, Washington, DC 20410.
                Catalog
        The Catalog of Federal Domestic Assistance numbers for these
    programs are 14.855 and 14.857.
    List of Subjects in 24 CFR Part 982
        Grant programs--housing and community development, Housing, Rent
    subsidies.

        Accordingly, HUD amends part 982 of title 24 of the Code of Federal
    Regulations as follows:

      PART 982--SECTION 8 TENANT-BASED ASSISTANCE: HOUSING CHOICE VOUCHER
                                    PROGRAM
        1. The authority citation for part 982 continues to read as
    follows:

        Authority: 42 U.S.C. 1437f and 3535(d).

        2. Amend Sec. 982.4(b) by adding the definition of Renewal units,
    in alphabetical order, to read as follows:

    Sec. 982.4 Definitions.
              * * * * * * *
        (b) * * *
        Renewal units. The number of units, as determined by HUD, for which
    funding is reserved on HUD books for a PHA's program. This number is
    used is calculating renewal budget authority in accordance with
    Sec. 982.102.
              * * * * * * *

    Sec. Sec. 982.102 and 982.103 [Redesignated as Sec. Sec. 982.103 and
    982.104]
        3. Redesignate Sec. Sec. 982.102 and 982.103 as Sec. Sec. 982.103
    and 982.104, respectively.
        4. Add a new Sec. 982.102 to read as follows:

    Sec. 982.102 Allocation of budget authority for renewal of expiring
                        CACC funding increments.

        (a) Applicability. This section applies to the renewal of CACC
    funding increments in the program (as described in Sec. 982.151(a)(2))
    that expire after December 31, 1999 (including any assistance that the
    PHA has attached to units for project based assistance under part 983
    of this title). This section implements section 8(dd) of the 1937 Act
    (42 U.S.C. 1437f(dd)),
        (b) Renewal Methodology. HUD will use the following methodology to
    determine the amount of budget authority to be allocated to a PHA for
    the renewal of expiring CACC funding increments in the program, subject
    to the availability of appropriated funds. If the amount of
    appropriated funds is not sufficient to provide the full amount of
    renewal funding for PHAs, as calculated in accordance with this
    section, HUD may establish a procedure to adjust allocations for the
    shortfall in funding.
        (c) Determining the amount of budget authority allocated for
    renewal of an expiring funding increment. Subject to availability of
    appropriated funds, as determined by HUD, the amount of budget
    authority allocated by HUD to a PHA for renewal of each program funding
    increment that expires during a calendar year will be equal to:
        (1) Number of renewal units. The number of renewal units assigned
    to the funding increment (as determined by HUD pursuant to paragraph
    (d) of this section); multiplied by
        (2) Adjusted annual per unit cost. The adjusted annual per unit
    cost (as determined by HUD pursuant to paragraph (e) of this section).
        (d) Determining the number of renewal units.--(1) Number of renewal
    units. HUD will determine the total number of renewal units for a PHA's
    program as of the last day of the calendar year previous to the
    calendar year for which renewal funding is calculated. The number of
    renewal units for a PHA's program will be determined as follows:
        (i) Step 1: Establishing the initial baseline. HUD will establish a
    baseline number of units (``baseline'') for each PHA program. The
    initial baseline equals the number of units reserved by HUD for the PHA
    program as of December 31, 1999.
        (ii) Step 2: Establishing the adjusted baseline. The adjusted
    baseline equals the initial baseline with the following adjustments
    from the initial baseline as of the last day of the calendar year
    previous to the calendar year for which renewal funding is calculated:
        (A) Additional units. HUD will add to the initial baseline any
    additional units reserved for the PHA after December 31, 1999.
        (B) Units removed. HUD will subtract from the initial baseline any
    units de-reserved by HUD from the PHA program after December 31, 1999.
        (iii) Step 3: Determining the number of renewal units. The number
    of renewal units equals the adjusted baseline minus the number of units
    supported by contract funding increments that expire after the end of
    the calendar year.
        (2) Funding increments. HUD will assign all units reserved for a
    PHA program to one or more funding increment(s).
        (3) Correction of errors. HUD may adjust the number of renewal
    units to correct errors.
        (e) Determining the adjusted per unit cost. HUD will determine the
    PHA's adjusted per unit cost when HUD processes the allocation of
    renewal funding for an expiring contract funding increment. The
    adjusted per unit cost calculated will be determined as follows:
        (1) Step 1: Determining monthly program expenditure.--(i) Use of
    most recent HUD-approved year end statement. HUD will determine the
    PHA's monthly per unit program expenditure for the PHA certificate and
    voucher programs (including project-based assistance under such
    programs) under the CACC with HUD using data from the PHA's most recent
    HUD-approved year end statement.
        (ii) Monthly program expenditure. The monthly program expenditure
    equals:
        (A) Total program expenditure. The PHA's total program expenditure
    (the total of housing assistance payments and administrative costs) for
    the PHA fiscal year covered by the approved year end statement; divided
    by
        (B) Total unit months leased. The total of unit months leased for
    the PHA fiscal year covered by the approved year end statement.
        (2) Step 2: Determining annual per unit cost. HUD will determine
    the PHA's annual per unit cost. The annual per unit cost equals the
    monthly program expenditures (as determined under paragraph (e)(1)(ii)
    of this section) multiplied by 12.
        (3) Step 3: Determining adjusted annual per unit cost. (i) HUD will
    determine the PHA's adjusted annual per unit cost. The adjusted annual
    per unit cost equals the annual per unit cost (as determined under
    paragraph (e)(2) of this section) multiplied cumulatively by the
    applicable published Section 8 housing assistance payments program
    annual adjustment factors in effect during the period from the end of
    the PHA fiscal year covered by the approved year end statement to the
    time when HUD processes the allocation of renewal funding.
        (ii) Use of annual adjustment factor applicable to PHA
    jurisdiction. For this purpose, HUD will use the annual adjustment
    factor from the notice published annually in the Federal Register
    pursuant to part 888 that is applicable to the jurisdiction of the PHA.
    For a PHA whose jurisdiction spans multiple annual adjustment factor
    areas, HUD will use the highest applicable annual adjustment factor.
        (iii) Use of annual adjustment factors in effect subsequent to most
    recent Year End Statement. HUD will use the Annual Adjustment Factors
    in effect during the time period subsequent to the time covered by the
    most recent HUD approved Year End Statement and the time of the
    processing of the contract funding increment to be renewed.
        (iii) Special circumstances. At its discretion, HUD may modify the
    adjusted annual per unit cost based on receipt of a modification
    request from a PHA. The modification request must demonstrate that
    because of special circumstances application of the annual adjustment
    factor will not provide an accurate adjusted annual per unit cost.
        (4) Correction of errors. HUD may correct for errors in the
    adjusted per unit cost.
        (f) CACC amendment to add renewal funding. HUD will reserve
    allocated renewal funding available to the PHA within a reasonable time
    prior to the expiration of the funding increment to be renewed and
    establish a new expiration date one-year from the date of such
    expiration.
        (g) Modification of allocation of budget authority.--(1) HUD
    authority to conform PHA program costs with PHA program finances
    through Federal Register notice. In the event that a PHA's costs
    incurred threaten to exceed budget authority and allowable reserves,
    HUD reserves the right, through Federal Register notice, to bring PHA
    program costs and the number of families served, in line with PHA
    program finances.
        (2) HUD authority to limit increases of per unit cost through
    Federal Register notice. HUD may, by Federal Register notice, limit the
    amount or percentage of increases in the adjusted annual per unit cost
    to be used in calculating the allocation of budget authority.
        (3) HUD authority to limit decreases to per unit costs through
    Federal Register notice. HUD may, by Federal Register notice, limit the
    amount or percentage of decreases in the adjusted annual per unit cost
    to be used in calculating the allocation of budget authority.
        (4) Contents of Federal Register notice. If HUD publishes a Federal
    Register notice pursuant to paragraphs (g)(1), (g)(2) or (g)(3) of this
    section, it will describe the rationale, circumstances and procedures
    under which such modifications are implemented. Such circumstances and
    procedures shall, be consistent with the objective of enabling PHAs and
    HUD to meet program goals and requirements including but not limited
    to:
        (i) Deconcentration of poverty and expanding housing opportunities;
        (ii) Reasonable rent burden;
        (iii) Income targeting;
        (iv) Consistency with applicable consolidated plan(s);
        (v) Rent reasonableness;
        (vi) Program efficiency and economy;
        (vii) Service to additional households within budgetary
    limitations; and
        (viii) Service to the adjusted baseline number of families.
        (5) Public consultation before issuance of Federal Register notice.
    HUD will design and undertake informal public consultation prior to
    issuing Federal Register notices pursuant to paragraphs (g)(1) or
    (g)(2) of this section.
        (h) Ability to prorate and synchronize contract funding increments.
    Notwithstanding paragraphs (c) through (g) of this section, HUD may
    prorate the amount of budget authority allocated for the renewal of
    funding increments that expire on different dates throughout the
    calendar year. HUD may use such proration to synchronize the expiration
    dates of funding increments under the PHA's CACC.
        (i) Reallocation of budget authority. If a PHA has performance
    deficiencies, such as a failure to adequately lease units, HUD may
    reallocate some of its budget authority to other PHAs. If HUD
    determines to reallocate budget authority, it will reduce the number of
    units reserved by HUD for the PHA program of the PHA whose budget
    authority is being reallocated and increase the number of units
    reserved by HUD for the PHAs whose programs are receiving the benefit
    of the reallocation, so that such PHAs can issue vouchers. HUD will
    publish a notice in the Federal Register that will describe the
    circumstances and procedures for reallocating budget authority pursuant
    to this paragraph.

        Dated: October 15, 1999.

    Deborah Vincent,

    General Deputy Assistant, Secretary for Public and Indian Housing.

    [FR Doc. 99-27445 Filed 10-20-99; 8:45 am]

    BILLING CODE 4210-33-P
                                consultant costs
        Question. Mr. Secretary, please identify all consultants who have
    worked for or are working for the Department since the beginning of
    fiscal year 1999 by name, amount of the contract, purpose of the
    contract, duration of the contract and the type of bidding process
    used?
        Answer. An attachment has been provided that identifies all
    consultants who have worked for or are working for the Department since
    the beginning of fiscal year 1999 by name, salary rate, purpose of
    project, and duration of employment. These consultants are hired
    through the Office of Human Resources and not via contracts, therefore
    the type of bidding process used is not applicable in this case.

                                                                           CONSULTANTS
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                    Name                   Salary                               Dates of employment             Office                Nature of project
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Elizabeth Burdock...................   $264.00  PD.....................  08/26/96 to present.....  Office of Housing.......  To work with staff to
                                                                                                                                  develop task orders for
                                                                                                                                  the National Partners in
                                                                                                                                  Homeownership program.
    Shaun Donovan.......................    333.60  PD.....................  10/13/98 to 07/17/99....  Office of Housing.......  To provide advice on
                                                                                                                                  multifamily housing,
                                                                                                                                  finance and policy
                                                                                                                                  matters.
    Andrew Fay..........................    191.66  PD.....................  10/25/98 to 04/10/99....  Office of Multifamily     To draft interim and final
                                                                                                        Housing Assistance        regulations on Owner
                                                                                                        Restructuring.            eligibility section of
                                                                                                                                  Operating Procedures guide
                                                                                                                                  and provide assistance in
                                                                                                                                  drafting Portfolio
                                                                                                                                  Restructuring Agreement
                                                                                                                                  and protocols.
    Todd Richardson.....................     38.40  PH.....................  10/08/99 to 05/20/00....  Office of Community       To perform analysis,
                                                                                                        Planning and              comparison and evaluation
                                                                                                        Development.              of state and SBA reported
                                                                                                                                  disaster data.
    Catharine Vernon....................    384.62  PD.....................  01/03/99 to 05/22/99....  Office of Multifamily     To develop and implement
                                                                                                        Housing Assistance        the Asset Allocation and
                                                                                                        Restructuring.            Critical data Tracking
                                                                                                                                  system.
    Michael Murphy......................    269.23  PD.....................  12/10/98 to 07/17/99....  Office of Multifamily     To develop system
                                                                                                        Housing Assistance        requirements and implement
                                                                                                        Restructuring.            a system to plan, monitor,
                                                                                                                                  and review the status of
                                                                                                                                  assigned assets, as well
                                                                                                                                  as create oversight
                                                                                                                                  controls.
    Howard Menell.......................    482.61  PD.....................  03/14/99 to 04/24/99....  Office of Multifamily     To negotiate final
                                                                                                        Housing Assistance        Portfolio Restructuring
                                                                                                        Restructuring.            Agreement for public and
                                                                                                                                  private PAE's.
    Frederick Tombar....................    364.16  PD.....................  01/19/99 to O6/19/99....  Office of Housing.......  To advise the Assistant
                                                                                                                                  Secretary on Section 8
                                                                                                                                  contract administration
                                                                                                                                  issues. Represent the
                                                                                                                                  Assistant Secretary before
                                                                                                                                  GAO, OMB and Congressional
                                                                                                                                  Budget Committees.
    Engram A. Lloyd.....................    372.64  PD.....................  11/29/99 to 02/12/00....  Office of Single Family   To advise on impact,
                                                                                                        Housing.                  efficiencies and benefits
                                                                                                                                  derived from
                                                                                                                                  organizational realignment
                                                                                                                                  within Home Ownership
                                                                                                                                  Centers. To evaluate the
                                                                                                                                  adequacy of property
                                                                                                                                  disposition program
                                                                                                                                  controls and recommended
                                                                                                                                  necessary changes to
                                                                                                                                  safeguard HUD's assets and
                                                                                                                                  insurance fund.
    Ruth Roman..........................    275.00  PD.....................  10/07/99 to 05/20/00....  Office of Housing.......  To work with Grants
                                                                                                                                  Technical Representatives,
                                                                                                                                  contracts office and
                                                                                                                                  contractor to manage
                                                                                                                                  development of new
                                                                                                                                  commercials and media
                                                                                                                                  campaign for Federal
                                                                                                                                  Housing Administration
                                                                                                                                  (FHA).
    Bonnie Jouhari......................    124.08  PD.....................  03/06/00 to present.....  Baltimore Field Office..  To provide research, fact
                                                                                                                                  finding, telephone and in
                                                                                                                                  person interviews, and
                                                                                                                                  file reviews with regard
                                                                                                                                  to counseling, and housing
                                                                                                                                  mobility.
    Emmanuel Cleaver, II................     46.59  PH.....................  09/21/99 to present.....  Office of Senior          To provide the Secretary's
                                                                                                        Community.                Representative, Great
                                                                                                                                  Plains, with advice on
                                                                                                                                  matters involving
                                                                                                                                  development and public
                                                                                                                                  service diversification.
                                                                                                                                  Analyzes and evaluates the
                                                                                                                                  Department's current
                                                                                                                                  procedures and makes
                                                                                                                                  recommendations for
                                                                                                                                  improvements and refines
                                                                                                                                  in the methodology.
    Truman Holland......................    362.00  PD.....................  07/20/98 to present.....  Office of Multifamily     To make written
                                                                                                        Housing Assistance        recommendations to
                                                                                                        Restructuring.            Congress outlining the
                                                                                                                                  characteristics of the
                                                                                                                                  Mark to Market process
                                                                                                                                  that need change and
                                                                                                                                  restructuring related
                                                                                                                                  mortgage issues.
    Cherylayne B. Walker................    372.64  .......................  04/03/00 to present.....  Office of Housing.......  To provide advice to the
                                                                                                                                  Deputy Assistant Secretary
                                                                                                                                  for Single Family Housing
                                                                                                                                  on the review and
                                                                                                                                  formulation of real estate
                                                                                                                                  owned disposition
                                                                                                                                  procedures.
    Michael Stegman.....................     46.57  PH.....................  07/21/99 to present.....  Office of Housing.......  To assess conditions and
                                                                                                                                  trends for affordable
                                                                                                                                  housing in the U.S. and
                                                                                                                                  report on major trends,
                                                                                                                                  needs and HUD's policy
                                                                                                                                  responses to these.
    David Snell.........................    236.32  PD.....................  11/08/98 to 01/15/99....  Office of Public and      No records could be
                                                                                                        Indian Housing, Denver.   obtained.
    Steven Kilkelly.....................    206.67  PD.....................  08/28/98 to 10/08/98....  Office of Community       No records could be
                                                                                                        Planning and              obtained.
                                                                                                        Development.
    William Apgar.......................    453.86  PD.....................  10/01/97 to 10/24/98....  Office of Housing.......  To provide a wide range of
                                                                                                                                  knowledge on matters
                                                                                                                                  involving programmatic
                                                                                                                                  development and
                                                                                                                                  diversification in and for
                                                                                                                                  the Office of Housing.
    Susan Wachter.......................    453.92  PD.....................  11/25/98 to 11/30/99....  Office of Policy          To analyze and evaluate
                                                                                                        Development and           current procedures and
                                                                                                        Research.                 make recommendations on
                                                                                                                                  possible refinements and
                                                                                                                                  improvements, as well as
                                                                                                                                  conducting a review of
                                                                                                                                  proposed strategies.
    Virginia Terzano....................     56.54  PH.....................  06/22/99 to 11/26/99....  Office of Public Affairs  To advise and provide
                                                                                                                                  expertise on the
                                                                                                                                  preparation of remarks,
                                                                                                                                  speeches, and talking
                                                                                                                                  points on issues,
                                                                                                                                  policies, and procedures
                                                                                                                                  confronting the Secretary.

    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Note: PH = per hour; PD = per day.

                          MORTGAGE PARTNERSHIP PROGRAM
        Question. The Mortgage Partnership Program offered by the some
    Federal Home Loan Banks has allowed members of the Federal Home Loan
    Bank System to offer FHA loans to consumers at a lower rate--as much as
    100 basis points--for first time home buyers in the first year.
    However, that program is currently capped at $9 billion.
        When will the cap be lifted on this program, and what assurances
    can you give me that first time home buyers will continue to have
    access to these new FHA loan products?
        Answer. The Mortgage Partnership Finance Program (MPF) offered by a
    number of Federal Home Loan Banks is currently subject to a limit of $9
    billion in outstanding residential mortgages that was established by a
    resolution of the Federal Housing Finance Board, the regulator of the
    Federal Home Loan Bank System. This program is not under HUD's
    jurisdiction. However, Secretary Cuomo is a member of the Finance Board
    and Assistant Secretary Apgar serves as his designee.
        On May 3, 2000, the Finance Board's Federal Home Loan Bank Acquired
    Member Assets, Core Mission Activities, Investment and Advances (AMA/
    CMA) proposed rule was published for public comment. The rule would
    authorize the Federal Home Loan Banks to hold acquired member assets
    (AMA), whole loans acquired from or through Bank System members or
    associates. Under the proposed rule, the MPF investments, including FHA
    loans funded through the MPF, would be considered AMA. The proposed
    rule would place no limit on the amount of AMA the Federal Home Loan
    Banks could hold, in effect eliminating the $9 billion aggregate limit
    currently applied to the MPF by resolution.
        In addition, the proposed rule does not limit the amount of FHA
    insured single family loans that a FHLBank could acquire under its MPF,
    so that any new FHA loan products that the FHLBanks are facilitating
    under the MPF could continue. Under the proposed rule, AMA would be
    considered core mission activities (CMA), except that only a proportion
    of the amount of federal government insured or guaranteed single family
    mortgage loans (including FHA insured loans) acquired as AMA after
    April 12, 2000, would be considered CMA. One dollar of government-
    insured single family AMA would be counted as CMA for every two dollars
    of conventional loans acquired as AMA. While the proposed rule does not
    contain any requirement that the FHLBanks engage in any particular
    amount of CMA, it would encourage the FHLBanks to see to it that the
    composition of their mortgage portfolios more closely reflects the
    distribution of loans made in the financial marketplace.
        The proposed rule public comment period closes on June 15 and the
    Finance Board expects to issue the AMA/CMA final rule shortly
    thereafter.

                           DOWNPAYMENT SIMPLIFICATION
        Question. The fiscal year 1999 VA/HUD spending bill contains an
    extension of the simplified FHA down payment calculation on a
    nationwide basis. However, the bill restricted the calculation to a
    two-year pilot program which is set to expire at the end of this fiscal
    year.
        The Administration's budget contains a permanent, nationwide
    extension of the simplified down payment calculation. How has the pilot
    program fared so far, and why do you believe this permanent extension
    is necessary?
        Answer. From the pilot, we learned that overall loan-to-values did
    not increase significantly and the process was more easily understood
    by homebuyers, real estate agents, and lenders. We need the permanent
    authority to maintain the simplified process and to continue to offer a
    process that is more easily understood than the ``sliding-scale''
    mortgage amount calculation previously employed. Reverting to the
    previous mortgage amount calculation and losing the ability to continue
    with a successful program would be counter to FHA's mission.
                                     ______

                   Questions Submitted by Senator Larry Craig

                                  GUN CONTROL
        Question. Please tell the Subcommittee what HUD's intentions are,
    and what actions you have taken, with regard to filling a lawsuit
    against members of the firearms industry.
        Answer. As the Department has stated on previous occasions, HUD has
    no intention of filing a lawsuit in its own capacity against the gun
    industry. HUD, however, is working with cities and counties that have
    filed suit against the gun industry, as well as with responsible
    manufacturers, to find a negotiated solution that will facilitate the
    industry's role in reducing the tide of gun violence by fostering safer
    manufacturing and distribution practices. Should these negotiations
    prove unsuccessful, HUD is prepared to work with public housing
    authorities, including those under HUD's control, on a possible suit
    against the industry.
        Question. For example, who authorized the filing of such a lawsuit?
    What actions by members of the firearms industry gave rise to that
    lawsuit? What actions by members of the firearms industry would prevent
    the filing of such a lawsuit against them, and who determined those
    parameters for withholding suit?
        Answer. No lawsuit on behalf of the Department is contemplated.
        Question. What HUD resources--financial or personnel--have been
    spent in preparing such a lawsuit or pursuing negotiations with the
    firearms industry, and what is the estimated cost to federal taxpayers
    of pursuing these activities?
        Answer. While HUD has spent no resources preparing to file suit on
    the Department's behalf, as noted above, the Department has been
    involved in assisting cities and counties that have filed suit against
    the gun industry reach common ground with the industry, thereby helping
    to bring the litigation to a close. The March 17, 2000 settlement with
    Smith & Wesson was the first fruit of that effort. In terms of
    resources, HUD has devoted staff time and related expenses (travel,
    phone, office supplies, etc.) maintaining contact with both sides and
    assisting in negotiations.
        Question. What other agency or agencies of the federal government
    has HUD consulted with about such a lawsuit or negotiations?
        Answer. HUD has consulted with the White House, the Justice
    Department, and the Department of Treasury in the course of assisting
    with negotiations.
        Question. What mission of HUD do these activities serve, and where
    is that mission stated in writing?
        Answer. In the Department's enabling statute, Congress made clear
    that HUD was created in part ``to encourage the solution of problems of
    housing, urban development, and mass transportation through State,
    county, town, village, or other local and private action.'' 42 U.S.C.
    Sec. 3531 (1999). Given the awful toll of gun violence in our nation's
    communities, particularly those at the core of HUD's mission, helping
    cities and counties seek improved gun safety and more responsible
    distribution through negotiations with the gun industry, is a prime
    example of such encouragement. Moreover, reducing gun violence is at
    the core of HUD's responsibility for promoting national housing policy.
    The Housing Act of 1949, for example, declared as national housing
    policy ``the realization as soon as feasible of the goal of a decent
    home and a suitable living environment for every American family,'' 42
    U.S.C. 1441 (1999), and Congress has declared that the ``objective of
    national housing policy shall be to reaffirm the long-established
    national commitment to decent, safe, and sanitary housing for every
    American by strengthening a nationwide partnership of public and
    private institutions able . . . to help make neighborhoods safe and
    livable.'' 42 U.S.C. Sec. 12701 (1999).
        Question. How much has HUD spent on gun turn-in program,
    cumulatively and by program?
        Answer. Please see attached chart.

                                                GUN BUYBACK PARTICIPANTS
    ----------------------------------------------------------------------------------------------------------------
                                                                                                              HA
            Name of applicant                  City                  State          HA's GBB    Eligible  allocation
                                                                                   allocation   matching    + match
    ----------------------------------------------------------------------------------------------------------------
    HA of the City of Foley..........  Foley...............  AL..................      $1,000       $430      $1,430
    Prichard HA......................  Prichard............  AL..................       5,245      2,255       7,500
    HA of the City of Talladega......  Talladega...........  AL..................       2,000        860       2,860
    HA of the City of Camden.........  Camden..............  AR..................      21,000      9,030      30,030
    HA of City of Flagstaff..........  Flagstaff...........  AZ..................       3,500      1,505       5,005
    San Francisco HA.................  San Francisco.......  CA..................      50,000     21,500      71,500
    HA of the County of Marin........  San Rafael..........  CA..................       3,000      1,290       4,290
    The New Britain HA...............  New Britain.........  CT..................       5,000      2,150       7,150
    HA of the City of Stamford.......  Stamford............  CT..................      50,000     21,500      71,500
    HA of the City of Meriden........  Meriden.............  CT..................       5,000      2,150       7,150
    HA of the City of Norwalk........  S. Norwalk..........  CT..................       6,993      3,007      10,000
    Hartford Housing Authority.......  Hartford............  CT..................      10,000      4,300      14,300
    District of Columbia HA..........  Washington..........  DC..................      70,000     30,100     100,100
    Metro Dade Housing Agency........  Miami...............  FL..................      50,000     21,500      71,500
    Tampa HA.........................  Tampa...............  FL..................      50,000     21,500      71,500
    HA of Savannah...................  Savannah............  GA..................       5,000      2,150       7,150
    HA of Columbus, Georgia..........  Columbus............  GA..................      17,500      7,525      25,025
    HA of the City of Augusta........  Augusta.............  GA..................      10,000      4,300      14,300
    HA of the City of Rome...........  Rome................  GA..................       2,500      1,075       3,575
    HA of the City of Cordele........  Cordele.............  GA..................       6,500      2,795       9,295
    HA City of Atlanta...............  Atlanta.............  GA..................      50,000     21,500      71,500
    Hawaii Hsg. & Com. Dev. Corp.....  Honolulu............  HW..................      25,000     10,750      35,750
    Davenport HA.....................  Davenport...........  IA..................      21,000  .........      21,000
    Rockford HA......................  Rockford............  IL..................      14,000      6,020      20,020
    Randolph County HA...............  Chester.............  IL..................       3,000      1,290       4,290
    Chicago Housing Authority........  Chicago.............  IL..................     100,000     43,000     143,000
    HA of City of Gary, Indiana......  Gary................  IN..................       5,000      2,150       7,150
    HA of City of Hammond............  Hammond.............  IN..................       4,000      1,720       5,720
    Jeffersonville HA................  Jeffersonville......  IN..................       1,400        602       2,002
    Kansas City, Kansas HA...........  Kansas City.........  KS..................      30,000     12,900      42,900
    Lexington-Fayette HA.............  Lexington...........  KY..................     100,000     43,000     143,000
    HA of Princeton..................  Princeton...........  KY..................       2,000        860       2,860
    HA of Columbia...................  Columbia............  KY..................         800        344       1,144
    HA of Louisville.................  Louisville..........  KY..................      20,000      8,600      28,600
    HA of Frankfort..................  Frankfort...........  KY..................       2,000        860       2,860
    Martin Housing Authority.........  Martin..............  KY..................       1,000        430       1,430
    Springfield HA...................  Springfield.........  MA..................      15,000      6,450      21,450
    Malden HA........................  Malden..............  MA..................       5,070      2,180       7,250
    HA of Worcester..................  Worcester...........  MA..................       1,425        613       2,038
    HA of Baltimore City.............  Baltimore...........  MD..................     200,000     86,000     286,000
    HA of the City of Annapolis......  Annapolis...........  MD..................       3,500      1,505       5,005
    Inkster Housing Commission.......  Inkster.............  MI..................      40,500     17,415      57,915
    Saginaw Hsg. Commission..........  Saginaw.............  MI..................       3,000      1,290       4,290
    Flint Housing Commission.........  Flint...............  MI..................      70,000     30,100     100,100
    City of Detroit Housing            Detroit.............  MI..................      15,000      6,450      21,450
     Department.
    River Rouge Housing Commission...  River Rouge.........  MI..................       7,500      3,225      10,725
    HA of the City of Hannibal.......  Hannibal............  MO..................       7,000      3,010      10,010
    Mississippi Regional HA VIII.....  Gulfport............  MS..................      30,000     12,900      42,900
    HA of High Point.................  High Point..........  NC..................       3,800      1,634       5,434
    HA of City of Wilmington, NC.....  Wilmington..........  NC..................      10,000      4,300      14,300
    HA of the City of Durham.........  Durham..............  NC..................      10,000      4,300      14,300
    HA of Union City.................  Union City..........  NJ..................      10,000      4,300      14,300
    HA City of Bayonne...............  Bayonne.............  NJ..................       3,750      1,613       5,363
    Paterson HA......................  Paterson............  NJ..................       6,300      2,709       9,009
    Newark HA........................  Newark..............  NJ..................     500,000    215,000     715,000
    HA of the City of Millville......  Millville...........  NJ..................       4,700      2,021       6,721
    HA of East Orange................  East Orange.........  NJ..................       5,000      2,150       7,150
    HA of the City of Orange.........  Orange..............  NJ..................       7,000      3,010      10,010
    HA of Hoboken....................  Hoboken.............  NJ..................       5,000      2,150       7,150
    HA of City of Las Cruces.........  Las Cruces..........  NM..................      10,000      4,300      14,300
    Plattsburgh HA...................  Plattsburgh.........  NY..................       5,000      2,150       7,150
    Albany HA........................  Albany..............  NY..................       5,000      2,150       7,150
    Amsterdam HA.....................  Amsterdam...........  NY..................       1,000        430       1,430
    Schenectady Municipal HA.........  Schenectady.........  NY..................         800        344       1,144
    The Mun. HA City of Yonkers......  Yonkers.............  NY..................      10,000      4,300      14,300
    Catskill HA......................  Catskill............  NY..................       1,000        430       1,430
    Cohoes HA........................  Cohoes..............  NY..................       2,000        860       2,860
    Watervliet HA....................  Watervliet..........  NY..................       3,000      1,290       4,290
    Lucas Metropolitian HA...........  Toledo..............  OH..................      35,000     15,050      50,050
    Stark Metropolitian HA...........  Canton..............  OH..................      22,000      9,460      31,460
    Easton HA........................  Easton..............  PA..................       2,000        860       2,860
    Woonsocket HA....................  Woonsocket..........  RI..................       5,000      2,150       7,150
    HA of the City of Pawtucket......  Pawtucket...........  RI..................      18,000      7,740      25,740
    HA of the City of Fort Mill......  Fort Mill...........  SC..................       5,070      2,180       7,250
    Beaufort HA......................  Beaufort............  SC..................       2,000        860       2,860
    Knoxville Com. Dev. Corp.........  Knoxville...........  TN..................      12,238      5,262      17,500
    Memphis HA.......................  Memphis.............  TN..................      50,000     21,500      71,500
    Corpus Christi HA................  Corpus Christi......  TX..................      25,000     10,750      35,750
    HA City of San Antonio...........  San Antonio.........  TX..................      25,416     10,929      36,345
    HA of the City of El Paso........  El Paso.............  TX..................       9,440      4,059      13,499
    HA of the City of Monahans.......  Monahans............  TX..................       5,000      2,150       7,150
    HA of the City of Laredo.........  Laredo..............  TX..................       5,000      2,150       7,150
    HA City of Houston...............  Houston.............  TX..................      25,000     10,750      35,750
    HA of Provo......................  Provo...............  UT..................      15,148      6,514      21,662
    Roanoke Redevelopment HA.........  Roanoke.............  VA..................      15,000      6,450      21,450
    Norfolk Redevelopment & HA.......  Norfolk.............  VA..................       5,000      2,150       7,150
                                                                                  ----------------------------------
          Totals GBB.................  ....................  ....................   2,036,095    875,521   2,902,586
    ----------------------------------------------------------------------------------------------------------------

        Question. How does HUD monitor the success of these programs in
    reducing crime?
        Answer. HUD is currently in the process of establishing an
    evaluation mechanism to assess the current buyback initiative.
        Question. How much has crime been reduced through these programs?
        Answer. Again, HUD is planning an evaluation. It is important to
    remember, however, that buybacks by their nature are preventative
    measures that reduce the presence of unwanted firearms in a community,
    thereby reducing the supply of weapons potentially available to
    criminals.
        Question. Were any other anti-crime efforts being pursued in the
    same areas simultaneously, and if so, what were they?
        Answer. HUD's buyback initiative is part of a larger anti-crime and
    anti-drug abuse effort funded through the Public Housing Drug
    Elimination Program (PHDEP), which is, in turn, part of the
    Department's comprehensive public safety agenda. PHDEP was funded at
    $310 million in fiscal year 2000, supporting a broad spectrum of
    activities, including employment of security personnel, reimbursement
    of local police for additional security services, physical improvements
    to increase security, training and equipping voluntary tenant patrols,
    innovative anti-drug programs, and funding nonprofit resident
    management corporations and tenant councils to develop security and
    drug-abuse prevention programs.

                         INTOWN MANAGEMENT GROUP (ITMG)
        Question. As mentioned, your agency recently negotiated with the
    Department of Justice to acquire funds to pay off liens placed on HUD
    owned homes as a result of HUD firing InTowm Management Group and
    transferring those accounts to Golden Feather Realty Services. Can you
    tell me what actions HUD is taking to insure that payments are received
    by all businesses, not just the larger subcontractors that worked with
    HUD and HUD's agents on a good faith basis?
        Answer. The Department has a procedure in place for satisfying
    liens placed on HUD-owned properties by subcontractors who have not
    been paid by ITMG. Lien resolution questions may be referred to HUD's
    Atlanta Homeownership Center at (888) 696-4687 (this is a toll-free
    number). This procedure, along with the Department's replacement of
    ITMG, will keep sales of HUD homes moving forward efficiently so that
    home buyers may complete the purchase of their homes promptly.
        The termination of the Management and Marketing prime contract
    under which subcontractors provided services was unavoidable.
    Termination of a contract is the most extreme action the Government can
    take to remedy a contractor's failure to perform. This was not the
    remedy HUD desired. HUD afforded ITMG every opportunity possible to
    correct its deficient performance, but in the end, ITMG's failure to
    perform acceptably left HUD with no other choice than to terminate
    ITMG's contracts. HUD did so in strict accordance with the Federal
    contracting rules that govern termination.
        In lieu of filing a lien and seeking its satisfaction by HUD, a
    subcontractor may file a claim with the Atlanta Division of the
    Bankruptcy Court for Northern District of Georgia. ITMG filed a
    voluntary petition for a Chapter 11 Bankruptcy, with that court, on
    September 22, 1999. All payments will be governed by the regulations
    covering bankruptcies under the Federal court system. ITMG's petition
    is identified as Case Number 99-74091. For more information pertaining
    to the bankruptcy and how to proceed with filing a claim,
    subcontractors should call the Atlanta Division of the Bankruptcy Court
    at (404) 215-1000.

                   SOUTHEASTERN IDAHO COMMUNITY ACTION AGENCY
        Question. I would also like to ask a few questions concerning
    SouthEastern Idaho Community Action Agency (SEICAA). As background,
    SEICAA has served its community for 31 years and is a vital link to
    providing safe, affordable housing in rural southeast Idaho. One of
    SEICAA's largest programs is our HUD Housing Apartment Complexes which
    they own, maintain, and rent to low-income individuals, families and
    elderly persons. However, their properties are older and are
    increasingly difficult to maintain, keep safe and sustain the required
    reserve accounts, pay their mortgages, repairs, preventative
    maintenance, etc. Because of the nature of their business, they
    occasionally turn to HUD for assistance in some of their sponsored
    programs, including Subsidy rent increase, Flexible Subsidy loan, and
    troubled project funding. However, SEICAA continually receives little
    communication, assistance, or direction from HUD as they struggle to
    maintain their HUD properties. SEICAA believes, and I am inclined to
    agree, that for the benefit of the people that are serving and the
    service they provide, they deserve HUD's timely attention and response
    to their inquires.
        When can SEICAA and other similar struggling properties expect HUD
    personnel to respond to requests submitted for assistance and keep in
    compliance with HUD's own designated timeframes and regulations?
        Answer. Efforts to improve customer service provided by federal
    employees has been a major effort for this Administration. HUD has a
    staff dedicated to precisely this function--Community Builders. The
    Community Builders have dramatically improved HUD's responsiveness. In
    fact, Anderson consulting surveyed HUD's customers and found that the
    agency was providing customer service at the level of Boldridge Quality
    Award winners--perhaps the most prestigious award a private business
    can receive. Ongoing outreach and technical assistance to HUD's program
    participants, like SEICCA, is a continuing mission through ongoing
    industry training sessions, our web sites, and points of contact who
    provide one on one technical assistance.
        With the recent changes in how Section 8 contracts are renewed,
    some owners experienced difficulty providing the necessary information
    HUD now requires in order to renew subsidy or increase subsidy levels.
    With the last year of implementing new Section 8 renewal policy behind
    us, and, the advent of 5-year contract renewals, contract renewals
    should run much more smoothly.
        In the specific case of problems encountered by SEICCA, they did
    experience difficulty and delay in renewing their Section 8 contract
    last year; it originally expired in July, 1999. In order to renew a
    Section 8 contract, HUD requires the renewal request to be complete and
    provided to HUD 120 days in advance of the contract expiration. When
    this is not done, as in the case of SEICCA, delays in subsidy renewal
    occur. In response to an inquiry from Senator Craig's staff regarding
    the delays in processing SEICCA's contract renewal in September of
    1999, a letter was sent to SEICCA specifically outlining the
    deficiencies in their submission for both a subsidy increase and
    renewal, as well as their subsequent request for additional flexible
    subsidy to handle additional required repairs. Once the deficiencies in
    the submission were corrected, the Section 8 contract was renewed, with
    substantially higher rents.

                            REDUCING INTEREST RATES
        Question. Will HUD consider reducing mortgage interest rates or
    mortgage elimination on struggling properties in order to increase cash
    flow for making emergency repairs, preventative maintenance and upkeep,
    retention of qualified employees to maintain the facilities, and to
    keep rents at an affordable level to qualified tenants?
        Answer. Where HUD is the holder of a mortgage the answer is yes.
    HUD has many tools at its disposal that can be used to address such
    needs, including those mentioned. However, HUD has a fiduciary
    responsibility to the taxpayers to make sure it services each property
    in the taxpayers' best interests. Therefore, it is essential that each
    project be evaluated separately to determine what, if any, of the tools
    can or should be used in a particular case. HUD is not the only answer.
    Owners need to seek and maintain professional property management that
    select tenants properly, perform preventive maintenance promptly, and
    budget wisely but adequately.
        Where HUD is mortgage insurer, there is a private lender involved
    who makes loans for a profit. We know of no private lender that would
    reduce interest rates or eliminate the need to repay the loan.

                                ONE-TIME GRANTS
        Question. Will HUD consider making available sizeable one-time
    grants to bring properties up to safe and decent standards?
        Answer. HUD has had authority over the years for various grant and
    loan programs. Funding for such programs as you describe lapsed several
    years ago.
        HUD and the Congress saw the continuing need for such programs. The
    latest program, which should be available shortly, will provide grants
    for some projects using unspent Interest Reduction Payments from the
    Section 236 program.

                                  INTERVENTION
        Question. HUD has commitments to communities. Will HUD consider the
    very real probability that without timely, appropriate intervention,
    many of these properties will either be condemned, fall into serious
    disrepair, and/or require foreclosure reverting back to HUD?
        Answer. HUD shares the Senator's concern for the community and the
    effects of maintaining affordable housing. This administration has
    taken several steps to do exactly as suggested to provide timely
    intervention. For example:
      --We established the Real Estate Assessment Center (REAC). One of
            REAC's jobs is to implement a system of uniform physical
            evaluations of multifamily properties. In fact, we just
            completed the first ever evaluation of the physical condition
            of the entire multifamily inventory. Through REAC, we also
            automated the receipt of Audited Annual Financial Statements.
            We now have the best information ever on the financial
            condition of this inventory.
      --We established the Departmental Enforcement Center (DEC). The DEC
            is responsible for enforcing the business documents between HUD
            and the worst offenders doing business with the Department.
      --We are in the process of awarding contracts for Contract
            Administrators who will administer project-based Section 8
            contracts.
      --We reorganized the Office of Multifamily Housing in the field to
            improve servicing. We recently reorganized the Office of the
            Deputy Assistant Secretary for Multifamily Housing in
            Headquarters to improve overall management.
        Also, foreclosure and or HUD ownership does not mean the loss of
    affordable housing. When properties are sold at foreclosure or from the
    owned inventory, if they need to be preserved as affordable housing, if
    feasible, they are sold with requirements that they be repaired, and
    operated as affordable housing. These requirements are enforced through
    land use restrictions that generally last at least 20 years. In
    addition, eligible tenants are provided with Section 8 vouchers, which
    they can use to stay at the repaired project, or move to another
    project or house.
        HUD also uses its ability to provide Up Front Grants for HUD-owned
    projects that need to be preserved and preservation is not feasible
    without a grant from HUD. We have sold over 60 projects in the last few
    years with such grants.
        So, while we would hope that no property ever would fall into
    disrepair, we are more prepared than ever to address such problems
    early on, and where such efforts fail, our foreclosure and disposition
    programs can and are used to address the problem.
                                     ______

                     Questions Submitted by Senator Jon Kyl

                                  GUN CONTROL
        Question. The Administration has not been successful in securing
    the passage of gun-control legislation. However, it has, through HUD,
    threatened a massive lawsuit against gun manufacturers (except for
    Smith & Wesson, which has now reached a separate agreement with the
    Department). Some believe that the Administration is attempting to
    achieve through litigation what it cannot achieve through the normal
    legislative process. What is the statutory or constitutional authority
    on which HUD intends to pursue lawsuits against the gun industry?
        Answer. As the Department has stated on previous occasions, HUD has
    no intentions of filing a lawsuit in its own capacity against the gun
    industry. HUD, however, is working with cities and counties that have
    filed suit against the gun industry, as well as with responsible
    manufacturers, to find a negotiated solution that will facilitate the
    industry's role in reducing the tide of gun violence by fostering safer
    manufacturing and distribution practices. Should these negotiations
    prove unsuccessful, HUD is prepared to work with public housing
    authorities, including those under HUD's control, on a possible suit
    against the industry.
        HUD has statutory authority, moreover, to provide such assistance,
    and to assist the cities and counties that have filed suit against the
    gun industry in their negotiations for settlement. In the Department's
    enabling statue, Congress made clear that HUD was created in part ``to
    encourage the solution of problems of housing, urban development, and
    mass transportation through State, county, town, village, or other
    local and private action.'' 42 U.S.C. Sec. 3531 (1999). Given the awful
    toll of gun violence in our nation's communities, particularly those at
    the core of HUD's mission, helping cities and counties seek improved
    gun safety and more responsible distribution through negotiations with
    the gun industry, is a prime example of such encouragement. Moreover,
    reducing gun violence is at the core of HUD's responsibility for
    promoting national housing policy. The Housing Act of 1949, for
    example, declared as national housing policy ``the realization as soon
    as feasible of the goal of a decent home and a suitable living
    environment for every American family,'' 42 U.S.C. Sec. 1441 (1999),
    and Congress has declared that the ``objective of national housing
    policy shall be to reaffirm the long-established national commitment to
    decent, safe, and sanitary housing for every American by strengthening
    a nationwide partnership of public and private institutions able( to
    help make neighborhoods safe and livable.'' 42 U.S.C. Sec. 12701
    (1999).

                            CIVIL RIGHT PROTECTIONS
        Question. Every year, local leaders from Arizona express
    dissatisfaction with the degree to which HUD's interpretation of fair
    housing statutes impedes their ability to protect the quality of life
    in their communities. Such questions typically arise in circumstances
    where a community seeks to exercise control over the siting of a group
    home--perhaps one where all the residents have a history of serious
    substance abuse--pursuant to the locality's traditional prerogative to
    set occupancy standards. In response to previous inquiries on this
    subject, your office has indicated its willingness to seek a more
    satisfactory accommodation with local leaders. The mechanism cited for
    reaching that accommodation is, I gather from your past responses, a
    process of consultation bringing together all those with a stake in the
    matter.
        I recognize the need to ensure that civil rights protections are
    enforced in the housing sphere. But my question to you is: When do you
    expect that these discussions will lead to concrete changes that will
    make it easier for local leaders to be responsive to the concerns of
    families in their communities?
        Answer. We believe that our discussions with stakeholders such as
    Mayors, the National League of Cities, and disability groups have
    served to clarify any misunderstandings about HUD's interpretation of
    the Fair Housing Act on the matter of group homes. In some instances,
    we have found that the stakeholders' concern rests not with HUD's
    interpretation of the law, but with the law itself, or the Supreme
    Court's interpretation of the law as in the Edmonds decision. To
    clarify where HUD stands on these issues, HUD and the Department of
    Justice issued easy-to-understand questions and answers. A copy of that
    guidance is attached. The Department welcomes further dialogue on this
    subject and believes our recent dialogue with the above interested
    parties has done much to resolve areas of disagreement or
    misunderstanding.

                                   Attachment

      JOINT STATEMENT OF THE DEPARTMENT OF JUSTICE AND THE DEPARTMENT OF
                         HOUSING AND URBAN DEVELOPMENT
             GROUP HOMES, LOCAL LAND USE, AND THE FAIR HOUSING ACT
        Since the federal Fair Housing Act (``the Act'') was amended by
    Congress in 1988 to add protections for persons with disabilities and
    families with children, there has been a great deal of litigation
    concerning the Act's effect on the ability of local governments to
    exercise control over group living arrangements, particularly for
    persons with disabilities. The Department of Justice has taken an
    active Part in much of this litigation, often following referral of a
    matter by the Department of Housing and Urban Development (``HUD'').
    This joint statement provides an overview of the Fair Housing Act's
    requirements in this area. Specific topics are addressed in more depth
    in the attached Questions and Answers.
        The Fair Housing Act prohibits a broad range of practices that
    discriminate against individuals on the basis of race, color, religion,
    sex, national origin, familial status, and disability.\1\ The Act does
    not preempt local zoning laws. However, the Act applies to
    municipalities and other local government entities and prohibits them
    from making zoning or land use decisions or implementing land use
    policies that exclude or otherwise discriminate against protected
    persons, including individuals with disabilities.
    ---------------------------------------------------------------------------
        \1\ The Fair Housing Act uses the term ``handicap.'' This document
    uses the term `disability' which has exactly the same legal meaning.
    ---------------------------------------------------------------------------
        The Fair Housing Act makes it unlawful--
      --To utilize land use policies or actions that treat groups of
            persons with disabilities less favorably than groups of non-
            disabled persons. An example would be an ordinance prohibiting
            housing for persons with disabilities or a specific type of
            disability, such as mental illness, from locating in a
            particular area, while allowing other groups of unrelated
            individuals to live together in that area.
      --To take action against, or deny a permit, for a home because of the
            disability of individuals who live or would live there. An
            example would be denying a building permit for a home because
            it was intended to provide housing for persons with mental
            retardation.
      --To refuse to make reasonable accommodations in land use and zoning
            policies and procedures where such accommodations may be
            necessary to afford persons or groups of persons with
            disabilities an equal opportunity to use and enjoy housing.
        --What constitutes a reasonable accommodation is a case-by-case
                determination.
        --Not all requested modifications of rules or policies are
                reasonable. If a requested modification imposes an undue
                financial or administrative burden on a local government,
                or if a modification creates a fundamental alteration in a
                local governments land use and zoning scheme, it is not a
                ``reasonable'' accommodation.
        The disability discrimination provisions of the Fair Housing Act do
    not extend to persons who claim to be disabled solely on the basis of
    having been adjudicated a juvenile delinquent, having a criminal
    record, or being a sex offender. Furthermore, the Fair Housing Act does
    not protect persons who currently use illegal drugs, persons who have
    been convicted of the manufacture or sale of illegal drugs, or persons
    with or without disabilities who present a direct threat to the persons
    or property of others.
        HUD and the Department of Justice encourage parties to group home
    disputes to explore all reasonable dispute resolution procedures, like
    mediation, as alternatives to litigation.
    DATE: AUGUST 18, 1999.

                          FAIR HOUSING ACT AND ZONING
        Question. Does the Fair Housing Act pre-empt local zoning laws?
        Answer. No. ``Pre-emption'' is a legal term meaning that one level
    of government has taken over a field and left no room for government at
    any other level to pass laws or exercise authority in that area. The
    Fair Housing Act is not a land use or zoning statute; it does not pre-
    empt local land use and zoning laws. This is an area where state law
    typically gives local governments primary power. However, if that power
    is exercised in a specific instance in a way that is inconsistent with
    a federal law such as the Fair Housing Act, the federal law will
    control. Long before the 1988 amendments, the courts had held that the
    Fair Housing Act prohibited local governments from exercising their
    land use and zoning powers in a discriminatory way.
        Question. What is a group home within the meaning of the Fair
    Housing Act?
        Answer. The term ``group home'' does not have a specific legal
    meaning. In this statement, the term ``group home'' refers to housing
    occupied by groups of unrelated individuals with disabilities.\2\
    Sometimes, but not always, housing is provided by organizations that
    also offer various services for individuals with disabilities living in
    the group homes. Sometimes it is this group home operator, rather than
    the individuals who live in the home, that interacts with local
    government in seeking permits and making requests for reasonable
    accommodations on behalf of those individuals.
    ---------------------------------------------------------------------------
        \2\ There are groups of unrelated persons with disabilities who
    choose to live together who do not consider their living arrangements
    ``group homes,'' and it is inappropriate to consider them ``group
    homes'' as that concept is discussed in this Statement.
    ---------------------------------------------------------------------------
        The term ``group home'' is also sometimes applied to any group of
    unrelated persons who live together in a dwelling--such as a group of
    students who voluntarily agree to share the rent on a house. The Act
    does not generally affect the ability of local governments to regulate
    housing of this kind, as long as they do not discriminate against the
    residents on the basis of race, color, national origin, religion, sex,
    handicap (disability) or familial status (families with minor
    children).
        Question. Who are persons with disabilities within the meaning of
    the Fair Housing Act?
        Answer. The Fair Housing Act prohibits discrimination on the basis
    of handicap. ``Handicap'' has the same legal meaning as the term
    ``disability'' which is used in other federal civil rights laws.
    Persons with disabilities (handicaps) are individuals with mental or
    physical impairments which substantially limit one or more major life
    activities. The term mental or physical impairment may include
    conditions such as blindness, hearing impairment, mobility impairment,
    HIV infection, mental retardation, alcoholism, drug addiction, chronic
    fatigue, learning disability, head injury, and mental illness. The term
    major life activity may include seeing, hearing, walking, breathing,
    performing manual tasks, caring for one's self, learning, speaking, or
    working. The Fair Housing Act also protects persons who have a record
    of such an impairment, or are regarded as having such an impairment.
        Current users of illegal controlled substances, persons convicted
    for illegal manufacture or distribution of a controlled substance, sex
    offenders, and juvenile offenders, are not considered disabled under
    the Fair Housing Act, by virtue of that status.
        The Fair Housing Act affords no protections to individuals with or
    without disabilities who present a direct threat to the persons or
    property of others. Determining whether someone poses such a direct
    threat must be made on an individualized basis, however, and cannot be
    based on general assumptions or speculation about the nature of a
    disability.
        Question. What kinds of local zoning and land use laws relating to
    group homes violate the Fair Housing Act?
        Answer. Local zoning and land use laws that treat groups of
    unrelated persons with disabilities less favorably than similar groups
    of unrelated persons without disabilities violate the Fair Housing Act.
    For example, suppose a city's zoning ordinance defines a ``family'' to
    include up to six unrelated persons living together as a household
    unit, and gives such a group of unrelated persons the right to live in
    any zoning district without special permission. If that ordinance also
    disallows a group home for six or fewer people with disabilities in a
    certain district or requires this home to seek a use permit, such
    requirements would conflict with the Fair Housing Act. The ordinance
    treats persons with disabilities worse than persons without
    disabilities.
        A local government may generally restrict the ability of groups of
    unrelated persons to live together as long as the restrictions are
    imposed on all such groups. Thus, in the case where a family is defined
    to include up to six unrelated people, an ordinance would not, on its
    face, violate the Act if a group home for seven people with
    disabilities was not allowed to locate in a single family zoned
    neighborhood, because a group of seven unrelated people without
    disabilities would also be disallowed. However, as discussed below,
    because persons with disabilities are also entitled to request
    reasonable accommodations in rules and policies, the group home for
    seven persons with disabilities would have to be given the opportunity
    to seek an exception or waiver. If the criteria for reasonable
    accommodation are met, the permit would have to be given in that
    instance. but the ordinance would not be invalid in all circumstances.
        Question. What is a reasonable accommodation under the Fair Housing
    Act?
        Answer. As a general rule, the Fair Housing Act makes it unlawful
    to refuse to make ``reasonable accommodations'' (modifications or
    exceptions) to rules, policies, practices, or services, when such
    accommodations may be necessary to afford persons with disabilities an
    equal opportunity to use or enjoy a dwelling.
        Even though a zoning ordinance imposes on group homes the same
    restrictions it imposes on other groups of unrelated people, a local
    government may be required, in individual cases and when requested to
    do so, to grant a reasonable accommodation to a group home for persons
    with disabilities. For example, it may be a reasonable accommodation to
    waive a setback requirement so that a paved path of travel can be
    provided to residents who have mobility impairments. A similar waiver
    might not be required for a different type of group home where
    residents do not have difficulty negotiating steps and do not need a
    setback in order to have an equal opportunity to use and enjoy a
    dwelling.
        Not all requested modifications of rules or policies are
    reasonable. Whether a particular accommodation is reasonable depends on
    the facts, and must be decided on a case-by-case basis. The
    determination of what is reasonable depends on the answers to two
    questions: First, does the request impose an undue burden or expense on
    the local government? Second, does the proposed use create a
    fundamental alteration in the zoning scheme? If the answer to either
    question is ``yes,'' the requested accommodation is unreasonable.
        What is ``reasonable'' in one circumstance may not be
    ``reasonable'' in another. For example, suppose a local government does
    not allow groups of four or more unrelated people to live together in a
    single-family neighborhood. A group home for four adults with mental
    retardation would very likely be able to show that it will have no more
    impact on parking, traffic, noise, utility use, and other typical
    concerns of zoning than an ``ordinary family.'' In this circumstance,
    there would be no undue burden or expense for the local government nor
    would the single-family character of the neighborhood be fundamentally
    altered. Granting an exception or waiver to the group home in this
    circumstance does not invalidate the ordinance. The local government
    would still be able to keep groups of unrelated persons without
    disabilities from living in single-family neighborhoods.
        By contrast, a fifty-bed nursing home would not ordinarily be
    considered an appropriate use in a single-family neighborhood, for
    obvious reasons having nothing to do with the disabilities of its
    residents. Such a facility might or might not impose significant
    burdens and expense on the community, but it would likely create a
    fundamental change in the single-family character of the neighborhood.
    On the other hand, a nursing home might not create a ``fundamental
    change'' in a neighborhood zoned for multi-family housing. The scope
    and magnitude of the modification requested, and the features of the
    surrounding neighborhood are among the factors that will be taken into
    account in determining whether a requested accommodation is reasonable.
        Question. What is the procedure for requesting a reasonable
    accommodation?
        Answer. Where a local zoning scheme specifies procedures for
    seeking a departure from the general rule, courts have decided, and the
    Department of Justice and HUD agree, that these procedures must
    ordinarily be followed. If no procedure is specified, persons with
    disabilities may, nevertheless, request a reasonable accommodation in
    some other way, and a local government is obligated to grant it if it
    meets the criteria discussed above. A local government's failure to
    respond to a request for reasonable accommodation or an inordinate
    delay in responding could also violate the Act
        Whether a procedure for requesting accommodations is provided or
    not, if local government officials have previously made statements or
    otherwise indicated that an application would not receive fair
    consideration, or if the procedure itself is discriminatory, then
    individuals with disabilities living in a group home (and/or its
    operator) might be able to go directly into court to request an order
    for an accommodation.
        Local governments are encouraged to provide mechanisms for
    requesting reasonable accommodations that operate promptly and
    efficiently, without imposing significant costs or delays. The local
    government should also make efforts to insure that the availability of
    such mechanisms is well known within the community.
        Question. When, if ever, can a local government limit the number of
    group homes that can locate In a certain area?
        Answer. A concern expressed by some local government officials and
    neighborhood residents is that certain jurisdictions, governments, or
    particular neighborhoods within a jurisdiction, may come to have more
    than their ``fair share'' of group homes. There are legal ways to
    address this concern. The Fair Housing Act does not prohibit most
    governmental programs designed to encourage people of a particular race
    to move to neighborhoods occupied predominantly by people of another
    race. A local government that believes a particular area within its
    boundaries has its ``fair share'' of group homes, could offer
    incentives to providers to locate future homes in other neighborhoods.
        However, some state and local governments have tried to address
    this concern by enacting laws requiring that group homes be at a
    certain minimum distance from one another. The Department of Justice
    and HUD take the position, and most courts that have addressed the
    issue agree, that density restrictions are generally inconsistent with
    the Fair Housing Act. We also believe, however. that if a neighborhood
    came to be composed largely of group homes, that could adversely affect
    individuals with disabilities and would be inconsistent with the
    objective of integrating persons with disabilities into the community.
    Especially in the licensing and regulatory process, it is appropriate
    to be concerned about the setting for a group home. A consideration of
    over-concentration could be considered in this context. This objective
    does not, however, justify requiring separations which have the effect
    of foreclosing group homes from locating in entire neighborhoods.
        Question. What kinds of health and safety regulations can be
    imposed upon group homes?
        Answer. The great majority of group homes for persons with
    disabilities are subject to state regulations intended to protect the
    health and safety of their residents. The Department of Justice and HUD
    believe, as do responsible group home operators, that such licensing
    schemes are necessary and legitimate. Neighbors who have concerns that
    a particular group home is being operated inappropriately should be
    able to bring their concerns to the attention of the responsible
    licensing agency. We encourage the States to commit the resources
    needed to make these systems responsive to resident and community needs
    and concerns.
        Regulation and licensing requirements for group homes are
    themselves subject to scrutiny under the Fair Housing Act. Such
    requirements based on health and safety concerns can be discriminatory
    themselves or may be cited sometimes to disguise discriminatory motives
    behind attempts to exclude group homes from a community. Regulators
    must also recognize that not all individuals with disabilities living
    in group home settings desire or need the same level of services or
    protection. For example, it may be appropriate to require heightened
    fire safety measures in a group home for people who are unable to move
    about without assistance. But for another group of persons with
    disabilities who do not desire or need such assistance, it would not be
    appropriate to require fire safety measures beyond those normally
    imposed on the size and type of residential building involved.
        Question. Can a local government consider the feelings of neighbors
    in making a decision about granting a permit to a group home to locate
    in a residential neighborhood?
        Answer. In the same way a local government would break the law if
    it rejected low-income housing in a community because of neighbors'
    fears that such housing would be occupied by racial minorities, a local
    government can violate the Fair Housing Act if it blocks a group home
    or denies a requested reasonable accommodation in response to
    neighbors' stereotypical fears or prejudices about persons with
    disabilities. This is so even if the individual government decision-
    makers are not themselves personally prejudiced against persons with
    disabilities. If the evidence shows that the decision-makers were
    responding to the wishes of their constituents, and that the
    constituents were motivated in substantial part by discriminatory
    concerns, that could be enough to prove a violation.
        Of course, a city council or zoning board is not bound by
    everything that is said by every person who speaks out at a public
    hearing. It is the record as a whole that will be determinative. If the
    record shows that there were valid reasons for denying an application
    that were not related to the disability of the prospective residents,
    the courts will give little weight to isolated discriminatory
    statements. If, however, the purportedly legitimate reasons advanced to
    support the action are not objectively valid, the courts are likely to
    treat them as pretextual, and to find that there has been
    discrimination.
        For example, neighbors and local government officials may be
    legitimately concerned that a group home for adults in certain
    circumstances may create more demand for on-street parking than would a
    typical family. It is not a violation of the Fair Housing Act for
    neighbors or officials to raise this concern and to ask the provider to
    respond. A valid unaddressed concern about inadequate parking
    facilities could justify denying the application, if another type of
    facility would ordinarily be denied a permit for such parking problems.
    However, if a group of individuals with disabilities or a group home
    operator shows by credible and unrebutted evidence that the home will
    not create a need for more parking spaces, or submits a plan to provide
    whatever off-street parking may be needed, then parking concerns would
    not support a decision to deny the home a permit.
        Question. What is the status of group living arrangements for
    children under the Fair Housing Act?
        Answer. In the course of litigation addressing group homes for
    persons with disabilities, the issue has arisen whether the Fair
    Housing Act also provides protections for group living arrangements for
    children. Such living arrangements are covered by the Fair Housing
    Act's provisions prohibiting discrimination against families with
    children. For example, a local government may not enforce a zoning
    ordinance which treats group living arrangements for children less
    favorably than it treats a similar group living arrangement for
    unrelated adults. Thus, an ordinance that defined a group of up to six
    unrelated adult persons as a family, but specifically disallowed a
    group living arrangement for six or fewer children, would, on its face,
    discriminate on the basis of familial status. Likewise, a local
    government might violate the Act if it denied a permit to such a home
    because neighbors did not want to have a group facility for children
    next to them.
        The law generally recognizes that children require adult
    supervision. Imposing a reasonable requirement for adequate supervision
    in group living facilities for children would not violate the familial
    status provisions of the Fair Housing Act.
        Question. How are zoning and land use matters handled by HUD and
    the Department of Justice?
        Answer. The Fair Housing Act gives the Department of Housing and
    Urban Development the power to receive and investigate complaints of
    discrimination, including complaints that a local government has
    discriminated in exercising its land use and zoning powers. HUD is also
    obligated by statute to attempt to conciliate the complaints that it
    receives, even before it completes an investigation.
        In matters involving zoning and land use, HUD does not issue a
    charge of discrimination. Instead, HUD refers matters it believes may
    be meritorious to the Department of Justice which, in its discretion,
    may decide to bring suit against the respondent in such a case. The
    Department of Justice May also bring suit in a case that has not been
    the subject of a HUD complaint by exercising its power to initiate
    litigation alleging a ``pattern or practice'' of discrimination or a
    denial of rights to a group of persons which raises an issue of general
    public importance.
        The Department of Justice's principal objective in a suit of this
    kind is to remove significant barriers to the housing opportunities
    available for persons with disabilities. The Department ordinarily will
    not participate in litigation to challenge discriminatory ordinances
    which are not being enforced, unless there is evidence that the mere
    existence of the provisions are preventing or discouraging the
    development of needed housing.
        If HUD determines that there is no reasonable basis to believe that
    there may be a violation, it will close an investigation without
    referring the matter to the Department of Justice. Although the
    Department of Justice would still have independent ``pattern or
    practice'' authority to take enforcement action in the matter that was
    the subject of the closed HUD investigation, that would be an unlikely
    event. A HUD or Department of Justice decision not to proceed with a
    zoning or land use matter does not foreclose private plaintiffs from
    pursuing a claim.
        Litigation can be an expensive, time-consuming, and uncertain
    process for all parties. HUD and the Department of Justice encourage
    parties to group home disputes to explore all reasonable alternatives
    to litigation, including alternative dispute resolution procedures,
    like mediation. HUD attempts to conciliate all Fair Housing Act
    complaints that it receives. In addition, it is the Department of
    Justice's policy to offer prospective defendants the opportunity to
    engage in pre-suit settlement negotiations, except in the most unusual
    circumstances.

              Letter From John A. Magagna and Kenneth H. Zimmerman

                                               August 13, 1999.
    Chai R. Feldblum,
    Georgetown University Law Center,
    Washington, D.C.
        Dear Ms. Feldblum: We are writing to provide you with the Joint
    Statement that the Department of Justice and the Department of Housing
    and Urban Development have developed concerning Group Homes, Local Land
    Use, and the Fair Housing Act.
        We are aware of the interest that the United States Conference of
    mayors, the National League of Cities, the Coalition to Preserve the
    Fair Housing Act, and other interested parties have expressed in such
    guidance from the federal agencies with responsibility for enforcing
    the Fair Housing Act. We would he happy to meet with you in the near
    future to discuss this statement and your own efforts to provide
    further information concerning these issues.
        Thank you for your ongoing interest in these issues. We look
    forward to working with you further.
                Sincerely,
                                               John A. Magagna,
            Chief, Housing and Civil Enforcement Section, Civil Rights
                                  Division, U.S. Department of Justice.
                                          Kenneth H. Zimmerman,
         Deputy Assistant Secretary for Enforcement and Programs, U.S.
                           Department of Housing and Urban Development.

                               SHELTER PLUS CARE
        Question. Shelter Plus Care is one of the federal Homeless
    Assistance Programs authorized under the McKinney Act. Under this
    specific program, the federal government funds permanent housing for
    some of the most troubled among the homeless population--particularly
    individuals with serve mental illnesses--and local governments provide
    social services for those residents. Shelter Plus Care projects
    initially receive five years of funding. After that, these programs
    must compete with other projects that serve the homeless. Local
    governments decide which projects will be funded, but the standards
    they use are guided by HUD's ``Continuum of Care'' framework.
        Last year, expiring Shelter Plus Care projects serving 885 people
    went unrenewed. A disproportionate share of these are in Maricopa
    County, Arizona. I recognize that HUD has proposed a fix for this
    situation in the fiscal year 2001 budget, but the fact is that Congress
    has been left to try to address the problem that currently exists. In
    light of these circumstances, and in light of the fact that we will
    likely see more projects going unrenewed in the next few years, do you
    believe that the ``Continuum of Care'' model could be improved to
    better address the varied needs of communities working to address the
    problems of homeless people?
        Answer. In the 1999 competition, 79 percent of all Shelter Plus
    Care renewal funding requests were approved for a total of $87.2
    million and representing 3,527 funded beds.
        Shelter Plus Care renewal requests are not spread proportionately
    among jurisdictions but are driven by local needs and timing
    considerations which vary considerably from place to place. In the 1999
    competition, Maricopa County had three of its four Shelter Plus Care
    renewal requests funded, $10,721,760 out of the $13,752,900 requested.
    The continuum of care competition provides additional funds to
    communities with large renewal burdens and Maricopa benefited from this
    adjustment in 1999. Only one other continuum in the country received
    more Shelter Plus Care renewal funding--Cuyahoga County, Ohio. Maricopa
    assigned its four S+C renewals priority numbers 17 to 20 out of the 23
    projects submitted. Maricopa Country had sufficient funds available to
    it in the competition, approximately $15 million, to have had all four
    of its Shelter Plus Care renewals funded, if they had decided to do so,
    by assigning them a higher priority.
        With or without a continuum of care system, the only way of
    ensuring the continuation of homeless assistance projects deemed
    essential to our communities, such as those in Maricopa County, is to
    fully fund them through an annual appropriations bill. The Department
    has proposed just such a vehicle for the funding of Shelter Plus Care
    renewals through the Section 8 Housing Certificate Fund. We strongly
    urge that Shelter Plus Care permanent housing project renewals be
    funded in this manner going forward. This will strengthen the continuum
    of care process and the communities and residents it is intended to
    serve.

                         SHORTAGE OF AFFORDABLE HOUSING
        Question. Mr. Secretary, the shortage of affordable housing in this
    country is truly a crisis. The tight rental market and the high cost of
    housing in Vermont is severely limiting the availability of affordable
    housing throughout the state. I am concerned that the high housing
    costs and limited availability are not only aggravating the need of low
    income families, but putting middle income families out in the streets.
    What is your Department's response to the rising housing costs
    throughout the country and how does your department intend to spur
    production of new housing?
        Answer. Senator, I couldn't agree with you more. The need for
    increasing the supply of affordable housing has reached crisis
    proportions--HUD's recent report on ``worst case'' housing needs found
    a record 5.4 million American families are in urgent need of affordable
    housing. The Department is moving on a number of fronts to address this
    problem. A key program proposal to foster affordable housing production
    is the Department's proposal to increase funding for Housing Vouchers
    and to earmark 10,000 vouchers for housing production--the first new
    affordable housing production program for families since 1996.
        HUD's HOME program provides funding to state and local governments
    to help them acquire, rehabilitate or build affordable housing and the
    Administration has proposed an innovative ``continuum of care'' program
    that would ensure that the full range of housing needs of the elderly--
    from maintaining their own homes to assisted living--are provided. And
    I should emphasize the Department's efforts to provide affordable
    housing for people with special needs--especially the homeless and
    people with AIDS.

                                  GUN CONTROL
        Question. The Administration has not been successful in securing
    the passage of gun-control legislation. However, it has, through HUD,
    threatened a massive lawsuit against gun manufacturers (except for
    Smith & Wesson, which has now reached a separate agreement with the
    Department). Some believe that the Administration is attempting to
    achieve through litigation what it cannot achieve through the normal
    legislative process. What is the statutory or constitutional authority
    on which HUD intends to pursue lawsuits against the gun industry?
        Answer. As the Department has stated on previous occasions, HUD has
    no intentions of filing a lawsuit in its own capacity against the gun
    industry. HUD, however, is working with cities and counties that have
    filed suit against the gun industry, as well as with responsible
    manufacturers, to find a negotiated solution that will facilitate the
    industry's role in reducing the tide of gun violence by fostering safer
    manufacturing and distribution practices. Should these negotiations
    prove unsuccessful, HUD is prepared to work with public housing
    authorities, including those under HUD's control, on a possible suit
    against the industry.
        HUD has statutory authority, moreover, to provide such assistance,
    and to assist the cities and counties that have filed suit against the
    gun industry in their negotiations for settlement. In the Department's
    enabling statue, Congress made clear that HUD was created in part ``to
    encourage the solution of problems of housing, urban development, and
    mass transportation through State, county, town, village, or other
    local and private action.'' 42 U.S.C. 3531 (1999). Given the awful toll
    of gun violence in our nation's communities, particularly those at the
    core of HUD's mission, helping cities and counties seek improved gun
    safety and more responsible distribution through negotiations with the
    gun industry, is a prime example of such encouragement. Moreover,
    reducing gun violence is at the core of HUD's responsibility for
    promoting national housing policy. The Housing Act of 1949, for
    example, declared as national housing policy ``the realization as soon
    as feasible of the goal of a decent home and a suitable living
    environment for every American family,'' 42 U.S.C. Sec. 1441 (1999),
    and Congress has declared that the ``objective of national housing
    policy shall be to reaffirm the long-established national commitment to
    decent, safe, and sanitary housing for every American by strengthening
    a nationwide partnership of public and private institutions able . . .
    to help make neighborhoods safe and livable.'' 42 U.S.C. Sec. 12701
    (1999).

                              SUBCOMMITTEE RECESS

        Senator Mikulski. With that, this hearing now stands
    recessed until next Thursday, April 6, at such time as we will
    take testimony from Secretary Togo West on the VA budget.
        [Whereupon, at 11:56 a.m., Thursday, March 30, the
    subcommittee was recessed, to reconvene subject to the call of
    the Chair.]

     DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT AND
            INDEPENDENT AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2001

                                  ----------

                            THURSDAY, APRIL 6, 2000

                                            U.S. Senate
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 9:30 a.m., in room SD-136, Dirksen
    Senate Office Building, Hon. Christopher S. Bond (chairman)
    presiding.
        Present: Senators Burns, Mikulski, and Leahy.

                         DEPARTMENT OF VETERANS AFFAIRS

    STATEMENT OF HON. TOGO D. WEST, JR., SECRETARY
    ACCOMPANIED BY:
            THOMAS L. GARTHWAITE, M.D., DEPUTY UNDER SECRETARY FOR HEALTH,
                VETERANS HEALTH ADMINISTRATION
            JOSEPH THOMPSON, UNDER SECRETARY FOR BENEFITS, VETERANS
                BENEFITS ADMINISTRATION
            MICHAEL WALKER, ACTING UNDER SECRETARY FOR MEMORIAL AFFAIRS,
                NATIONAL CEMETERY ADMINISTRATION
            D. MARK CATLETT, DEPUTY ASSISTANT SECRETARY FOR BUDGET,
                DEPARTMENTAL ADMINISTRATION

                OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

        Senator Bond. Good morning, ladies and gentlemen. The
    Subcommittee will come to order. We meet this morning to review
    the fiscal year 2001 budget request of the Department of
    Veterans Affairs. We welcome Secretary Togo West and other VA
    officials. Senator Mikulski is here but she was called away
    temporarily, so she suggested that I go on, because we do have
    a couple of votes beginning at 10:30, and with the budget and
    vote-arama going on, we don't know if we're going to be able to
    give you the full treatment, Mr. Secretary, and I know that
    you're going to miss that if we're unable to come back; but we
    will keep the record open and have questions for the record.
        VA's appropriation request totals about $47 billion of
    which $22.4 billion is in the discretionary appropriations
    level. The budget would grow by $1.5 billion over the fiscal
    year 2000 level under the proposal submitted by the
    administration.
        A year ago, VA submitted a request to Congress which would
    have resulted in 13,000 VA health care workers being laid off,
    thousands of veterans being denied medical care, longer waiting
    times for appointments, and closures of scores of programs for
    such critical activities as substance abuse treatment, cancer
    therapy, psychiatric treatment and cardiac surgery.
        Despite the fact that the Vice-President announced in July
    the administration would request an additional $1 billion for
    medical care, we never received a budget amendment or any
    request from the administration. Notwithstanding the
    administration's failure to be responsive, after a long hot
    summer and a lot of hard work we came up with a budget for the
    Department which increased medical care by $1.7 billion. I
    think everyone in the room will agree it was the right thing to
    do to ensure high quality, accessible medical services to all
    veterans seeking care at the VA.

                           VA'S MEDICAL CARE PROGRAM

        It seems the administration finally saw the light, as this
    year's budget proposal would increase medical care by $1.35
    billion for a total of $20.3 billion. I congratulate you, Mr.
    Secretary, in getting the White House to come to its senses and
    recognize the importance of this vital program for veterans.
        We are pleased the budget includes $548 million to
    implement the new Millennium Act, increasing by $278 million
    the funds for home and community-based care. These programs are
    vitally important for our growing aging veteran population. The
    new emphasis on home-based services should allow more veterans
    to stay in their homes, surrounded by their family members, as
    long as possible.
        While we're on the issue of long-term care, let me say I
    have become increasingly concerned about the quality of care
    provided to our nation's elderly and nursing homes. A recent
    audit in Missouri and several GAO reports indicate there are
    serious and well-documented problems in the nation's nursing
    home system, suggesting that inexcusable regulatory lapses have
    occurred. VA has established a process to ensure that veterans
    it places in community nursing homes are receiving good care,
    through regular inspections and evaluations. Yet it is my
    understanding that VA is neither systematically maintaining nor
    sharing critical information with HCFA and State agencies about
    the community homes with which it contracts. We will be
    following up with you on this issue because I think this is one
    area where VA could make a significant contribution and benefit
    from the work done by HCFA and State inspection agencies as
    well.
        The budget also includes $339 million to continue to treat
    veterans who suffer from Hepatitis C. Last year, Dr. Kizer told
    us that Hepatitis C was a problem of epidemic proportion among
    the veteran population in particular, and we seek to ensure
    that the Department is allocating funds appropriately,
    screening all at-risk patients and treating all veterans who
    can benefit from the new combination therapy.
        While Dr. Kizer spoke last year about the need for as much
    as $500 million for treating veterans with Hepatitis C, your
    budget indicates only $195 million will be spent in fiscal year
    2000. More disturbing, recent data from the field indicates far
    less than this is being spent this year. We need to understand
    why this is happening.
        I note there is a new initiative in this year's budget
    which you've dubbed 30-30-20--I understand it has nothing to do
    with the old 30-20-10 initiative--aimed at improving access to
    care and decreasing waiting times. This is an admirable goal;
    we all have scores of stories from our constituents about their
    having to wait for weeks or even months to get an appointment
    and then waiting for hours to see the doctor the day of the
    appointment. I look forward to hearing details about how VA
    will improve this situation.
        Another emphasis in VA's budget is patient safety, with
    $137 million in initiatives aimed at patient safety
    improvements. This is an extremely important issue, and while
    VA has been a leader in certain aspects of ensuring the safety
    of its patients, such as the bar coding system for medications
    and the patient safety registry, VA, along with all health care
    providers, has a long way to go. Anytime there are instances of
    patient abuse, neglect or mistakes, there's much work to be
    done. VA must ensure that all of its facilities are following
    VA's patient safety policies and procedures, and that there is
    strong and consistent leadership.
        Another area I am interested in is VA's homeless programs.
    We increased these programs by $40 million last year, and the
    budget proposal would maintain current levels of spending. I'm
    concerned that while we're spending a lot of money on these
    programs, there seems to be insufficient coordination within VA
    and with a myriad of other Federal agency programs serving
    homeless. Also, there seems to be a great deal of variation
    from one VA hospital to the next in terms of how much priority
    is placed on helping homeless veterans.
        If helping homeless veterans is a national priority for VA,
    and it absolutely should be, we need to be confident that it is
    a priority at each of the 22 networks and each of the 172 VA
    hospitals. Anecdotal evidence coming to us suggests that it is
    not.
        Fortunately, VA has efforts underway to identify and link
    services between homeless veterans and VA medical and other
    supportive services. This is a good thing, but the Department
    needs also to recognize the importance of preventing its
    patients from becoming homeless. The point is very important in
    view of the fact that substantial numbers of homeless vets are
    treated in every VA medical center.

                       CAPITAL ASSET REALIGNMENT PROTOCOL

        Moving on, I also have concerns about VA's progress in
    developing the capital asset realignment protocol. GAO told us
    last year that the VA was wasting $1 million a day on unneeded
    buildings, and that only 25 percent of buildings in the VA
    medical system are being used for direct patient care. So it is
    important that VA move forward with capital asset planning and
    market studies, and in a manner which protects veteran's needs
    but does not enable stakeholders to hijack the process.
        Mr. Secretary, you have to have direct involvement in this
    and push this forward; this is not something that is going to
    happen. It is pushing a rock up a hill, but that rock has to go
    up the hill.
        Clearly everyone who has an interest--veterans, employees,
    the medical schools--need to be at the table and contributing
    to the process. But the stakeholder process that I've witnessed
    too often is like trying to load frogs in a wheelbarrow. You
    get a couple in, and when you go out to look for the others,
    the ones you put in at first jump out. That's what we've seen
    in Chicago, and we absolutely cannot repeat this process in
    other market studies.
        According to GAO testimony, which will be inserted in the
    record today, ``VHA's process, as currently designed, raised
    concerns about whether the right people are involved at the
    right times in the right ways.'' GAO's assessment is that VA
    has not learned any lesson from the Chicago capital asset
    realignment study and that the process as currently structured
    will not lead to timely, appropriate capital investment
    decisions that are in the best interests of veterans and
    taxpayers.
        [The information follows:]

                    [General Account Office, April 6, 2000]

          VA is Struggling to Respond to Asset Realignment Challenges

                            (By Stephen P. Backhus)

        Mr. Chairman and Members of the Subcommittee: We are pleased to
    contribute this statement for the record for the Subcommittee's
    deliberations on the fiscal year 2001 budget request for the Department
    of Veterans Affairs (VA). It discusses the management of VA's health
    care assets that are operated by the Veterans Health Administration
    (VHA). VHA has primary responsibility for capital asset planning
    activities, whereas VA's Capital Investment Board has primary
    responsibility for capital budgeting activities, including review of
    VHA's capital investment proposals.
        Between its establishment in 1946 and 1995, VHA's health care
    system grew into our nation's largest direct provider of health care,
    serving veterans at over 600 locations nationwide. In October 1995, VHA
    began to transform its system from a hospital operator to a health care
    provider that relies on community-based, integrated networks of VA and
    non-VA providers to meet veterans' needs.
        Over the next few years, VHA will spend billions of dollars
    operating, maintaining, and improving buildings and land at health care
    delivery locations nationwide. Currently, VA's health care capital
    assets total over 4,700 buildings and 18,000 acres of land at 181 major
    delivery locations.
        In March 1999, we reported that VHA could enhance veterans' health
    care benefits if it reduced the level of resources spent on underused,
    inefficient, or obsolete buildings and reinvested these savings in
    providing health care more efficiently in modern facilities at existing
    locations or new locations closer to where the veterans live.\1\
    ---------------------------------------------------------------------------
        \1\ VA Health Care: Capital Asset Planning and Budgeting Need
    Improvement(GAO/T-HEHS-99-83, Mar. 10, 1999).
    ---------------------------------------------------------------------------
        VHA agreed in general with our evaluation and committed at that
    time to taking the steps needed to realign its portfolio of health care
    assets. In essence, VHA agreed to implement in a timely manner a
    strategic planning process that systematically studies all its medical
    care markets in order to develop capital asset realignment plans.\2\
    VA's Capital Investment Board will use these plans to determine the
    best investment opportunities.
    ---------------------------------------------------------------------------
        \2\ A market, for the purposes of this statement, is defined as a
    geographic area generally within 75 miles of an existing VHA major
    delivery location.
    ---------------------------------------------------------------------------
        Last April we reported to this Subcommittee that VHA's
    transformation had made significant progress, although it appeared to
    be losing momentum. We concluded that VHA's transformation could not be
    successfully completed until VHA had addressed its greatest management
    challenge: realigning its massive portfolio of aged capital assets.\3\
    ---------------------------------------------------------------------------
        \3\ Veterans' Affairs: Progress and Challenges in Transforming
    Health Care (GAO/T-HEHS-99-109, Apr. 15, 1999).
    ---------------------------------------------------------------------------
        Last July we reported that VHA had made limited progress toward
    implementing a realignment process and estimated the opportunity cost
    of delay was as high as $1 million a day.\4\ VHA's efforts had focused
    primarily on discussions among VHA officials, VA officials, and
    stakeholders, such as veterans' service organizations, regarding a
    conceptual framework for its asset realignment process. VHA reported at
    that time that its realignment process would be operational within 2
    months (September 1999).\5\ Our statement today (1) assesses VHA's
    progress to date, (2) identifies concerns regarding VHA's realignment
    process, and (3) examines the potential effects of VHA's actions on
    VA's capital budgeting process.
    ---------------------------------------------------------------------------
        \4\ VA Health Care: Challenges Facing VA in Developing an Asset
    Realignment Process(GAO/T-HEHS-99-173, July 22, 1999).
        \5\ VA's Capital Assets Realignment Plan for Enhancing Services to
    Veterans, hearing before the Subcommittee on Oversight and
    Investigations, House Committee on Veterans' Affairs, No. 106-20 (July
    22, 1999).
    ---------------------------------------------------------------------------
        My comments this morning are based on discussions with officials
    responsible for VHA's asset realignment and VA's capital budgeting
    processes and reviews of documents, primarily those relating to VHA's
    proposed asset realignment procedures and VA's Capital Investment Board
    decisions concerning VHA investment proposals considered for funding in
    fiscal year 2001.
        In summary, VHA has been unsuccessful over the past 13 months in
    its efforts to design a capital asset realignment process. VHA's
    efforts have focused on discussions of who should lead such a process,
    how stakeholders should participate, and how decisions are to be made.
    Moreover, VHA estimates, as it did 8 months ago, that it could be
    several months before its process is operational.
        Our assessment of VHA's process, as currently designed, raises
    concerns about whether the right people are involved at the right times
    and in the right ways. Specifically, senior managers at headquarters
    may not be proactively involved in a leadership role at key decision
    points. In addition, stakeholders with vested interests appear to be
    involved in decision-making, rather than advisory, roles. And
    activities supporting key components, such as options development and
    evaluation, are not sufficiently rigorous. As a result, VHA may not be
    able to produce within a reasonable time frame capital asset plans that
    are in the best interest of veterans.
        VHA's slow progress creates dilemmas for VA's capital budgeting
    process. In the short term, VHA and VA's Capital Investment Board face
    the challenge of maintaining and improving capital assets without
    sufficient information about future asset needs to ensure cost-
    effective capital investment decisions. By contrast, if funding for
    projects is delayed until capital asset plans are completed, the
    longer-term challenge will be how to successfully finance and implement
    capital realignment investments potentially totaling billions of
    dollars. These challenges could be ameliorated, in part, if VA
    effectively manages short-term investment risks and the Congress
    provides alternative financing arrangements for future investments.

             VHA IS STRUGGLING TO DESIGN ASSET REALIGNMENT PROCESS
        The goal of an asset realignment process, in our view, is to
    produce within a reasonable time frame a capital asset plan that is in
    the best interest of veterans namely one that provides better health
    care services for currently enrolled veterans while enabling more
    veterans to access VA care. The capital asset plan should conform to
    Office of Management and Budget guidelines.\6\ If done successfully,
    the capital asset plan should provide a road map to guide investment
    decisions over the next decade.
    ---------------------------------------------------------------------------
        \6\ Capital Programming Guide, Office of Management and Budget
    (July 1997).
    ---------------------------------------------------------------------------
        Over the past 13 months, VHA has taken an inordinate amount of time
    trying to develop a method to achieve these objectives. In March 1999,
    VHA developed a broad conceptual framework to guide its design efforts.
    Over the next 3 months (July 1999), VHA developed a draft statement of
    work needed to conduct the market studies and an action plan for
    completing the studies. Three months later (October 1999), VHA
    developed a draft capital asset management policy statement that
    outlined a proposed design method as well as a revised statement of
    work and action plan. In February (4 months later), VHA provided a
    revised draft policy statement to a wide variety of stakeholders for
    their review.
        These critical documents are currently being revised again. Over
    the next several months, VHA expects to (1) continue refining its
    capital asset realignment design method on the basis of stakeholder
    concerns and suggestions, (2) complete work needed to solicit and award
    a consulting contract, and (3) obtain senior management review and
    final approval of a method to employ.
        During the same period, VHA has also struggled to develop a capital
    asset realignment plan for its Chicago market. This initiative,\7\
    started in July 1998, produced a draft realignment plan in September
    1999. VHA has spent the last 6 months obtaining and evaluating
    stakeholders' concerns and advice as well as reevaluating potential
    options. VHA expects this experience to help shape the ultimate design
    of its systemwide asset realignment process.
    ---------------------------------------------------------------------------
        \7\ VA Health Care: Closing a Chicago Hospital Would Save Millions
    and Enhance Access to Services (GAO/HEHS-98-68, Apr. 16, 1998)
    recommended that VHA develop and implement a plan that meets veterans'
    needs by operating fewer capital assets.
    ---------------------------------------------------------------------------

        VHA'S PROPOSED CAPITAL ASSET REALIGNMENT PROCESS RAISES CONCERNS
        We identified three weaknesses in VHA's proposed method. First,
    senior managers at headquarters appear to be in reactive, rather than
    proactive, leadership roles. Second, stakeholders appear to have
    decision-making, rather than advisory, roles. Third, key components,
    such as development of evaluation criteria, lack rigor; that is, they
    do not appear to be driven by quantifiable, objective data clearly
    linked to well-defined measurement standards.

                   VHA'S SENIOR MANAGERS LACK PROACTIVE ROLE
        VHA's senior management should play a critical leadership role in
    the development of (1) well-defined evaluation criteria that have the
    measurement standards needed to guide the collection of data necessary
    to make capital asset realignment decisions, (2) guiding principles
    that consultants and others could use when developing asset realignment
    options for consideration, and (3) systematic procedures for scoring
    options in relation to each evaluation criterion.
        However, VHA plans to give a consultant primary responsibility for
    developing options and evaluation criteria as well as for conducting
    the evaluation of potential options. Senior managers at headquarters
    are to be primarily in an oversight role, reacting to the consultant's
    proposed evaluation criteria, methods for evaluating potential options,
    and choice of the best option.
        We are concerned about this arrangement. The capital asset plans
    that result from these market studies are expected to guide VHA's
    future investment initiatives for the next decade. Without strong
    leadership in the development of these plans, VHA risks not being able
    to timely implement meaningful capital asset realignments. A case in
    point is VHA's Chicago market realignment process. Senior managers at
    headquarters were not actively involved until after stakeholders and
    others raised significant concerns about the recommended realignment
    option. VHA has since convened a special review group that has spent
    the last 2 months assessing stakeholders' concerns and deciding how
    such concerns could be best resolved. Now, 20 months after the study
    was initiated, this review group has decided to set aside the
    originally recommended option and consider others, including options
    that had not been considered before. If senior managers had been
    involved, such options might have been considered earlier. With senior
    managers continuing in a reactive role in its proposed systemwide asset
    realignment process, VHA risks replicating in other markets its
    struggle to make progress realigning assets in Chicago.

                  VHA'S STAKEHOLDERS HAVE DECISION-MAKING ROLE
        Last July we expressed concern that VHA's capital asset realignment
    process as then proposed could rely too heavily on local stakeholders
    who may have vested interests in maintaining the status quo. Our
    assessment of VHA's proposed asset realignment process today suggests
    that stakeholders remain heavily involved in a decision-making role.
        VHA plans to have national and local committees, which possess
    decision-making authority, review the consultant's products, such as
    its proposed evaluation criteria and data collection methods. The
    committees' members include representatives of veterans' service
    organizations, union or labor organizations, medical school affiliates,
    research organizations, state veterans and health associations, and
    local VHA staff.
        We remain concerned that stakeholders' participation as decision-
    makers on such committees could bias the market studies and,
    ultimately, the capital asset plans. VHA stakeholders are a diverse
    group with competing interests, who, quite naturally, could oppose some
    changes that they believe are not in their best interests. For example,
    medical schools' reluctance to change long-standing business practices
    has sometimes been a factor inhibiting VHA's asset management. In
    addition, unions sometimes are reluctant to support decisions that
    result in a restructuring of services because operating efficiencies
    can result in staffing reductions.
        We believe it is essential to involve stakeholders in an advisory
    role in the capital asset realignment process. This is because they can
    provide valuable perspectives on the evaluation criteria for selecting
    the best market study option and on procedures for scoring realignment
    options in relation to the criteria. Such input could enhance
    stakeholder understanding of VHA's capital asset realignment process
    and build confidence that realignment decisions are fair and fact-
    based.
    Realignment Decision Points Lack Rigor
        From our perspective, VHA's experience with the Chicago capital
    asset realignment study offers three valuable lessons so far that could
    improve VHA's systemwide asset realignment process:
      --ill-defined capital asset realignment evaluation criteria lead to
            unsupportable decisions;
      --flawed asset realignment options result in flawed decisions; and
      --an unstructured, subjective evaluation process impedes stakeholder
            acceptance.
        It does not appear, though, that VHA has taken these lessons into
    account for its proposed realignment process. First, VHA's systemwide
    evaluation criteria, when developed, could be vaguely defined. VHA's
    draft statement of work for its systemwide process calls for a
    consultant to develop evaluation criteria, but it does not require the
    evaluation criteria to be defined in terms of quantifiable measurement
    standards that are clearly linked to each criterion. The lack of well-
    defined criteria can lead to problems, as it did in the Chicago
    realignment process. There, VHA used accessibility of health care
    services as a criterion without adequate measurement standards that
    could be quantified, such as the potential effect on veterans' travel
    time and the number of veterans affected. Moreover, because VHA's draft
    statement of work for its systemwide process does not require the
    consultant to develop a systematic data collection approach that
    directly links data to individual evaluation criteria, the consultant's
    data collection could be incomplete. This could significantly reduce
    the likelihood that VHA would select the best option available.
        Second, we are concerned that VHA's systemwide realignment process
    may not consider the best options that are potentially available. For
    example, VHA's Chicago process appears to have explored flawed options
    because VHA's steering committee and consultant limited the options
    evaluated to ones that would generally rearrange services among
    existing assets. On the basis of its assessment of stakeholders'
    comments pertaining to the Chicago process, we understand that VHA is
    reevaluating options, including ones not originally evaluated. VHA's
    draft statement of work for its systemwide process calls for a
    consultant to develop at least three alternative asset configurations.
    VHA plans to rely on the consultant's judgment to develop the best
    options for consideration. Unless options other than incremental
    reconfiguration of current assets are considered, the realignment
    process is likely to take a narrower view than is needed to identify
    the most efficient and effective way to meet veterans' health care
    needs. For example, building or leasing a replacement facility in a
    location closer to where veterans live might not be evaluated.
        Third, we are concerned that VHA will use an unstructured process
    to decide which of the available capital asset realignment options best
    meets the evaluation criteria. For example, in its Chicago process, VHA
    did not prioritize its evaluation criteria, nor did it use a systematic
    scoring method to reach decisions about how well each option met the
    evaluation criteria. Rather, its recommended realignment option was
    determined on the basis of the subjective consensus of a steering
    committee, but the draft report did not elaborate sufficiently on VHA's
    rationale. VHA's draft statement of work for its systemwide process
    calls for a consultant to develop a method for evaluating realignment
    options. At present, this statement of work has no requirements for the
    consultant to develop a systematic way to score how well each option
    meets the evaluation criteria, nor has anyone in VA been charged with
    doing this. Without a systematic method for reaching a decision about
    the best option, VHA's realignment decisions may be difficult to
    explain, support, and defend.
        While VHA possibly could satisfactorily address our concerns within
    the coming months, its progress to date casts doubt on its ability to
    do so. This is because, in part, VHA may not possess the requisite
    financial planning skills to make the best realignment decisions.
    Currently, VHA is using health care professionals to make financial
    decisions. While such professionals have the necessary skills to make
    decisions about veterans' health care needs, they may not have the
    business skills necessary to make the best financial decisions. For
    example, financial experts possess knowledge and skills for analyzing
    life cycle costs of assets under different scenarios as well as for
    determining potential pay-back schedules for initial capital
    investments for options and potential long-term returns on those
    investments.
        Clearly, it seems desirable to bring to bear the combined expertise
    of financial experts and health care professionals to evaluate
    potential realignment options to identify those that provide the best
    investment return for veterans and other taxpayers. There is a unit
    within VA that, in our view, has worked to develop financial expertise
    regarding capital asset management decision-making, namely, VA's
    Capital Investment Board. The Board has (1) experience developing
    options evaluation criteria that are more clearly defined than criteria
    used in VHA's Chicago realignment process, (2) a systematic data
    collection approach that directly links data to each evaluation
    criteria, (3) guidance for developing options, and (4) a systematic
    options evaluation process. The Board currently uses a capital
    budgeting model for major investments that embodies the key attributes
    needed to address our concerns about VHA's process. Its model has been
    used and refined over the past 3 years, and it gives decisionmakers, in
    our view, better information than they had in the past.
    New Business Model Could be Considered
        There appear to be two alternative business models for completing
    the design and implementation of a capital asset realignment process in
    a timely manner, besides continuing with VHA's current efforts. First,
    leadership of the asset management responsibilities could be
    transferred to another unit within VA, but outside of VHA. A second
    model could involve the shifting of capital asset decision
    responsibility outside VA.
        Transferring capital asset management responsibilities to another
    unit within VA, such as the Capital Investment Board, could better
    combine VHA's health care expertise with VA's financial experts. As
    previously discussed, VA's Capital Investment Board appears to have a
    business model that could address financial management decisions
    involving capital asset realignment options. This approach has appeal
    because the Board has a full-time dedicated group that has studied
    industry best practices for capital asset management and has used this
    knowledge to develop evaluation criteria and procedures to score
    capital asset investment options.
        Capital asset decision-making could also be moved outside of VA.
    This could be accomplished through the establishment of an independent
    commission or comparable group to develop and evaluate options for
    realigning capital assets. This option could be advisable if it is
    determined that VA lacks the desire or wherewithal to realign capital
    assets or that the pressures from competing stakeholders inherent in
    VA's environment are deemed to be insurmountable.
        Regardless, VA needs to finalize its capital asset realignment
    process as quickly as possible because its delay is creating dilemmas
    for short-term and long-term capital investment decisions, as I will
    discuss next.

                 VHA'S DELAYS CREATE CAPITAL BUDGETING DILEMMAS
        VHA's slow progress creates dilemmas for VA's capital budgeting
    process. On a short-term basis, VHA, VA's Capital Investment Board, and
    the Office of Management and Budget must decide what level of risk they
    are willing to tolerate as they continue maintaining or improving
    capital assets without sufficient information about VA's future asset
    needs to ensure cost-effective investment decisions.
        Appropriately, they seem unwilling to accept much risk when making
    high-cost capital investment decisions those exceeding $4 million. They
    have significantly limited such investments over 4 fiscal years (1998
    through 2001) and could continue this de facto moratorium for another 3
    years (through 2004), given VHA's struggle to realign its assets. VA's
    fiscal year 2001 budget 8 for high-cost capital investments, for
    example, requested only $25 million for one new project after VA's
    Capital Investment Board considered 14 VHA high-cost investment
    proposals totaling $350 million.
        By contrast, there appears to be a greater willingness to accept
    more risk for less expensive capital investment decisions those below
    $4 million. We find this troublesome because there have continued to be
    significant investments requested for less expensive capital
    improvements about $400 million for each of fiscal years 2000 and 2001.
    These involve improvements at many locations, such as ward renovations;
    outpatient space reconfigurations; and enhanced heating, ventilation,
    and air conditioning systems. To successfully manage investment risks,
    VHA needs to carefully consider its less expensive construction
    investments at delivery locations that could ultimately be determined
    to be unneeded to meet veterans' health care needs once capital asset
    plans are completed.
        In March 1999 we reported that, until an effective capital asset
    planning process is in place, VHA's less expensive investment decisions
    should be subjected to tighter scrutiny. Toward that end, we suggested
    that VHA ensure that the fundamental principles underlying the Capital
    Investment Board's evaluation process for high-cost capital investment
    be rigorously implemented when making less expensive capital investment
    decisions.\9\
    ---------------------------------------------------------------------------
        \9\ VA Health Care: Capital Asset Planning and Budgeting Need
    Improvement(GAO/T-HEHS-99-83, Mar. 10, 1999).
    ---------------------------------------------------------------------------
        An effective risk assessment process should identify health care
    delivery locations where, for example, there are no alternatives for
    providing care. This process could involve two key components: (1) risk
    measurement factors and (2) data to evaluate investment proposals in
    relation to risk factors. Low-risk factors, for example, could include
    noncompetitive markets, large veteran population growth, or large
    growth in veterans' use of VHA services.
        On a longer-term basis, VA faces a different dilemma. Today VHA's
    high-cost capital investment needs are not known and will remain so
    until its capital asset plans are completed; nonetheless, VHA believes,
    and we agree, that they will likely require a significant investment.
    VHA's investment needs may not be as daunting as they now seem because,
    for example, investments will be spread over the next decade and each
    will require many years to implement. VHA's Chicago realignment
    process, for example, is expected to take 10 years to be fully
    implemented.
        Moreover, the magnitude of the new investment resources needed
    could be mitigated. First, VHA should realize significant returns on
    these capital investments up to 100 percent or more in the form of
    annual operational savings. VHA's Chicago realignment option, for
    example, was estimated to yield annual operating cost savings of $189
    million, compared with one-time capital investment needs of $92
    million. In March 1999 we suggested that some or all of these savings
    could be used to finance future capital investment decisions.
    Legislative action, for example, could authorize VA to accumulate
    resources (that is, savings) in a Capital Asset Fund by charging VHA
    delivery locations for the capital investment costs used to realign
    assets. Locations could return to the fund some or all of the amount
    invested over a prescribed number of years.\10\
    ---------------------------------------------------------------------------
        \10\ GAO/T-HEHS-99-83, Mar. 10, 1999, p. 23.
    ---------------------------------------------------------------------------
        Second, last year VA proposed a new funding source to help finance
    high-priority investments faster. In its fiscal year 2000 budget
    submission, VA proposed a 5-year demonstration that would allow VHA to
    sell, transfer, or exchange up to 30 excess or underutilized
    properties; deposit proceeds into a new Capital Asset Fund; and use the
    Fund to invest in more appropriate assets. This proposal, which we
    supported last year, offers a way to help finance capital investments
    needed to realign assets for two reasons: VA has significant unused or
    underused buildings, and it lacks incentives to dispose of properties
    because funds can, by law, be spent only to construct, alter, or
    acquire nursing home facilities.\11\
    ---------------------------------------------------------------------------
        \11\ GAO/T-HEHS-99-83, Mar. 10, 1999, p. 23.
    ---------------------------------------------------------------------------
        In addition to addressing high-priority asset needs faster, such
    funding sources could also provide incentives for more effective
    capital planning and greater accountability for investment decisions.
    To realize such benefits, the Congress would need to expand the types
    of deposits that VHA could make into its proposed Capital Asset Fund or
    establish a separate revolving fund for this purpose.

                            CONCLUDING OBSERVATIONS
        We are concerned that VHA's slow progress in establishing an asset
    realignment process needlessly delays critical decisions and the
    opportunity to reinvest resources to enhance veterans' future health
    care. Furthermore, the weaknesses we identified in VHA's realignment
    process, as currently proposed, undermine our confidence that, once
    implemented, it will produce within a reasonable time frame capital
    asset plans that are in the best interest of veterans and taxpayers. It
    appears that if a capital asset realignment process is patterned after
    the Capital Investment Board's decision-making model, the process would
    be less likely to replicate VHA's Chicago experience.
        Because VHA is struggling to reach a sound realignment decision in
    Chicago and complete the design of a systemwide realignment process,
    and because VA's Capital Investment Board has a model that could
    address many of VHA's weaknesses, it seems appropriate that VA consider
    transferring the asset planning responsibility to the Board. The daily
    cost of delayed decisions is unacceptably high.
        Mr. Chairman, this concludes my prepared statement. I will be happy
    to answer any questions that you or Members of the Subcommittee may
    have.

                     GAO CONTACT AND STAFF ACKNOWLEDGMENTS
        For future contacts regarding this testimony, please call Stephen
    P. Backhus at (202) 512-7101. Individuals who made key contributions to
    this testimony include Paul Reynolds and Walter Gembacz.
        Senator Bond. Before moving on to other accounts, I have to
    tell you I'm very troubled about the accountability in the VA's
    medical care budget. We've given the Department tremendous
    flexibility in how it allocates its budget, yet we have come to
    find huge discrepancies between what we thought we were
    spending money on and what is actually happening. We are seeing
    this is in Hepatitis C, post traumatic stress disorder,
    substance abuse and other areas which are stated as national
    priorities for the VA. This is something we absolutely must get
    a handle on, or we will begin in the appropriations process to
    be far more prescriptive as to how VA is to allocate its
    budget.

                        VETERANS BENEFITS ADMINISTRATION

        Moving on to the Veterans Benefits Administration, the
    budget also calls for an increase of roughly $100 million for
    VBA. There are tremendous needs in VBA to expedite and improve
    the quality of veterans' claims for service-connected
    disability and pension payments, and it seems additional funds
    are needed for more staff and to bring the process into the
    21st Century.
        I am deeply disappointed that so little progress seems to
    have been made in the last year. I recognize that the under
    secretary, Joe Thompson, has made many changes including a
    reorganization of the field, and a new emphasis on quality, not
    just timeliness. When you overhaul a system, obviously it's
    going to be disruptive. However, we've been talking about this
    problem as long as I've been chairman, and as long as Senator
    Mikulski was chair before me.
        In fiscal year 1999, the time it took to process an
    original disability claim worsened from the year before,
    growing from 168 days in 1998--which we said was unacceptable--
    to 205 days in 1999. Now let me let you guess on how excited
    and enthusiastic we are about those numbers. And, quality
    improved only marginally. I certainly hope you are on a
    glidepath at this point to your goal of 74 days, and that we
    won't see any more upticks. Too many veterans are dying before
    their claims are decided, and that is simply unacceptable.

                         OTHER CONCERNS ON VA'S BUDGET

        With respect to other aspects of the administration's
    budget request, I'm disappointed with the budget proposal for
    research. This critical program will be frozen at current
    levels of $321 million, leading to a real reduction in staffing
    and a further decline in the number of proposals that get
    funded. Certainly based on my experience and visits with the VA
    hospitals, I will tell you that we are able to attract and
    retain top quality physicians and researchers mainly because
    they have the opportunity to combine research with their
    service to patients; and I would hope that you would agree that
    this program is vitally important in maintaining VA's cadre of
    high quality clinicians.
        I am also discouraged that VA has chosen, once again, to
    cut the budget for the State home construction grant program.
    The program is slated to be cut by one-third, down to $60
    million, despite the fact there are hundreds of millions of
    projects in the pipeline. The program is a very cost-effective
    way of caring for our aging veteran population, and we will be
    seeking to ensure an appropriate level of funding.

                    STATEMENT OF SENATOR BARBARA A. MIKULSKI

        Senator Bond. That concludes my statement, and I'll be
    happy now to turn to Senator Mikulski. Welcome.
        Senator Mikulski. Thank you very much, Mr. Chairman. This
    morning I would like to welcome the Secretary of VA, Mr. Togo
    West, to our hearing to discuss our most crucial and probably
    one of the significant parts of our VA-HUD appropriations.
        Since the VA was founded, we fought a world war, a cold
    war, a Gulf war, and now once again our troops are overseas in
    Bosnia, Kosovo and other places around the world, keeping the
    peace and enforcing the peace. We're very proud of our
    military, and one of the reasons, as they serve we make a
    promise to them that when they come home, there will be a
    Department of Veterans Affairs to meet their needs. Promises
    made must be promises kept. Veterans, both men and women,
    really count on the VA for so much of their medical care.
        The VA budget contains some good news for our veterans
    despite some troubling issues that must be resolved.
        VA health care is funded at $20.9 billion, including $608
    million in medical collections, the largest increase VA has
    received in years. While many groups believe more is necessary,
    it is an important first step to ensuring that our veterans get
    the health care that they need. We're also very glad that the
    proposal in the President's budget for VA medical and
    prosthetic research is funded at $321 million; and we all know
    the crucial nature of VA medical research. VA medical research
    doesn't just help veterans, it helps everyone.
        Hepatitis C research is funded at $340 million, an increase
    of $145 million over fiscal year 2000. This is especially
    important for Vietnam-era vets; a major cause of liver cancer,
    Hepatitis could become a major medical expense in future years.
    I also believe that the Hepatitis C research will have
    tremendous benefits to our civilian community. When we talk to
    our firefighters or our first responders to medical emergencies
    like our paramedics, one of the greatest fears that they have
    is contacting Hepatitis C, though they used universal
    precaution; but they still feel very vulnerable; nurses, et
    cetera.
        So once again, as VA does the research to help veterans it
    also helps a larger population, and we're very proud of it.
        I'm very proud of the three major facilities in Baltimore
    or in Maryland; Baltimore, Fort Howard, and Perry Point, in
    addition to our wonderful extended rehab and long-term care
    facilities. You should know that we're very pleased with the
    community-based outpatient clinics that we have established. I
    think it has been a new model for making highest and best use
    of staff, taking the services to where the veterans are, and
    yet making again highest and best use of the specialty services
    we have; we are very, very pleased about that.
        There are two issues that I will raise with you in the
    course of the hearing, Mr. Secretary. One is the future of Fort
    Howard, which served our veterans so ably over many years; but
    now the facility is dated, we're talking about a new mission,
    but there is a question about both mission and who will be the
    leader.
        The second will be the yet still-unresolved cases of
    discrimination that I brought to your attention; and there are
    people in the audience here who have come to hear our
    questions, and we will be able to deal with this. I know of
    your deep commitment to end discrimination across all lines;
    race, ethnicity, gender, and so on. There are still some
    troubling things that I would like to share with you; they're
    not widespread, they're not systemic, and I'd like to bring it
    to your attention for a greater resolution.
        So I look forward to hearing your testimony, and once
    again, problem-solving with you both on budget and service
    delivery and an open door both for veterans for service and for
    people to be able to move up the ladder of opportunity within
    the veterans organization itself.
        Thank you very much.
        Senator Bond. Thank you very much, Senator Mikulski, and
    now I turn to Senator Burns for his statement.

                       STATEMENT OF SENATOR CONRAD BURNS

        Senator Burns. Thank you, Mr. Chairman. I will just submit
    my statement, and I want to thank----
        Senator Bond. We will really be pleased to submit the whole
    thing in the record.
        Senator Burns. Really?
        Senator Bond. Yes, sir.
        Senator Burns. You're not going to edit it?
        Senator Bond. No, sir, you can have the whole----
        Senator Burns. I appreciate the Secretary coming in, and we
    talked about some things that are pretty parochial as far as
    the State of Montana is concerned.
        I have a couple of questions, and I'm looking forward to
    hearing from the witnesses. Here it is, we've already gone 20
    minutes and we haven't learned a dang thing.
        Senator Bond. Well, thank you very much, Senator Burns, I'm
    sure glad you weren't paying attention, because you would have
    heard some really interesting things.
        Senator Burns. Apparently, I was----
        Senator Bond. Tell you what, I'll submit a copy of my
    statement for your review, too.
        With that, Mr. Secretary, would you proceed?

                         STATEMENT OF TOGO D. WEST, JR.

        Secretary West. Thank you, Mr. Chairman, Senator Mikulski,
    Senator Burns, Members of the Subcommittee. Indeed, we have had
    a chance to learn quite a bit over the last few minutes, and
    we're grateful to you, Mr. Chairman, and to the Members of the
    Subcommittee for this opportunity to present the
    administration's fiscal year 2001 budget proposal for the
    Department of Veterans Affairs.
        I do have a statement.
        Senator Bond. We will be happy to have the full statement
    submitted in the record, right after Senator Burns' statement.
    And we just ask you to summarize the things that you think are
    most important, and we will get into probably many of these
    areas in the questions.
        Secretary West. Thank you, Mr. Chairman. I have a few brief
    highlights.
        The President's budget for 2001 for the entire Federal
    Government uses a fiscally responsible approach to balancing
    the budget; it puts our nation on a path to eliminate the
    national debt in the year 2013, while strengthening social
    security and extending its solvency to the year 2050. The
    President's fiscal year 2001 budget request for the Department
    of Veterans Affairs recognizes as well another debt--that owed
    by this nation to her veterans.
        The request reflects, as has been noted, the largest
    discretionary dollar increase ever proposed by any president
    for veterans programs. It demonstrates his and this nation's
    continued commitment to those who have served our country well
    and with honor.
        It proposes significant increases in each of VA's three
    administrations and for all of our staff functions. We expect
    these resources will continue to improve our ability to provide
    the highest quality service.
        The 2001 budget request totals, as has been noted, some $48
    billion--$22 billion for discretionary programs, $26 billion
    for entitlements--that request is $1.5 billion above last
    year's enacted funding level. Let me note at this point that we
    in the Department are grateful to this committee especially,
    Mr. Chairman, for the work you did in seeing that the budget
    that emerged from the Congress and from the joint efforts of
    the administration and Congress for fiscal year 2000 was able
    to support the things that needed to be done for veterans.
        A $1.5 billion increase in the fiscal year 2001
    discretionary budget, along with those resources that the
    Congress added and that the administration agreed in fiscal
    year 2000 provides a 2 year total increase of more than $3.1
    billion, or 16.4 percent.
        For the Veterans Health Administration, our appropriation
    proposal is $20.3 billion to provide health care; this is a
    $1,355 million increase over last year's appropriated level,
    and added to that is an additional $608 million in anticipated
    collections, for a total of $20.9 billion to be spent on health
    care.
        With these funds, VA will treat in fiscal year 2001, 3.9
    million veterans, 100,000 more patients in 2001 than in 2000.
    VA will open 63 new outpatient clinics to go with the total
    that we are opening in fiscal year 2000 so that by the end of
    fiscal year 2001 we should exceed some 650 outpatient clinics
    across the nation. We will put 1,500 full time equivalent
    employees directly into the effort to increase access to VA
    health care, and to improve health care service to veterans.
        And as noted, we will increase our spending on Hepatitis C
    by $145 million for a total of $340 million, and we will fully
    fund the provisions of the Veterans Millennium Health Care and
    Benefits Act passed last year by the Congress, in the amount of
    $548 million. This allows us to increase our funding on long-
    term care initiatives by $350 million, enhancing home and
    community-based care programs for older veterans, covering the
    implementation of emergency care programs for veterans as well.
        As noted, the $321 million which we will set aside again
    for VA research, will support more than 1,942 high priority
    research programs.
        It is true, Mr. Chairman, that over the last several months
    in medical journals and in other media, were noted the reports
    that as many as 180,000 deaths may be occurring in the United
    States each year due to errors in medical care, many of which
    are preventable. As you have pointed out, it will take dramatic
    action from every health care provider in the nation in
    addition to the VA to improve in this area.
        We plan to spend $137 million to monitor and oversee safety
    issues and recruit and comprehensively train all VA health care
    staff on a recurring basis. We not only recognized the problem,
    but also recognized that it is a great opportunity, perhaps the
    greatest in recent times, for this nation to make very dramatic
    improvements in the way health care is provided.
        We have insisted that it is impossible to correct medical
    errors and to prevent them without first acknowledging that
    they do exist. We've launched a National Safety Partnership, an
    organization that's brought together Federal and private sector
    experts to join forces to address this problem. We have
    recognized that change will require team effort, and we will
    make that effort.
        We have led the nation in identifying problems that result
    in medical errors, and this budget will enable us to continue
    that leadership. In the coming year, our oversight of patient
    safety will be addressed through comprehensive monitoring at
    the national and local levels. Significant training,
    highlighted by a national center for patient safety, a quality
    scholars program, and 20 hours of biannual training for all
    full time staff, thus keeping this Department at the forefront
    of patient safety management issues.
        For benefits programs, we're requesting $22.8 billion to
    support compensation payments for 2.3 million veterans, 301,000
    survivors of veterans, and 864 children of Vietnam veterans who
    were born with spina bifida. These funds will support pension
    payments to 363,000 veterans and 253,000 survivors.
        We propose a cost of living adjustment, currently estimated
    at 2.5 percent to all compensation beneficiaries. We propose
    the increase be effective December 1, 2000.
        If this committee and the Congress approves, we will pay
    full disability compensation to veterans of Filipino forces who
    served with U.S. forces in World War II and are now residing in
    the United States. They currently receive benefits at half the
    level of the U.S. veterans beside whom they fought.
        We're requesting $1.6 billion for the readjustments benefit
    program to provide education benefits, opportunities for
    veterans and eligible dependents, and for special assistance
    programs for disabled veterans.
        For the Veterans Benefits Administration and benefits
    processing, the budget provides $999 million. That's an
    increase of $109 million over fiscal year 2000. With that, we
    will add 586 FTE into compensation processing to help us
    improve quality and the timeliness of disability claims. It
    will result in a 14 percent increase in staffing for
    adjudication over the past 2 fiscal years when we add in the
    440 that were included in the fiscal year 2000 budget.
        We will also continue our funding for the pilot project,
    Virtual VBA, to get us to the era where veterans claims can be
    processed in an entirely electronic environment. Thus
    eventually eliminating our paper-intensive and time-consuming
    manual claims process.
        Let me emphasize, Mr. Chairman and Members of the
    Subcommittee, that is very important to us, for that is the
    long-range solution we believe to both timeliness and accuracy
    in claims processing. But in the interim to have results now,
    we have added in the 586 additional FTE to try to make
    improvements in the processing right now.
        Last year 561,000 veterans died, more than 1,500 a day.
    About 1,000 of those each day are World War II veterans. For
    the operation of the National Cemetery Administration we are
    proposing $110 million for their budget, a $13 million increase
    over the 2000 appropriated level.
        That budget provides funding and FTE to address an
    increasing interment and maintenance workload at our national
    cemeteries, due to the high rates of increasing interments
    during the first years of operation of new national cemeteries.
    In addition, we have four new national cemeteries that are
    operational, two that opened in 1999 at Saratoga, New York, and
    at the Abraham Lincoln National Cemetery outside Chicago. And
    two more that will open this year: the Dallas-Fort Worth
    National Cemetery, and the Cleveland, Ohio National Cemetery.
    Also, this budget includes master planning funds on sites which
    will be used on new national cemeteries in Atlanta, Detroit,
    Miami, and Sacramento.
        Mr. Chairman and Members of the Subcommittee, our national
    cemeteries are and should be shrines dedicated to preserving
    our nation's history, nurturing love of country and honoring
    the service and sacrifice of our veterans. They should be
    places where our honored dead rest, in quiet triumph, yes; but
    also where veterans families can, amid peaceful and beautiful
    surroundings, resume their closeness, even for a brief moment,
    with family members who are buried there. And where visitors
    can move in hushed awareness. The grave markers among which
    they walk are in truth memorials both to our veterans and to
    our nation's eternal virtues of patriotism, honor and fidelity.
        To achieve this, we will use $5 million of the $13 million
    increase to begin this national shrine commitment, beginning an
    extensive and long-deferred renovation of grounds, grave sites,
    grave markers and historic structures. This amount, $5 million
    in a $48 billion budget, is only a small down payment on years
    of work which will commence across the entire cemetery system.
        For 224 years, America's veterans and our men and women in
    uniform have brought a record of security and peace to our
    North American continent, benefiting this nation and our
    citizens. With this bill we say to our veterans, ``Well done.
    The nation values your gift of service and patriotism and will
    honor her commitment to you.''
        We're grateful to this committee and to this committee's
    staff, to each member, for your support of our veterans and of
    this department. We're grateful to the VSOs, the veterans
    service organizations, for their advocacy both in our budgeting
    cycle and in the appropriations cycle. We look forward to
    working with you on these issues in the future.

                               PREPARED STATEMENT

        Seated with me, Mr. Chairman, to my immediate right, the
    Acting Deputy Under Secretary and the Under Secretary Designate
    for Memorial Affairs, Mike Walker. To my immediate right, the
    Under Secretary for Health, Dr. Tom Garthwaite. To my left,
    Mark Catlett, who directs our budget, Deputy Assistant
    Secretary of the Budget. To the far left, Joe Thompson, Under
    Secretary for Benefits.
        We are available for your questions.
        [The statement follows:]

                    Prepared Statement of Togo D. West, Jr.

        Mr. Chairman and members of the Committee, good morning. I am
    pleased to present the President's 2001 budget request for the
    Department of Veterans Affairs (VA). The President's budget for 2001
    uses a fiscally responsible approach to balancing the budget. Utilizing
    realistic and responsible funding levels, it puts our Nation on a path
    to eliminate the national debt in the year 2013, making our Nation debt
    free for the first time since 1835.
        The President's request for VA reflects the largest discretionary
    dollar increase ever proposed for veterans' programs. It demonstrates
    his continued commitment to those who served our country with honor.
    Our budget proposes significant increases for each of VA's three
    administrations and all of our staff functions. These resources will
    allow us to continue to improve our ability to provide the highest
    quality service to our Nation's veterans--service they have earned
    through their sacrifices for America.
        We are requesting approximately $48 billion, which includes $22
    billion for discretionary programs, without collections, and $26
    billion for entitlements. Our request for discretionary programs is
    $1.5 billion more than last year's enacted funding level. This request,
    along with additional resources agreed to by Congress and the
    Administration in 2000, reflects a two-year total increase of more than
    $3.1 billion, or 16.4 percent.
        Our veterans are entitled to the best health care America can
    provide. In the past few years, we have transformed the hospitals run
    by VA to provide greater access for better care to more veterans. And
    with the funding in our fiscal year 2001 budget, we will continue this
    improvement.
        The budget provides $20.9 billion, including $608 million in
    medical collection transfers, to provide medical care to eligible
    veterans. This represents a $1.4 billion increase over last year's
    level. VA plans to open 63 new outpatient clinics and treat 100,000
    more patients in 2001 than in 2000, a 2.6 percent increase. This
    patient level is 24 percent above the 1997 baseline, which exceeds our
    goal of a 20 percent increase.
        We are focusing our resources on improving veterans' access to VA
    health care and the services we provide them through newly established
    service standards and access goals. These are:
      --New patients are to receive an initial or non-urgent appointment
            with their primary care or other appropriate provider within 30
            days.
      --Patients will receive a non-urgent specialty appointment within 30
            days when referred by a VA practitioner.
      --Patients will be seen within 20 minutes of their scheduled
            appointment.
        Restructuring efforts made possible through the use of buyout
    authority will allow us to redirect an additional 1,500 full time
    equivalent (FTE) employees to meeting these goals. Altogether, more
    than 2,200 employees will be dedicated to improving access and
    services. These FTE, along with planned management savings and an
    additional funding request of $77 million, will provide a total
    resource commitment of $400 million in this area in 2001.
        To enhance VA's leadership role in patient safety management, we
    plan to spend $137 million to monitor and oversee safety issues and to
    comprehensively train all VA staff on a recurring basis.
        We are also requesting an increase of $145 million to treat
    veterans with Hepatitis C. In addition, our budget would fully fund the
    $548 million needed to implement provisions in the Millennium Act
    dealing with specialized mental health services, emergency care, and
    extended care services.
        Enhancing VA's patient safety management and reporting system will
    also improve the quality of care we provide veterans. It has been
    reported in medical literature that as many as 180,000 deaths occur in
    the United States each year due to errors in medical care, many of
    which are preventable. It will take dramatic action from every health
    care provider, not only VA, to improve in this area.
        VA has not only recognized the problem, but also recognized that it
    is the greatest opportunity we have had in a very long time to make
    dramatic improvements in the way health care is provided in our
    country.
        We have acknowledged that it is impossible to correct or prevent
    errors without first accepting that they exist.
        We are taking a systematic approach to solving the problem of
    patient safety, and to the way we deliver health care, to identify
    problems and develop solutions.
        We have launched the National Patient Safety Partnership, an
    organization that has brought together Federal and private sector
    experts to join forces to address this problem.
        We have recognized that change will require a team effort at every
    level of our organization, and we are committed to making that effort.
        VA has led the Nation in identifying problems that result in
    medical errors. Our budget will enable VA to continue its world
    leadership in patient safety initiatives--benefiting not only veterans,
    but all Americans.
        Our oversight of patient safety will be addressed through
    comprehensive monitoring at the national and local levels. We will be
    redirecting an additional 190 FTE toward patient safety enhancements,
    which means 500 FTE will be dedicated to this effort. Significant
    training, highlighted by a national center for patient safety, a
    quality scholars program, and 20 hours of biannual training for all
    full-time staff, will keep VA at the forefront of this important area.
        In addition to basic clinical components funded through medical
    care, the 2001 budget request provides considerable support for the
    education and training of health professionals, and for VA's research
    programs.
        In addition, we will increase the number of unique patients treated
    to 3.9 million, continue to enhance the quality of our care, and
    improve customer satisfaction.
        Among our most important new initiatives are those designed to
    provide long-term care for veterans. These initiatives are linked to
    the provisions of the Millennium Act. The $350 million increase for
    these initiatives included in this budget will enhance home and
    community-based care programs for older veterans. It will also cover
    out-of-system emergency care for certain veterans.
        VA is committed to formulating and implementing a well-designed
    pilot of VA-Medicare subvention. Currently, the Department of Defense
    is operating a three-year subvention demonstration in six sites,
    scheduled to end in December 2000, and the demonstration results may
    offer a useful lesson for us. We look forward to working with you again
    to pass a VA subvention model that does not jeopardize the Medicare
    Trust Funds or VA's ability to provide top-quality medical care to high
    priority veterans.
        We propose a legislative initiative to combine the Health Care
    Services Improvement Fund and the Extended Care Revolving Fund with the
    Medical Care Collections Fund (MCCF) to improve administrative
    efficiencies. This legislative proposal also allows 50 percent of
    medical collections to be returned to the Treasury as they are received
    until a level of $350 million is achieved. Returning collections in
    this amount will recoup Millennium Act funding appropriated in medical
    care, while maintaining an incentive to collect all government debt.
        To continue VA's identification and treatment of Hepatitis C for
    veterans, we request an additional $145 million, which will increase
    the total funding level to combat this disease to $340 million. Also
    provided is funding to meet anticipated increases for pharmaceutical
    and prosthetic costs.
        We continue to support a two-year spending availability of $900
    million, less than five percent of our resources--excluding those funds
    set aside due to the deferred spending of medical equipment funds
    required by law. This proposal will provide VA with maximum flexibility
    regarding spending decisions and will promote cost-effective decision-
    making.
        For Medical and Prosthetic Research, a total of $321 million and
    2,883 FTE will support more than 1,942 high priority research projects
    to enhance the quality of health care our veterans are provided. This
    level of funding will allow VA to continue our significant research in
    the areas of Gulf War veterans' illnesses, diabetes, Parkinson's
    disease, spinal cord injury, cancer, prostate disease, depression,
    environmental hazards, and women's issues, as well as rehabilitation
    and Health Service Research and Development field programs.
        No other federally-supported clinical or research entity has
    initiated or completed such critical and ambitious research activities
    on behalf of America's veterans as VA. The Department expects the
    amount of non-appropriated research funding we receive from the private
    and public sectors to total an additional $497 million.
        The Balanced Budget Act of 1997 and the Millennium Act allow VA to
    retain collections from third parties, copayments, per diems, and
    certain other sources. These collections are deposited in the MCCF and
    are available for transfer to the Medical Care appropriation. The funds
    remain available to VA until they are expended. For 2001, VA estimates
    more than $958 million will be collected, of which VA will retain $608
    million.
        In part, we will be able to do this by implementing reasonable
    charges to certain veterans for inpatient and outpatient procedures. In
    addition, we are in the process of ensuring that our collection
    documentation meets the requirements of the Health Care Financing
    Agency. We are also looking to improve our ability to collect funds
    from private sector organizations. Additional Tricare payments from the
    Department of Defense, and increased copayments by veterans as provided
    for in the Millennium Act are assumed in the collection estimate.
        For the Medical Administration and Miscellaneous Operating
    Expenses, or MAMOE activity, we are requesting $64.8 million in
    appropriations and expect $7.2 million in reimbursements to support 584
    FTE in 2001. This level of staffing will strengthen the functions,
    especially in the areas of quality assurance and performance
    management, needed to oversee VA's efforts.
        Our veterans are entitled to have their claims for benefits
    processed correctly and in a timely manner. This budget will fund
    initiatives to process claims and education benefits in an electronic
    environment--allowing those who process claims to have complete and
    easy access to the information they need.
        For benefits administration, the budget provides $999 million. The
    request reflects an increase of $109 million over the operating level
    enacted in 2000 and a one-time adjustment of $30 million from the
    Readjustment Benefit Account to ensure that all Vocational
    Rehabilitation and Employment administrative costs are funded from
    General Operating Expenses. Excluding this technical adjustment, this
    is a 13 percent increase.
        These additional resources will ensure that veterans' compensation,
    pension, vocational rehabilitation and employment, education, and
    housing benefits will continue to be delivered while we move forward
    with our reengineering efforts. To help us process disability claims
    more efficiently, provide quality-enhancing initiatives, and continue
    our succession planning efforts, 586 FTE will be added to compensation
    processing.
        VA's benefits programs are a tangible expression of the Nation's
    obligations to its veterans. For 2001, the Administration is requesting
    $22.8 billion to support compensation payments to 2.3 million veterans,
    301,000 survivors and 864 children of Vietnam veterans who were born
    with spina bifida, and to support pension payments to 363,000 veterans
    and 253,000 survivors.
        We propose to provide a cost-of-living adjustment (COLA) based on
    the change in the Consumer Price Index, to all compensation
    beneficiaries, including spouses and children receiving dependency and
    indemnity compensation. The percentage of the COLA is currently
    estimated at 2.5 percent, which is the same percentage that will be
    provided, under current law, to veterans' pension and Social Security
    recipients. The increase would be effective December 1, 2000, and would
    cost an estimated $345 million during 2001.
        If Congress approves, VA will pay full disability compensation to
    veterans of Filipino forces residing in the United States who currently
    receive benefits at half the level that U.S. veterans receive. The cost
    of this legislation is estimated to be $25 million over five years.
        The Administration is also proposing repeal of a provision in the
    Balanced Budget Act of 1997 which would preclude the Government from
    making its October, 2000, VA-benefit payments on Friday, September 29,
    2000 and instead require that they be delayed until Monday, October 2
    (in fiscal year 2001). Under the law which would otherwise apply, when
    the first of the month falls on a weekend, payments are to be made on
    the Friday immediately preceding it.
        In order to enhance educational opportunities for veterans and
    eligible dependents and provide various special assistance programs for
    disabled veterans, an appropriation of $1.6 billion is being requested
    for the Readjustment Benefits program.
        Education benefits will be provided for about 480,000 trainees in
    2001, including 309,000 training under the Montgomery GI Bill. This
    request includes funds for the annual Consumer Price Index adjustment,
    which is estimated to be 2.7 percent effective October 1, 2000, for
    education programs.
        The heart of the Veterans Benefits Administration's (VBA) strategy
    for improved customer service is measurable success. This budget builds
    on critical indicators that have been instrumental in past performance.
    VBA is positioning itself to improve dramatically the delivery of
    benefits and services.
        Mr. Chairman, as we all know, VA is not completing work on claims
    for compensation and pension benefits in as timely a manner as we would
    like. This is a difficult problem not easily or quickly resolved. More
    veterans are receiving disability compensation today than at any time
    in the history of the United States and, despite a declining veteran
    population, VA has an ever-increasing compensation workload.
        Veterans are filing claims today for more issues or conditions than
    at any time in our history. The complexity of these claims has also
    increased dramatically. The level of effort required to evaluate a
    claim for benefits today is significantly greater than just eight years
    ago. This is because of both the increased complexity of today's claims
    and expanded procedural requirements occasioned by judicial review of
    our decisions. VA has embarked on an aggressive program to hire
    veterans service representatives who, when fully trained in these
    intricate procedures, will ensure veterans get the right decision on
    their claim the first time.
        By the end of 2001, we expect to have 1,000 more employees to work
    on adjudicating claims than we had last year. Significant strides have
    been made in implementing our case management approach to customer
    service and in improving the information technology infrastructure that
    supports veterans' claims processing. For example, two years ago, a
    veteran would get a busy signal more than half the time he or she
    called our nationwide toll-free number; today, the percent of blocked
    calls is 5 percent.
        The problems facing VA in overcoming its claims processing backlog
    were long in making and are systemic in nature. All of us are
    dissatisfied with the rate of our progress, but there is no ``quick
    fix'' to this problem. To do what is needed will take time, but we have
    put in place a foundation for success and are requesting a budget
    through which these goals will be achievable.
        Our vision for VBA emphasizes accurate and timely claims decisions,
    along with a high level of customer service and satisfaction. To reach
    those goals, VBA's 2001 budget request is $999 million and 11,824 FTE.
    This represents an increase of $109 million and 287 FTE above the 2000
    level, plus a one-time adjustment of $30 million from the Readjustment
    Benefit Account for Vocational Rehabilitation and Employment
    administrative costs.
        By combining this increase in the number of employees with
    positions available due to efficiencies in other areas, VBA will be
    able to increase its number of personnel in claims processing and
    associated initiatives by 586. This will result in a 20 percent
    increase in adjudication staffing since 1999.
        This budget continues to include funding for a pilot project,
    Virtual VBA, which will allow VA to process veterans' claims in an
    electronic environment, eventually eliminating the now paper-intensive
    and time-consuming manual claims process. When fully implemented, it
    will provide for complete access to information by anyone with access
    to the new system.
        In addition to the electronic claims processing pilot project and
    increased FTE, VBA seeks funding in the amount of $31.1 million for a
    number of other C&P initiatives including:
      --The expansion of our Systematic Technical Accuracy Review (STAR)
            Program in order to obtain current and diagnostic information
            about the accuracy of the work being produced at field
            stations.
      --The Systematic Individual Performance Assessment (SIPA), a new
            initiative designed to complement the on-going STAR program,
            which will bring performance assessment and accountability to
            the journey-level employee. This will help keep fraud from
            occurring and will improve oversight of individual decision-
            making accountability.
      --Training and Performance Support Systems (TPSS), an ongoing multi-
            year training initiative for employees working in the area of
            compensation and pension. The effectiveness of this training
            has been established and it substantially improves the accuracy
            of the work of those who complete it.
      --Initiatives to assist in replacing our antiquated payment system,
            and provide various improvements to existing technology used in
            this environment.
        Funding is included for the enhancement of education activities
    intended to improve stakeholder and customer satisfaction. Building
    upon the EDI/EFT initiative, funding is included for The Education
    Expert System (TEES), an umbrella project that will expand our
    achievements in the area of electronic data exchange and funds
    transfer, and will make changes to the application used by schools to
    transmit enrollment information to VA.
        This budget contains several initiatives designed to provide much
    needed improvements in service and accountability to VA's housing
    program. Included is funding to redesign our Loan Service and Claims
    processes in order to automate routine activities. Funds are also
    provided for an ongoing effort to consolidate guaranteed loan servicing
    at the nine Regional Loan Centers. Other projects include providing a
    redesign of the Construction and Valuation system; continuing the
    consolidation of the mortgage loan accounting functions to one
    centralized location; and enhancing the Lockbox Funding Fee system and
    a system to provide on-line determinations of eligibility for loan
    guaranty benefits.
        Funding has also been included to support several areas of service
    that the Vocational Rehabilitation and Employment program has sought to
    strengthen. These initiatives are designed to improve communications,
    emphasize outreach, increase access, improve case management, and
    emphasize the program's central goal of finding appropriate employment
    for our veterans.
        Mr. Chairman, issues regarding the Department's responsibility to
    procure for claimants the evidence necessary to establish their
    eligibility for disability and death benefits are also of concern to
    many. What responsibility do claimants, and those advocating on their
    behalf, have to first demonstrate their claims are plausible before
    significant Government resources are devoted to the claims' further
    development? Should the Department's obligation be the same regardless
    of a claim's plausibility, or should VA resources be devoted to those
    claims most likely to prove meritorious? The answers will directly
    affect our ability to award benefits in a timely manner to deserving
    claimants.
        On December 2, 1999, we published for public comment a notice of
    proposed rulemaking concerning well-grounded claims and VA's duty to
    assist claimants. Consistent with currently controlling judicial
    precedents, the regulations we have proposed would include important
    exceptions to a general rule that claimants must present plausible
    claims before the Department's duty to assist arises.
        First, under the proposed rule, there are certain types of
    assistance VA would provide without regard to whether a plausible claim
    had been submitted. VA would routinely procure service medical records
    in claims for service-connected disability or death benefits, and would
    obtain records of any VA medical treatment identified by a claimant.
        Further, if VA determines a claim is not ``well grounded,'' which
    is the legal term denoting plausibility, a claimant would be notified
    of the types of evidence they would need to present to make it so. In
    addition, our proposal exempts certain claimants from the well-
    grounded-claim requirement: those whose claims are filed within a year
    after service separation, and certain specific categories of others,
    such as the terminally ill and those unable to afford medical
    treatment, for whom the burden of producing evidence may be especially
    onerous.
        Within the dictates of current law, we have attempted to strike an
    appropriate balance between the obligations of claimants for Federal
    funds and their claims representatives and those of the Government they
    honorably served.
        We are hopeful that, with input from veterans and their
    representatives, we can develop a final rule that will be both
    acceptable to veterans and administratively feasible. Should Congress
    judge the outcome of this rulemaking unacceptable and contemplate
    shifting more of the evidentiary burden onto the Department, we ask
    only that consideration be given to the resource and performance
    issues, which would necessarily accompany such a change in law.
        Our veterans deserve a dignified and respectful final resting
    place. The final resting places we provide for them--our Nation's VA
    cemeteries--are national shrines and must be maintained in a way that
    does honor to the men and women who are buried there.
        The budget requests $110 million, $13 million more than the 2000
    enacted level, for the operation of the National Cemetery
    Administration (NCA). This 13 percent increase will reinforce our
    national shrine commitment by beginning an extensive renovation of the
    grounds, gravesites and grave-markers at cemeteries where the most need
    exists.
        New national cemeteries at Albany, NY; Chicago, IL; Dallas/Ft.
    Worth, TX; and Cleveland, OH will be fully operational in 2001. We will
    begin master planning on sites in Atlanta, GA; Detroit, MI; Miami, FL;
    and Sacramento, CA.
        One of VA's strategic goals is to assure that national cemeteries
    are shrines dedicated to preserving our Nation's history, nurturing
    patriotism, and honoring the service and sacrifice veterans have made.
    In order to achieve this objective, it is necessary for NCA to address
    some deferred-maintenance needs. Improvements in the appearance of
    burial grounds and historic structures will be accomplished with an
    additional $5 million requested in this budget.
        VA estimates that the annual number of veteran deaths will peak in
    the year 2008 before beginning to decrease. Consequently, NCA's
    workload is projected to rise during that period. NCA is preparing for
    this increase by planning for the construction of new national
    cemeteries, extending the service life of existing cemeteries, and
    encouraging states to build state veterans cemeteries.
        This budget includes funding and FTE to address increasing
    interment and maintenance workload at the national cemeteries,
    including the high rates of increase in interments during the first
    years of operation at the new cemeteries just completed. The budget
    also includes planning funds in the Construction, Major Projects
    appropriation to continue the development of additional new national
    cemeteries.
        VA is asking for $226.5 million for the Office of the Secretary,
    six Assistant Secretaries, Board of Veterans' Appeals, Board of
    Contract Appeals and General Counsel. This request, along with $4.4
    million associated with credit reform funding, will provide us a total
    resource level of $230.9 million.
        Compared to last year's appropriation, the 2001 request is $20.3
    million higher. The budget authority, along with $53 million in
    anticipated reimbursements, will provide for total obligations of $280
    million in 2001. FTE will decrease by 93 in 2001 from the 2000 current
    estimate of 2,528.
        We are requesting $45.9 million in funding for the Board of
    Veterans' Appeals for 2001. The Board's marked improvement in
    timeliness in making decisions on veterans claims, its increase in
    productivity, and its reduction of the appeals backlog from 1995
    through 1999 have exceeded our most optimistic expectations.
        The budget request will give us the opportunity to continue to
    decrease the amount of time it takes to process veterans' appeals. BVA
    and VBA have adopted a joint performance indicator that is a system-
    wide measure of how long it takes to resolve an appeal made by a
    veteran. In 2001, we project it will take an average of 650 days. In
    1999, it took an average of 745 days.
        We are requesting $56.6 million for the Office of the General
    Counsel. This would include $47.6 million in budget authority, and an
    additional $9.0 million funded through reimbursements under the MCCF,
    the Credit Reform statute, and other reimbursable authorities. This
    level of funding is essential if the office is to continue to meet the
    increasing demand for legal services required by VA's three
    Administrations, and if it is to keep pace with its representational
    responsibilities at the Court of Appeals for Veterans Claims (CAVC).
        Increased funding for the Office of the General Counsel will also
    permit us to address rising demands for representation of the
    Department in workplace disputes.
        For the Office of Information and Technology (OI&T), we are
    requesting $30.9 million in total obligations and 195 FTE, including
    $22.3 million in budget authority (156 FTE) and reimbursements of $8.6
    million (39 FTE). These resources would enable OI&T to continue to
    support information technology policy, program assistance, VA capital
    planning, the nationwide telecommunications network, the VACO campus
    office automation platform and local network, and other efforts. The
    Austin Automation Center is separately supported by VA's Franchise
    Fund.
        VA successfully began the Year 2000 without any significant Y2K
    incidents. VA benefits were paid on time and our health care facilities
    remained open throughout the date rollover. Having met the challenge of
    Y2K, our next priority is information security.
        In early 1999, VA initiated a Department response to the General
    Accounting Office (GAO) and Inspector General recommendations on the
    need for a strengthened VA information security program. A Department-
    wide working group created a security plan for investment of $83.3
    million from 2000-2005 with funding to be redirected from completed
    Year 2000 efforts.
        The plan, which GAO commended, is a comprehensive approach to
    managing risk through continuous risk assessment, incident response
    processing, policy development, workforce education, virus protection,
    intrusion detection, and strong centralized management and oversight.
    Immediate undertakings have resulted in the establishment of a national
    Critical Incident Response Capability system, which tracks security
    incidents; the initiation of a Department-wide assessment of risk;
    piloting of Web-based workforce security awareness training; and the
    issuance of strengthened security policies for high-risk areas.
        For 2001, the Office of Financial Management (OFM) is requesting
    $30.9 million in total obligation authority and an average employment
    of 229. Before I discuss the specifics of our request for OFM, I would
    like to highlight a recent accomplishment. I am pleased to announce our
    success in obtaining an unqualified opinion on the Department's
    Consolidated Financial Statements for fiscal year 1999 and 1998. This
    represents a major milestone in improving financial management and
    reporting in VA and provides sound baseline information to build upon
    for the future. It also fulfills my commitment to the President to
    obtain a clean audit opinion on our fiscal year 1999 financial
    statements in my July 1998 letter. Office of Financial Management staff
    and the Chief Financial Officer staffs of the Veterans Health
    Administration and the VBA made a significant effort to make this
    possible.
        The request for OFM includes $29.1 million in budget authority and
    $1.8 million in reimbursable authority. These resources will allow us
    to continue our current level of operations and sustain efforts on
    critical initiatives underway. Reimbursements will fund financial
    operation and program reviews, and will allow us to provide assistance
    in financial policy development and oversight. The requested budget
    authority also includes $2.6 million toward implementation efforts of a
    new integrated VA core Financial and Logistics System to replace the
    current financial management system and its interfaces. OFM will
    coordinate the Department's investment in this area. In 2001, the total
    investment of approximately $57 million will fund specific tasks for
    the acquisition (Phase III) and the prototyping and implementation
    (Phase IV) phases of the project.
        We are requesting $13.9 million and 65 FTE to support the
    activities of the Office of Planning and Analysis (OP&A). With these
    resources, OP&A will continue to facilitate the Department's strategic
    planning process; provide actuarial and analytical support to VA
    program offices; conduct statutorily required program evaluations;
    coordinate corporate management improvement activities; and support the
    development, analysis, and review of issues affecting veterans'
    programs.
        Funding increases for 2001 will support expanded analyses and
    reports of data collected in the National Survey of Veterans, which
    will be conducted in 2000. Additional funding will be used to enhancing
    data development and actuarial services so that VA program offices and
    others will have available more sophisticated demographic and socio-
    economic information about veterans. This will improve our service-
    delivery planning.
        Increased funding will also support a continuous environmental scan
    process, including stakeholder consultation sessions and focus group
    meetings, and an ambitious schedule of program evaluations mandated by
    Title 38 and the Government Performance and Results Act.
        The Office of Human Resources and Administration (HR&A) is
    requesting $82.8 million in total obligation authority and an average
    employment of 579 FTE. The requested budget authority for HR&A is $51.4
    million.
        Included are requests for additional resources to carry out several
    initiatives, such as developing and implementing strategies to prevent
    discrimination complaints; developing a Departmental workforce
    succession planning and decision system; conducting the Department's
    next One VA organizational assessment; conducting VA's next Human
    Resources conference; and maintaining and testing the Department's
    Continuity of Operations Plan for assuring essential emergency
    services.
        The total figure for HR&A reimbursements is $31.4 million. This
    includes $27.8 million and 260 FTE for the Office of Resolution
    Management (ORM) and $3 million to complete development of the
    department's HR LINK$ personnel payroll system. In 2001, the Department
    is again requesting that the operations of ORM and Office of Employment
    Discrimination Complaint Adjudication (OEDCA), located in the Office of
    the Secretary, be funded through reimbursements from its customers.
        In summary, a total appropriation of $1.062 billion is requested
    for General Operating Expenses (GOE); $835 million for VBA and $226.5
    million for General Administration in 2001. This funding level,
    combined with $168 million of administrative costs associated with VA's
    credit programs, funded in the loan program accounts under credit
    reform provisions; $9.8 million in reimbursements from the compensation
    and pensions account for costs associated with the implementation of
    the Omnibus Budget Reconciliation Act of 1990 as amended; $36.5 million
    from insurance funds' excess revenues; and other reimbursable
    authority, will provide $1.359 billion to support operations in the GOE
    account.
        Our Franchise Fund completed its third year of operations on
    September 30, 1999. The six lines of business, our Enterprise Centers,
    are proving to be very successful. Sales to federal entities have
    dramatically increased since our initial year of operations in 1997,
    from $59.1 million to $97.3 million. The 1998 financial statements of
    the Fund were audited by a private sector CPA firm. The audit resulted
    in an unqualified, or clean, opinion. On October 1, 2000, the Shared
    Services Center (SSC), which will support the implementation and
    operation of the HR LINK$ personnel payroll system, will join VA's
    Enterprise Centers.
        The 2001 request for the Office of the Inspector General (OIG)
    contains total resources slightly over $49 million. The request
    includes direct budget authority of $46.5 million and planned
    reimbursements of $2.6 million, which supports average staffing levels
    of 369 and 24 positions, respectively.
        This funding provides OIG with an increase of $1 million for nine
    positions. The request will assist OIG in expanding oversight in the
    quality of health care services rendered our veterans, identifying
    internal control vulnerabilities in benefit payment processes, and
    detecting fraud through extensive review and analysis of VA databases
    and matching initiatives.
        We are requesting new budget authority of $309 million for the
    Department's construction programs. Our request provides funding for
    two major construction projects and another $10 million for an effort
    to assess our medical infrastructure needs for the future. A 10 percent
    increase above last year's requested level is included for minor
    construction and the grant programs for state veterans' nursing homes
    and cemeteries.
        We are requesting new budget authority totaling $62 million for the
    major construction program. The major construction request includes
    funding for a seismic corrections project at Palo Alto, CA and a
    gravesite development project at Ft. Logan National Cemetery in
    Colorado. An additional $10 million is requested in planning funds to
    continue the Capital Asset Realignment for Enhanced Services (CARES)
    studies. Congress initially provided $10 million to begin these market-
    based assessments of health care requirements and capital needs in
    2000. The 2001 request also includes planning funds to continue the
    development of four new national cemeteries, to be located near
    Atlanta, GA; Detroit, MI; Miami, FL; and Sacramento, CA.
        Additionally, we are requesting new budget authority totaling $162
    million for VA's minor construction program. The request will be used
    to make improvements throughout the Nation to our medical centers'
    ambulatory care settings, patient environment, and aging
    infrastructure. Funds have also been requested for nursing home care,
    clinical improvements, correction of code deficiencies in existing
    facilities, and the elimination of fire and safety deficiencies at our
    facilities.
        Funds requested in the minor construction budget will also support
    VBA and staff office construction requirements, and gravesite
    development and improvements at existing national cemeteries. In
    addition, as a result of the expanded authority provided by the
    Millennium Act, minor construction funds may be used to make capital
    contribution payments for enhanced-use lease projects such as the new
    regional office building at Milwaukee, Wisconsin.
        The 2001 request of $60 million for the Grants for the Construction
    of State Extended Care Facilities will provide funding to assist states
    in establishing new nursing homes and domiciliaries or renovating
    existing facilities. The 2001 request of $25 million for the Grants for
    the Construction of State Veterans Cemeteries will provide funding to
    assist states in establishing, expanding, or improving state veterans
    cemeteries.
        Mr. Chairman, for 224 years, America's men and women in uniform
    have brought a record of security and peace to the North American
    continent that is unmatched in the history of the world.
        I believe this budget meets the needs of the Nation's veterans and
    lives up to the commitment we have to them.
        I want to thank the members and staffs for your continued interest
    in our Department's needs. I look forward to continuing to work with
    you on behalf of our Nation's veterans and their families.
        I also want to thank the Veterans Service Organizations for the
    vigorous efforts they have made on behalf of veterans during the
    appropriations process, and I look forward to continuing to work with
    them on these issues in the future.
        Thank you for your time, and your consideration.

                        ALLOCATION OF MEDICAL CARE FUNDS

        Senator Bond. Thank you, Mr. Secretary. We'll try to take
    advantage of all these great opportunities.
        There are several areas of your budget where VA is spending
    far less than what you told us you would in 1999 and the
    current year, even while we increased the overall budget by
    $1.7 billion. Let me give you a couple examples.
        Post-traumatic stress disorder, VA spent $87 million in
    1999, when you told us last year the estimate was $109 million.
    VA is estimating that it will spend $94 million this year,
    while last year VA estimated it would spend $113.5 million in
    2000.
        In the substance abuse treatment area, last year you told
    us VA would spend $411 million in 1999, yet the actual 1999
    expenditure was $357 million. The 2000 estimate had been $427
    million and currently VA estimates it's going to spend about
    $373 million. The homeless compensated work therapy program,
    you now estimate you will spend about half of what was
    estimated for fiscal year 2000.
        These programs are highlighted in the budget because
    they're national priorities that you've identified, critical to
    veterans. I'd like you to address the following questions:
        Why isn't VA allocating its budget consistent with its own
    budget justification? How can we be sure that through the VERA
    allocation system that VA networks and individual hospitals are
    allocating sufficient funds to these national priorities, and
    why shouldn't we be funding these national priorities
    separately from VERA?
        Secretary West. Let me make a preliminary response, Mr.
    Chairman. I suspect Dr. Garthwaite, who oversees that
    administration, will want to speak more specifically.
        The first and easy answer is, we should be spending the
    money the way we tell you we're going to spend it when we come
    up here to ask for it. It seems to me that's the whole purpose
    of this process, and that if you get to a point in this
    committee where you cannot trust our best good faith estimates,
    and that we will live up to them, then we will be in great
    trouble.
        I think the first answer is, I believe it is our intention
    to do what we say we're going to do with the funds, it is then
    our best effort to follow through on it. I think you are going
    to want to know more than our best efforts, though; so I will
    let Dr. Garthwaite try to address these directly.
        Dr. Garthwaite. Thank you. I think there are probably three
    or four reasons, perhaps, that contribute to this. I think at
    the beginning of last year, many of our FTE hires were delayed
    somewhat because of the initially presented budget and the
    plans that we had for that.
        But I think the two key pieces are (1) our data systems;
    and we have been working diligently to put into place a
    decision support system. The decision support system is now
    fully operational in most VA medical centers. And we're in fact
    going to use fiscal year 2000 DSS data as the base for future
    allocations so that the intensity and interest by our managers
    in getting the data in DSS so that we have a more complete base
    for our budget allocation decisions.
        The final thing I would mention is that the issues tend to
    be quite complex. Our initial runs at trying to understand how
    much we were spending on Hepatitis C, for instance, used
    diagnostic codes. And when we went back and saw how many people
    were identified with primary diagnosis of Hepatitis C under
    specific diagnostic codes and compared that to our laboratory
    data systems and found out how many people actually had a
    positive test, we found a significant discrepancy.
        So today we have the list of patients with positive tests
    being sent to the financial folks, who work from the diagnostic
    codes, so we can begin to compare and understand and correct
    the discrepancy.

                              HEPATITIS C FUNDING

        Senator Bond. I was just looking at the Hepatitis C because
    in the first quarter, your figures show that the total amount
    spent was $8.6 million and for all of 1999, as I said, it was
    only $26.8 million, but we had obviously a much greater
    indicated need and provided much more money.
        Will that solve the problem?
        Dr. Garthwaite. I think it will make a significant
    difference. Just to give you an example, in fiscal year 1999,
    by pulling out diagnostic codes only, we found 25,000 patients
    treated for Hepatitis C. We know that the number of unique
    patients that we diagnosed was closer to 60,000. So we are only
    accounting for about half of them with the diagnostic codes.
        If you came in with a primary diagnosis coded as cirrhosis,
    and the computer also included Hepatitis C as a diagnosis, and
    the major reason you're in there is end stage liver disease
    from hepatitis, we have to make sure that when we do the
    necessary analysis so that both the clinical people and the
    analytical people capture the Hepatitis links. I think that is
    what we've accomplished; we have figured that out and we are
    hard at work making sure that we capture all the actual
    workload.
        Senator Bond. This is a concern. Do we have to line item it
    to make sure that the networks actually do spend it? How are we
    going to make sure that sufficient funds are allocated to a
    national priority?
        Dr. Garthwaite. I believe that, we've made it exceptionally
    clear. We have in place now a registry so we will be able to
    track each patient. We'll very shortly be able to marry our
    database that identifies who has a positive test with the
    database that identifies who got medications. So I think that
    we will be in good shape to double-check to make sure that a
    patient who has a positive test either gets the drug or we have
    a reason for not providing it.
        Senator Bond. Thank you very much.
        Secretary West. Mr. Chairman, I might just say that when we
    have instances like this where the question is: Are we able to
    get sufficient and timely data for you that indicates that
    we're following through on the spending patterns the way we
    said and to give you a sense of what we are seeing? It is not
    unusual for us to undertake some sort of a regular report on
    workload, and get it to you on some sort of a quarterly basis
    so that your people, and you are able to follow with us what
    our experience is. It may be more reliable data, it may be
    better than trying to seek some other way to put in controls
    before we know what we're dealing with.
        Senator Bond. It's not just us, I hope you get the
    information yourself.
        Secretary West. Yes.
        Senator Bond. Let me turn now to Senator Mikulski.

                            MEDICAL CARE COLLECTIONS

        Senator Mikulski. Thank you very much, Mr. Chairman.
        Mr. Secretary, we presume that, and maybe unfairly, that
    this will be your last appearance before--but we do know that a
    year from now we will have a new president and so on. But I
    would really like to thank both you and your entire team for
    their professionalism and their work with my staff in trying to
    determine how we can often in tight years really serve our
    veterans.
        So I would like to thank each and every one of them for
    their competency and their professionalism in dealing with
    this.
        Let me ask a question about medical care and the budget,
    and it will go to the collections from third parties. Wherever
    we go, the veterans organizations and service organizations and
    so on, the word is always ``more.'' What can we do more, what
    can we do better, the rising cost of prescription drug benefits
    that we are grappling with and maybe we all be grappling with
    in Medicare.
        There is a limit to our budget, so this then takes me to
    ``Where can we get our money?'' And takes us to the collection
    aspects. Could you tell me what is the current status of VA's
    efforts to increase collections, what have we seen from your
    plan to increase recoveries, and what can we expect? Is it that
    we don't have the right systems from VA to collect the money,
    or do we have deadbeat third parties?
        Secretary West. I am going to let Dr. Garthwaite speak to
    that, but I want to----
        Senator Mikulski. He liked that last phrase.
        Secretary West. He does. First of all, I think we are
    getting to the point where we are better at predicting how much
    we will be able to collect, and at making hardheaded, accurate
    estimates.
        For one thing, we have learned from experience. We have put
    in changes so that our billing is done better, more
    professionally. Additionally, I will say that we have to remind
    ourselves at VA that this is not a core competency of VA or of
    VHA; we're learning, but we are also continuing to have to look
    at something you just mentioned--the best ways of making these
    collections. Do we need to contract it? Do we need to have
    other ways of doing it?
        I know that our networks have tried both ways; and I'll let
    Dr. Garthwaite take it from there.
        Dr. Garthwaite. Thank you. I think there are several issues
    here. One is that because we for many, many years did not bill,
    it has taken us a while to get better at billing. We're still
    not all the way there, but I think we've made significant
    progress in the last year.
        We have gone through the issue of teaching everyone how to
    do the proper documentation to support the bill rendered, and
    that's a key piece in collection. Second, I think we
    implemented reasonable rates which should help significantly
    with collection efforts. That also took us some time to get
    going, but in January of this year we sent out bills for a 14
    percent greater amount than we did in the January of last year,
    and for February, 23 percent greater than in February of last
    year.
        So we think we may have turned the corner. We believe these
    are optimistic signs that the compliance efforts and the
    reasonable billing rates have both helped.
        There are certain parts of the process namely, the end in
    the collection area where we don't think we're necessarily the
    best at doing that, and we would be willing to look at possibly
    contracting it out. There are a lot of human resource and
    personnel issues related to that.
        Senator Mikulski. Well, thank you very much, Doctor. I
    think that this is a big issue, and it's a big issue of how we
    can make highest use of professional staff at VA, new
    technologies and new infotech technologies in terms of
    identifying what needs to be collected and how is the best way
    to do this.
        I feel very strongly that this should be a very important
    revenue stream, and it is essentially VA getting its fair share
    from third party contracts.
        I know that--I see that flashing yellow light here. One
    that I need you to get back to me on, on two issues.

                           DISCRIMINATION ALLEGATIONS

        Mr. Secretary, last year about 20 VA employees, working
    under one assistant secretary at VA came to me with allegations
    of discrimination at VA. And we wrote you about this, asking
    you to review the companies, and let me get to where I want to
    make my point.
        We received an interim response from Eugene Brickhouse
    saying that they were looking into it. Then also this was
    assigned to a Miss Gibson, who has sent an interim draft. And
    there seem to be some issues resolved and some not.
        Mr. Secretary, knowing of your own commitment, your own
    memorandum to staff and so on, could you look into this?
    Because it seems to come from one place at headquarters. I
    don't want to elaborate on it here, we'll be able to talk with
    you privately about it--and I would like to have this response
    from you: Number one, that you've looked into it; number two,
    that corrections are being made about those 20 complaints. That
    where it has been directed at one spot and primarily one person
    and one culture within that area, that the corrections have
    been made, and we'll get you the specifics after the hearing.

                         FORT HOWARD VA MEDICAL CENTER

        The last point I would like to make where we need help
    back, and then yield to the next senator--the biggest issue in
    Maryland right now is the future of Fort Howard Hospital. We
    know that it needs a new mission, a new direction, and so on.
    What we are facing, though, is confusion because of VA
    organization.
        There has been submitted to headquarters a desire for there
    to be declared a new mission. There is supposed to be an answer
    on that. We really need to have that answer. Number two, VA in
    Maryland has yet reorganized itself to delineate activity. We
    have no idea who was in charge of the Fort Howard project. It
    used to be Mr. Dennis Smith. We are not going to pick your
    leadership team for you, but we need a one-stop shop with Fort
    Howard and a one-stop shop leader who doesn't say, ``It's all
    up to headquarters,'' and then goes out to the veterans and say
    ``it's up to headquarters and Mikulski.'' It's not up to
    Mikulski. But if it's going to be up to Mikulski, the first
    thing is we need to know what is the mission, who was your
    projects director, and then make highest and best use of this
    really grand facility.
        Can I have your help on this?
        Secretary West. Yes, you can, Senator.
        Senator Mikulski. Thank you very much.
        Senator Bond. Thank you, Senator Mikulski.
        Senator Burns.
        Senator Burns. Thank you very much, Mr. Chairman.

                            FUNDING FOR RURAL HEALTH

        Mr. Secretary, last year there was language inserted in the
    appropriations bill that directed you to do a study of some of
    the problems we face in rural areas where we are a long way
    from health care facilities.
        That report was due to us about the end of this month, the
    21st of April. Could you give me a progress report on that, and
    are you going to make the deadline?
        Secretary West. Dr. Garthwaite.
        Dr. Garthwaite. I believe this is the one related to
    funding for rural health?
        Senator Burns. Yes.
        Dr. Garthwaite. We do have this particular report in
    headquarters and we plan to make the deadline.
        Senator Burns. Okay, I would be interested in that, because
    we have a couple of questions that we talked about the other
    day and there are a couple more.

                              PRESCRIPTION POLICY

        We are having a hard time in getting our prescriptions
    filled. In other words, prescriptions that are written by a
    private doctor under his consultations, and then getting those
    filled.
        Can we allow these veterans to have their prescriptions
    issued by a private doctor and filled at a VA pharmacy?
        Dr. Garthwaite. VA has never really believed it should fill
    prescriptions other than for patients who are under VA care.
        Secretary West. That is probably not Dr. Garthwaite's
    fault, it is probably the fault of our general counsel--not
    this one.
        In the late Eighties, and I will count on her to correct
    me, VA's general counsel did an opinion about that practice and
    I think the prevailing opinion is that Dr. Garthwaite's doctors
    are not a pharmacy; they are part of a continuum of care. They
    can write prescriptions for patients for whom they are caring,
    who come in, who have enrolled.
        Once they've had that first prescription, of course, they
    could mail in the refills from all over if they would like. So
    what may be the solution for us is to try to get our doctors
    even closer to those veterans who are far away from the
    hospital where they can be treated.

                                 EMERGENCY CARE

        Senator Burns. We know in some States that is going to be
    almost impossible to do, so we are going to have to do
    something to develop that.
        Just to take that one step further, we have an arrangement
    now under emergency conditions. If a veteran needs health care
    he can go to a local facility and that will be reimbursed by
    the VA. If we close up at 5 o'clock and it's on a Saturday
    night or whatever, we have people and they're sick, they don't
    care whether it's service-connected or not. That would have to
    be determined later, but we are having a hard time in making
    those connections or working that out.
        Do you want to respond to that, how we're taking care of
    that?
        Dr. Garthwaite. In cases where someone's receiving service
    for a service connected condition, we can fee basis out their
    care, that means they can see someone in the local community,
    we give them a card, and we will fill those prescriptions.
        If we become the pharmacy for every veteran, then that will
    require significant resources, and some veterans who rely on us
    for their care will go by the wayside unless there are
    appropriations to compensate for those additional dollars. It's
    a very expensive position to put us in. There are 25 million
    veterans, all of whom would love to get free prescriptions.
        So if the difference between the 25 million who are out
    there, who have prescriptions and would like them free, and the
    current 4.2 million who are enrolled in our system, that would
    be an enormous undertaking to do in any fair fashion.
        Secretary West. It seems to me, Senator, that you are
    raising a problem, though, that we should be able to try to
    look at and work with. It is the question of whether we are
    delivering the services to a veterans population that is
    disbursed, like Americans, they live where they want to live.
    Your State is an example, but we have similar challenges in
    other States--whether there is some way to address that.
        For example, you have already addressed the emergency care
    problem to some extent in the Millennium Act, I think now
    emergency care is not just service-connected, it's just whoever
    is enrolled according to the Millennium Act that you passed
    last fall.
        So the real question in emergency care is veterans who are
    not yet enrolled. In fact, the problem with pharmacy care is
    the same thing, the prescriptions. Veterans who are not yet
    enrolled in the system. If we can deal with that part and
    somehow make them able to become part of the system, then we
    may be able to help out there. I think we need to look at the
    particular circumstances.
        Senator Burns. Yes. Are you comfortable with the way you
    are dealing with emergencies now, that are away from a VA
    hospital?
        Secretary West. I saw a head shake over there, from Dr.
    Garthwaite.
        Dr. Garthwaite. Well, no, because until we implement the
    Millennium Act later this spring, there is really no way for us
    to pay for emergency care for the non-service-connected. We
    believe that people shouldn't have to worry about how far
    they're going to drive when they are ill, they should go right
    to the emergency room, the closest one, if that's the medically
    appropriate thing to do.
        We believe that the Millennium Act will fix that, and we
    think that's an important piece of legislation.
        Secretary West. But we have got to get them enrolled.
        Senator Burns. Those are areas where we have the most
    concern, Mr. Chairman and, of course, we are talking about
    distances. We realize that change comes slowly. We understand
    that, and any way that we can help facilitate that we sure
    would. I think sometimes we lose what our mission is, and our
    mission is to provide medical services to our veterans, and how
    we get that done is where we run into disagreements.
        I thank you for coming today, and I thank you for your
    service to your country also, Mr. West, and this may be your
    last appearance--it may not be, who knows? We may see you
    around a lot.
        Secretary West. Anything is possible.
        Senator Bond. Thank you very much, Senator Burns. We very
    much appreciate your participation.
        Senator Leahy.

                           STATEMENT OF PATRICK LEAHY

        Senator Leahy. Thank you, Mr. Chairman. I am glad to see
    the panelists here, and Secretary West, I enjoy the fact that I
    have always been able to communicate with you and talk about
    problems, and while not wanting to sound overly parochial, we
    usually talk about the VA hospital in White River Junction,
    Vermont. I appreciate you always calling back, and I am glad to
    see my friend Mike Walker here, we worked together when one of
    my favorite-of-all-time colleagues, Jim Sasscer was here, we
    were able to handle all the serious things and Mike, you
    recall, we sometimes had a few--especially when Jim was on a
    roll--some very funny lines in the back room. And Dr.
    Garthwaite, you were willing to come over and meet with me off
    the floor on one occasion when it was very important, and I do
    appreciate that.
        I will continue to say now, I know we are going to be
    running out of time so I am going to submit questions for the
    record--but I would urge that we continue to look at the
    geographical differences in the VA medical system. It really is
    not--I realize I preach to the converted with this panel--but
    it isn't a one-size-fits-all, sometimes it is a difference of
    accessibility, even of climate. The situations and problems you
    may have in Florida and the Southwest or anywhere else it may
    be a lot different than the Northwest or the Northeast and
    colder climates. It doesn't mean that there are not needs in
    both places, but they are different needs.
        I would look at things like the rural health care
    initiative and see the effects of different health care models
    based on where the people are. And I look forward to seeing the
    results of that kind of study.

                                 PATIENT SAFETY

        I also was concerned--Mr. Secretary, I know you were--about
    the reports last year of the prevalence of medical errors in
    the VA health care system. They put the errors somewhere around
    3,000 from June 1997 to December 1998.
        Now I'm not suggesting that VA is getting more or less
    problems than the civilian sector, but I worry about
    misdiagnosis, wrongly filled prescriptions, other types of
    mistakes. I know it could have been anything from a hurried
    prescription written down to illegible handwriting, whatever it
    might be.
        We have things like so-called clinical couplers, the
    technology that may provide a solution to that. It's the kind
    of software that the doctor writes this, the pharmacy--it
    couples up the nurse that may actually be delivering it, sees
    all of this and suddenly the red light goes on and says ``Wait
    a minute, somebody else has also prescribed this, which would
    be fatal.'' I mentioned before, my wife is a nurse, she has
    found--usually she is grabbing a Merck manual and doing twenty
    different steps to see if the medicine is the right thing;
    sometimes people don't take that extra step.
        Can you give us an idea of how such couplers might help
    you?
        Secretary West. Oh, yes, and I think Dr. Garthwaite has
    some things to say about bar coding as well.
        Dr. Garthwaite. We met with Dr. Weed and his staff last
    week, and have been working with the Department of Defense to
    look at the PKC coupler system. The reports I received have
    shown that we are fairly favorably impressed with what it can
    bring, and we will have to look at how it might integrate it
    into our system. But to the extent that we can find things like
    that, it helps us.
        In terms of patient safety, I think it is important to
    realize that VA leads the way. That the report that showed
    3,000 adverse events, not all of those were errors and not all
    of those were preventable with today's state of knowledge. So
    that has been widely misquoted in the media as all errors, and
    reading the report carefully I think you will be able to see
    the distinction.
        The positive things we are doing are bar coding for
    medications, computerized entry of prescriptions and other
    data, research on what errors might occur and how to prevent
    them, especially the human factors engineering, which has never
    really been applied to medicine.
        Finally I would say we have in place a fascinating and
    important new reporting mechanism. One that teaches people not
    just to report but that it's safe to report, and one that
    teaches them how to actually look for the root cause.
        By history we blamed people and assumed we could train them
    to be perfect, and I think today we realize that people will
    always make some mistakes and we need to reengineer to provide
    the safety nets.

                         VERA ALLOCATION IN NEW ENGLAND

        Senator Leahy. Some of the things you are talking about,
    bar coding, color coding, a number of other things can
    dramatically reduce the accidents.
        The other thing, and I would like more of an answer for the
    record, but the medical care funding allocation that VA uses, I
    think it really shortchanges New England, and equipment
    renovation. It divides funds based on patient volume--well, not
    only are our hospitals older, we're an older part of the
    country, our hospitals are older. But when it's 25 below zero
    and you are moving from A to B, and you have had a foot of snow
    the night before--which happens. I was going to my office in
    Vermont one time this winter when we had had a foot of snow
    within the last 24 hours, it is now 24 below zero--everything
    is open, everybody is expected to get to work, but even in
    Vermont it takes a little bit of effort.
        I would ask you to look at this, because if the allocation
    is just on patient volume, then VA medical centers across our
    region are going to suffer some very serious budget shortfalls
    every year. And I think you have to have more in the allocation
    models than just volume. And I'd ask you to respond to that if
    you could for the record, because I think it's something we
    should look at in this committee.
        [The information follows:]

                         VERA ALLOCATIONS IN NORTHEAST

        Energy Costs.--Department of Veterans Affairs (VA) reviewed this
    issue on numerous occasions and found that because there is not
    significant variation among networks, specific energy allocations would
    not change the final outcome. VA does recognize that energy costs have
    risen sharply in the last couple of months and are having some affect
    on the network costs more heavily in the Northern areas. VA is
    monitoring this to see if the costs begin to rise in the Southern areas
    as warmer weather sets in. Comparing the last 12 months with the
    previous 12 months, the average national energy cost increase was 7.5
    percent and the cost increase in Veterans Integrated Service Network
    (VISN) 1 was 6.8 percent.
        NRM Costs.--Funds are allocated on a basis of patient volume
    adjusted for regional costs of construction and renovation. Building
    age previously was a factor in this allocation process but was phased
    out because it was not making a material difference in the network
    allocations.
        Equipment Costs.--Funds are allocated on the basis of patient
    volume. Equipment needs are directly related to the level of patient
    care services.
        Veterans Equitable Resource Allocation (VERA) was designed to be a
    workload-based allocation system and efforts have been to strive
    towards a system where allocations are in line with patient need.

        Senator Bond. Thank you very much, Senator Leahy.
        Senator Leahy. I have other questions to submit for the
    record.
        Senator Bond. Please, yes. We will be submitting some for
    the record as well.

                           SCREENING FOR HEPATITIS C

        Mr. Secretary, in June 1998, VA issued a mandate that all
    veterans seeking care were to be evaluated for HCV risk.
    According to the Inspector General, VA hospitals are not
    uniformly screening all veterans who seek care.
        Why, and again this points to a huge problem. There seems
    to be a disconnect between a national priority and what's
    really happening where the rubber hits the road.
        Dr. Garthwaite. Mr. Chairman, we've undertaken many
    initiatives to make sure that every veteran gets screened.
    We've had a satellite broadcast to let our staff know what is
    expected, we've trained physicians, brought them to Washington.
    We trained counselors and pharmacists last week, and we have
    primary care M.D.'s coming to a conference on Hepatitis C very
    shortly.
        By the end of next month, we are introducing a patch to our
    electronic data system that whenever a patient's record is
    electronically accessed, the provider is automatically reminded
    they need to check one of four boxes, two of which are: ``is
    going to be screened,'' ``wants to be screened.'' The key
    questions will be asked of each clinician interactively at the
    time patients are being seen.
        So we have screened a significant number of patients. In
    fiscal year 1998, we tested approximately 113,000 and detected
    27,000 unique veterans with Hepatitis C. In fiscal year 1999,
    we tested another 176,000 veterans and found 32,000 unique
    veterans with Hepatitis C, and this year we've already tested
    37,000 veterans and found an additional 8,000 with Hepatitis C.
        We continue to have outreach efforts, both with the
    American Liver Foundation and we've received some publicity
    help from the current Miss America who is very interested in
    veterans issues. We ourselves go out into the community. We are
    finding that the community efforts don't yield a large number
    of veterans, and a lot of the veterans that do surface are
    already in our system. We'll continue our efforts.
        Senator Bond. Can you assure me that you will follow up to
    make sure that what you say is a national priority and what we
    fund as a national priority actually gets done in the field?
        Dr. Garthwaite. Absolutely.
        Senator Bond. Do we have that commitment?
        Dr. Garthwaite. [Affirmative, nonverbal]
        Senator Bond. All right, we will remember that. Thank you.
    I don't say that you won't, I just want to make sure that we
    are clear on that, and that we understand that.

                               NURSING HOME CARE

        Mr. Secretary, as I mentioned in my opening statement, it's
    my understanding the VA places veterans in private nursing
    homes when they can't be placed in a VA-operated facility. In
    doing so, the VA conducts its own evaluations of the homes to
    ensure that the nation's elderly veterans receive the quality
    of care that they so richly deserve. Furthermore, nursing homes
    under contract with the VA are evaluated annually. Follow-up
    service is provided by VA staff who visit the veterans homes on
    a monthly basis.
        As I indicated, I've been concerned with the quality of
    care, and the regulatory lapses that have occurred in other
    Federal agencies and in State agencies. It seems to me that
    VA's evaluation and follow-up services would be helpful to
    other elderly residents in problem homes.
        Does the VA currently share its evaluations and
    observations either with HCFA or with State agencies? Is there
    a centralized system in place where the information and data
    can be integrated?
        Dr. Garthwaite. We have completed a draft directive that
    mandates that we share all this information, and it will be
    going out as soon as it clears. But we agree with you and think
    it's important.
        Senator Bond. I thank you for that, because I think it is
    very important that the VA, which already uses HCFA and State
    agency information, should likewise share their evaluations and
    observations. It makes sense, and it would seem that
    coordination would encourage rigorous monitoring of problem
    nursing homes.

                            MANAGEMENT EFFICIENCIES

        Mr. Secretary, one last major question. You assume in your
    budget $360 million in management efficiencies. We've received
    no details as to what these efficiencies are. It's tough for us
    to assess them. When will we see the specifics? Are you
    confident that the budget you proposed is adequate and would
    not require inappropriate cutbacks?
        Dr. Garthwaite. We believe we can do these efficiencies. We
    have a large budget, and health care is not optimized in terms
    of all the processes within it.
        A part of these are energy savings. We find that we can
    sign energy contracts by putting in new electronics and so
    forth, controlling lights and other things and can save a fair
    amount of money there.
        We can have continued integrations and realignments and
    other movements for using automation that help us. It is a
    little like, I think you said earlier, pushing a rock uphill to
    make changes because it does affect employees and other things.
    So it is hard work to make a lot of the efficiencies, but we
    think there are opportunities and we think what we have on the
    table this year is realistic.
        Secretary West. In response to the last part of your
    question, yes, we believe we can do very well with this budget,
    Senator. We don't expect to have panicky moments when we're
    looking to cut here in order to fund somewhere else. If there
    are changes in the system, in our health care system, they will
    be so that we can do our job better.
        Senator Bond. And you will implement best practices?
        Secretary West. Yes.
        Dr. Garthwaite. Yes, sir.
        Senator Bond. Senator Mikulski, do you have----

                           PRESCRIPTION DRUG BENEFIT

        Senator Mikulski. One final question, and this goes to a
    prescription drug benefit, and maybe it requires a detailed
    written answer.
        As you know, we're considering adding a voluntary
    prescription drug benefit to Medicare. There is no doubt about
    the compelling human need, particularly for the management of
    chronic conditions--blood pressure, cholesterol, diabetes, et
    cetera.
        Here's the question: Whatever we embark upon must be
    affordable to the taxpayer and affordable to the patient, and
    must be sustainable. How has VA been able to control costs in a
    way that has kept at least some financial discipline on the
    prescription drug benefit for our veterans? And what are the
    lessons learned as we embark upon a medicare expansion to date?
        Secretary West. I know Dr. Garthwaite wants to answer that,
    because VHA is particularly proud of what they've done. I would
    say in one word the formulary, but I should let him say it in
    greater detail.
        Dr. Garthwaite. I think we have used several strategies. We
    have clear clinical guidelines and we expect people to adhere
    to these guidelines which spell out which drugs are effective,
    and which effective drugs to use first.
        Second, to not provide every possible drug on our
    formulary, but to drive that process with very bright clinical
    involvement. So we use some of our best front line clinicians
    who are actually prescribing to help select the drugs for the
    formulary. The good news about all that is, the recent drug
    that was pulled off the market for diabetes, we recognized that
    we shouldn't have that on our formulary. We didn't put it on
    the formulary, and in fact we were so concerned we put out
    guidelines for its use off formulary.
        So I think the formulary process worked very well in that
    instance. Then I think the third strategy we have used is that
    if we can limit our choices and commit to a certain volume, we
    can negotiate pretty good prices, and we have done that both
    alone and more recently in partnership with the Department of
    Defense, to save the taxpayers a lot of money.
        Senator Mikulski. Well, thank you, Doctor. If you could,
    I'd like to have a paper or something on this, because I think
    there are really very important lessons learned, both in the
    area of formulary issues which are quite complex and should
    never be political. Number two, though, the negotiation of
    price without formal price controls, stifling innovation, and
    someone--we are going to have a lot of big issues ahead of us,
    and we can't just do slogans and bumper stickers and so on. So
    we appreciate whatever lessons are learned. Thank you very
    much.
        Dr. Garthwaite. Thank you.
        [The information follows:]

                           PRESCRIPTION DRUG BENEFIT

       VA'S NATIONAL FORMULARY PROCESS: LESSONS LEARNED FOR A SUCCESSFUL
                             MEDICARE DRUG BENEFIT
        The basic premise of department of veterans affairs' (va) approach
    to formulary management has been and remains the provision of quality
    medical care at an affordable price through the appropriate use of
    pharmaceuticals in the veteran population. Formularies are not a new
    component of healthcare delivery systems in either the private or
    public sector. The Veterans Health Administration (VHA) has employed
    drug formularies for over four decades. What has changed over time is
    formulary management. In the distant past, the sole function was to
    define what drugs could and could not be prescribed. More recently,
    formulary management has included clinical protocols to assist
    clinicians in using drugs effectively and efficiently and is continuing
    to evolve.
        One of the many positives to formulary management is solid clinical
    evidence demonstrating that a specific drug can provide a cost-
    effective benefit to a patient population. The result of this is the
    ability to negotiate lower drug acquisition cost. As indicated earlier,
    VA's primary motivation is always to improve the quality of care.
    Economics, though important, has become a secondary issue. This change
    in philosophy is a major reason that VA pharmacy expenditures have
    risen over the past few years and, VHA officials believe will continue
    to rise during the foreseeable future.
        Formulary management today not only includes the functions above,
    but also seeks to develop the means to measure and improve disease
    outcomes associated with pharmaceutical care. Moreover, formulary
    management has become far more dependent on evidenced-based reviews and
    practices than ever before. This is part of the overall strategy to
    improve healthcare delivery, especially as it pertains to caring for
    large populations with specific diseases. No one to date has perfected
    such a strategy, but to work toward this goal established the Pharmacy
    Benefits Management (PBM) Strategic Healthcare Group (SHG) in September
    1995. The PBM is composed of a twelve member Medical Advisory Panel
    (MAP) comprised of field-based practicing physicians, including one
    member from the Department of Defense, clinical pharmacist specialists,
    data based managers and contracting experts.
        A fundamental part of the overall strategy in establishing the PBM
    was to create a comprehensive pharmaceutical coverage package for the
    VA system. The reasons for this are fourfold. First, this ensures that
    all veterans, no matter where they are in the United States, will have
    the same potential access to important pharmaceuticals, over-the-
    counter medications and medical-surgical supplies. This improves
    overall equity of care and reduces the likelihood that patients will be
    denied drugs or other items because of local economic considerations.
    However, the national formulary process is not all-inclusive, but
    rather, with few exceptions, allows Veterans Integrated Service
    Networks (VISNs) to add pharmaceuticals that may be important to
    selected populations within their region. In addition, VA's formulary
    management system includes a responsive and locally directed non-
    formulary approval process. While VA's goal is to include on its
    formulary those medications which best serve the needs of veterans, the
    non-formulary process addresses those situations and patients where the
    formulary drug does not produce the desire clinical outcome.
        Second, our strategy ensures that the VA healthcare system will
    have a coordinated approach in determining the optimal use of
    pharmaceuticals for patient populations with specific diseases. An
    example of this coordinated approach is the PBM/MAP's recommended
    protocols for treating diseases commonly found in veteran patients.
    These protocols include pharmacologic guidelines on Diabetes,
    Hypertension, High Cholesterol, Heart Failure, Prostatic Hypertrophy,
    Depression, Ulcer Disease, Gastroesophageal Reflux, and Osteoarthritis
    (pending). These evidence-based guidelines, developed in collaboration
    with physician experts, are being used by many VISNs to help improve
    and measure the quality of care.
        Third, a coordinated approach to pharmacy benefits management means
    that VA can better organize its purchase and distribution of
    pharmaceuticals. The PBM SHG has beneficially utilized the power of the
    entire VA healthcare system to assure the best value possible, both
    clinically and economically, for selected pharmaceuticals. The
    grassroots approach, reliance on sound clinical evidence, and the
    ownership of the organization in the process has resulted in dramatic
    compliance rates with VA national contracts. This initiative has been a
    major success for the Department and has had ancillary benefits for the
    Department of Defense and the U.S. Public Health Service. With regard
    to distribution, the VHA's leadership and track record in implementing
    pharmaceutical prime vendor systems and Consolidated Mail Outpatient
    Pharmacies (CMOPs) is exemplary.
        Fourth, a comprehensive formulary management program allows for
    applied research. Our goals are to continually improve the
    pharmaceutical benefits package, clinical guidelines and, ultimately,
    patient care. In this area, the PBM has begun to matrix with
    established research groups within VA and is also in the process of
    developing relational software in order to better assess quality of
    care as it relates to pharmacy and to pharmaceuticals. This process is
    in its infancy, but we expect VA, as one of the nations largest
    integrated healthcare networks, to soon lead and influence policy
    decisions on how to deliver high quality pharmaceutical care to all
    Americans.
        VA's success in formulary management is due to the grassroots
    nature of its process, buy-in from front line physicians and a
    commitment to using the best drug(s) possible in the veteran
    population. As indicated above, the cost of an individual drug is
    important but it is outweighed through providing the right drug to the
    right patient at the right time. In this context, VA's pharmaceutical
    expenditures, as a percentage of its health care dollar, have increased
    and VHA officials anticipate they will continue to increase. There are
    many lessons learned by VA that could benefit the Medicare program.
        First, a Medicare drug benefit that only concerns itself with the
    cost of a bottle of pills is doomed for financial and clinical failure.
    Second, interdisciplinary and multidisciplinary involvement in
    guideline development and care delivery has and can contribute to the
    delivery of best value care, including the financial viability of the
    Medicare program. Third, VAs accomplishments in contracting for
    selected high cost, high volume pharmaceuticals are successes that can
    be replicated under Medicare. There is no reason that Medicare cannot
    contract in this manner to reduce price without impinging on overall
    quality of care as VA as done. These successes have enabled VA to treat
    many more veterans, again without compromising patient care.
    Standardized contracting could be applied across providers and a
    consortium of states without resorting to federal price controls.
    Fourth, VA's success in implementing new initiatives for the
    distribution of prescriptions to veterans has direct implications for
    the Medicare program. For example, through the use of federal
    consolidated mail outpatient pharmacies, coupled with the wide-spread
    use of strategically placed, federally controlled unit of use
    outpatient automated dispensing technology, the federal government
    could economically and effectively distribute needed medications to
    Medicare beneficiaries. The most important part of this strategy for
    the Medicare program is a matrix of contracts with private sector
    credentialed clinical pharmacists to work collaboratively with
    physicians to manage the appropriate use of medications in the senior
    population. This two-fold approach ensures integrity in the
    distribution processes (one the pharmaceutical industry would be happy
    about and embrace from a diversion perspective) and, equally important,
    develops a relationship between the patient, his physician and
    pharmacist. If (1) appropriate copayment infrastructure for patients,
    (2) appropriate risk incentives for providers (physicians and
    pharmacists) and (3) the ability of the states to form consortiums for
    price negotiations are a part of the expansion, the potential for a
    successful, financially viable response to the medication need of this
    Nation's seniors is accomplishable.
        Finally, VA's excellence in geriatric medical practice is well
    documented. Part of that excellence is the wisdom gained and successful
    management of co-morbid older patients taking multiple drug therapies.
    VA truly does have much to offer the Medicare program as it considers
    expansion to include a drug benefit.

        Senator Bond. Thank you, Senator Mikulski.
        Mr. Secretary, we are going to have a number of questions
    for the record. They've called for a vote.

                  CORRECTING PROGRAM DEFICIENCIES IN ST. LOUIS

        Last October, the combined assessment program review by the
    I.G. identified a number of areas in the St. Louis VA hospital
    requiring management attention, and I'd like for you to give me
    in writing an update on correcting the program deficiencies at
    St. Louis. I'd like to know how VA follows up to ensure the
    problems are corrected in a timely manner.
        I would like your views on the CAP program and whether it's
    a useful target.
        [The information follows:]

                  CORRECTING PROGRAM DEFICIENCIES IN ST. LOUIS

     SUMMARY OF INSPECTOR GENERAL COMBINED ASSESSMENT PROGRAM (CAP) REVIEW
    CONDUCTED AT VETERANS AFFAIRS MEDICAL CENTER, ST. LOUIS, MISSOURI, JUNE
                                   7-11, 1999
    Summary of Recommendations and Responses
        (1) Take immediate action to ensure that nurse staffing levels in
    the Nursing Home Care Unit (NHCU) are always at or above established
    minimum safe staffing levels.
        Nurse staffing levels are kept at or above minimum safe levels by
    reassignment of staff within the Extended Care Service Line wards,
    scheduling contract agency staff, and scheduling overtime. Recruitment
    and hiring has been an on-going process. Staffing needs are reviewed
    daily and recruitment requests sent weekly as vacancies occur. Recently
    with the Medical Center's initiative of reorganization, merging and
    relocation of wards have occurred. This has allowed for additional
    staff to be assigned to the wards as needed. Patient acuity and program
    activities are continually monitored to determine staffing needs and
    readjustments are made.
    Office of Inspector General (OIG) STATUS: Closed
        (2) Take immediate action to ensure Domiciliary patient privacy
    needs are met when providing urine samples for drug testing.
        A Standard Operating Procedure (Domiciliary SOP # 4) has been
    written to provide guidance on DOA Collection. Procedures have been
    developed to cover situations when there is no same gender staff member
    present. For male patients who present concerns regarding specimen
    collection by female staff members, the specimen will be obtained at a
    later time, usually this occurs on the next shift. All female patients
    will have the specimen collected by a female staff person. However,
    this policy emphasizes the need for sensitivity for all of our patients
    and attempts to ensure patient privacy to the maximum extent possible.
    Staff training and orientation has been provided on the procedure. This
    process has been in effect since July 27, 1999. No patient or staff
    complaints have been identified since the OIG visit or initiation of
    the new procedure.
        (3) Assess the issues regarding employee safety to determine the
    adequacy of shuttle bus services from the employee parking lot to the
    medical center.
        Every effort has been made to improve parking for our patrons and
    staff, particularly during the hours of darkness. The following actions
    have been taken by management to insure the safety of the staff during
    hours of darkness.
      --Employees working irregular tours of duty, particularly at night,
            are encouraged to park on VA property and not on the streets or
            in private parking lots adjoining VA property.
      --Police and Security routinely accomplished street and parking lot
            lighting surveys to insure that lights are repaired as quickly
            as possible when deficiencies exist as well as to identify
            areas that need improved lighting.
      --Efforts have been made and will continue to be made to improve
            lighting so as all parking areas used by the staff are brightly
            illuminated during the hours of darkness.
      --Police and Security provides security escorts upon request,
            regardless of the time of day or night with only one exception
            and that is during peak duty changeover hours (see next item).
            Employees arriving for duty during hours of darkness must park
            in card access only parking lots. When they arrive at the gates
            they may, by using the call boxes, request a police patrol be
            dispatched to escort them to the 24-hour entrance by the
            Emergency Room (ER). Again, police and security will provide
            this service at any time except during peak changeover hours
            (see next item).
      --During peak changeover hours, police and security post their on
            duty officers in the John Cochran (JC) Division parking lots,
            one in top half of lot ``E'' (south side of hospital) across
            from the ambulance parking area, to monitor the staff as they
            enter/exit the 24-hour entrance. The second officer on duty is
            posted at the bottom half of lot ``E'' and monitors employees
            coming and going from their vehicles in lot ``E'', ``F'' and
            ``G''.
        There have been no incidents where a staff person has been
    assaulted, molested, mugged or robbed as they negotiated VA owned
    property to go to and from their vehicles.
        In addition, there have not been any incidents of assault,
    molestings, muggings, or the robbery of anyone who parks on the lots
    leased by the VA during daylight hours. Approximately half of the
    employees who park on the Grandel and Sun lots ride the shuttle while
    the remainder of the staff walks from the lots to work without any
    problems. Employees are urged to ride the shuttle bus during the
    afternoon hours, particularly in the Fall and Winter months when it
    becomes dark earlier in the day.
        The facility monitors employee needs regarding the shuttle via
    general surveys and verbal comments and complaints. Complaints were
    received previously that identified a need for wheelchair accessible
    vans. Wheelchair accessible vans are now in use. Comments also
    identified a potential need to expand services to the Yeatman lot. The
    stop was added to the driver's route for several weeks. Records were
    kept on the number of employees being picked up and dropped off at the
    stop. There were very few employees that rode the shuttle van to or
    from this stop, thus, it was not adopted as a permanent pick-up stop.
        A parking garage would be a great improvement in alleviating the
    parking situation at John Cochran Division; however, even with a
    parking garage, safety will remain an issue and if the staff is not
    alert of what is going on around them, incidents may occur.
        (4). Revisit the issue of shared use of the dining room and
    combined recreational activities for Nursing Home Care Unit patients
    and Domiciliary patients to ensure this arrangement is therapeutic for
    both groups.
        Recreational activities have been consolidated in the Nursing Home
    Care Unit (NHCU) for NHCU resident and Mental Health patients.
    Domiciliary patients do not use the NHCU dining room for any
    activities. The joint recreational programs for NHCU residents and
    Mental Health patients was instituted just prior to the site visit.
    Enhancements have been implemented with the input of the residents
    council.
        Residents now have the option of attending combined recreational
    activities or program specific recreational activities. The combined
    activities are monitored by ward nursing staff, recreational staff and
    the nursing supervisor. Improved scheduling and monitoring of the
    recreational activities have eliminated this process.
        No complaints have been received and no patient incidents have been
    reported. Residents Council will continue to monitor this process.
        (5). Assure that patients are seen by a clinician within 15 minutes
    of their arrival in the Walk-in Clinic to determine urgency of
    treatment needs.
        We concur that unscheduled patients should be seen by a clinician
    in a timely manner. The Department of Veterans Affairs ``Customer
    Service Standards'', VHA Directive 10-94-102, dated October 14, 1994,
    establishes a standard that patients will be seen within 30 minutes of
    their scheduled appointment time. Walk-in patients report to clinics in
    two ways: (1) After they have first been seen in the Emergency Room and
    referred to a clinic, or (2) After they have been interviewed by the
    Operations Center (Patient registration) and then referred to a clinic.
    During 1998 and 1999 walk-ins to Emergency Room (ER) were seen by a
    physician within 10 minutes of their arrival. The desired outcome is
    that patients will be seen by a physician within 20 minutes of their
    arrival. Data is not available on walk-in patients who present to the
    clinic but have not been seen first in ER.
        For those walk-ins that are not seen in ER, a time study will be
    conducted to determine waiting time to be seen by a clinician. The
    study will examine the delays that would preclude a walk-in patient
    from being seen by a clinician within 15 minutes of their arrival.
    Also, walk-ins are instructed to report back to the Operations Center
    if they were not seen by a clinician within 20 minutes.
        Regularly scheduled patients were seen in the seven Primary care
    Clinics within an average of 15 minutes of their appointment. This data
    is based on the two most recent waiting time studies conducted in each
    of the Primary Care clinics. Waiting time studies are conducted usually
    in the Primary Care Clinics semi-annually. These studies examine all
    aspects of waiting time and care time that are part of the Veteran's
    clinic visit.
        Further measures have been incorporated into the fiscal year 2000
    Performance Improvement Plan to assure continued timeliness.
        (6). Examine the system for awards and recognition to ensure
    equitability.
        VA Handbook 5430.1, dated February 28, 1997, outlines the approved
    performance appraisal program for the VA. Paragraph 14, states,
    ``Performance awards that are solely based on an employee's rating of
    record are not authorized in connection with this appraisal program.''
        VA Handbook 5451, dated August 18, 1998, outlines the approved
    award recognition system for the VA. Part C, paragraph 1a, states,
    ``General Provisions. Recognition through a cash award, time off award
    or other honorary or non-monetary means may be granted to an individual
    employee or group or team of employees in recognition of a
    contribution, act, service or achievement that benefits VA or beyond,
    or for overall sustained performance beyond normal job requirements.''
        Currently, award nominations are submitted by the Service Line
    Director, through Human Resources (for technical review), to the
    Medical Center Director for approval. In accordance with Article 15,
    Section 4, of the Master Agreement between the Department of Veterans
    Affairs (VA) and American Federation of Government Employees (AFGE),
    each facility will establish an awards panel consisting of management
    and bargaining unit employees. The Partnership Council at this medical
    center submitted a charter and a local awards panel has been
    established.
        In July 1998, this medical center established a Veterans Service
    Excellence (VSE) recognition system to recognize employees who go out
    of their way to provide service to veterans seeking health care and
    related social services. The program is in addition to the Special
    Contribution, Suggestion, and Employee of the Month/Year, Team of the
    Quarter and other existing recognition programs. In accordance with
    Medical Center Memorandum 00-35, the VSE program was thoroughly audited
    by two employees who have a knowledge of the process but are not
    involved in the assignment of VSE points. The results of this audit
    were provided to the Director. Some of the results included reviewing
    VSE Point Earning Categories to ensure that all ``reports of
    excellence'' from patients and/or their families be treated in the same
    manner; establish a procedure whereby the Canteen will process and
    redeem certificates in a timely manner, etc. The Employee Satisfaction
    Team and Partnership Council used the audit results to improve the VSE
    program.
        This medical center is taking the necessary steps to ensure
    equitability of award recognition.
        (7). Assess employee morale to determine why such a large number of
    randomly selected employees do not believe the medical center is an
    employer of choice and would not recommend treatment at this facility
    to a friend or family member.
        An all employee survey has been conducted for the purpose of
    determining what areas can be specifically addressed in relation to
    making our facility an employer of choice. Subsequently, issues of
    concern were categorized and prioritized based upon the employee
    responses to this survey. Results were shared with all employees and
    workgroups are in various stages of developing and implementing
    strategies for improvement. Examples are as follows:
      --Job advancement opportunities.--Selection Panels are now utilized
            to interview and screen applicants based on the performance
            based interview process.
      --Job training/proficiency.--All-employee survey conducted to
            determine training/educational needs.
      --Improve communication/keeping employees better informed.--All-
            employee forums are held every other month. Supervisory forums
            are held every other month. The employee newsletter was
            reinstated. The Medical Center Director continues to send all-
            employee E-mail informational bulletins.
      --Performance/job-recognition improvement.--Semi-Annual Formal Awards
            ceremonies established for more timely recognition. Employee
            newsletter issue dedicated to awards recognition.
      --Improve employee morale and employee behavior/conduct.--Achieving
            Excellence in Service (AES) two day customer service training
            being provided to all employees Electronic employee suggestion
            program under development Patient Satisfaction and Employee
            Satisfaction committees combined
        A follow-up all employee survey will be conducted in the future to
    measure the results of our actions.
        (8). Take immediate action to ensure cleanliness of the public
    bathrooms at both divisions.
        All public use restroom facilities are now being maintained/cleaned
    hourly instead of once in the morning and again in the afternoon. In
    concert with the Associate Director, supervisors in Environmental
    Management (EMS) have developed a weekly basis ``inspection checklist''
    which they use to monitor the cleanliness of their areas. Problem areas
    are then graphed and tracked/trended, with employees providing input on
    how to improve the results. The supervisors responsible for sanitation
    activities at both divisions submit the tracking reports to the EMS
    Program Manager. The cleanliness of the public use areas, including
    restrooms has improved and is being maintained at satisfactory levels.
        (9). Improve the management of the ambulance service contract by:
    Establishing local policies that include adequate procedures and
    controls regarding authorization, certification, and payment of
    transportation services.
        Policies have been created and implemented regarding the ambulance/
    transportation program. Trip sheets are now required to be provided to
    the medical center by the contractor. These sheets are used to verify
    services provided.
        Reexamining the number of personnel authorized to order ambulances
    and determine if the number is appropriate.
        A review of staff authorized to order transportation was completed.
    It was determined that current staff authorized should continue to do
    so. Additional training has been provided to the staff authorized to do
    this.
        Providing training for all personnel responsible for ordering
    ambulances to include identifying the proper mode of transportation of
    the patient.
        Training has been conducted with all clerical staff and providers.
        Reviewing the ambulance service contract provision with the
    contractor and ensuring that we pay only the contract rate for
    transport of veterans.
        The contract rate is being applied for all ambulance trips whether
    ordered by the VA or the patient. This was implemented on July 1, 1999.
    Upon receipt of the bill, the price is verified. Those that are priced
    higher are paid at the contract rate. Any invoice that is not charged
    at the contract rate is extensively reviewed and challenged as
    appropriate
        Ensuring that certification procedures include verifying the rates
    charged.
        The contract rate is being applied for all ambulance trips whether
    ordered by the VA or the patient. This was implemented on July 1, 1999.
    Upon receipt of the bill, the price is verified. Those that are priced
    higher are paid at the contract rate. Any invoice that is not charged
    at the contract rate is extensively reviewed and challenged as
    appropriate
        Challenging every invoice that is priced higher than the contract
    rate.
        The contract rate is being applied for all ambulance trips whether
    ordered by the VA or the patient. This was implemented on July 1, 1999.
    Upon receipt of the bill, the price is verified. Those that are priced
    higher are paid at the contract rate. Any invoice that is not charged
    at the contract rate is extensively reviewed and challenged as
    appropriate
        Challenging invoices that do not appear to be proper or may have
    received prior payment from other sources.
        The contract rate is being applied for all ambulance trips whether
    ordered by the VA or the patient. This was implemented on July 1, 1999.
    Upon receipt of the bill, the price is verified. Those that are priced
    higher are paid at the contract rate. Any invoice that is not charged
    at the contract rate is extensively reviewed and challenged as
    appropriate.
        Proceeding with collection actions if it is verified that duplicate
    payments have occurred.
        Duplicate billings were corrected by Fiscal Program staff. One
    duplicate payment of $562.50 has been recovered by offset from current
    payments to the contractor. The other duplicate payment of $9,613.45
    will be deducted In May, 2000, from future payments for services
    rendered.
        Establishing better communication and control over patients
    scheduled to ensure that ambulance arrival is coordinated with the
    patient's completion of clinic exams or discharge.
        A transportation team was appointed to improve the coordination and
    communication of patient travel. This included working with clinic
    staff to better coordinate ordering of the transportation. The
    following were reviewed, and/or implemented:
        1. A cost comparison study was performed for contract ambulance
    versus VA owned ambulance to determine if owning and operating our own
    ambulance would be more cost effective. A two-month study indicated
    that owning our ambulance would not result in any cost saving.
        2. Psychiatric patients presenting to JC, if stable, are
    transported to Jefferson Barracks (JB) by ParaLift (Wheelchair) Van
    with an attendant in lieu of ambulance.
        3. We have increased communication and coordination of scheduling
    appointments and ambulance trips in order to reduce waiting time and
    resulting increased costs. There will be final review in May, 2000 to
    determine the outcome of these efforts. During December, we did a
    specific review of ambulance trips to determine if they were clinically
    necessary. This review indicated that 95 percent were clinically
    necessary and the other 5 percent may be able to be transported by
    alternate modes if we change specific ER practices before transporting
    the patient between divisions. The following alternatives are being
    actively pursued with providers to help make further reductions:
      --Whenever possible, provide appropriate psychiatric medications
            before transfer to the mental health unit in order to stabilize
            the patient and allow for alternate mode of transportation.
      --When appropriate, insert Heplock in patient to remove the necessity
            for IV treatment during transport.
        Based on the issues identified above, review all other contracts
    and contracting procedures to ensure that effective internal controls
    are in place and are working.
        Thirty-one individuals received Contracting Officer Technical
    Representatives (COTR) training on June 14, 1999 and June 15, 1999
    concerning their duties and responsibilities as a COTR. This training
    was done at the request of VISN 15 at each of the facilities. This
    training emphasized to the COTR's their responsibility for ensuring
    that the work under the contract must be performed in a complete and
    exact compliance with the requirements of the contract including review
    of contractors invoices against the contract price and terms.
        (10). Establish controls over fee basis payments to ensure: CPT
    coding is accurate.
        Reviews have been made of bills received to assure the accuracy of
    CPT codes provided. If a CPT code is not listed the bill is returned
    requesting this information with justification of the amount billed
    based on that CPT code. Training has been provided to further educate
    staff on what to look for to improve the accuracy of our reviews.
        VA's fee schedule is updated properly and used to limit fees paid.
        VA's fee schedule is updated at the beginning of each fiscal year.
    The recommendation has been implemented and is being used to limit
    amounts paid.
        Verification that service was provided prior to authorizing
    payment.
        Test results and progress notes are being requested with each
    authorization to verify services were rendered. If the information is
    not provided, the invoices are not paid and are returned to the vendor
    as incomplete.
        (11). Establish procedures to notify the contract credit card
    company and cancel the authorized use of purchase credit cards by
    employees who either transfer to a position not requiring the purchase
    card or leave VA employment.
        Effective September 20, 1999, the contract credit card company was
    notified to cancel all accounts for employees who either transfer to a
    position not requiring the purchase card or leave VA employment. We
    continue to monitor purchase credit cards and employee transfers and
    separations. The credit card company is being appropriately notified to
    cancel cards.
        (12). Consult with Regional Counsel to determine the next course of
    action for recovering the balance owed VA in the case identified.
        Financial Services forwarded the information in question to
    Regional Counsel, St. Louis, Missouri, and asked for their advise as to
    what course of action can be taken for recovering the balance owed the
    VA in the case identified, ``Pre-Trial Diversion Procedures.'' A re-
    payment plan was established and signed by the individual in March and
    we have received two consecutive payments. Further collection options
    are legally available if there is failure to pay.
        (13). Require excess government vehicles be turned in as surplus.
        Utilization of leased vehicles was reviewed. Five were determined
    to be no longer needed. Five vehicles were turned into General Service
    Administration (GSA) during the time period of June and July 1999
    saving the lease cost of $17,400 annually. The vehicles turned in are
    as follows:

    2 G92 series............................................ tractor/trailer
    1 G82 series............................................ tractor/trailer
    2 G32 series............................................   shuttle buses

        (14). Ensure the Muse CV File System is recorded on the CMR and a
    preventive maintenance schedule is established.
        The Muse CV File System was recorded on CMR 20C in June 1999. It is
    covered by a one-year warranty which expires in the spring of 2000.
    BMET will review the system requirements and determine if preventive
    maintenance should be performed by in-house staff or by contract.
        (15). Ensure that identified payroll overtime ``Exceptions'' are
    reviewed.
        The Exceptions Listing is reviewed on a regular basis by payroll,
    but, it is the responsibility of the timekeeper and supervisor to
    review this menu option on a regular basis (daily, weekly or bi-
    weekly), and act on any discrepancies listed. The Exceptions Listing is
    available under both the supervisors and timekeepers menus. As part of
    payroll's semi-annual timekeeper audits, the Exceptions Listing is
    reviewed by payroll and forwarded to the appropriate timekeeper for
    action. All discrepancies MUST be resolved by either the timekeeper or
    the supervisor. The supervisor must then certify the audit and return
    to it to payroll.
        During the recent timekeeper and supervisor training, timekeepers
    and supervisors were once again reminded to utilize the Exceptions
    Listing menu option regularly. Currently, the subject Service does not
    have any prior pay period exceptions.
        (16). Require Washington University to ensure that transferred
    research projects meet the informed consent standards set by VAMC St.
    Louis.
        Transfer of research studies to the St. Louis VA Medical Center
    from the affiliated universities is rare. Research Service Line has,
    however, adopted a policy that will require the VA investigator to
    develop and submit a VA consent for Human Studies Subcommittee review.
    Upon approval of the consent, the investigator will be required to re-
    consent all subjects that are continuing in the study. The subjects
    will be advised of the reason for the change in venue and need for re-
    consent. Thus, the subject, the investigator, and a disinterested
    witness will be required to sign the new VA consent form.
        (17). Share with other VAMCs the best practice of photocopying
    patient insurance cards to improve the identification of third party
    obligors.
        This was implemented when the VISN 15 MCCF Accounts Manager
    reviewed our Category A/MCCF Program. This program was provided to her
    and she indicated she would encourage other VISN facilities to
    implement this practice.
        There were 28 recommendations covering 17 areas. All of these
    recommendations have been closed by the OIG with two exceptions (9H and
    9I). VA expects that our report to OIG on April 28, 2000 will result in
    closure of these final two items. At the St. Louis VAMC, we have
    charged the Director of Quality Management to maintain a tracking
    mechanism on all recommendations from external review groups, including
    the Office of Inspector General. This tracking mechanism is maintained
    until recommendations are resolved and closed. This has been a
    successful method to assure timely completion.

                           CAPITAL ASSET REALIGNMENT

        Senator Bond. And finally on the capital asset realignment.
    As I indicated, GAO has raised serious questions--this is the
    rock we have got to push up the hill. Stakeholders seem to be
    involved in decision making rather than advisory roles, and the
    senior leadership in VHA is not involved until too late in the
    process.
        I would like to know here, now, on the record, if these
    problems can be resolved in the final plan, when the plan will
    be finalized, and when will VA begin allocating the $10 million
    we gave you for these studies in fiscal year 2000?
        Dr. Garthwaite. We will be implementing, and spending the
    $10 million for the studies this year. We believe that one of
    the key issues is to have criteria-based evaluation. We've
    promised draft criteria yesterday in testimony and we'll
    provide it here as well--within 30 days and, hopefully, then be
    able to have final draft criteria shortly after that.
        I think we are open to many different models and how to
    govern this in headquarters. I would agree with you, we need
    stakeholder involvement, but how that is done, it needs to be
    less as a decision-making, more advisory, and we don't disagree
    with the GAO at all on that.
        Senator Bond. You have got to be directly involved, and we
    expect to see some movement on it. It's tough, and this is
    going to be the challenge. And we really expect to see the
    process underway, because there is so much money we could be
    devoting to better patient care if we weren't taking care of
    empty, unneeded buildings.

                         ADDITIONAL COMMITTEE QUESTIONS

        Joe Thompson, it seems that we have been neglecting you,
    but you should know that you are in our hearts and you are
    going to be in our questions for the record. As a matter of
    fact, we have just a lot of interesting things we are going to
    get into. Unfortunately, I see that we have run out of
    committee members because of the vote.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]

               QUESTIONS SUBMITTED BY SENATOR CHRISTOPHER S. BOND

                              ALLOCATION OF FUNDS
        Question. There are several areas of your budget where VA is
    spending far less than what it told us it would spend in 1999 and the
    current year--even while we increased the overall budget by $1.7
    billion. For example:
        Post-Traumatic Stress Disorder.--VA spent $87 million in 1999 when
    it told us last year the estimate was $109 million. It is estimating it
    will spend $94 million this year, while last year VA estimated it would
    spend $113.5 million in 2000.
        Substance Abuse Treatment.--Last year you told us VA would spend
    $411 million in 1999, yet the actual 1999 expenditure was $357 million.
    The 2000 estimate had been $427 million, and currently VA estimates
    $373 million.
        Homeless Compensated Work Therapy Program.--VA now estimates it
    will spend about half what it had estimated for fiscal year 2000.
        How were these budget estimates developed, and why are there such
    inconsistencies between planned and actual expenditures (please provide
    specific answers for each of the three examples cited)?
        Answer. Budget estimates for 1999 and 2000 in last year's budget
    for PTSD and Substance Abuse treatment were based on the 1998 actual
    experience plus inflation. The reasons for the decrease in actual
    expenditures for PTSD and Substance Abuse Treatment follows:
        PTSD.--The decrease reflects the continuing shift in clinical
    emphasis from inpatient to outpatient care in VA. There was a 22.1
    percent decrease in episodes of care for PTSD, and a decline of 15.1
    percent in general psychiatry beds used to treat veterans with a
    primary diagnosis of PTSD in fiscal year 1999 compared to fiscal year
    1998. During the same time, specialized outpatient episodes increased
    3.1 percent. A recent population-based assessment of PTSD treatment
    need indicated there are gaps in PTSD care at various places across the
    system in inpatient and residential care, as well as potential
    outpatient needs. In recognition of this, the Millennium Act directed
    increased funding for specialized PTSD (and substance abuse) care
    programs for fiscal year 2000.
        Substance Abuse Treatment.--A combination of closure of inpatient
    beds and increased use of ambulatory care have resulted in an overall
    reduction in total program expenditures.
        For both of these programs, we believe that the steady outpatient
    increases will catch up with the initially quick inpatient reductions,
    providing more stability to the funding level of these programs.
        Homeless Compensated Work Therapy Program.--The estimates contained
    in the fiscal year 2000 budget for this program were built upon a 1998
    base that was not an actual at the time of printing. The base estimate
    turned out to be double the actual. The estimates included in the
    fiscal year 2001 budget (for 2000 and 2001) were based on a 1999 actual
    of $4.1 million which reflects the actual allocation of homeless
    veterans program funds to specific VA medical centers for use in
    implementing CWT and CWT/TR programs.
        Question. How does VHA management ensure national priorities are
    implemented at the local level?
        Answer. One of the primary tools that VHA uses to ensure that
    national priorities are implemented at the local level is a system of
    performance measures and monitors. The Chief Network Officer (CNO)
    holds quarterly conference calls with each of the network directors and
    their staffs to review the progress made on performance measures in a
    number of areas. Examples of measures tracked are the Chronic Disease
    Index, Prevention Index and Clinical Practice Guidelines. National
    goals are set for each of these measures, and success on these, as well
    as the other measures, is an important factor in the end of year
    performance appraisal for each Network Director. In addition, the CNO
    monitors many areas that he and other officials in the Office of the
    Under Secretary of Health have determined need special attention, such
    as implementation of Alternate Dispute Resolution, the High Performance
    Development Model, and Patient and Occupational Safety Initiatives. In
    addition the Headquarters program officials monitor their specific
    field activities and report findings to the field and the Office of the
    Under Secretary of Health.
        Question. How does VHA management track local expenditures?
        Answer. Local expenditures are tracked at each VA facility and
    input to a national cost system in Austin, Texas. Costs are accumulated
    to specific clinical activity levels on the Cost Distribution Report
    (CDR). Costs for each medical center and the Nation are then
    consolidated with workload information in the VA's National Patient
    Care Database, and costs are computed for specific patient care
    activities at the local and national levels. Patient specific cost is
    also determined in this process.
        Question. Where expenditures are inconsistent with plan, what
    actions are taken?
        Answer. At the Veterans Integrated Service Network (VISN) level,
    Network Directors intervene as necessary to re-focus or re-emphasize
    facility direction. If expenditures are deemed reasonable for the
    outcome generated, the plan is modified accordingly. At the national
    level, the VHA Chief Financial Officer provides information and
    recommendations to the network and Administration management. As in the
    case with supplemental funding requests from VISNs, a financially-based
    site visit to the VISN and respective facilities may be conducted and
    recommendations provided. Specific program site visits also may be
    initiated.
        Question. How can we be sure that through the VERA allocation
    system that VA networks and individual hospitals are allocating
    sufficient funds to these national priorities? Why shouldn't we be
    funding these national priorities separately from VERA?
        Answer. VHA believes that the value of its national programs can
    best be managed through setting standards and measuring performance,
    assigning accountability and monitoring spending and revenues rather
    than centrally controlling all program funding. The performance of
    national programs are monitored through established VISN measures.
        VERA is an effective system for allocating resources to the network
    level. It was not designed to allocate to facilities or programs.
    Networks have the flexibility to allocate resources to their facilities
    using methodologies that they need to meet local needs. However, VHA
    Headquarters has provided networks with the ten resource allocation
    principles that they are to use in providing allocations below the
    network level.

                                 WAITING TIMES
        Question. One of your key budget initiatives is ``reducing waiting
    times,'' for which you estimate spending $400 million in fiscal year
    2001, an increase of $200 million over the current year. How can we be
    assured that these additional resources will go to ``reducing waiting
    times?''
        Answer. The resources for this initiative are tied to the service
    and access budget initiative. As a result, performance measures and
    monitors also include monitoring waiting times. The Chief Network
    Officer reviews VISN performance with the Network Directors quarterly.
    VA is developing software to better measure waiting times and
    accurately reflect the reporting and progress of this initiative.
    Through network financial planning, VISNs will identify planned and
    actual expenditures towards reaching their waiting times performance
    targets.
        Question. Will VISN directors be required to track and report to
    headquarters the funds spent on meeting the 30-30-20 timeliness goals?
        Answer. To ensure accountability for resources attributed to the
    waiting times reduction initiative, VHA is developing a plan to monitor
    and track expenditures and evaluate the impact of the resources and
    activities in reducing waiting times. Six clinics have been identified
    to monitor the waiting times for specialty care. These will be
    reflected in the performance goals. This plan will be part of the VISN
    financial plan submission to VHA headquarters this summer.
        Question. Will all of these funds be allocated through VERA, or
    will you be targeting resources to those facilities which have the
    worst waiting times?
        Answer. The majority of the $400 million will be included in the
    $18 billion General Purpose funding distributed by VERA. The exception
    may be the Information Technology dollars spent nationally (e.g., the
    scheduling package). General Purpose funds constitutes 89 percent of
    VA's Medical Care appropriation. The combination of increased funding
    and specific monitoring of performance toward the goals is expected to
    address the waiting time issue appropriately at all sites.
        Question. VA has acknowledged it has a problem with waiting times.
    What data did VA use to make that assessment?
        Answer. There are several sources that VHA used to make that
    assessment. The Institute for Healthcare Improvement (IHI) initiative
    findings and an evaluation of the top diagnoses of the veteran
    population provided an analysis of potential clinic workload
    requirements. VHA also analyzed data extracted from the medical
    centers' scheduling packages. These are the main sources for the
    initial assessment. Other sources include, patient complaints,
    historical problems with hiring specialists in some areas, and
    evaluation of the top diagnoses of our veteran population that indicate
    potential clinic load.
        Question. Did VHA analyze the root causes of its excessive waiting
    times?
        Answer. The Institute for Healthcare Improvement (IHI) initiative
    on Waits and Delays started their improvement effort by having each
    facility-based team perform a root cause analysis for the specific
    clinic they were trying to improve. This is most appropriate since it
    is not possible to identify two or three root causes for waits and
    delays at a national or even a VISN level. Root causes are embedded in
    clinic processes, which vary from clinic to clinic and site to site.
        Question. If not, how did VHA identify the initiatives it plans to
    use to help achieve the 30-30-20 goals?
        Answer. As noted in the previous response, root causes were
    identified. Also, VHA intends to issue planning guidance indicating
    that for each service and access goal, sites are to identify their
    current level of performance and performance target for that goal. For
    each goal they are to identify all planned interventions and the
    estimated or actual expenditures for each intervention. The list of
    possible interventions was developed from those identified by IHI and
    from actions Networks identified as possibilities. VHA believes this
    approach allows facilities to individualize their approaches, while
    providing for the national development and monitoring of improvement
    actions.
        Telephone care was chosen as a national initiative based on
    numerous published articles that indicate access to telephone care
    increases patient satisfaction, provides quick access to the system and
    decreases the number of medically unnecessary visits to providers.
    Providing alternatives to physician/clinician visits should decrease
    the overall demand for visits. That in turn will make more appointment
    slots available and help decrease waits. As VHA implements phone care
    across the system, it expects to develop measures that assess the
    number of avoided visits and the appropriateness of that avoidance.
        Question. What problems exist with VHA's current efforts to collect
    national waiting time data and how will VA fix these problems?
        Answer. The current methodology used to measure clinic appointment
    waiting times is to measure the time between the date that a next
    available appointment was requested at a clinic and the date for which
    the appointment was scheduled to occur. This time actually represents
    the waiting time experienced by the patient for the appointment. Next
    available appointment types were selected because their waiting time is
    dependent on the availability of an opening and is not confounded by
    patient date and time preferences.
        Problems with existing waiting time data is as follows: Waiting
    times derived from using this next available approach suffer two
    weaknesses. The first is that if a clinic has zero next available
    appointments the waiting time cannot be calculated. The possibility of
    a clinic not having a `next available' is that the clinician and/or the
    patient have requested a specific time in all cases. If a specific
    appointment time is requested it is not placed in the average for next
    available as there may be numerous slots available before this
    appointment was made. If the longer, requested time is averaged in it
    gives a false extended waiting time. The potential for no visits to be
    `next available' is small but could happen. In general about 20 percent
    of scheduled appointments are comprised of next available appointment
    types. There is however a good deal of variation across clinics. The
    second problem is the dependence on the scheduling clerk to accurately
    categorize an event as a next available appointment request. We are
    working to solve this problem through training. Guidance and education
    directed at the scheduling clerks on how to respond to the VISTA
    scheduling prompts has been provided.
        VHA's ability to solve these problems is directly related to
    deficiencies in the VISTA scheduling software. This software was built
    in the 1970's and needs to be replaced. Deficiencies in the scheduling
    software are listed below:
        (1) Inability to distinguish between new and follow-up appointments
    and the inability to distinguish between urgent and routine
    appointments.
        (2) Inability to document the patient's or provider's desired date
    of the future appointment.
        (3) Inability to specify a particular appointment duration when
    searching for future availability.
        (4) Inability to calculate the total time interval between request
    and appointment when the appointment has been rescheduled one or more
    times.
        (5) Inconsistent use of the scheduling system within and across
    facilities due to locally developed ``work-arounds'' devised in
    response to deficiencies in the scheduling software.
        The current software does not support local business needs and is
    viewed as an obstacle rather than an asset. Tasks such as managing
    rotating house-staff (with concomitant changing and unpredictable
    staffing levels, difficulties in achieving continuity of care and
    requirements to transfer appointments from one provider to another),
    scheduling visits far into the future, scheduling across facilities,
    viewing a patient's appointment schedule from a VISN perspective and
    linking appointments together (such as laboratory or radiology visits
    preceding a provider encounter) are only marginally supported by the
    current Scheduling System. It is believed that a major overhaul of the
    Scheduling System is required in order to facilitate these types of
    activities.
        The VA is considering another software patch that will collect
    waiting times for all appointment types by recording the date the
    appointment is desired and the date the appointment is scheduled for.
    This will produce waiting times that have some elements of patient
    preference built into them and will be able to collect waiting times
    for all patients. This patch will help produce a more complete view of
    waiting times but does not substitute the need to rebuild the existing
    software.
        Question. What types of ongoing data reliability problems might
    persist?
        Answer. Waiting times are a new measure. As with all new measures,
    data reliability is an issue during the first few early runs. As
    concerns arise, they are solved (e.g. the first pilot run of the
    measure indicated a problem with the clinic numbers that designate a
    primary care clinic). The issue was addressed and resolved. There will
    be ongoing evaluations to identify future issues.
        Question. What is VHA's basis for selecting the six clinics--
    audiology, cardiology, opthalmology, orthopedics, primary care, and
    urology--that will be measured?
        Answer. Initial entry into the VHA is through the Primary Care
    provider or clinic, therefore Primary Care clinics were chosen. The
    other clinic choices resulted from historical qualitative information
    about diagnoses that lead to high clinic loads and historical problems
    with hiring specialists.
        Question. How will VHA ensure that improved timeliness for the six
    clinics is not achieved at the expense of other clinics?
        Answer. Each quarter the Performance Measurement Workgroup reviews
    the findings of all measures. The waiting times reviews will include
    not only those selected, but all clinics. This evaluation will be used
    to determine the performance measure for upcoming years. This baseline
    clinic information will be used to track progress and to determine if
    any other clinic waiting times are increasing. Selected clinics for
    subsequent years will change according to the findings of these
    reviews.
                                    RESERVE
        Question. Each year VA has a national reserve for ``emergencies.''
    What is the process for allocating the reserve?
        Answer. The reserve is used as a source of funding for new
    activities or to supplement existing activities during the year. VHA's
    Screening and Evaluation Committee releases funds from the reserve
    after review, recommendations by the Policy Board, and approval by the
    Deputy Under Secretary for Health. If there is a current year funding
    balance at or shortly after mid-year that is not expected to be needed
    for other emergencies, it is distributed to the networks using the VERA
    methodology.
        Question. How much is left in fiscal year 2000 reserve funds?
        Answer. The current balance in the reserve, originally $150
    million, is now $42.7 million.
        Question. Have any networks requested additional Hepatitis C funds?
        Answer. VA has not had any requests from networks for additional
    Hepatitis C funding. However, Network 3 requested supplemental funding
    for fiscal year 2000 and included Hepatitis C workload as part of its
    justification. Its total request was $102 million and $66.2 million was
    approved.

                                 TWO-YEAR FUNDS
        Question. Last year the Committee agreed to the administration's
    proposal to make available for 2 years about 5 percent ($900 million)
    of the medical care appropriation. How much do you anticipate you will
    carryover, and can you give me assurances these funds aren't being
    inappropriately squirreled away when needs exist now?
        Answer. VA still embraces the concept of 5 percent of appropriation
    as no-year funding to provide maximum beneficial use for veterans
    health care of all funds Congress provides. Last year Congress set the
    level as an absolute amount at $900 million. That level was close to
    the 5 percent amount of the 2000 appropriation level. The $900 million
    level provides sufficient flexibility for fiscal year 2001 and we will
    adjust it in the fiscal year 2002 budget request.
        VHA has no intent to withhold dollars inappropriately or otherwise
    to compromise the intent of Congress. Two-year availability provides
    flexibility to management in those cases where funding priorities need
    to be addressed.

                                  HEPATITIS C
        Question. A year ago, we were told that VA spending for hepatitis C
    might need to be $500 million or more in fiscal year 2000. At that
    time, there was question as to the prevalency rate in the veteran
    population, as well as uncertainty about what percent of patients
    afflicted with Hepatitis C might be well-suited for the new combination
    treatment. Does VA have a better handle on the prevalency rate in the
    VA population?
        Answer. The prevalence rate from the one day Surveillance sample of
    March 17, 1999, was 6.6 percent. Two ongoing clinical trials (one
    funded by VHA and one by industry) should provide more precise data
    within the next several months.
        Question. How many patients are currently receiving the new
    combination therapy, and what is your current estimate of the number of
    enrolled veterans who would benefit from treatment?
        Answer. According to current information approximately 1,200
    patients are receiving combination therapy for hepatitis C. The
    medication was not approved by the FDA until December 1998 and was
    placed on the VA formulary in February 1999. Currently only 20 percent
    of our HCV positive patients are believed to be clinically appropriate
    for combination therapy. This is based on both expert opinions by VA
    hepatologists and early evidence from an ongoing clinical trial where
    appropriateness for treatment in clinical study patients ranges from 0
    percent to 40 percent. Many patients do not have evidence of cirrhosis
    on liver biopsy and, therefore, are not presently believed to require
    treatment with interferon and ribavirin. Other patients have cirrhosis
    that is too severe to be improved by treatment. All patients who are
    not presently being placed on combination therapy are still followed
    for any change in their clinical status which might make them eligible
    for treatment at another point in time. Also, some patients refuse
    treatment after they are informed of the risk and benefits, and many
    drop out due to side effects.
        Question. According to the budget, VA estimates it will spend $195
    million in fiscal year 2000 on Hepatitis C, while the original budget
    estimate had been $250 million. Yet for the first quarter of this year,
    VA hospitals have reported that they have spent only $9 million.
    Whether the field is not coding information properly, or if in fact
    they're only spending $9 million, in either case this points to a huge
    problem. These numbers give us no confidence in the estimates we see in
    the budget justification. Can you explain the numbers? Why is spending
    so much less than the $500 million we anticipated last year?
        Answer. Last year's (fiscal year 2000) and this year's (fiscal year
    2001) budget estimated the following costs for Hepatitis C:

                           HEPATITIS C COST ESTIMATES
                            [In millions of dollars]
    ------------------------------------------------------------------------
                                                         Fiscal years--
                        Budget                    --------------------------
                                                     1999     2000     2001
    ------------------------------------------------------------------------
    Fiscal year 2000 President's Budget..........      114      250  .......
    Fiscal year 2001 President's Budget..........       46      195      340
    ------------------------------------------------------------------------

        Fiscal Year 2000 and Fiscal Year 2001 Budget Estimates.--Although
    the Hepatitis C funding model was used in formulating estimates for
    both fiscal year 2000 and fiscal year 2001 budgets, the cost estimate
    differences between the two budgets can best be summarized as follows:
        The fiscal year 2000 budget model assumed more patients would be
    evaluated and treated in fiscal year 1999 and fiscal year 2000 than
    that predicted in the fiscal year 2001 budget for the same years. VA
    believes that the surge of patient workload is likely to occur in the
    fiscal year 2001 due to the increasing veteran awareness, education and
    training of staff and to VA's promotional efforts to identify patients
    of high risk for this disease.
        It is important to note that the unit cost assumptions in the
    fiscal year 2001 budget are higher. However, the overall total cost
    estimates are lower than that estimated last year due to a more
    conservative assessment of screening and patient workload for fiscal
    year 2000.
        Actual Costs Compared to Estimates.--The original estimates for
    Hepatitis C were based on a model developed in VA that included cost
    and workload assumptions on screenings, tests, and treatments. With the
    availability of hard data (actual costs), a transition will be made
    from modeled baseline costs to actual baseline costs. At this time,
    some actual information is available for fiscal year 2000, although
    somewhat limited. Using available information we have estimated costs
    for screenings, tests for patients testing negative, clinic and
    counseling staff for patients testing positive, and education costs not
    available in actual cost reporting. Projecting actual and estimated
    costs for the full year results in a current Hepatitis C estimate of
    just under $100 million for fiscal year 2000. In addition, VA will
    spend approximately $1.8 million to support the two Centers for
    Excellence for Hepatitis C and national training efforts in fiscal year
    2000. We are taking steps to capture more complete information on
    treatment of patients who are HCV positive and to improve our cost
    accounting for these patients. An automated Hepatitis C registry with a
    clinical reminder patch is currently being tested and is expected to be
    fully operational later this summer. This updated system will permit VA
    to better track its Hepatitis C efforts and their associated costs.
    Also, we are reviewing our program and its funding to ensure that our
    facilities and providers have the proper incentives to aggressively
    pursue the goals of this program.
        Question. Recognizing that Hepatitis C treatment is very expensive,
    and given VHA has apparently limited both the scope of its outreach
    efforts and the pace of screenings, can it be concluded that VHA's
    hepatitis C spending plan is more budget-driven than needs based?
        Answer. The scope of outreach efforts has not been limited and the
    pace of screening has significantly increased in a number of Networks.
    Recently the local chapters of the Vietnam Veterans of American held
    screening efforts in several cities in conjunction with Miss America,
    an effort sponsored by Schering-Plough. The turnout was disappointingly
    low, but VA Medical Centers across the country provided support to
    these efforts. On March 31 and April 1, the American Liver Foundation
    also held screening efforts in five cities in cooperation with the
    national offices of the major Veteran Service Organizations (VSOs).
    Again, the turnout was lower than expected, but the efforts continue.
        The Chief Consultant, Acute Care Strategic Healthcare Group also
    made a presentation to the Hepatitis Foundation International regarding
    VA's efforts. This organization's membership is largely individuals who
    have either Hepatitis B or C, and this organization has already been
    helpful in providing educational materials for patients.
        A presentation about Hepatitis C and liver transplantation was held
    May 4, 5, and 6 on the Mall for Public Service Awareness Week. At the
    booth VA provided patient information and answered questions from the
    public. Outreach efforts are also a part of each network plan. It is
    VA's intention that every patient is asked about his/her risk factors
    for HCV, and tested if appropriate or if the patient requests a test.
    VA has developed a clinical reminder system that is currently in beta
    testing. The purpose of this system is remind clinicians to screen all
    veteran patients for HCV risk factors. Full implementation of this
    system is expected in the near future and should ensure that 100
    percent of enrolled veterans are screened for risk factors.
        Based on their risk factors, veterans are then referred for HCV
    testing. The pace of such screening, testing and treatment is dependent
    on having in place the appropriate education, infrastructure, and
    resources. Appropriate clinical staff are being recruited and educated
    to meet these needs. Programs of this magnitude require time to
    develop, implement, and subsequently evaluate.
        The Acute Care Strategic Health Care Group program office has
    worked with the Centers of Excellence to support the networks' effort
    with the appropriate provider education materials and presentations,
    and counseling materials and educational sessions. This office has
    assisted in outreach through public relations; published articles in
    both the lay press and professional journals; and provided network
    management with feedback from the HCV Registry in order to assist them
    in assessing their needs.
        Question. I understand that last year, VA spent $657,000 on six
    projects directly related to Hepatitis C, and expects to spend $1.2
    million this year. Is this enough, to really get a better handle on
    this disease and treatments?
        Answer. In fiscal year 1999 the VA expended $5,549,009 on 34
    projects related to liver disease; $2,639,091 was expended on 24
    projects related to Hepatitis; and $657,031 on six investigator-
    initiated projects directly related to Hepatitis C. This was an
    increase for Hepatitis C from fiscal year 1998, when $298,433 was
    expended on three projects, and reflects the increased interest in
    Hepatitis C as an emerging pathogen. Starting July 2000, we anticipate
    funding a Cooperative Study, entitled ``Epidemiologic Multi-Site
    Hepatitis C Virus (HCV) Study.'' This will cost approximately $500,000
    in fiscal year 2000, raising the total VA Research expenditure this
    fiscal year to $1.3 million. In fiscal year 2001, the Cooperative Study
    will be fully funded for $1 million. This will result in an estimated
    expenditure in fiscal year 2001 of $1.9 million on Hepatitis C research
    provided the VA Research budget remains level. This represents an
    almost 300 percent increase in spending on Hepatitis C research from
    fiscal year 1998 to our projection for fiscal year 2001. At present,
    $1.3 million is adequate as it represents what VHA can appropriately
    spend on scientifically meritorious proposals dealing with Hepatitis C.
    As time goes on, we anticipate more meritorious proposals on the topic,
    and we will endeavor to fund them as they are approved. Presently, the
    number of meritorious proposals, not the amount of money, is the
    limiting factor.

                            MANAGEMENT EFFICIENCIES
        Question. Last year, General Accounting Office (GAO) indicated that
    approximately $600 million of the ``management efficiencies'' that VA's
    22 networks identified as potential cost-savings measures for fiscal
    year 2000, could be undertaken without jeopardizing patient care. How
    much of the $600 million in initiatives identified by GAO and VA are
    being implemented with funds redirected to health care?
        Answer. VHA is in the process of implementing approximately $348
    million in cost savings measures.
        Question. How much is left to make VA health care truly cost-
    effective?
        Answer. Achieving cost effectiveness is not a one-time effort. It
    is an on-going process. There will always be elements within VHA, as
    with any public or private business, that can operationally improve.
    VHA's task is to continue to monitor and assess its operations to:
    identify areas where efficiencies can be implemented; to utilize the
    skills of its work force to identify areas available for improvement;
    participate with the private sector to determine best management
    practices; and, be forward thinking and willing to improve management
    practices and provide more appropriate health care. Significant
    progress has been made by VHA in the last few years and more is
    expected. Since fiscal year 1996, VHA has reduced cost per unique
    patient by 8.25 percent (18.25 percent in constant dollars) through
    management efficiencies.
        Question. Have ``best practices'' been standardized throughout the
    system?
        For example, the IG recently reported that centralizing food
    productions within a network is a best practice that should be adopted
    by all networks if feasible.
        Another example, the IG did a recent report on management of
    prosthetic supply inventories, and found better management could lead
    to $31 million in savings.
        Answer. Best practices are commonly applied throughout VHA.
    Examples include: clinical guidelines implementation, health promotion/
    disease prevention, management of chronic disease, patient safety
    initiatives, management and care of Human Immunodeficiency Virus (HIV)/
    Acquired Immune Deficiency Syndrome (AIDS) patients, homeless--care and
    psycho-social intervention, IHI collaborative on waits and delays, and
    care and treatment of PTSD. Another example is the standardization of
    pharmaceuticals which has resulted in cost savings of approximately
    $650 million. Now, VHA is implementing standardization of Medical/
    Surgical supplies.

                                   ENROLLMENT
        Question. VA is in the second year of open enrollment. What has
    been VA's experience to date--has it met or exceeded expectations in
    terms of the numbers of veterans who have signed up for care?
        Answer. VA is experiencing a slight increase in enrollees from
    fiscal year 1999 to fiscal year 2000. This would bring us to
    approximately 4.3 million veterans--2.8 percent more than fiscal year
    1999. This is consistent with our expectations.
        Question. What percentage of veterans who enroll are actually using
    VA for health care?

    ------------------------------------------------------------------------
                                          Patient       Total
                Fiscal year                users      enrollees   Percentage
    ------------------------------------------------------------------------
    Fiscal year 1999..................    3,177,216    4,520,012        70.3
    Fiscal year 2000 \1\..............    2,849,189    4,411,859       64.6
    ------------------------------------------------------------------------
    \1\ Fiscal year 2000 data is through March 2000. Additionally, the total
      enrollee definition was modified from fiscal year 1999 to fiscal year
      2000.

        Question. How many people are enrolling and using VA primarily to
    ``fill in the gaps''--say for inexpensive prescriptions and eyeglasses?
        Answer. VA can give an estimate of those types of people by
    identifying the ``non-vested'' (those not receiving a full range of
    services) priority 7 patients in VERA. Of the approximately 85,000 non-
    vested priority 7 veterans, 687 used prosthetic services (which
    includes eyeglasses) and 18,000 received pharmacy services.

                                    HOMELESS
        Question. How does VA evaluate the effectiveness of its various
    homeless initiatives?
        Answer. VA's Northeast Program Evaluation Center (NEPEC) has been
    monitoring and evaluating VA's homeless veterans programs since the
    programs began in 1987. The program monitoring and evaluation system
    uses structure, process and outcome measures to evaluate the
    effectiveness of the homeless veterans programs. Clinicians assigned to
    the homeless veterans programs across the country complete intake forms
    when homeless veterans are first enrolled in the program and complete
    discharge summary forms when veterans are discharged from the program.
    The data gathered on each homeless veteran at admission and discharge
    is analyzed and used for program evaluation.
        Outcome measures that are used to evaluate the therapeutic
    effectiveness of the programs include:
      --percentage of homeless veterans who are housed at the time of
            discharge;
      --percentage of homeless veterans who are employed at discharge; and
      --clinical improvement for mental health and substance abuse
            problems.
        In addition to the ongoing monitoring of the homeless veterans
    programs described above, NEPEC conducted an observational outcome
    study of the initial Homeless Chronically Mentally III (HCMI) Veterans
    Programs at nine pilot sites to assess the long-term effectiveness of
    the services offered by these programs. A total of 406 veterans
    completed follow up interviews and the average number of months from
    time of admission to final follow-up interview was eight months.
    Significant findings from this observational outcome study were as
    follows:
        Greater numbers of contacts between homeless veterans and the
    clinical staff of the HCMI Veterans Program was significantly
    associated with greater improvement in four outcome measures: (1)
    veterans had less psychological distress; (2) veterans had reduced
    severity of alcohol problems; (3) veterans had fewer days of substance
    used; and, (4) veterans spent fewer days homeless.
        The longer duration of homeless veterans' involvement in the HCMI
    Veterans Program was related to improvement in the number of days
    housed from the time of discharge to the time of the follow-up
    interview.
        The greater number of days in community-based residential care was
    associated with greater improvement in: (1) number of days housed from
    the time of discharge to follow-up; (2) number of days employed from
    time of discharge to follow-up; and, (3) size of social network at
    follow-up.
        Although this observational outcome study was conducted several
    years ago, the structure of VA's core-homeless veterans programs (i.e.,
    outreach, treatment, case management, and contract residential care in
    community-based programs) remains essentially the same. The results of
    this study are applicable to VA's programs as they exist today.
        VA continues to monitor the outcome of residential treatment
    through clinician discharge summaries. In addition, at General
    Accounting Office's request, we are starting a new series of outcome
    studies.
        NEPEC is also completing data collection and analysis of a five-
    year, long-term follow-up study of homeless veterans who received
    standard care in the HCMI Veterans Program and homeless veterans who
    received services in the Housing and Urban Development--VA Supported
    Housing (HUD-VASH) Program. The HUD-VASH program provides permanent
    housing to homeless veterans through dedicated Section 8 housing
    vouchers made available by HUD, and VA clinicians provide ongoing case
    management services to help these homeless veterans find permanent
    housing and remain in it. While the HUD-VASH demonstration program
    exists at 35 locations, four pilot sites were selected to participate
    in a rigorous experimental design approach. Homeless veterans at these
    four pilot sites were randomly assigned to: (1) Section 8 Vouchers plus
    Case Management; (2) Case Management Only; or (3) HCMI Veterans Program
    Treatment (which includes relatively short-term transitional
    residential care in community-based facilities that are under VA
    contract).
        The purpose of the HCMI Veterans Program/HUD-VASH Program long-term
    outcome study is to compare the effectiveness of three types of
    services that are being provided to homeless veterans. In this study,
    care provided in the HCMI Veterans Program is considered to be standard
    care while case management only and case management plus vouchers are
    considered to be new models of treatment.
        Outcome measures for the HCMI Veterans Program/HUD-VASH Program
    Study include housing stability, clinical status and employment status.
    Veterans who were assigned to these three models of care have been
    followed for several years and have been interviewed on a quarterly
    basis. Results of this study will provide important information on the
    types of services that are most effective in helping homeless veterans
    achieve housing stability, clinical improvements, and meaningful
    employment. This study was started five years ago and was designed to
    address questions concerning long-term effectiveness of VA's homeless
    veterans programs. Results of this study will be available in 2001.
        Question. How does VA ensure each VA hospital has effective
    programs, particularly in those geographic areas where a large homeless
    population exists?
        Answer. All VA medical centers with specialized homeless veterans
    programs comply with NEPEC's evaluation procedures. Information about
    workload for each homeless veterans program is compiled and sent to
    each program coordinator and VA medical center director. NEPEC uses 32
    key measures to assess therapeutic and cost effectiveness. Any program
    that fails one standard deviation from the national average in a
    negative direction on a given measure is identified as an outlier.
    Program coordinators and VAMC Directors have an opportunity to compare
    their programs with others and modify program operations if necessary.
    Programs are asked to address the causes of outlier status and identify
    plans for remedial action. These changes are reviewed in the subsequent
    year's report.
        Question. Does VA track staffing and funding levels in each medical
    center dedicated to homeless services? If not, why not?
        Answer. Yes. Tracking staffing and funding levels is part of the
    NEPEC evaluation system.
        Question. The CHALENG legislation (Public Law 102-405) required VA
    to assess and coordinate the needs of homeless veterans living within
    the area served by the medical center or regional office. What progress
    has VA made in implementing that legislation?
        Answer. VA has been coordinating Project CHALENG (Community
    Homelessness Assessment, Local Education and Networking Groups) for the
    past five years. Each VA medical center has appointed a CHALENG Point
    of Contact to work with representatives from other federal agencies,
    state and local governments and nonprofit organizations to identify the
    needs of homeless veterans and to develop action plans to meet those
    needs. The CHALENG process usually involves one or more meetings per
    year and gives both VA and non-VA staff an opportunity to discuss
    homeless veterans issues. In 1999, 2,651 people participated in CHALENG
    activities across the country. Of the total participants, 15 percent
    were VA staff and 85 percent were community participants. Approximately
    8 percent of the participants were homeless or formerly homeless
    veterans. As in past years, the need for transitional housing,
    permanent housing, transportation, day treatment programs, eye care,
    dental care, childcare, legal assistance and guardianship were
    identified as some of the greatest needs of homeless veterans. VA staff
    has also identified plans that have been jointly developed by VA and
    community partners to address these unmet needs.
        Question. Are all medical centers implementing the law fully?
        Answer. In 1999, 92 percent of all VA medical centers participated
    in Project CHALENG with 8 percent failing to comply with the
    legislation. Those sites have been contacted and we expect 100 percent
    compliance next year.

                   COMMUNITY BASED OUTPATIENT CLINICS (CBOCS)
        Question. VA's goal is to have a total of 659 community-based
    outpatient clinics by 2003; VA estimates it will reach that goal in
    fiscal year 2001. What is the basis for that number?
        Answer. CBOCs are defined as all outpatient clinics except;
    hospital based, mobile, and independent clinics. The 659 was a
    combination of clinics existing prior to the 1995 legislation, opened
    between 1995 and 1997 as reported in the 1998 VA Accountability Report,
    and projected 1998-2002 by the networks in their 1998-2002 strategic
    plans. Each network, as part of the strategic planning process,
    evaluates veteran needs and service delivery options which will result
    in a full continuum of care. Access to outpatient services is an
    integral part of providing a full continuum of care and CBOCs are
    identified in the Strategic Plan. When meeting veterans' need for
    services is hampered by access, Networks plan new CBOCs.
        Question. With 659 CBOCs, will there be adequate access, and equity
    of access, throughout the VA system?
        Answer. Equity of access is relative and definitional. VHA strives
    to assure that all veterans who use VA have access to all needed
    service as close to their home as possible. There are challenges in
    doing this. More CBOCs continue to be proposed and established which
    will increase convenience of access. At this time, 80 to 85 percent of
    veterans have access to care within 30 minutes or 30 miles of their
    homes.
        Question. How many total new users have come to the VA in the last
    4 years through CBOCs?
        Answer. Using the definition of a new user as someone who has not
    received VA health care services during the previous three fiscal
    years, during the time period of fiscal year 1996 to fiscal year 1999,
    there were 374,127 new users who came to VA through CBOCs. This data
    only captures those new patients who had their first encounter at a
    CBOC versus at a parent facility.
                                                         Number of new users
            Fiscal year                                   first seen in CBOC
    1996..........................................................    72,452
    1997..........................................................    70,222
    1998..........................................................    95,720
    1999..........................................................   135,733

        Question. Are the CBOCs actually providing care more cost-
    effectively? If yes, on what basis can you claim this?
        Answer. A CBOC Performance Evaluation study is being conducted and
    should be completed by early summer. This study will include
    information on cost effectiveness. Preliminary indications, based on a
    sample, indicate that primary care costs may be higher but are offset
    by lower specialty and inpatient costs resulting from early
    intervention.
        Question. What is the total fiscal year 2000 and fiscal year 2001
    cost of the CBOCs?
        Answer. In order to obtain accurate current and projected costs, a
    field survey has been conducted and the information is being compiled
    and should be available by the end of summer.

                                    BUYOUTS
        Question. VA estimates it will buyout 4,400 VHA employees in fiscal
    year 2000-2001. What is the basis for predicting the number of
    employees who would accept buyouts?
        Answer. VHA was provided authority to use up to 4,400 buyouts in
    fiscal year 2000 and the first quarter of fiscal year 2001 through the
    Veterans Millennium Health Care and Benefits Act, Title XI--Voluntary
    Separation Incentive Program. As VHA committed in discussions with
    Congressional staff, the positions eliminated as a result of these
    buyouts are no longer needed as the result of improvements in
    healthcare services delivery or through efficiencies gained through
    organizational restructuring and business process re-engineering. In
    their place, new or restructured positions will focus on direct health
    care delivery, quality and safety improvement and improving access to
    care.
        VHA's estimates of potential buyouts were based on the Buyout
    Operational Planning process we completed in December 1999 to obtain
    Office of Management and Budget (OMB) approval to implement our Buyout
    program. Through this process, all VHA facilities were surveyed and
    asked to estimate the number of potential buyouts they may expect based
    on their individual organizational plans. Based on this Buyout
    Operational Plan, we anticipate that we will use from 3,000 up to the
    4,400 maximum buyouts allowed by December 31, 2000. We expect that the
    majority of these buyouts will come from administrative and clinical
    positions impacted by reduced inpatient care programs and from
    organizational and business process efficiencies.
        As noted above, VHA will use the resources freed through this
    effort to add new or restructured positions to support achievement of
    VA's goals to improve quality and access to care (predominately through
    expansion of our outpatient healthcare programs) and to expand our
    patient safety program. VHA will establish and fill these new positions
    as specific needs are identified and as associated program and
    organizational plans are implemented. Based on trends in earlier Buyout
    programs and on employee retirement patterns in general, we expect that
    large numbers of buyouts will occur around fiscal and calendar year
    boundaries. On the other hand, new positions will be continually
    established as buyout savings accrue and program and organizational
    plans are implemented throughout the fiscal year.
        Question. For the projected level of accepted buyouts, how many FTE
    can be realized in fiscal year 2000-fiscal year 2001?
        Answer. While it is difficult to predict with any great degree of
    accuracy this early in the Buyout program, we anticipate that the
    number of new positions established in fiscal year 2000 and fiscal year
    2001 will approximate the number of buyouts given in each of these
    fiscal years. VHA has implemented a monthly reporting process to ensure
    effective monitoring of our Buyout program and we are actively managing
    the program to ensure that we fully comply with the intent of the law,
    especially to not use buyouts to reduce full time equivalent employment
    in VHA.

                                  COLLECTIONS
        Question. What progress has been made in improving VA's collections
    of third- party payments?
        Answer. Billing third party carriers using Reasonable Charges is
    vastly different from previous billing and includes a significant
    increase in the type, amount, and complexity of information required to
    prepare the claims for each episode of care, higher standards for the
    accuracy and completeness of clinical data and documentation required
    to support each claim, and the procedures needed to post reimbursement
    to first party copayment and third party accounts. Since the
    implementation of Reasonable Charges on September 1, 1999, networks
    have provided staff training to address issues of documentation,
    coding, and compliance. They are entering into agreements with carriers
    for payments. A Reasonable Charges workgroup has been formed to address
    the operational issues that the field encounters as we continue billing
    under Reasonable Charges. Third party receivables have gone from a low
    $63 million in October to a high of $185 million in March. First-party
    collections appear to be following this trend as well.
        Question. Are you satisfied with the progress that has been made in
    the last year, and why does VA continue to fall short of its goals?
        Answer. The field is going through a massive training effort and
    the results are just now beginning to be seen in increases in
    receivables and collections. We are satisfied that progress is being
    made and are encouraged by the fact that revenue exceeded prior
    collections for the month of March. Collections reached $55.5 million
    in March, our highest collection month ever.
        Question. What is the status of VA's compliance with HCFA
    requirements for billing and coding?
        Answer. VHA has taken a position that we will strive to meet HCFA
    requirements. Due to the complexity of the issue and the impact that
    compliance with HCFA standards may have on medical center operations,
    VHA has decided to conduct an Impact Analysis of meeting HCFA
    standards. An independent consultant that understands VHA policies and
    HCFA requirements will conduct the Impact Analysis. A contract was
    awarded in May and we expect to have the analysis completed within 60
    to 90 days. VA expects the contractor to conduct a comprehensive
    analysis of the circumstances and issues surrounding VHA's ability to
    meet Medicare/HCFA standards specifically as it relates to resident
    billing and supervision. The recommendations and findings from the
    study are expected to provide a more clear understanding of the impact
    on VHA operations and quantification relative to resources and effect
    on revenue in meeting HCFA standards.
        Question. The Independent Budget has as one of their key
    recommendations, that VA should have authority to contract out its
    medical care collections. Do you agree?
        Answer. VA currently is in the process of developing a pilot test
    to determine the most feasible way to do medical care collections,
    either by internal franchise or by contracting out. VA agrees that it
    should have the flexibility to contract out, if it proves to be more
    effective than in-house collections.
        Question. Is VA confident it will collect the $958 million
    estimated in the budget for fiscal year 2001?
        Answer. Collection of $958 million is dependent on VHA making
    timely policy decisions on how to implement various provisions of the
    Millennium Health Care Bill, capturing those decisions into
    regulations, issuing draft regulations, receiving comments, and issuing
    final regulations. Implementation of the Millennium Health Care bill
    will require major software changes to the Veterans Health Information
    Systems and Technology (VISTA) system as well as an extensive
    educational effort. Reaching $958 million will also depend on VA and
    Department of Defense agreeing on how to implement the ``Priority 7
    retiree'' provisions, and implementing those provisions nationwide. If
    those two processes are completed early in fiscal year 2001, VA
    believes the $958 million estimates are obtainable.
        Question. If not, what are the consequences, particularly in view
    of VA's proposal to return to Treasury 50 percent of the first $700
    million in collections?
        Answer. VHA has projected that returning $350 million of the $958
    million in collections to Treasury is possible without negatively
    impacting patient care since the President's Budget includes an
    additional $350 million in its estimate to offset new costs imposed by
    the Millennium Bill.

                               COMPUTER SECURITY
        Question. According to the Secretary's opening statement, VA is
    working to improve its information security program. Have there been
    incidences of hackers intruding into VA systems? Please explain. How
    much is included in the budget to implement VA's computer security
    improvements which are described in today's testimony?
        Answer. VA has experienced one known outside attack. An outside
    party attacked VA's public website on October 25, 1999. The website's
    content was defaced with a hacker's signature message but was restored
    to its normal appearance in a few hours. VA operates numerous
    connections to the Internet. Tests conducted by VA indicate some of
    these connections are vulnerable to attack. Further, some of these
    connections are not adequately monitored to recognize attempted or
    successful intrusions. VA's national information security plan calls
    for a strategic investment of $83.3 million over the six-year period
    fiscal year 2000 through fiscal year 2005 to address the Internet
    attack vulnerability, as well as other kinds of information security
    weaknesses. The annual cost for fiscal years 2000 to 2002 will average
    $16 to $17 million. Beyond fiscal year 2002, the program will level to
    about $10 million per year. The national plan was approved by the
    Capital Investment Board, and is included in VA's fiscal year 2001
    submission as a budget neutral item. VA will face difficulties
    constituting a national security fund from multiple appropriations
    because formal management mechanisms to do so are unavailable.

                               MILITARY RETIREES
        Question. According to VA's budget, VA anticipates receiving $182
    million in DOD reimbursements. What is the status of VA's negotiations
    with DOD?
        Answer. The two Departments and the Office of Management and Budget
    (OMB) are working together to resolve some implementation issues in
    preparation for the development of the memorandum of understanding
    (MOU) that is required by the statute. We remain hopeful that we will
    be able to meet the date of August 31 for completion of a MOU.
        Question. Are you confident a MOU will be in place prior to the
    start of the fiscal year?
        Answer. Although there are some difficult legal issues
    (reimbursement issues, current status of TRICARE and users of Military
    Medical Treatment facilities) to address, all parties concerned are
    seeking to have a MOU in place by the deadline.
        Question. What is the basis for $182 million in reimbursements, and
    how many military retirees do you anticipate serving in fiscal year
    2001?
        Answer. DOD and VA jointly developed the $182 million estimate that
    VA would receive from DOD for providing services to DOD beneficiaries.
    This is a ``best guess'' estimate since neither VA or DOD have the
    appropriate statistics on the number of military retirees who currently
    use or will now use VA health services due to the provision.
        Question. What is the current number of military retirees using VA
    medical care services?
        Answer. Although we do not have this information currently, VA is
    in the process of matching patient records against the Defense
    Eligibility and Enrollment System and should have better data this
    summer.

                                 LONG-TERM CARE
        Question. VA's budget includes $548 million to fulfill the
    requirements of the Millennium Act, an increase of $350 million over
    the current year. According to the veterans service organizations, an
    increase of $459 million is needed for the new long-term care
    initiatives and $270 million is needed to cover the costs of expanded
    emergency care. Have you looked at the VSO's analysis? Why is there
    such a large discrepancy between your estimates and theirs?
        Answer. VA has not had the opportunity to review the methodology
    supporting the veterans service organizations' cost estimates of Public
    Law 106-117. VA is seeking that information and will provide a final
    response to this question once complete.
        Question. Are you confident sufficient funds have been included?
        Answer. VA is confidant that funds available in fiscal year 2000
    and proposed in fiscal year 2001 are sufficient to meet the
    implementation costs of Public Law 106-117.

                           CAPITAL ASSET REALIGNMENT
        Question. Capital asset realignment is the most important next-step
    for VA to ensure it expends its medical care dollars effectively for
    health care. Only about 25 percent of facilities currently are used for
    direct-care. And GAO estimated last year VA is wasting about $1 million
    a year on unneeded infrastructure. GAO recommends that VA's Capital
    Investment Board--which manages the process of prioritizing
    construction projects--be given responsibility for capital asset
    realignment. Do you agree? Please explain how VA will be addressing the
    concerns and recommendations in GAO's testimony of today.
        Answer. GAO concluded that VHA is spending 25 percent of the
    medical care appropriation on operating, maintaining, and improving
    buildings and land nationwide. Based upon the fiscal year 2000 proposed
    medical care appropriation these costs would be approximately $4
    billion. These expenditures are based on activities that GAO includes
    in asset ownership, such as administration, engineering, environmental,
    security, textile services, food services and capital investment. These
    expenditures represent the total costs of asset ownership and not the
    potential savings. GAO estimated that $365 million of the $4 billion
    could potentially be saved if VA stopped operating and maintaining
    unneeded buildings. GAO based their savings estimate on their finding
    that $20 million could be saved if VA closed one of the four VA
    hospitals in the Chicago area. GAO then assumed that approximately 18
    locations of VA's 40 multi-facility markets could be removed from
    service at savings (generalized from the Chicago estimate) of $20
    million each. The GAO estimate of $365 million or $1 million a day
    would be a result of these locations being removed from service.
    According to GAO, approximately 50 percent of the savings consists of
    reductions in personal services and 50 percent would be for all other
    costs. GAO is in agreement with VA that $365 million represents a
    portion of the $4 billion asset ownership costs that could be
    potentially saved by realigning VA's capital assets.
        We do not agree with GAO's recommendation that the VACIB be given
    operational responsibility for capital asset realignment. The VA
    Capital Investment Board has accomplished much over the past three
    years in the development of the Capital Investment Methodology and in
    improving the Department's capital investment decision making. VHA
    needs to take advantage of this experience and the lessons learned by
    the Department VACIB. There are many reasons that the responsibility
    for capital realignment should reside in VHA. The primary reason is
    Capital Assert Realignment for Enhanced Services (CARES) must respond
    to patient needs and services and the enhancement of those needs and
    services to veterans. VHA is clearly the best organization to focus the
    initiative on appropriate patient and clinical issues.
        VHA agrees with GAO, in the need to develop objective and
    measurable criteria that can be used to evaluate the service delivery
    options and the associated capital realignment proposals that will
    result from the (CARES) process. VHA is currently developing criteria
    in conjunction with Department offices, and GAO staff, that will result
    in a decision model that will be similar to that used by the VACIB to
    evaluate major capital investments but will focus on patient outcomes
    such as quality and access to services in addition to resource
    utilization and cost.
        As stated at the hearing, VHA will provide a report to the
    subcommittee within 30 days that will identify the broad evaluation
    criteria that have been agreed to and will outline the process to
    involve stakeholders in the development of criteria weights, specific
    identification of quantifiable sub-criteria, identification and linkage
    of specific data to each of the sub-criteria, development of rating
    scales for evaluating the proposed options and incorporation of all of
    this into a methodology that will be used to evaluate CARES study
    recommendations. In addition, the final report and completed
    methodology, including specific criteria and sub-criteria with relative
    weights and the rating scales will be provided in 60 days.
        VA recognizes the need to raise the importance of asset management
    at both the Department and Administrative (VHA, VBA, and NCA) levels.
    The Department and Administrations including VHA also need to have
    staff dedicated to the improvement of the management of capital assets.
        Currently, VA does not have a comprehensive asset management
    program. In order to meet this need, VA proposed the establishment of a
    Department level office for Capital Asset Management in the fiscal year
    2001 Budget Submission. This office would provide corporate policy and
    direction to other aspects of asset management including, but not
    limited to, asset utilization and disposal. The functions of a capital
    asset management program would include policy development, planning,
    investment strategies, portfolio management, performance measurement,
    and administration. Also, as with the implementation of the VHA Capital
    CARES studies, this office would work to ensure a Department-wide
    perspective on capital investment decisions made, with respect to the
    needs of VBA, NCA, and staff offices.
        Question. What is the status of the Chicago realignment, and when
    will a final decision be made?
        Answer. The VISN 12 Delivery System Options Study was commissioned
    by Dr. Kenneth W. Kizer, former Under Secretary for Health, in response
    to a GAO report that recommended the closure of a VA hospital in the
    Chicago area. In August 1998 the Veterans Health Administration charged
    a steering committee to develop a report with recommended options for
    restructuring the delivery of health care to veterans in the Chicago
    area. The recommended options were to increase the efficiency of the VA
    health care system by planning for the best use of capital assets in
    the long term while maintaining or improving the quality of care and
    ensuring the availability of health care to veterans for many years.
        The Veterans Health Administration received in excess of 5,000
    comments in response to this VISN 12 Delivery Options Study report. The
    comments were categorized into broad topic headings and provided to a
    Review Task Group who met at the end of January under the auspices of
    the Special Medical Advisory Group (SMAG). The goals of the Review Task
    Group were to review and evaluate comments received, consider the
    impact of the comments on the original study options and provide a
    revised prioritized set of options if indicated.
        At an April 5, 2000 House Committee on Veterans' Affairs
    Subcommittee on Health hearing, VA received congressional guidance on
    capital asset planning which is applicable to the VISN 12 Delivery
    System Options Study. The Subcommittee asked VA to develop and adopt
    objective, measurable criteria for formulating and evaluating options
    for restructuring the delivery of health care. Presently the Veterans
    Health Administration is working with VA Office of Financial Management
    and the General Accounting Office in the development of this criteria.
    Stakeholder comments will be sought, the criteria finalized and then
    once developed, will be applied to the various VISN 12 options
    identified by the Review Task Group.
        The outcome of the application of the criteria to the various
    options will be shared with key stakeholders, as was the case for the
    first report in September 1999. A second round of comments would extend
    any decision on the Options Study into fall 2000. Again the purpose of
    this initiative is to assure that the healthcare needs of veterans
    residing in the Chicago area are met well into the future.
        Question. GAO also recommended that minor construction projects be
    subject to the same rigorous scrutiny as major construction projects.
    Do you agree?
        Answer. VHA concurs with GAO's recommendations to improve the
    capital investment decision making process for minor construction
    projects. A VHA policy directive is being developed and coordinated
    with the CARES process. This policy for network level capital
    investment decisions, including those in the minor construction
    program, will require a multi-level criteria based review. All minor
    construction initiatives will be subjected to a more rigorous review
    process at the network level that will include an assessment of minor
    investments against accepted decision criteria. Following the criteria
    based evaluation of minor projects at the network these applications
    will be forwarded to VA Headquarters where a VHA CARES Project Team
    will validate the proposal prior to implementation by the network. The
    VA Headquarters' review will ensure that network investment decisions
    are viable in the context of VHA strategic goals and objectives,
    statutory requirements, and VA's overall corporate perspective. VHA
    plans to implement this review process for minor construction projects
    concurrently with the implementation of the CARES directive in June
    2000. Projects in the networks' fiscal year 2001 operating plans will
    be included.
        Question. Will you begin using the Capital Investment Board process
    for minor construction projects this year?
        Answer. The Capital Investment Board process has been developed for
    reviewing the Department's major capital investment decisions. This
    process will not be used to evaluate minor construction projects.
        Question. Why isn't VA supporting, as it did last year, a Capital
    Asset Fund to expedite the divestiture of underutilized properties?
        Answer. VA continues to fully support the creation of this fund,
    however, at this time there are a number of intragovernmental issues
    that need to be worked out before the fund can be established. One of
    the major issues that needs to be resolved is the how the operations of
    this fund would relate to the requirements of the McKinney Act that
    requires that excess Federal properties be offered to homeless
    organizations. The fiscal year 2000 Capital Asset Fund proposal stated
    that in order to be exempt from McKinney Act, 10 percent of the net
    proceeds would be transferred to the Department of Housing and Urban
    Development to assist in funding homeless assistance groups in local
    areas. This aspect of the proposal met stiff resistance from some
    homeless organizations and from other Federal agencies.

                        VETERANS BENEFITS ADMINISTRATION
        Question. A year ago, VA testified that its average days to process
    claims in 1999 were going to be worse than what was in the budget
    justification. The budget justification indicated it would take 99 days
    to process a rating-related action in 1999. It actually took 166 days.
    Are you satisfied with the progress that has been made in the last
    year? Why is progress so slow?
        Answer. We are not satisfied with the progress that has been made
    in the last year to improve claims processing timeliness. However, many
    complex factors have had a cumulative effect on our efforts to improve
    service. At the same time, we are working to reshape and rebuild the
    claims process and make changes in our organizational culture and
    structure that are essential to our long-term success. We are making
    effort to improve this indicator and we believe have made a good start.
        Over the past few years, we have struggled with a number of factors
    that directly impact our efforts to progress at a more rapid pace:
        Workload Management.--We shifted our focus from working newer cases
    and asked employees to process the older claims. This action was taken
    to ensure claims continue to move through the system. However, it also
    caused average processing time to increase.
        Because of concerns about our high error rate, we asked employees
    to take a closer look at the way they process claims. We asked them to
    write better decisions--decisions which are more easily understood by
    our claimants and can be sustained through the appellate process.
        Increased Difficulty and Complexity of the Workload.--Our employees
    are faced with significant changes in the body of law governing the
    compensation and pension programs. Disability decisions must
    increasingly be prepared using case law rather than a static body of
    regulations--a more difficult and time-consuming process. The process
    of evaluating claims using a combination of regulations and precedent
    decisions is much more complex, and requires additional research time.
        VA has made ad hoc changes to the regulations based on the Court's
    decisions. The consequence of making changes on an ad hoc basis is
    decreased readability of the regulations. In addition, the changes were
    written in a bureaucratic and legalistic format which is not easy for
    employees to interpret. At this time, we are rewriting regulations so
    that they will have a cohesive structure which employees and veterans
    can easily understand.
        The decisions of the Court have long-ranging effects on our
    workloads. Precedent decisions which invalidate previously accepted
    adjudicative practices impact cases in the pipeline and remands. We
    have also increased the level of resources devoted to training to
    better support our employees in implementing important Court decisions.
        We have struggled with the issue of service-connection for
    undiagnosed illness for Gulf War veterans. The processing of these
    claims is contrary to the way we traditionally adjudicate service-
    connected disabilities. Decisions on undiagnosed illness claims are
    labor intensive and are therefore completed at the expense of other
    claims. We have dedicated additional resources to several efforts to
    ensure that Gulf War veterans claims are properly evaluated.
        Changed Organizational Structure.--The first stage of the
    evolutionary process to our reengineered environment required regional
    offices to merge Adjudication and Veterans Services Division functions
    into Veterans Services Centers. While this merger will ultimately
    result in better customer service, it has required stations to
    undertake a major cultural and organizational shift. Extensive cross-
    training of employees must be accomplished. Decisionmakers in the
    Adjudication Divisions must now learn or refine their public contact
    skills and gain general knowledge about other VA benefit programs.
    Personnel in the Veterans Service Divisions must learn how to
    adjudicate compensation and pension claims.
        We anticipated some service degradation as employees are pulled
    away from claims processing and customer service activities to undergo
    training. However, the transition has proven even more labor intensive
    than anticipated and performance suffered more than expected. We
    underestimated the magnitude of the training hours required to teach
    each group of employees the full range of duties and skills needed to
    function in a merged environment. While we consider this training a
    critical investment for the future, the enormity of this effort has had
    an adverse impact on the productivity of the existing workforce. As
    cross-training is completed and employees are certified in their
    positions, performance will improve.
        Loss of Highly Experienced Decision-Makers.--Succession planning
    estimates show that about 2,200 decision-makers will be eligible to
    retire over the next five years. We project that nearly half of this
    pool of potential retirees will actually retire. In order to avoid a
    two to three year skill gap, which would exacerbate our service
    delivery challenges, we have begun a nationwide recruitment initiative
    to stabilize the C&P workforce.
        Question. The number of rating cases pending over 6 months is 68
    percent at the Washington, DC RO according to a March ``Monday Morning
    Report,'' an increase from the July 1999 level of 66.5 percent. This
    office appears to be the worst in the nation, and was the topic of
    debate in last year's appropriation hearing. Why has progress actually
    deteriorated there? What has been done to improve their performance?
    What interventions does VBA take to improve the performance of
    ``problematic'' regional offices?
        Answer. Significant progress has been made in resolving the
    workload situation at the Washington Regional Office over the past
    eight months. The total number of pending claims has been reduced by
    over 40 percent (from 12,266 at the end of August to 7,417 as of the
    end of April). While the over-six-month cases may represent a slightly
    higher percentage of the current pending workload, the actual number of
    over-six-month cases has been reduced by nearly 2,400 cases. Since
    September, we have transferred over 4,000 ready-to-rate cases to other
    Regional Offices for processing. We continue to broker 200 cases per
    week to our satellite rating activities in Huntington, West Virginia
    and St. Louis, Missouri.
        At the same time, we have made a major commitment to building the
    technical capabilities of the Washington Regional Office and increasing
    the Service Center staffing. Twelve senior level technicians and
    managers were recruited from across the nation to enhance the
    experience level of the staff and provide a strong base of technical
    knowledge and training support. An aggressive training program is in
    place for all Service Center employees, with over 2,900 hours of
    training completed during the first six months of this fiscal year.
    Special training classes for rating specialists have been conducted by
    C&P Service staff experts. Master rating specialists have been charged
    with reviewing the work of all rating specialists and providing
    comprehensive rating board training.
        Since September, we have transferred over 4,000 ready-to-rate cases
    to other regional offices for processing. We continue to broker 200
    cases per week to our satellite rating activities in Huntington, West
    Virginia and St. Louis, Missouri.
        The Washington Regional Office is concentrating on completing the
    development of claims and identifying claims that are ready-to-rate so
    that decisions can be rendered as quickly as possible.
        The Washington Regional Office is a member of Service Delivery
    Network (SDN) 3. The SDN played a key role in identifying and assessing
    the workload and performance problems of the Washington office. The SDN
    is jointly responsible for the operations of all regional offices
    within the SDN, and is therefore working very closely with Washington's
    management team to provide assistance and ensure that actions are taken
    to resolve the situation as quickly as possible.
        The performance of all regional offices is monitored continuously
    through our bi-monthly leadership meetings attended by the SDN team
    representatives and the headquarters top management staff. At every
    Leadership meeting, we make it a practice to analyze VBA performance
    across all business lines and in all SDNs. Each team representative is
    responsible for identifying significant gaps in performance and
    discussing actions the SDN has taken to remedy those gaps. We review
    the success of interventions undertaken to improve performance in
    offices with more difficult workload situations. This process assures
    that we are constantly assessing the level of service delivery in all
    program areas and in all regional offices, and that we are sharing best
    practices and working together to correct deficiencies and improve
    performance.
        Question. The Veterans Service Organizations and the National
    Academy of Public Administration in their report a few years ago,
    recommended giving VA program directors line authority over the 57
    regional field office directors. VA has resisted making this
    organizational change but without it, it seems VA headquarters has no
    real hammer to effectuate the changes which are desperately needed. Why
    hasn't VA made this change to ensure standards are enforced and
    managers held accountable for performance?
        Answer. The restructuring of our field organization into Service
    Delivery Networks (SDNs) was designed to increase the responsibility
    and accountability of field managers for performance. Through the SDN
    structure, decision-making authority is pushed down to lower levels of
    the VBA organization, which then allows us to hold managers accountable
    for their decisions and their performance--and for identifying and
    effectuating the changes needed to improve performance.
        The regional offices are organized under nine SDNs. Directors and
    program managers in each SDN function as a team, jointly responsible
    for the delivery of benefits and services within the SDNs' geographic
    boundaries. The SDNs operate with a practical degree of autonomy, but
    we have systems in place to ensure their accountability and measures
    established that evaluate performance on the basis of improvement and
    outcomes. Performance measures are tied to our Balanced Scorecard and
    strategic goals.
        In restructuring the VBA organization, we recognized the need to
    maintain a direct line of authority over the field organization.
    Ensuring a direct line of authority is particularly critical during the
    initial stages of our evolution to the team-based SDN structure. This
    line of authority is provided through the Deputy Under Secretary for
    Operations and his two Associate Deputies. The Associate Deputies are
    responsible for overseeing the operations of the Service Delivery
    Networks, including monitoring performance against goals and standards
    and assuring progress in the implementation of national policies and
    initiatives. We believe this structure accomplishes the intent of the
    recommendation of the National Academy of Public Administration.
        Question. VA's budget includes $54 million in various electronic
    initiatives to improve the processing system. How much more will be
    required in the future to complete these initiatives and have a fully
    automated, 21st century system?
        Answer. VBA developed a Compensation and Pension information
    technology (IT) strategy called Modern Award Processing (MAP) which
    examines the claims process from establishment through payment and
    accounting. This strategy provides guidance for current and future IT
    development efforts.
        In 1999, we enhanced our existing technological tools in order to
    streamline evidence gathering and tracking processes. The Automated
    Medical Information Exchange (AMIE) system, the Personnel Information
    Exchange System (PIES), and the Veterans Appeals Control and Locator
    System (VACOLS) were successful. In 2000, we expect to have several
    more tools. Single Logon, which is access to our different applications
    through one password, was available to the field offices on April 17,
    2000. Claims Application Processing Systems (CAPS), which is a rules-
    based system with case management features, will be available at the
    field offices by September 2000. Rating Board Automation (RBA) 2000,
    which is an application used by rating specialists to prepare rating
    decisions, will be deployed in August 2000. The functional requirements
    for Virtual VBA have been completed and we will begin building shortly.
    Development and Case Management and Establish Claim & Award Screen/
    Design also are expected to be available by the end of this year. In
    fiscal year 2001, we will have other tools such as Electronic Burial
    Claims and Social Security Administration Data Exchange.
        As we become aware of new technology and develop ways to
    incorporate that technology into the claims processing environment, we
    will keep Congress informed of our efforts.
        Question. A recent Court decision requires that a veteran must
    submit, without VA's help, enough evidence to prove that his claim is
    well-grounded, before the veteran is entitled to government assistance
    in obtaining evidence. Up until now, when a veteran filed a claim, VA
    assumed the responsibility of obtaining necessary records. I understand
    this Court decision is very controversial. How does it affect VBA and
    all the problems VBA has before it, and what is the Department's
    position on this matter?
        Answer. The court decision, Morton v. West, affected VBA by
    invalidating certain internal claims development procedures of the
    Compensation and Pension Service (C&P Service), which supported full
    development of all claims, as inconsistent with Congress' intent. It
    led the C&P Service to develop a new policy for claims development
    pending the final publication of a revised regulation to liberalize the
    effects of the court's decision. Under this policy, we inform a
    claimant of the evidence needed to establish a pausible or ``well-
    grounded'' claim. While claimants are gathering required evidence, we
    request their VA medical records and military records. If, after thirty
    days, the evidence of record does not establish a well-grounded claim,
    we will deny the claim on that basis. However, we review any evidence
    we receive in the subsequent year to determine if the claim has been
    well-grounded.
        The Department believes it is still possible, under this court
    decision, to fashion a fundamentally workable and balanced sharing of
    responsibilities between VA and a claimant which will best utilize VA's
    available resources. We agree with the Court that the statutory scheme
    reflects a policy that implausible claims should not consume the
    limited resources of the VA and force into even greater backlog and
    delay those claims which are well-grounded. VA has proposed a
    regulation which recognizes five exceptions to the well-grounded claim
    requirement for persons for whom the burden of producing evidence to
    well ground a claim may be especially onerous.
        Question. Will the Court's interpretation worsen the current
    backlog of claims?
        Answer. No, it will improve it. Because a well-grounded claim is
    accompanied by evidence sufficient to justify a belief that the claim
    is plausible, including medical evidence, less development action is
    required to process it. Therefore, we are able to process more claims
    more quickly. Implausible claims require the most work on our part
    because the evidence to support such claims is often scant if non-
    existent, causing multiple requests for this evidence to ensure that we
    have exhausted all reasonable attempts to find it. Thus, the least
    meritorious of the claims take up the most time and action on the part
    of VA. This considerable expenditure of time and effort is
    counterproductive and causes an overall degradation in the service
    provided to claimants with plausible claims.
        Question. Several pieces of legislation have been introduced to
    require VA to assist veterans. Does the administration have a position
    on the legislation?
        Answer. We have recommended to Congress that action on this
    legislation be deferred until the ongoing rulemaking concerning VA's
    duty to assist claimants has been completed. Our proposed regulation
    reflects the conclusion of the Veterans' Claims Adjudication Commission
    that a policy of providing unconditional assistance to all claimants is
    unneeded and would be a waste of time and resources.

                                VA NURSING HOME
        Question. The VA enters into contracts with private nursing homes
    as necessary for patient placement--do most nursing facilities request
    to participate in the VA's Community Nursing Home (CNH) program or does
    the VA usually seek out nursing homes with whom to contract?
        Answer. VA is seeking new Community Nursing Home (CNH) contracts
    through a national bidding process. Awards are expected in late May/
    early June 2000. At the local level, CNH Programs will seek out nursing
    homes to meet a specific care or geographic need. For the most part,
    CNH is a mature program with a sufficient inventory of nursing homes
    under contract.
        Question. How are CNH applications processed, i.e., are they stored
    in a centralized and readily accessible record-keeping system? If so,
    please provide a list of applicants, broken down by state, for fiscal
    years 1998, 1999 and through March 2000.
        Answer. CNH applications are handled locally by a manual process.
    There is no centralized listing of CNH applications.
        Question. Prior to acceptance CNH applicants are evaluated--please
    describe in detail the CNH evaluation process.
        Answer. Local CNH applications are evaluated in one of two ways.
    The CNH Evaluation Team at the VA Medical Center will review either the
    latest State Survey Agency (SSA) findings using a hard copy of SSA Form
    2567, or the team will review OSCAR (On-Line Survey, Certification and
    Retrieval) reports. OSCAR reports contain findings of deficiencies for
    the past 5 years, a catalog of substantiated and unsubstantiated
    complaints, and patient and staffing profiles. The CNH Evaluation Team
    is composed of VA staff from Social Work, Nursing, Medicine, Pharmacy,
    Dietetics, Rehabilitation, Fire Safety, Medical Administration and
    Contracting. When the team uses the SSA 2567 as their review document,
    the team will decide which members of the team, other than nursing and
    social work will make an initial on-site evaluation. Social work and
    nursing staff will make an initial evaluation in any case. If the team
    uses the OSCAR system for their initial review, an evaluation visit is
    not required. VA staff are encouraged to make an orientation visit.
    Based on the findings of the review and the initial on-site evaluation,
    if indicated, the CNH team will make a recommendation to the
    Contracting Officer regarding the home's application.
        Question. Does the VA use standardized forms/records in the CNH
    evaluation process? If so, please describe in detail how the forms/
    records are used in the evaluation process and provide copies for
    review.
        Answer. VA does not use standardized forms/records in the CNH
    evaluation process. This was a deliberate decision, following extensive
    consultation with VA field staff. No consensus was developed on the
    need for or content of such standardized forms. Absence of standardized
    forms, however, does not impact the standard approach and process of
    the evaluation.
        Question. Does the VA conduct on-site evaluations of all CNH
    applications?
        Answer. At this time, VA conducts on-site evaluations of almost all
    CNH applications. VA is moving away from this approach, finding it of
    marginal use. VA believes that full implementation of OSCAR-based
    reviews will provide a better assessment of the CNHs.
        Question. What percentage of CNH applicants receive an on-site
    evaluation?
        Answer. This information is not readily available and will require
    a field survey. The information will be provided in a month's time.
        Question. What percentage of CNH applicants are rejected? Please
    provide a list of rejected nursing homes, broken down by state, for
    each of the following:
      --Rejected after an initial CNH evaluation.
      --Rejected after on on-site evaluation.
        Answer. This information is not readily available and will require
    a field survey. The information will be provided.
        Question. If the CNH evaluation determines that problems exist, are
    the CNH applicants notified and given an opportunity to make
    corrections?
        Answer. Continued negotiations with a CNH which has not corrected
    State-found deficiencies will depend on the scope and severity of those
    deficiencies and the level of interest/need VA has in/for that
    particular CNH.
        Question. How are rejected CNH applicants notified and are
    explanations provided for the rejections? Describe in detail whether
    standardized forms/records are used and provide copies for review.
        Answer. Rejected CNH applicants are notified by letter of that
    rejection and the reasons for it. Standardized forms/records are not
    used in this process.
        Question. Does the VA maintain CNH applicant rejection notification
    and/or explanation forms/records? If so, are rejection notifications
    and/or explanations integrated into a centralized and readily
    accessible record-keeping system?
        Answer. VA does not maintain centralized files for local CNH
    applicant rejections. For the national contracts, VA does maintain
    files on rejected CNHs.
        Question. Are rejection notification and/or explanation forms/
    records shared with HCFA and state regulatory agencies?
        Answer. When VA staff conducts a full or partial on-site team
    evaluation of a CNH and uncovers new deficiencies of a serious nature,
    HCFA and/or the SSA are notified. When VA staff conducts an OSCAR-based
    review without an on-site visit and chooses not to contract with the
    CNH as a result of that review, then HCFA and the SSA will not be
    contacted. In the latter case VA is directly basing its decision on
    state-provided information.
        Question. Provide a list of CNH participants, broken down by state,
    for fiscal years 1998, 1999, and through March 2000, that:
      --Were suspended from accepting new veterans.
      --The VA removed or transferred veterans.
      --Were terminated from the CNH program.
      --The VA did not renew contract with the CNH participant.
        Answer. This information is not readily available and will require
    a field survey. The information will be provided.
        Question. When the VA suspends placement of veterans in CNH
    facilities, removes or transfers veterans, or terminates nursing home
    facilities from the CNH program, are HCFA and state regulatory agencies
    notified?
        Answer. HCFA and/or the SSA are notified when any of the events
    listed in the question occur and are related to poor care delivered in
    the CNH.
        Question. When CNH participants' contracts are not renewed are they
    provided with an explanation?
        Answer. CNHs are notified in writing when the CNH is not renewed
    for cause. An explanation is provided.
        Question. Describe in detail the CNH quality assurance plan?
        Answer. Listed below is the text from VHA's proposed directive on
    quality assurance in the CNH Program. This directive is in the final
    stages of concurrence within the VHA. Access to HCFA's Quality
    Indicators is expected to be available in the next six months. Current
    practice, based on re-hospitalizations, is described in Item number 6b,
    below.
    Quality Assurance in the CNH Program
        (a) The VA center will integrate the CNH Program in its Quality
    Assessment and Improvement Program. Quality indicators may be
    identified through review of the HCFA Facility Quality Indicator
    Profiles.
        (b) CNH clinical indicators may include, but are not limited to,
    patient deaths at the Nursing Facility, multiple medication usage,
    psychotropic drug use, skin care, accidents and patients or family
    complaints about the CNH. Information on these indicators is available
    through the HCFA Facility Quality Indicator Profile. For patients
    readmitted to the medical center from CNHs, clinical indicators may
    encompass, but are not limited to the following areas: CNH-acquired
    pressure ulcers; falls with injury; medication errors with adverse
    effects; other issues as determined by the medical center.
        (c) Patients readmitted to the VA medical center from CNHs will be
    evaluated for incidents in accordance with M-2, Part I, Chapter 35.
        (d) The VA to improve care and make decisions about renewing
    contracts will use results of quality assessment and improvement
    activities.
        Question. Does the VA maintain forms/records of evaluations and/or
    observations in the CNH quality assurance plan? If so, please describe
    in detail how the records/forms are used and provide copies for review.
        Answer. VA does not maintain such records at the national level.
    This information is not readily available and will require a field
    survey. The information will be provided.
        Question. How are CNH quality assurance forms/records processed,
    i.e., are they stored in a centralized and readily accessible record-
    keeping system?
        Answer. Quality assurance forms are maintained at the Veterans
    Affairs Medical Center (VAMC) level. There is no centralized record
    keeping.
        Question. Describe in detail the CNH follow-up service plan?
        Answer. CNH follow-up services are provided every 30 days by VAMC
    staff. The health care record is reviewed, and VA staff discusses the
    care plan with the CNH staff and the patient. Any problems with the
    care or with the veteran's adjustment to the CNH are also discussed.
    The need for additional VA services are discussed, e.g., visit to
    specialty clinics.
        Question. Does the VA maintain forms or records of evaluations and/
    or observations in the CNH follow-up service plan? If so, please
    describe in detail how the records/forms are used and provide copies
    for review.
        Answer. Documentation of CNH follow-up services are contained in
    the VA health care record. These notes, along with SSA 2567 or OSCAR
    information and the review of re-hospitalizations, are used as part of
    the annual review process of the CNH. Attached is a sample OSCAR
    Report. Form SSA 2567 consists of multiple pages and not readily
    available at VA Central Office. We will provide a copy as soon as we
    receive it.
    [GRAPHIC] [TIFF OMITTED] T05AP06.001

    [GRAPHIC] [TIFF OMITTED] T05AP06.002

        Question. How are CNH follow-up service forms/records processed,
    i.e., are they stored in a centralized and readily accessible record-
    keeping system?
        Answer. Documentation of CNH follow-up services is contained in the
    VA health care record. There is no centralized record keeping of this
    information.
        Question. Are CNH participants provided with follow-up service
    forms/records of evaluations and/or observations?
        Answer. CNH participants are generally not provided with
    information on a specific follow-up visit or evaluation.
        Question. If problems are identified during CNH follow-up service
    are HCFA and state survey agencies notified?
        Answer. HCFA and/or the SSA is notified when serious problems are
    uncovered by a VA follow-up visit.
                                     ______

                   QUESTIONS SUBMITTED BY SENATOR LARRY CRAIG

                                    TRICARE
        Question. What is the status of the Memorandum of Understanding
    between the Veterans Administration and the Department of Defense for
    the procedures for providing medical services to TRICARE-dependent
    military retirees in the Veterans Medical Centers?
        Answer. Section 113 of the Veterans' Millennium Health Care and
    Benefits Act, Public Law 106-117, provides for reimbursement to the
    Department of Veterans Affairs (VA) for medical care provided to
    certain eligible military retirees. The law states that the Secretary
    of Defense and the Secretary of Veterans Affairs shall enter an
    interagency agreement not later than nine months (August 31, 2000)
    after the law's enactment to implement this section.
        The law states that implementation would be phased in across the
    country. The first contract award for TRICARE 3.0 is scheduled for the
    summer of 2001. Thus, a minimal amount of revenue will be obtained in
    fiscal year 2001.
        The two Departments and the Office of Management and Budget (OMB)
    are working together to resolve some implementation issues in
    preparation for the development of the memorandum of understanding
    (MOU) that is required by the statute. The Department of Defense and
    Department of Veterans Affairs have interpreted the previsions in this
    section differently and we are working to achieve a common
    understanding. We remain hopeful that we will be able to meet the date
    of August 31 for completion of a MOU. From VA's perspective, requiring
    TRICARE beneficiary cost sharing would be a major disincentive for
    retirees to use this program. VA remains hopeful of meeting the
    agreement date of August 31, 2000.

                           TRAVEL REIMBURSEMENT RATES
        Question. Considering the rising gas prices, what flexibility does
    the Veterans Administration have in adjusting the travel reimbursement
    rates?
        Answer. Each time there is an increase in travel allowances for
    Federal employees, Section 111 of Title 38 U.S.C. requires VA to
    conduct an analysis of the adequacy of mileage rates for travel by VA
    beneficiaries.
        Mileage rates for Federal employees were increased on January 14,
    2000. As a result of that increase, VA has began the required analysis
    of beneficiary travel mileage rates.

                           CLAIMS AND APPEAL PROCESS
        Question. What are the short-term and long-term procedures and
    policy changes which can be used to expedite the claims and appeal
    processes?
        Answer. VBA continues to merge veterans services functions with
    adjudication functions into Veterans Services Centers where veterans
    service representatives use a case manager approach to complete claims
    for veterans benefits. Although this merging of functions initially
    adversely affects our ability to complete claims, the long term effect
    will be the ability to provide more timely and accurate service to our
    veteran customers.
        VBA is committed to improve performance in claims processing, and
    the revised process which is demonstrated in the number and type of
    initiatives which are currently dedicated to achieving our performance
    improvements.
        One critical area to be addressed in which to expedite the claims
    and appeal processes is the performance of claims development,
    disability examinations, and the preparation of rating decision for
    service persons awaiting discharge from active duty. Currently we have
    a physical presence in several military separation points in the United
    States, and ultimately it is our intention to provide every separating
    service person, regardless of point of separation, with a physical
    examination adequate for rating purposes according to VA protocols.
        Another important initiative for VBA is Virtual VBA (VVBA), a
    project that will launch VA into the 21st Century by allowing VA to
    process veterans' claims in an electronic environment. This will
    eliminate the now paper intensive and time consuming manual claims
    process.
        The Personnel Information Exchange System (PIES) component for
    requesting service medical records and service verification from
    National Personnel Records Center (NPRC) to VA Regional Offices has
    been implemented since December 1998. During this initial development,
    additional requirements were identified. The PIES application will
    electronically submit information requests to all military records
    centers. These electronic linkages will eliminate the current
    cumbersome paper process. In addition, the Department of Defense (DOD)
    is engaged in the design and development of two initiatives which will
    have a direct bearing on our ability to acquire claims information. The
    first will attempt to create an on-line common pay and personnel system
    for all the military services, which will provide VBA with the ability
    to acquire the requisite service date, including data previously
    contained on the DD 214. Currently, all military services have optical
    digital imaging systems which are utilized for storing documents from
    the Office Military File. The second initiative will allow us to have
    access to all these optical digital-imaging systems from individual
    workstations. This will give the ability to select documents pertaining
    to claims development and further eliminate paper processing.
        For a period of one-year we tested the viability of the Decision
    Review Officer (DRO) position as an enhancement to the appeal process.
    The results of the test indicated significant improvements in the
    appellate process. Timeliness of the decisions, from the date of the
    formal appeal to the date of the final decision, was reduced from an
    average of 421 days to 316 days. The DRO program will be implemented
    nationwide by September 2000.

                                CROHN'S DISEASE
        Question. Is Crohn's disease being considered as a presumed
    disability under Agent Orange?
        Answer. In establishing presumption of service connection for
    specific diseases and exposure to Agent Orange by United States
    veterans of the Vietnam War, the Department of Veterans Affairs relies
    extensively upon the periodic reviews of the scientific and medical
    literature conducted by the National Academy of Sciences Institute of
    Medicine (IOM). The IOM has published three major reviews on this topic
    (in 1994, 1996, and 1998), and a fourth review is due by the end of
    this calendar year. Crohn's disease has not been linked to Agent Orange
    exposure in previous IOM reviews on this topic. The IOM would consider
    this possibility in its future reviews of veterans and Agent Orange
    only if there is available scientific or medical literature that makes
    this association that it could review.

                       COMMUNITY BASED OUTPATIENT CLINICS
        Question. To provide better and more local medical care, what are
    the plans to provide more services to veterans at the outpatient
    clinics?
        Answer. The major goals of Community Based Outpatient Clinics
    (CBOCs) include the following:
      --Improving geographic access
      --Disease prevention/wellness approach
      --One provider coordinating care for patients
      --Quicker access to care and reduce need for service at parent
            facilities
      --Increasing convenience
      --Increasing pre-admission work-up and post discharge follow up to
            shorten hospital length of stay
        The CBOCs have always been intended to provide primary care
    services. Veterans Health Administration (VHA) also now requests that
    facilities examine the need for mental health services. Although some
    CBOCs do provide some specialty services such as podiatry or
    ophthalmology on a limited basis, VA does not anticipate that these
    clinics will expand beyond the basic services they were initially
    intended to provide. VA does not anticipate a proliferation of expanded
    service outpatient clinics, rather it will continue to expand access to
    primary care services and, as the veteran need dictates, expand beyond
    primary care selectively.
                                     ______

                QUESTIONS SUBMITTED BY SENATOR PATRICK J. LEAHY

                               CLAIMS PROCESSING
        Mr. Secretary, I continue to receive mail from Vermont veterans
    about problems they are having with their claims. Some tell me that it
    takes on excessive amount of time, sometimes over six months, for the
    Veterans Benefits Administration to respond to their claims
    applications. Others have complained about the accuracy of the
    administration's response, saying that VBA has simply responded wrongly
    to their claims.
        I understand that VBA is undertaking several initiatives to
    increase the speed and efficiency of the claims calculation process,
    but I am concerned that the administration is not taking advantages of
    new technologies that will assist in claims calculation. For instance,
    I understand that VBA is considering a new technology called clinical
    couplers which is an advanced decision-making software that can
    automate claims processing and improve the accuracy of reviews.
        Question. Does VBA plan to implement these new advanced
    technologies to the claims calculation process? Are there funds in the
    fiscal year 2001 budget request to support such an initiative?
        Answer. VBA has made improvement in technical accuracy its first
    priority. In 1997, we developed the Systematic Technical Accuracy
    Review (STAR) program, to replace the C&P's Quality Assurance (QA)
    program. STAR will be fully implemented this year. Complimenting the
    STAR program is Systematic Individual Performance Assessment (SIPA),
    which brings performance assessment and accountability to the journey-
    level individual. This is a system that will enable local management to
    consistently monitor individual performance.
        In addition, our commitment to improved performance in claims
    processing is demonstrated in the number and type of initiatives
    dedicated to achieving our performance improvements. These initiatives
    have been designed to streamline or enhance the claims process while
    providing employees better tools with which to serve veterans.
        We have developed a Compensation and Pension information technology
    (IT) strategy called Modern Award Processing (MAP) which examines the
    claims process from establishment through payment and accounting. Our
    Training and Performance Support Systems (TPSS) contains comprehensive
    training and performance support systems for the core service delivery
    positions of the reengineered environment. Rating Redesign, along with
    the Rating Board Automation 2000 tool, will help to restore an
    analytical approach to the rating decision.
        We recently became aware of the knowledge coupler technology. This
    technology does not recommend a decision, but gives options for a
    decision and the factors in the unique claim fact pattern that support
    or fail to support each possible decision.
        Question. Are there funds in the fiscal year 2001 budget request to
    support such an initiative?
        Answer. No funds were requested in the fiscal year 2001 budget,
    however, we have just contracted out for the development of a prototype
    in the area of psychiatry.
                                     ______

               QUESTIONS SUBMITTED BY SENATOR BARBARA A. MIKULSKI

                                  FORT HOWARD
        Question. Theme.--Enhancing the quality of life for our aging
    veterans in Maryland and across the country.
        Point.--VA must stand sentry on the Fort Howard transition plan,
    and there must be a single point of contact regarding Fort Howard.
    Because the inclusion of a new State Veterans Home at Fort Howard is
    now unlikely, we need clear answers on how this development will affect
    VA's plan and the timeline for Fort Howard.
        Who is the point person at VA who is in charge of Fort Howard?
        Answer. Mr. Dennis Smith, Director of the VA Maryland Health Care
    System (VAMHCS), Phone Number (410) 605-7016, is in charge of Fort
    Howard. Mr. Alan Hackman, Executive Officer, Phone Number (410) 605-
    7000, has the daily duty of operational oversight for Fort Howard, and
    is in charge of the Fort Howard Mission Review and Campus
    Revitalization project.
        Question. What is the current status of the Fort Howard mission
    change proposal?
        Answer. The proposed Fort Howard Mission Change and Campus
    Revitalization project with stakeholder comments is currently being
    analyzed in Headquarters for the Secretary of the Department of
    Veterans Affairs' review and decision.
        Question. When can we expect a final decision on this?
        Answer. VA anticipates a decision within two months.
        Question. It appears that the state will not authorize construction
    of a State Veterans Home at Fort Howard. If the state does not build a
    Veterans Home at Fort Howard, what impact will this have on the overall
    plan for Fort Howard?
        Answer. No effect. The State Veterans Home is a nice complement to
    the proposed continuum of care housing proposed, but neither the
    mission change nor the Enhanced-Use project, depend on that presence.
    Current plans will set aside property for the potential State Veterans
    Home and the VA welcomes a presence now or in the future.
        Question. What is the current status of the Fort Howard facility?
        Answer. Fort Howard continues to operate ``status quo'' pending
    final approval of the mission change by the Secretary of the Department
    of Veterans Affairs.
        Question. What changes can veterans served at Fort Howard, their
    families, and VA employees expect in the coming months?
        Answer. Upon approval by the Secretary of the Department of
    Veterans Affairs, the mission change will begin being implemented.
    There are several construction projects that will need to be
    accomplished before large-scale relocations can be accomplished. In
    anticipation of the approval, these projects are currently being
    designed. The complete relocation of all inpatient functions from Fort
    Howard is estimated to take 18 to 24 months to complete.
        Question. What are the plans for the enhancement/expansion of the
    outpatient clinic at Fort Howard?
        Answer. The primary care clinic will continue to operate without
    interruption. Current plans are to relocate this function temporarily
    to a one level building (building 249) behind the main hospital
    building. If the plan is approved by the Secretary of the Department of
    Veterans Affairs, under the proposed Enhanced-Use development of the
    campus, a new primary care building will be constructed.
        Question. How is the VA working with the community and VA patients
    to ensure that patient care at Fort Howard is maintained and improved
    during the transition process?
        Answer. The VAMHCS has given over 30 presentations to the numerous
    stakeholders including the Veteran Service Organizations, the VA
    employees, unions, local county and government officials, local
    community interest groups, and the local community at large. During
    these presentations it has been stressed that all current inpatient
    programs will continue, but will move to another VAMHCS site. The
    relocations are expected to enhance patient access to follow-up care at
    the downtown facility and increase hospice and respite bed access.
        Question. What specific steps have been taken to ensure that this
    occurs?
        Answer. During the presentations given, the VAMHCS has been
    responsive to concerns raised over some of the consultant's original
    recommendations. For example, the original plans to relocate the
    dementia unit at the Baltimore Rehabilitation and Extended Care Center
    (BRECC) to the Perry Point facility has been revised due to concerns
    over the adaptability of those patients to such a move. In its place, a
    more general nursing home population will now be relocated.

                                  ALLEGATIONS
        Question. Secretary West, are you personally aware of the
    allegations raised by these employees and Maryland residents?
        Answer. I have been briefed on the nature of the allegations.
        Question. I sent a letter and supporting material regarding these
    allegations on February 4, 2000, asking you to review these complaints
    and to report back to me as soon as possible. To date, I have only
    received an interim response from Eugene Brickhouse, your Assistant
    Secretary for Human Resources and Administration. A final report was
    promised within 30 days (March 30).
        Answer. I directed the Assistant Secretary for Human Resources and
    Administration to provide an interim and final response to you since
    the matters brought to my attention fall under the Assistant Secretary
    for Human Resources and Administration's responsibilities. The
    Honorable Eugene A. Brickhouse was appointed by the President and
    confirmed by the Senate to occupy this most critical position. Mr.
    Brickhouse provided you with a final response on April 7, 2000. On
    March 30, a member of your staff, Mr. Sean Smith, met with Ms. Ventris
    Gibson, Deputy Assistant Secretary for Resolution Management, to
    discuss the allegations and provide you with information that would be
    in the final response. Following the hearing, Mr. Brickhouse and Ms.
    Gibson spoke with Mr. Smith to further provide assurance that we would
    maintain contact with your office.
        Question. Why have I not heard from you personally on this most
    important matter?
        Answer. On matters involving discrimination complaints processing
    or allegations of discrimination, I endeavor to be fair and impartial,
    affording all parties due process and maintaining a posture of
    independence. Since the allegations involved discrimination complaints
    pending within the Department or before the EEOC, my neutrality must be
    unwavering and unquestionable. This does not, however, inhibit my
    ability to exercise leadership over diversity management issues. For
    this reason, I have taken steps to see that the appropriate leaders
    within the Department and addressing these matters.
        Question. Why has this deadline come and gone without a complete
    final report from anyone at VA?
        Answer. On April 7, 2000, Mr. Brickhouse provided your office with
    a final report.
        Question. Are you personally involved in this matter?
        Answer. To the extent appropriate, I have provided executive
    direction to the responsible senior leaders and required their
    involvement, consistent with the employees' rights and the integrity of
    the process.
        Question. Your issued a memorandum to VA employees on September 22,
    1999 on harassment and discrimination at VA. However, is this policy
    being implemented and carried out at VA?
        Answer. The policy was fully implemented on September 22, 1999, and
    is in effect Department-wide.
        Question. Specifically how?
        Answer. The September 22 letter to all VA employees provides for
    appropriate disciplinary and adverse action to be taken against those
    individuals who engage in harassing behavior or other discriminatory
    conduct should an investigation reveal that such misconduct occurred.
    Allegations, even multiple allegations, of discriminatory acts are an
    inadequate basis upon which to find discrimination or to impose
    discipline. VA would violate the rights of those alleged to have
    committed discriminatory acts when the case has not been fully
    adjudicated. When a finding of international discrimination or
    retaliation occurs, the respective VA organization takes appropriate
    personnel action affording due process as required by Federal
    regulations.
        Question. Upon review of these complaints, it is clear that the
    majority come from one area of VA--the Office of the Assistant
    Secretary for Information and Technology and the Washington Regional
    Office. In addition, there are now complaints against the Office of
    Resolution Management, who is charged with the authority to thoroughly
    investigate allegations like these. What action is being taken to look
    into these areas of VA?
        Answer. On March 29 and April 6, the Department advised each
    concerned employee, in writing, to contact a designated official within
    the office where he or she worked to discuss his or her concerns and
    attempt resolution, where possible. Senior leaders in the Veterans
    Benefits Administration and the Office of Information and Technology
    have initiated steps to meet with these employees. In ORM, the employee
    who wrote to you filed several complaints; all but one of these
    complaints was against the employee's former employing office, not ORM.
    The Office of Employment Discrimination Complaint Adjudication (OEDCA)
    dismissed the complaint the employee filed against ORM because the
    employee failed to provide requested information relative to the
    specific nature of his allegations. The Deputy Assistant Secretary for
    Resolution Management met with the employee within her organization to
    determine the specific nature of the employee's complaint. ORM also
    employs an Employee Executive Ombudsman for ORM employees who wish to
    discuss workplace or personal issues, or to mediate disputes. The
    establishment of this position is consistent with EEOC's guidance to
    ORM on addressing internal concerns, should they arise.
        Question. VA's own statistics appear to confirm that there are few
    promotions of minorities in VA. In addition, they show that the
    majority of minorities at VA are within the lowest payscales. What is
    being done to address this discrepancy?
        Answer. We believe that we can do more, as there is room for
    improvement. For example, VA is developing a plan in support of our
    diversity efforts to ensure that African Americans and other minorities
    benefit from all employment, advancement, and training opportunities
    available in the Department. The plan includes a focused effort on
    increasing the representation of African Americans in grades GS-7
    through GS-12, and in grades GS-13 through GS-15, the primary feeder
    group from which we can develop a representative pool of candidates for
    the Senior Executive Service. We will continue our plans to provide
    additional developmental opportunities, mentoring assignments, and
    ensure recognition and awards for outstanding contributions toward this
    effort.
        Question. What specific plans are in place to help move minorities
    up the ranks at VA?
        Answer. VA conducts On-Site Equal Employment Opportunity Technical
    Assistance Reviews at field facilities around the country. Local and
    national union representatives are consulted during these reviews and
    have, at times, served on the review team. These reviews address the
    employment concerns of all employees, minorities, and non-minorities.
    The team provides the facility Director with recommendations to correct
    deficiencies noted during the review. Other initiatives include:
      --African Americans are included in external training programs such
            as the Women's Executive Leadership Program, the Federal
            Executive Institute, Aspiring Leaders Program, and the
            Management Development Centers.
      --VA revised the Performance Appraisal process for senior executives
            to include a section on equal opportunity and diversity. The
            new requirement is that senior executives must show measurable
            progress in improving employment opportunities for women and
            minorities and increasing the diversity of organizations under
            their control.
      --Prior to any senior executive being considered for a bonus or pay
            adjustment, the respective Under Secretary or Assistant
            Secretary must provide specific written examples of how the
            executive has contributed, by his or her actions, to a diverse
            workforce ensuring equal opportunity to all.
      --ORM conducts trend analysis of discrimination complaints. Part of
            the trend analysis focuses on the underlying causes of
            allegations of discrimination when such allegations do not rise
            to the level of discrimination, for example, common workplace
            disputes. Since employees utilize the EEO complaint process to
            air common workplace disputes because they believe

                              VA RESEARCH PROGRAM
        Question. VA is not requesting an increase in fiscal year 2001 for
    its research program. Please comment on the reason for this decision.
        Answer. The request for fiscal year 2001 assures that all of our
    resources available to VA Research will be used with maximum
    efficiency.
        VA currently funds approximately two thirds of the research program
    using non-VA research appropriations. It is anticipated that VA will
    increase funding from these sources so the research program will
    continue to grow and remain a national resource.
        Question. I understand that VA has implemented a new policy
    intended to help solve the problem physician-investigators have in
    finding time to conduct research. What is the current status of this
    policy?
        Answer. The ``policy'' referred to above was an interim
    arrangement, functional only for the fiscal year 2000 allocation
    period, pending development of a more comprehensive allocation solution
    that would assure dependable resource support to the Veterans Health
    Administration's (VHA) research program. Basically this interim policy
    calls for a ``pass through'' of prior local reported costs to support
    research activities.
        Based on guidance from the Acting Under Secretary for Health, VHA's
    Chief Financial Officer appointed a VHA panel of research and financial
    specialists to examine and improve the current system of accounting for
    costs of the Medical Care appropriation that are applied to support VHA
    research at the facility level (including direct salary costs of
    clinician-investigators, facilities and administrative costs). This
    panel completed its analysis and submitted a report to the VHA Acting
    Chief Financial Officer on April 1, 2000.
        The report recommends VHA take four actions:
      --Adopt an interim manual spreadsheet accounting system, focused at
            the VA medical center level of research activity, but with
            capabilities of ``rolling up'' research support costs to higher
            levels.
      --Field-test the manual system in a new group of VA medical Centers
            (it had been tested in ten centers at the writing of the
            report).
      --Reprogram the new automated Decision Support System (DSS)
            accounting system to carry forward the intent of the manual
            spreadsheet.
      --Pending full national implementation of the new method of
            accounting for Medical Care expenditures in support of
            research, extend for fiscal year 2001 the current ``pass
            through'' system of local research support, which characterizes
            VHA allocation policy for the fiscal year 2000 period.
        The accounting team report is currently being reviewed by VHA. VHA
    anticipates presenting the report to the Acting Under Secretary for
    Health soon for consideration. Assuming approval of the proposal,
    field-testing of the improved accounting system will require several
    months. In the interim, a recommendation has been made to the Acting
    Under Secretary for Health to extend the ``pass-through'' policy of
    support to research in the fiscal year 2001 allocation.
        Question. When does it expire?
        Answer. As noted earlier, the expiration date is September 30,
    2000.
        Question. Are there plans to extend this policy?
        Answer. A decision by the Acting Under Secretary for Health is
    pending.
        Question. Last year, the Under Secretary for Health announced two
    new oversight mechanisms for VA research involving humans--one external
    and one internal. Could you please detail the progress that has been
    made towards the implementation of each?
        Answer. The Office of Research and Compliance (ORCA) is the primary
    component responsible for assuring compliance with the rules, policies,
    and procedures to protect human subjects in VA-conducted research. ORCA
    reports to the Under Secretary for Health. ORCA's responsibilities
    include compliance through training, education, and development
    activities, negotiation of VA assurance documents with sites conducting
    research, and site visits (routine and for cause) to research sites.
    This office, announced in April 1999, currently has five employees in
    headquarters and has additional recruitment actions underway.
    Currently, there are plans for four Regional Offices in ORCA, that will
    include four employees in each office to help ensure compliance
    oversight in the 22 Veterans' Integrated Service Networks (VISNs) and
    approximately 120 Veterans Affairs Medical Centers (VAMCs) that conduct
    research involving human subjects. The Regional Offices will be in
    Washington, DC; Atlanta, Georgia; Chicago, Illinois; and Los Angeles,
    California. Recruitment for their Directors is ongoing. ORCA is
    completing the final stages of its budget estimates for fiscal year
    2000 and fiscal year 2001.
        The external mechanism of oversight is based on a contract with the
    National Committee for Quality Assurance, which is managed by the
    Office of Research and Development, with participation from ORCA. After
    open competition, NCQA was selected to review each of VA's sites
    conducting research and to evaluate them for accreditation for
    compliance with all VA and applicable Federal requirements for
    protection of human subjects in research. VA and the contractor will
    develop standards and pilot testing, and visits will begin later this
    year. ORCA staff will participate in site visits in conjunction with
    the accreditation process. In addition, ORCA will receive reports on
    each site to help assure education and training, and other actions that
    help promote compliance.
        Question. How does VA plan to meet the needs of VA research
    facilities that need upgrades, renovations, or expansions?
        Answer. Our programs in VHA health care facilities engaged in bio-
    medical research have identified twenty-five sites with high-priority
    needs for infrastructure improvements, primarily in direct research
    laboratories (so-called ``wet'' laboratories). The VA research program
    is given an annual opportunity, both locally and here in headquarters,
    to identify capital facilities projects for consideration in the
    overall VA budget formulation and capital investment review process.
    The Department's priority-setting process correctly favors patient care
    and life-safety facilities projects at the highest level of priority.
    The Chief Research and Development Officer and the Chief Facilities
    Management Officer will continue to work together to carefully consider
    research--supportive capital projects during the budgetary process.
        Question. In last year's appropriations bill, the Committee
    supported expanding the number of community-based outpatient clinics
    which promote Mental Health Intensive Psychiatric Case Management.
    Research shows economic and health benefits from such clinics and its
    model, Assertive Community Treatment. Two Public Laws 104-262 and 106-
    74 charge the Veterans Health Administration (VHA) to maintain capacity
    by providing for the specialized treatment needs of disabled veterans.
    What has been done to make certain that money cut from inpatient
    psychiatric facilities is being used for Mental Health Intensive
    Psychiatric Care Management programs?
        Answer. VHA surveyed each of the 22 VISNs to determine to what
    extent the savings in costs of inpatient psychiatric care were
    reinvested in outpatient mental health services. VISNs were asked to
    compare total costs in fiscal year 1996 for both inpatient and
    outpatient mental health care to the same costs in fiscal year 1999.
    That study, which is about to be released to Congress, suggests
    considerable reinvestment in outpatient mental health services and
    increases in the number of veterans served.
        Various groups in VHA are collaborating to prepare a Directive that
    will encourage new initiatives in Mental Health Intensive Case
    Management (MHICM) programs. The directive asserts a policy to:
      --Establish new MHICM programs where the need is demonstrated.
      --Defines the target population within each VISN.
      --Describes what is required to have an effective MHICM program.
      --Mentions the monitoring procedures required to determine outcomes.
      --Provides VISN-level responsibilities and national oversight.
        Question. What is being done to ensure that quality psychiatric
    care is being offered within the community-based care facilities?
        Answer. From fiscal year 1998 to fiscal year 1999, the total number
    of veterans served by mental health programs increased by 3.3 percent.
    Over the period of fiscal year 1996 to fiscal year 1999, a 9 percent
    increase was observed. This has been associated with a decrease in
    inpatient care, and an increase in outpatient services. Health services
    research has indicated that nearly half of the new Community Based
    Outpatient Clinics (CBOCs) offer basic mental health services. VHA
    believes that access to mental health services in general is
    increasing.
        Although the inpatient workload and dollars have decreased from
    fiscal year 1996 to fiscal year 1999, outpatient workload and dollars
    have increased resulting in the total number of veterans served by VA's
    special emphasis programs increasing from 269,000 to 293,473. The
    increase in services is accounted for by improvements in access to and
    utilization of outpatient programs. VHA is a leader in mental health
    care and is one of the few health systems that support equal access to
    medical care and mental health care. VA will continue to monitor needs
    for mental health capability for new, as well as existing CBOCs.
        Performance Measures for Mental Health Programs.--The Management
    Decision and Research Center (MDRC), a part of VHA's Health Services
    Research and Development Service recommended three performance measures
    addressing mental health in the community clinics: 1. the number of
    patients assigned a mental health diagnosis; 2. the average weighted
    outpatient workload per clinical mental health FTE; and, 3. the
    percentage of patients seen within 30 days after hospitalization for a
    mental health disorder.
        All measures are compared to the parent VAMCs and are expected to
    be statistically identical or higher.
        In May 1999, in response to the Under Secretary for Health's
    comments to a recommendation by the Committee on Care of Severely
    Chronically Mentally Ill Veterans, the Chief Consultant, Mental Heath
    Strategic Healthcare Group, published criteria for VISN Directors and
    Clinical Managers for including mental health services in CBOCs. As a
    benchmark, ``if the total number of veterans service-connected for
    mental health conditions in the 1-15 mile(s) CBOC catchment area
    exceeds 150, or the number of Priority 1 through 7 veterans exceeds
    3,000, then it is strongly recommended that an existing or proposed
    CBOC would provide (or contract for) general mental health services.''
        As with all other mental health patients, those seen by a mental
    health professional in CBOCs, will be assessed using the Global
    Assessment of Functioning (GAF) scale to help determine whether their
    overall functioning improves following professional treatment. Used as
    an outcome measure, the quality of care for each patient or for all
    patients in each CBOC can be estimated. For fiscal year 2000, the
    percentage of mental health patients who receive a GAF rating is
    reported monthly to VISN Directors.
        Question. How does VA intend to care for the ever-increasing demand
    for psychiatric care among veterans?
        Answer. VA has increased the number of patients treated by its
    mental health services nationally. A recent survey shows that six
    Networks increased the number of patients seen in outpatient mental
    health facilities by greater than 25 percent from fiscal year 1996-
    fiscal year 1999. (VISNs 4, 8,10,15, 16 and 19). In fiscal year 1999
    Network 10 for example, cared for 34 percent more Post-Traumatic Stress
    Disorder (PTSD) patients, and 24.2 percent more patients needing
    substance abuse treatment. VA has developed the largest integrated
    service delivery system for the homeless in the nation. These changes
    have been associated with a decrease in inpatient care, and increase in
    access to and utilization of outpatient programs including treatment at
    Community Based Outpatient Clinics (CBOCs). Half of all CBOCs currently
    offer basic mental health services.
        Mental health services are addressed by providing a full continuum
    of care and access to needed medical/geriatric care. VA is working
    toward better integration of medical care with mental health care for
    veterans. Ongoing activities in the integration of mental health and
    medical and geriatric primary care programs and the development of
    mental health primary care teams demonstrate this.
        An acknowledged leader in developing outcome measures of quality of
    care, VA is focusing its efforts on performance measures for all
    special disability programs including mental health to ensure that
    quality, access and service are maintained or improved.
        In summary, VA is seeing more patients who suffer from mental
    disorders more efficiently and with no loss in quality. In fact,
    patient satisfaction with mental health services has increased from
    1995 to 1999. VA has been able to do this by increasing its use of
    residential care and outpatient services including CBOCs. VA has also
    increased its contracting capabilities with non-VA service providers as
    evidenced by the programs for homeless veterans. VA is using innovative
    approaches in telemental health to increase access to specialty mental
    health services in VA community-based sites such as CBOCs and Veterans
    Outreach Centers. VA will continue using these clearly efficient and
    effective approaches to maintain capacity and quality of care for
    veterans with mental disorders.
        Question. What is being done to ensure the VA National and Veterans
    Integrated Service Network Formularies are becoming less restrictive?
        Answer. The Congressionally mandated Institute of Medicine (IOM)
    study of the VA's formulary concludes that VA's National Formulary is
    not overly restrictive, and that its effects on quality are likely
    comparable to those of formularies in private and other public sector
    programs. The IOM report found no reason to abandon the National
    Formulary yet recommended improvements in the management of the VA
    formulary system. VA plans to respond constructively to all the
    recommendations in the report.
        Question. What is the status of phasing out a typical medications
    that could be less expensive but have damaging side effects?
        Answer. VA's national formulary process is designed to provide the
    most efficacious, safe and cost effective medications for use in the
    veteran population. VHA uses many factors to determine a product's
    suitability for use in the VA population, including patient compliance,
    relevance to the veteran population, pharmacy factors, adverse event
    profile and clinical outcomes. Management of VA's formulary process is
    a very dynamic activity that is clinically driven by the VA Medical
    Advisory Panel, a group of field-based practicing physicians; the VISN
    Formulary Leaders Committee, a group of clinical representatives from
    each of the 22 VISNs; and various VHA Technical Advisory Panels, which
    are comprised of senior VHA subspecialty clinicians. Safety and
    efficacy receive the highest priority in their deliberations.

                              SUBCOMMITTEE RECESS

        Senator Bond. So with that I thank you, Mr. Secretary. I
    appreciate working with you. If this is our last time, it's
    always a pleasure to work with you in various generations and
    different decades. We wish you well and we thank you very much.
    Hearing is adjourned.
        [Whereupon, at 10:40 a.m., Thursday, April 5, the
    subcommittee was recessed, to reconvene subject to the call of
    the Chair.]

     DEPARTMENT OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT AND
            INDEPENDENT AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2001

                                  ----------

                           WEDNESDAY, APRIL 12, 2000

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 9:36 a.m., in room SD-138, Dirksen
    Senate Office Building, Hon. Christopher S. Bond (chairman)
    presiding.
        Present: Senators Bond, Mikulski, and Lautenberg.

                 CORPORATION FOR NATIONAL AND COMMUNITY SERVICE

    STATEMENT OF HARRIS WOFFORD, CHIEF EXECUTIVE OFFICER
    ACCOMPANIED BY:
            WENDY ZENKER, CHIEF OPERATING OFFICER
            TONY MUSICK, CHIEF FINANCIAL OFFICER
            LUISE S. JORDAN, INSPECTOR GENERAL
            KARYN L. MOLNAR, PARTNER, KPMG

                OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

        Senator Bond. The subcommittee will come to order.
        This morning the VA-HUD Subcommittee will hear testimony on
    the President's fiscal year 2001 budget request for the
    Corporation for National and Community Service, the Chemical
    Safety Board, and the Department of Treasury's Community
    Development Financial Institutions Fund.
        First we will hear from the Corporation's Chief Executive
    Officer, Senator Harris Wofford, who will be followed by the
    Honorable Luise Jordan, the Corporation's Inspector General,
    and Ms. Karyn Molnar from KPMG.
        The subcommittee will then hear from the Chemical Safety
    Board. Finally, we will have officials testifying from the CDFI
    Fund.
        The Appropriations Committee and the VA-HUD Subcommittee
    will face another year of very difficult budget decisions due
    to needs for VA medical care, significant increases in needed
    budget authority for Section 8 housing assistance contract
    renewals, and FEMA disaster assistance.
        For the Corporation for National and Community Service, the
    President has requested a significant spending increase.
    Specifically, $538.7 million has been requested, an increase of
    $101.6 million over the $437.1 million provided in fiscal year
    2000.
        Under the President's budget request, the Corporation would
    expand the AmeriCorps service from its current membership of
    50,000 participants to 62,000 by fiscal year 2001, with a goal
    of 100,000 in fiscal year 2004. In addition, the President is
    proposing a number of new initiatives such as creating a new
    AmeriCorps Reserve program and two new youth programs under its
    Learn and Serve account.
        While the Corporation has a number of laudable goals, such
    as improving child literacy--that is obviously one of my very
    strong concerns--there remain many significant issues
    concerning the management and implementation of its programs.
        First, providing an increase in funds to an agency that has
    been fraught with significant management problems is troubling
    at best. While I applaud the progress the Corporation has
    achieved over the past year, there continues to be serious
    problems.
        The Corporation has again received a ``clean'' opinion on
    its balance sheet, but a ``disclaimer'' on its statements of
    operations and cash flows. The number of material weaknesses
    has been reduced from eight to five, but a number of reportable
    conditions and failures to comply with various Federal laws and
    regulations remain.
        We will later hear more from the CNCS's IG and KPMG
    auditors on these matters, but I must emphasize that I remain
    concerned about these issues.
        Second, there continues to be a question of accountability
    within the Corporation and the grantees who administer many of
    its programs.
        Last year, the auditors were unable to determine the nature
    of $31 million in unidentifiable expenditures in the
    Corporation's financial statements. It was only after this
    Subcommittee raised concerns about it, that the Corporation's
    management took action to address this matter.
        Unfortunately, the Corporation's contractors were
    unsuccessful in determining the nature of this $31 million, and
    to this date, the Corporation still has no documentation or
    proof on whether those funds were misspent or whether this was
    simply a series of bookkeeping errors or a combination of both.
        It is my understanding that this contractor was also
    responsible for preparing the Corporation's financial
    statements. I hope this contractor was not actually paid on its
    work to identify the $31 million in unidentifiable amounts that
    it was responsible for creating.
        Another major concern is the Corporation's oversight of its
    grantees. The IG has found numerous problems in this area and
    continues to cite this as a major internal control weakness.
        In this year's budget request, the Corporation has
    requested the legal authority to provide additional
    administrative funds to troubled State grantees. Currently,
    each State commission must provide a 50-percent match for any
    administrative funds received from the Corporation.
        Nevertheless, the Corporation seeks to waive this matching
    requirement for troubled grantees. More puzzling is the
    Corporation's request for an additional $3.6 million for this
    effort. Frankly, this could be characterized as ``throwing good
    money after bad,'' or rewarding non-performance or poor
    performance.
        Instead of throwing good money after bad, I wonder: Has the
    Corporation considered other ideas that would address the
    problems with its troubled grantees? How about using
    enforcement actions against troubled grantees? If the
    Corporation lacks the legislative tools to do this, I would be
    more than happy to entertain your requests for legislative
    solutions.
        I am also curious to know if the Corporation allows its
    grantees to take on additional programmatic responsibilities
    when they have been found to be troubled.
        The Corporation admits in its budget justifications that
    these ``oversight problems are occurring at a time when the
    AmeriCorps grants program is growing significantly.'' Well, if
    this is the case, why not reduce the programmatic burdens of
    these troubled grantees?
        Finally, I emphasize the need for the Corporation to
    resolve fully its long-standing management and financial
    operations problems. The Corporation has made some real
    progress over the last year. For that, it deserves recognition
    and commendation. We are happy to do that.
        Moreover, the Corporation has assembled a management team,
    which is beginning to lay the foundation for sound management.
        In your testimony, Senator Wofford, you state that the
    Corporation's ``programs will depend upon the effective
    management of the resources dedicated to these purposes.''
    While I agree completely with that statement, it seems
    questionable to me that the Corporation would increase its
    program workload when it still has not cleaned up its
    management problems.
        It seems like the Corporation is trying to fix a bike while
    riding it at the same time. I would hope that the Corporation
    will seriously consider my suggestion that you need to slow
    down and maybe take a minute to get off the bike before you
    start riding it again. In this city, I have seen a lot of
    potholes, and I think that would be good advice whether you are
    riding a bike or running a troubled agency.
        I will now turn to my ranking member, Senator Mikulski for
    her statement and comments.

                    STATEMENT OF SENATOR BARBARA A. MIKULSKI

        Senator Mikulski. Thank you very much, Mr. Chairman.
        And I want to welcome the National Service Chief Executive,
    Senator Harris Wofford and, of course, the Inspector General,
    Ms. Luise Jordan, to our first panel.
        I am very proud of the role that I played in helping to
    create National Service, the original authorizing framework.
    And I would hope in the next session of Congress, we could
    review the authorizing framework and really bring it in
    alignment with really the evolution and lessons learned from
    the more, now, than 6 years of the existence of National
    Service, because I think we all agree on both sides of the
    aisle that volunteerism is one of the best aspects of the
    United States of America.
        And volunteerism is the backbone of our communities,
    working from seniors to community cleanups to helping your
    children get ready to learn.
        The whole idea behind National Service was to link our
    values to public policy and to provide young Americans with an
    opportunity of doing community service and earning a voucher to
    reduce their student debt.
        In my own home town of Baltimore, college tuition is
    escalating, where at Johns Hopkins the tuition next year will
    be $33,000. Not everybody can get into Hopkins either because
    of SAT scores, or finances. But I would hope getting into the
    college of your choice would be based on your SAT scores and
    your dream, and not on your family's wallet. And this is a tool
    that we hope would be able to help with student debt.
        We also wanted to link responsibility to opportunity. I am
    a firm believer that for every opportunity, there should be an
    obligation. And this is what we were going to promote.
        So we look forward to hearing the results of now more than
    5 years of the existence of the Corporation for National
    Service, on what it has meant to communities and what it meant
    to the volunteers who participated and the way they have either
    utilized the student voucher to go on, if they are the first
    one in their family to go to college; or to reduce student debt
    so they could either go on to volunteerism, or even careerism,
    non-profit organizations.
        We also want to look at kind of the new innovations that
    have developed with the new economy. I want to be hearing from
    the--from Senator Wofford really about his relationships with
    the private sector, not only the wonderful things I know about
    the cooperation with General Colin Powell, but also the private
    sector in terms of the high-tech crowd, what--Steve Case's
    Power Up and other things that you have been doing, and then to
    discuss with him the idea of an E-Corps that I am advocating to
    help boys and girls cross the digital divide.
        I am not talking about E-Corps volunteers being a
    substitute for teachers or a substitute for paid local
    government staff and programs. But one of the things that we
    have heard about, and clear, is that--two things: One, there is
    a work force shortage in America, but there is really a skill
    shortage. We have zip codes of prosperity, and yet high zip
    codes of unemployment.
        If we could help our boys and girls learn the tools of the
    new economy and learn--and have their parents learn the tools
    of the new economy, they could literally be able to leapfrog
    out of poverty.
        My E-Corps idea would be for the AmeriCorps volunteers to
    teach the teachers. Very often, our teachers have not had the
    technological training in order for them to make highest and
    best use of the technology we want to bring to the classroom.
        So after the volunteers leave, we want to have in place
    teachers who have benefitted from their youth, their enthusiasm
    and their technical know-how, so they can keep it going in the
    classroom long after the volunteers leave. It is the old thing
    about let us--if we teach the teachers, then we have taught the
    children forever.
        We will also be talking today about the issues around
    financial management; and we will be happy to hear from Anthony
    Musick, who was confirmed in November, what he found and some
    of the management issues, many of which have been raised by
    Senator Bond.
        I will talk about the Chemical Safety Board and CDFI when
    those very able people come to the table. But for now, I am
    ready to listen to Senator Wofford, to move the hearing on.
        Senator Bond. Thank you very much, Senator Mikulski. I am
    most interested in your E-Corps idea. Sometime when we have
    more time and are not on the record, I will tell you about the
    problems I have confronted as an old dog trying to learn the
    new tricks of computers and E-commerce, but not where it is
    going to be on the public record. [Laughter.]
        Senator Mikulski. Well, getting booted has a whole new
    meaning, does it not?
        Senator Bond. I do not even understand that. Senator
    Wofford.
        Senator Wofford. Me, too, Mr. Chairman, with my problems on
    the computer. I need some of those teachers to help me. Thank
    you very much, Mr. Chairman and Senator Mikulski.
        Mr. Chairman, if my remarks do not respond to all of your
    suggestions, we--and we do not have time today, but we want to
    respond to your----

                          STATEMENT OF HARRIS WOFFORD

        Senator Bond. We will have--we will raise some of the
    issues in questions and answers and also give you an
    opportunity to respond in writing. We will keep the record
    open, making your full statement a part of the record, and
    asking you to summarize.
        Senator Wofford. Thank you.
        I would like to introduce Wendy Zenker, the Corporation's
    Chief Operating Officer and Tony Musick, our Chief Financial
    Officer.
        Let me start by thanking the committee for your support
    over the past years. The National Service would not be where it
    is today without your help.
        Four and a half years ago when the President asked me to
    head the Corporation, he gave me a very specific charge: To
    make National Service a non-partisan enterprise in which all
    Americans take pride, like the Peace Corps and the Armed
    Forces. Even before I was confirmed, I was confronted with the
    second challenge, to strengthen management practices at the
    Corporation. These two imperatives have been my focus, and I
    will report briefly on both.
        Under the guidance of your committee, the Corporation
    developed a detailed action plan to set our course on
    management improvements. We report regularly to the committee
    on this plan, so you have seen the progress we have made.
        We now have a strong financial management team that has
    brought rigor and discipline to our business operations. Since
    our meeting last year, we have added an exceptionally gifted
    chief financial officer, Tony Musick, as well as a deputy CFO
    and a chief information officer.
        Mr. Chairman, I want to thank you especially for your help
    in securing Tony's confirmation last fall. It was down to the
    wire, and you made sure that Tony was confirmed before Congress
    recessed, and it has made a great difference for us.

                              FINANCIAL MANAGEMENT

        We have also made great improvements in our systems,
    including bringing critical new systems online. We have
    installed and are using a new core financial management system
    that dramatically improves the Corporation's financial
    accountability.
        All documents in the National Service Trust have been
    digitally imaged and filed, making it easy, fast and accurate
    to retrieve records.
        AmeriCorps grantees are now submitting information on
    enrollment, service hours and term completion through a secure
    web-based system. We have worked extremely hard, taken on big
    challenges and made major progress.

                             FISCAL YEAR 1999 AUDIT

        The Inspector General's recently released audit report for
    fiscal year 1999 reflects some of this progress. The number of
    material weaknesses, as you pointed out, is reduced from eight
    to five. And the auditor issued a clean opinion on the
    Corporation's statement of financial position. And we still
    have much to do.
        As this is the last annual audit during my tenure at the
    Corporation, I wish we had made it the final mile to full
    auditability. The Inspector General wrote that reducing the
    number of material weaknesses and implementing the new
    accounting system indicate that the Corporation continues to
    make progress toward producing auditable financial reports.
        So while the outcome of the audit is not all that we had
    worked to achieve, it is now apparent that our goal of full
    auditability is within sight.
        We will continue to focus our attention, resources and
    energy to complete this job. And we are requesting an increase
    in program administration funds to support that effort.
        On the program front, National Service is stronger, more
    vital and more effective. That is why I am pleased to present
    the President's request to expand the opportunities for
    Americans to engage in service because it works, is working,
    and is recognized around the country as meeting critical needs
    of our communities and of our young people.

                            LEARN AND SERVE AMERICA

        Through Learn and Serve America, young people in school are
    being challenged to take personal responsibility for the needs
    of their communities. Service-Learning is taking root in
    schools throughout the country. The evaluation shows that
    students who participate in Service-Learning improve their
    academic performance, develop problem-solving skills, and learn
    the habits of good citizenship.

                                   AMERICORPS

        In AmeriCorps over the past 5 years, communities across the
    country have experienced the power and the value of more than
    150,000 AmeriCorps members getting things done, important
    things that the communities need.
        The 5-year evaluation of AmeriCorps conducted by Aguirre
    International concluded that AmeriCorps prepares young
    Americans for the future, strengthens communities and helps
    build the civic sector by providing people-power to non-profit
    organizations.
        We have worked to focus AmeriCorps and all of National
    Service on tackling big problems and achieving important goals.
    Three years ago, the Congress and the President agreed that the
    country should make literacy a top priority, which I know is a
    special interest of yours, Mr. Chairman.
        AmeriCorps and our other service programs have taken this
    charge to heart. In fiscal year 2000, we will meet and exceed
    the committee's direction to devote at least $40 million to
    literacy projects.

                                 DIGITAL DIVIDE

        Similarly, taking Senator Mikulski's lead, AmeriCorps
    members will be on the front lines of closing the digital
    divide. New technologies have brought our country to a critical
    juncture. Either computers and the Internet will be a great
    instrument of new opportunity, or they will create an even
    great chasm between the haves and have-nots in our society.
        AmeriCorps and National Service will be powerful tools to
    help transform the digital divide we see today into the digital
    empowerment we seek.
        AmeriCorps has supported several successful technology
    projects in the past with private sector partners, and now
    Senator Mikulski has proposed this new E-Corps within
    AmeriCorps. The President and Senator Mikulski announced just
    last week that AmeriCorps will make a start on E-Corps right
    away, and we look forward to working with the committee to make
    E-Corps a powerful reality.

                               CLOSING STATEMENT

        Senator Bond and Senator Mikulski, this is the fifth and
    the last time that I will appear before this committee. I want
    to express my special thanks to you. The health of the
    Corporation and the strength of National Service have been
    greatly improved by the personal interest you and your staff
    have taken.
        National Service is challenging citizens, especially young
    people, to take responsibility for something greater than their
    own self-interest, to become new patriots of the home front.
        I believe more than ever today that National Service is at
    the vital center, not on any ideological spectrum, but at the
    core of what we need to do to make the promise of America a
    reality for all Americans.
        Thank you.
        [The statement follows:]

                      PREPARED STATEMENT OF HARRIS WOFFORD

                                  INTRODUCTION
        Mr. Chairman, Ranking Member Mikulski, and members of the
    Subcommittee, I appreciate this opportunity to present to you the
    Administration's fiscal year 2001 budget request for the Corporation
    for National Service and the national service programs that you fund:
    AmeriCorps, including the National Civilian Community Corps, and the
    service-learning program for students--Learn and Serve America. These
    programs have helped to reinvigorate the long American tradition of
    service to community.
        AmeriCorps members continue to provide valuable and important
    service to our country. This past year we celebrated those
    accomplishments on the occasion of AmeriCorps' Fifth Anniversary. One
    way we marked the Anniversary was to select 21 All AmeriCorps Award
    winners--AmeriCorps members whose exemplary service received special
    recognition at a White House ceremony. They were introduced and saluted
    by Sargent Shriver, General Colin Powell, Governor Michael Leavitt,
    Coretta Scott King, and President Clinton.
        In at least 44 states and the District of Columbia, AmeriCorps
    members, state and local officials, and friends marked the Fifth
    Anniversary with Kick-Off and Swearing-In ceremonies. The Anniversary
    was planned in conjunction with Make A Difference Day, the nation's
    largest service day, in which thousands of AmeriCorps members and
    students in service-learning projects participated.
        Mr. Chairman, five years ago when the legislation establishing the
    Corporation was passed, there were many questions: Would the
    combination of eight different federally-supported service programs
    work? The new Corporation for National Service, as you know, combined
    three long-serving senior service programs--Foster Grandparents, Senior
    Corps, and the Retired and Senior Volunteer program (RSVP)--with the
    Volunteers in Service to America (VISTA), the first domestic Peace
    Corps, now 35 years old; the service-learning program and the grant
    programs for youth service of the Commission on National Service,
    authorized by the National Service Act of 1990; the National Civilian
    Community Corps which was established by Congress in 1992; and on top
    of this Congress added the larger new national service program to be
    called AmeriCorps. The question was whether this combination would work
    to the benefit of American communities--and to the benefit of young and
    older Americans who want opportunities to serve their country.
        As to the new venture--AmeriCorps--the questions were also
    numerous: Would it be effective in getting important things done? Would
    AmeriCorps support--and not in any way undermine--the large and small
    non-profit institutions of the service sector and the volunteer spirit
    in our country? Would AmeriCorps' decentralized system, designed to
    rely on newly-created, governor-appointed state commissions to deliver
    service opportunities, work? And would the experience of giving back
    through service to their communities prove beneficial to young people
    in AmeriCorps, giving them marketable skills, assisting them with
    paying for college, and making them better citizens?
        Mr. Chairman, the work of the Corporation, and the work of now more
    than 150,000 AmeriCorps members, half a million senior citizens, and
    more than a million students in service-learning programs assisted by
    the Corporation has answered each of these questions with a strong Yes.
        I am attaching the statement of sixty nonprofit organizations
    comprising the National & Community Service Coalition, including the
    American Red Cross, Big Brothers/Big Sisters of America, the Catholic
    Network of Volunteer Service, the Girl Scouts of the USA, and the YMCA
    of the USA. This is what they say about the Corporation's service
    programs:

        ``[W]e have seen firsthand how the federal investment has spurred
    the growth of service opportunities and mobilized hundreds of thousands
    of school-aged children, young adults and senior citizens to tackle an
    array of our nation's educational, social and environmental needs. They
    have contributed to the safety and well being of our must vulnerable
    citizens, the improvement of reading skills among young children, the
    protection of our endangered natural resources, the construction and
    renovation of homes for low-income families, and the restoration of
    individual neighborhoods and communities across the country.
        ``Federal funds constitute a small, but strategic, portion of the
    total resources which support national service. Moreover, the vast
    majority of federal funds pass straight through to State Commissions
    which, in turn, award grants to locally-controlled programs on a
    competitive basis that emphasize both quality and cost effectiveness.
    Finally, the federal government's involvement in national service
    builds on the nation's well-established tradition of volunteerism and
    on decades of painstaking development by grass-roots service programs--
    both of which have long enjoyed nonpartisan support from elected
    officials at every level of government.
        ``It is important to note that the sheer reality of federal
    legislation and leadership has brought heightened visibility, as well
    as new state, local and private resources to the service movement.''
    [emphasis in original]

        These are not just generalities. The results, for example, in terms
    of the construction and renovation of homes for low-income families
    have been extraordinary. Habitat for Humanity reports that it has built
    1,372 Habitat houses as the result of AmeriCorps and counts over
    177,000 Habitat volunteers who have been supervised by AmeriCorps
    members. I attach the statement of Tom Jones of Habitat for Humanity
    given recently at a congressional briefing. I also attach the summary
    of an independent study by Aguirre International on the cost
    effectiveness of AmeriCorps service, its benefits to communities, and
    the personal gains for members resulting from AmeriCorps service.
        Mr. Chairman, AmeriCorps has affirmed what we already knew--that
    the answer to America's biggest problems lies in the energy, idealism,
    and personal responsibility of Americans.

                             BUDGET REQUEST SUMMARY
        The total fiscal year 2001 budget request for the Corporation's
    programs in this Subcommittee's jurisdiction is $533.7 million, an
    increase of $100.6 million above fiscal year 2000. This increase will
    continue the Corporation's progress toward reaching the President's
    goal of having 100,000 new AmeriCorps members by the year 2004. This
    budget request will support 62,000 AmeriCorps members in fiscal year
    2001, including 1,100 National Civilian Community Corps (NCCC) members.
    The request includes a $79.6 million contribution to the National
    Service Trust to provide for the educational awards to AmeriCorps
    members upon completion of their service. The Office of the Inspector
    General is requesting a separate appropriation of $5 million to support
    the functions of that organization, a $1 million increase over fiscal
    year 2000.
        The request also includes $5 million to establish an important new
    effort--the AmeriCorps Reserves program. This pilot program will be
    modeled on the military reserves: former AmeriCorps members would serve
    in the Reserve Corps on weekends and/or after work or on vacations, and
    would work on critical national problems such as the need for rapid
    response to natural disasters. The Reserves program will enable former
    AmeriCorps members to re-engage in continuing special service to their
    communities, particularly in times of crisis. The Reserves will build
    on the AmeriCorps Continuing Service initiative, which connects
    AmeriCorps alumni to community service projects through a partnership
    with national non-profit organizations such as the American Red Cross,
    the Boys and Girls Club, Big Brothers/Big Sisters, Habitat for
    Humanity, the National Mentoring Partnership, and the YMCA.
        The budget request also provides an $8 million increase for the
    Learn and Serve America program. The total request for that program is
    $51 million. This funding will continue the growth of service-learning
    for students at all grade levels and those in college. The $8 million
    increase will support two new service-learning initiatives: $5 million
    in grants for a new Community Coaches program and $3 million for Youth
    Empowerment Grants.
        The budget request would increase funding for Innovation,
    Demonstration and Assistance activities by $14 million to $42.5
    million. The Corporation uses these funds to provide technical
    assistance to grantees and service programs, to assist programs in
    enrolling participants with disabilities and accommodating their
    participation, and to support innovative demonstration service programs
    that may not be eligible under other Corporation programs. This funding
    supports a significant portion of the Corporation's literacy
    activities, including a major literacy initiative in the District of
    Columbia and a part of America Reads funding designated by Congress, as
    well as the AmeriCorps Promise Fellows program.
        As the members of the Subcommittee know, the Corporation for
    National Service has forged a very successful relationship with the
    Points of Light Foundation, an initiative established by President
    George Bush. The fiscal year 2001 budget request contains $7.5 million
    for the Points of Light Foundation to continue support at last year's
    level.
        The fiscal year 2001 budget request also contains an additional
    $7.5 million to support America's Promise: The Alliance for Youth, led
    by General Colin Powell. That effort was launched by Presidents
    Clinton, Bush, Carter, Ford, and Mrs. Reagan representing her husband,
    at the Presidents' Summit for America's Future in Philadelphia. This
    new funding will enable America's Promise to continue and expand the
    work for children and youth started by all the living Presidents at
    Philadelphia, along with 38 Governors, more than a hundred mayors, and
    several thousand national and community civic leaders and
    organizations.
        Like the Points of Light Foundation, America's Promise is a special
    agency for mobilizing community volunteering with the collaboration of
    the great organizations of the non-profit sector, large and small, of
    the business sector, and of government at all levels. Together, they
    are key parts of the system of community and national service.
        The Corporation is seeking $35.6 million for program
    administration. This includes $3.6 million in additional funding for
    the state commissions and $4.1 million in program administration
    funding to continue the high priority management information that are
    needed at the Corporation. The commissions are largely responsible for
    the selection and oversight of AmeriCorps programs and members. In
    addition, we are requesting $5 million for program evaluation.

         MANAGEMENT SYSTEMS IMPROVEMENT AND THE FISCAL YEAR 1999 AUDIT
        Mr. Chairman, the future success of national service, the
    Corporation, and its programs will depend upon the effective management
    of the resources dedicated to these purposes. Since my last appearance
    before this Subcommittee the Corporation has taken aggressive action to
    improve its overall management.
        We have given particular focus in the last year to remedying the
    material weaknesses in our financial management systems, as identified
    by the fiscal year 1998 audit. The Corporation developed an Action Plan
    not only to correct these weaknesses, but also to strengthen
    Corporation management generally, increase the use of technology, and
    improve our stewardship over Federal funds. The Action Plan is an
    effective tool for correcting problems and resolving issues, and
    reflects the Corporation's much improved general control environment.
        When first developed for fiscal year 1999, the Action Plan had 8
    Goals, 37 Objectives and 165 tasks. As the year progressed, we added
    additional tasks. As of March 21, 2000, we have completed 268 of 329
    planned tasks, or over 80 percent.
        The Corporation has made very substantial progress in critical
    management areas over the past 18 months. We have implemented new
    systems, successfully transitioned to the Year 2000 and brought on
    exceptionally talented people in key leadership positions at the
    Corporation. Specifically, the Corporation has--
      --implemented a new financial management system that offers on-line,
            real-time data for management of the Corporation's resources;
      --selected and confirmed an exceptionally well-qualified Chief
            Financial Officer, selected a Deputy Chief Financial Officer
            and a Chief Information Officer;
      --hired new staff with strong financial management qualifications;
      --within the National Service Trust, installed a new imaging system
            to electronically capture all of the historical Trust records
            and to digitally scan all new forms submitted to the Trust.
            This system has improved data reliability, addressed past audit
            issues, and reduced the labor needed for the management of the
            Trust;
      --implemented a new Web Based Reporting System for AmeriCorps
            grantees to enroll, monitor and certify AmeriCorps member
            service;
      --transitioned to the Year 2000 without mishap;
      --issued seventeen new policies that provide clear management
            guidance in areas such as procurement, audit resolution, debt
            collection, and network and computer security;
      --provided extensive training to staff to improve their skills and
            knowledge in areas such as procurement, grants management,
            grant monitoring, EEO compliance, finance, and appropriations
            law;
      --established and staffed Executive Offices in the program areas to
            improve administrative controls;
      --implemented a management control program;
      --strengthened the performance management system; and
      --increased oversight of grantees.
        These are considerable accomplishments the results of which are
    reflected in the recently released fiscal year 1999 audit. Mr.
    Chairman, as you know last year auditors from KPMG, under contract to
    the Corporation's Inspector General, gave an unqualified opinion on the
    Corporation's balance sheet, or statement of financial position for
    fiscal year 1998, with disclaimers on the statements of operations and
    cash flow. They also identified eight material weaknesses in the
    Corporation's financial and other management systems.
        This year, the audit found that the material weaknesses had been
    reduced from eight to five and again, the Corporation received an
    unqualified opinion on its balance sheet, and disclaimers on the other
    two related statements. In submitting the new audit the Inspector
    General stated that, ``These improvements, and the Corporation's new
    accounting system implemented during the final months of fiscal year
    1999, indicate that the Corporation continues to make progress toward
    producing auditable financial reports.'' The Inspector General also
    pointed out that ``the Corporation has yet to fully correct all its
    financial management deficiencies.''
        We had hoped to receive unqualified opinions on all or our
    statements. However, the transition to the brand new financial
    management system, as the auditors noted, was arduous. We succeeded,
    before the end of the fiscal year, in making the new system fully
    operational, but for most of the year we had to draw information from
    the long-established, but very inadequate former system. We will reap
    the great benefits of the new system in fiscal year 2000 and beyond.
    Meanwhile, the decrease in material weaknesses shows that our
    management improvements are working. We maintained the same opinion on
    our statements in a year when we implemented a brand new financial
    management system. This was a major effort for the Corporation and one
    that will reap benefits in fiscal year 2000 and beyond.
        The major initiatives that have brought about this improvement are
    described below.
    Implementation of the New Financial Management System
        The Corporation implemented the new financial management system in
    September of 1999. The ``Momentum'' system is Year 2000 compliant,
    conforms to Federal system standards, and uses the federal government's
    standard general ledger. The system provides real-time, on-line access
    to data and it has front-end edit checks. Funds control is an integral
    part of the new system. Data integrity is much improved, and
    Corporation staff has access to critical management and reporting
    information.
        The system implementation was difficult for us, as it has been for
    other federal agencies. The Corporation was moving from a non-standard
    to a standard system. Configuring the new system and converting data
    from the old system to the new system was a significant effort. We
    recruited new staff in Accounting with the skills needed to accomplish
    this goal, who worked long and hard hours to successfully implement the
    system without any break in meeting our financial obligations to
    grantees or participants.
    Management Team in Place
        The Corporation has taken its management responsibilities
    seriously. Wendy Zenker, our Chief Operating Officer, and the rest of
    the management team have worked diligently to improve the Corporation's
    operations.
        The President nominated Anthony Musick as Chief Financial Officer
    in July and the Senate confirmed him in November of last year. His
    expertise and experience have provided important leadership in our
    determined efforts to improve financial management systems.
        In addition, we recently named William Anderson as Deputy Chief
    Financial Officer. Mr. Anderson served in the Corporation's Inspector
    General's Office as the Assistant Inspector General for auditing. His
    experience will be a great asset to the Corporation. We have also hired
    additional staff in accounting, including an individual responsible for
    producing the Corporation's financial statements who reports directly
    to the CFO and Deputy CFO.
        We also recently appointed David Spevacek as the Corporation's
    Chief Information Officer, another key position in our management team.
    He had previously served as our Director of Budget and the National
    Service Trust and has wide knowledge of the Corporation.
    Management Controls
        We have issued a number of new policies and procedures to make the
    Corporation operate more effectively in areas ranging from procurement,
    debt collection, audit resolution, property management, computer
    security, to Internet use. Seventeen policies have been issued. These
    administrative policies complement the programmatic policies that are
    already in place.
        As we have developed our policies and procedures we have paid
    particular attention to our audit resolution processes. The Corporation
    maintains detailed reports on open and closed audit recommendations. As
    of March 31, 2000, the Corporation had completed final action on 181 of
    the 212 financial audit recommendations made by the Inspector General.
        The Corporation has developed State Administrative Standards to
    guide state commissions in the administration of their grants. The
    Standards will enable the Corporation to apply consistent criteria to
    the assessment of state commission operations and to make well-informed
    decisions about funding. The Standards will enable commissions to
    pinpoint and diagnose their technical assistance needs. Once needs are
    clearly defined, commissions will improve their foundational systems,
    creating reliable infrastructure for the future of national service.
    Technology
        We have made improvements to the National Service Trust and have
    provided Internet access to each employee's desktop. Our transition to
    the year 2000 occurred smoothly for our widely dispersed field and
    headquarters staff.
        Significant technology initiatives that were accomplished in fiscal
    year 1999 include the installation of an imaging system in the National
    Service Trust and the implementation of a web-based reporting system to
    record AmeriCorps member service. All existing Trust file documents
    have been captured electronically, and all official forms (enrollment,
    end-of-term, and other forms) are being imaged and retrieved
    electronically. This greatly improves the Corporation's ability to get
    access to historical records and speeds up the processing of newly
    received documentation. The system allows for the electronic storage
    and retrieval of almost one million pieces of paper filed with the
    Trust since the beginning of AmeriCorps.
        The Web-Based Reporting System (WBRS) for AmeriCorps member service
    was pilot tested in 10 states in 1999 and is now being implemented in
    all 50 States, 32 National Direct grantees, and 15 Education Awards
    programs. State Commissions and National Direct grantees are using this
    secure Internet server to record enrollments, member hours served, and
    education awards earned. WBRS is greatly improving the quality of the
    data received by the Corporation and the speed at which the Corporation
    can process that data.
        Mr. Chairman, these changes did not happen overnight. There were no
    quick fixes to longstanding problems, many going back to the systems
    used for years by the Corporation predecessor agencies before the
    Corporation was created. We have been working to develop lasting
    solutions to the financial and management problems the Corporation has
    faced. Our efforts to implement systemic improvements are recognized by
    the fact that the auditors' financial statement report reduced the
    number of material weaknesses from eight to five.
        The Corporation is committed to continuing these improvements. The
    President's Budget requests $35.6 million for the Corporation's program
    administration in fiscal year 2001, an additional $7.7 million over
    fiscal year 2000. Of this increase, $4.1 million will go to the
    Corporation's management. These funds will continue the critical
    financial management and other management improvements needed to make
    the Corporation operate in a more efficient and effective manner. The
    additional funds will support system development projects, such as the
    grants system; other technology improvements, such as increased use of
    the web; and critical staff needs to support the growing Corporation
    workload.
        The increase includes $3.6 million for State Commission
    administrative requirements. Reviews and other reports, such as pre-
    audit surveys now being performed by the Corporation's Inspector
    General, indicate that State Commissions require additional support to
    fully perform the responsibilities entrusted to them under the National
    and Community Service Act.
    Cutting Per Member Costs
        In addition to the management improvements, the General Accounting
    Office has found that pursuant to a 1996 agreement with Congress, the
    Corporation has reduced its average budgeted cost per member to no more
    than $15,000 in the AmeriCorps*State/National program. We set ceilings
    on average budgeted costs for grants to state commissions and national
    non-profits, as well as implemented other cost cutting measures such as
    raising the program matching fund requirements for grantees. In
    addition, we expanded the Education Awards program under which the
    Corporation provides only the AmeriCorps education award and a minimal
    amount (less than $500) of program support. The local nonprofits cover
    any other costs including living allowances. The Education Awards
    program is a major way of reducing the Corporation's costs while
    increasing support from the private and independent sectors.

              AMERICORPS PROGRAMS FISCAL YEAR 2001 BUDGET REQUESTS
    AmeriCorps*State/National
        Last October, AmeriCorps celebrated its Fifth Anniversary. Since
    the beginning of the program, more than 150,000 people have joined
    AmeriCorps. For fiscal year 2001, the Administration is requesting a
    total of $284 million for AmeriCorps grants. Of this total, $233
    million will fund grants to state commissions under the
    AmeriCorps*State program and $51 million will go to our National Direct
    grantees. The overall request will support a total of 62,000 AmeriCorps
    members, 12,000 more than in fiscal year 2000, and will keep AmeriCorps
    on track to reach 100,000 members annually by the year 2004.
        Under the AmeriCorps*State grant program, AmeriCorps members
    participate in local service programs operated by nonprofit agencies,
    local and state government entities, Indian tribes, institutions of
    higher education, local school and police districts, and partnerships
    among any of the above. Member recruitment, selection, and placement
    are the responsibility of the grantees. Members serving with these
    grantees must help communities meet their educational, public safety,
    environmental, and other human needs. Governor-appointed state
    commissions select the local non-profits and community organizations
    that will provide service to communities with the AmeriCorps members.
    The $233 million request is a $44 million increase over fiscal year
    2000.
        AmeriCorps*National Direct program grantees are national nonprofit
    service organizations that operate in a number of states such as
    Habitat for Humanity, the American Red Cross, and the Boys and Girls
    Clubs. The Corporation has 39 National Direct grantees.
        The National Direct program is an efficient and effective use of
    Corporation funding. These national and multi-state organizations have
    expertise and successful track records in administering service
    initiatives. They also have great success in meeting one of the goals
    of national service--increasing the spirit of volunteering in America.
    For example, AmeriCorps members with Habitat for Humanity supervised
    over 177,000 volunteers. We attach a 1999 article by Habitat's founder,
    Millard Fuller, ``Habitat, AmeriCorps good partners,'' in which he
    states:

        ``This year, more than 500 AmeriCorps members are wielding hammers
    and recruiting more volunteers for Habitat for Humanity. . .
        ``That's where AmeriCorps has played such a vital role. AmeriCorps
    members help train local people in basic construction skills. They are
    there, day in and day out, supervising and directing the part-time
    efforts of others.
        ``The continuity, leadership and knowledge that AmeriCorps members
    provide allow us to increase both the number of volunteers we are able
    to mobilize effectively and the overall productivity of our efforts.''

        Despite the service opportunities these national and multi-state
    grantees provide, their expertise in managing large-scale service
    projects, and the advantages of using such non-profit organizations to
    fulfill the goals of AmeriCorps, Congress has capped the National
    Direct program at $40 million for several years. In fiscal year 2000,
    Congress appropriated $45 million for the National Direct program of
    which $5 million was intended to support a teen anti-violence
    initiative of the Girl Scouts of America.
        For fiscal year 2001 we are requesting $51 million for the National
    Direct program. The modest increase in funding for this element of
    AmeriCorps will produce real benefits by increasing the service
    opportunities these national non-profits will create. We hope the
    Subcommittee will agree to lift the cap on the National Direct program.
    AmeriCorps*Education Awards Program
        In accordance with an agreement with Members of Congress to reduce
    the Corporation's average budgeted cost-per-member, and to increase the
    number of AmeriCorps members, the Corporation established the Education
    Awards Program three years ago. This initiative provides education
    awards to national, state, and local community service organizations
    that can support most or all of the costs associated with AmeriCorps
    members from sources other than the Corporation. AmeriCorps members
    serving in these projects are eligible to receive education awards, but
    do not receive federally-supported living allowances paid by the
    Corporation. In fiscal year 2000, the Corporation anticipates
    allocating approximately 13,000 education awards under this program.
    Under the President's budget proposal, this allocation will be expanded
    in fiscal year 2001 to about 15,000.
        The Education Awards program has proven to be attractive to
    grantees and relatively uncomplicated to administer. During the first
    three years of the Education Awards program, AmeriCorps approved more
    than 175 new grants, creating opportunities for approximately 35,000
    new AmeriCorps members. The program has been one of the Corporation's
    most successful innovations, extending the number of organizations
    participating in AmeriCorps and increasing the number of AmeriCorps
    members, while at the same time lowering the Corporation's per member
    costs.
    AmeriCorps*NCCC
        The National Civilian Community Corps (NCCC) is unique among the
    various streams of AmeriCorps service. It is a 10-month residential
    program run directly by the Corporation. Unlike the State and National
    Direct grant programs, the Corporation administers all aspects of NCCC.
    NCCC members receive a $4,000 annual living allowance, room and board,
    and they receive an education award upon the successful completion of
    their service.
        The NCCC was approved by Congress and President Bush in 1992,
    before AmeriCorps. The key sponsors included Senators Boren, Dole,
    Warner, McCain, Mikulski, Spector, Seymour, Simon, Nunn, and Wofford.
    The following year, the National and Community Service Act of 1993
    placed the administration of the NCCC in the Corporation for National
    Service.
        NCCC members are housed at five campuses serving regions across the
    United States. In three locations, the campuses occupy closed or
    downsized military bases: the Southeast Region at the Charleston Naval
    Training Center, Charleston, South Carolina; the Central Region at
    Lowry Airforce Base, Denver; and the Western Region at the San Diego
    Naval Training Center. The campus in the Northeast Region is located at
    a medical facility for veterans in Perry Point, Maryland, and the
    Capital Region campus is at a municipal facility in Southeast
    Washington, D.C.
        AmeriCorps*NCCC members serve in local communities and, in the
    tradition of the Civilian Conservation Corps of the 1930s, are
    frequently deployed on ``spikes'' to perform critical service projects.
    They tutor children, rehabilitate public schools and public housing in
    urban areas, help Habitat for Humanity organize ``blitz builds,'' and
    provide assistance in daily living activities to low-income residents
    at nursing homes.
        All NCCC members receive special training in disaster relief and
    are rapidly deployed to assist the Federal Emergency Management Agency
    and the Red Cross in national disasters. Members have served in 45
    disasters since 1994, giving direct help to victims and organizing
    community volunteers to help. In the 1998-1999 program year, NCCC
    members assisted 83,000 people in disaster areas; served 40,500 meals
    to disaster victims; and distributed 780,000 pounds of clothing to
    disaster victims. They played a crucial role in providing relief to the
    flood victims in North Carolina.
        Funding for NCCC was originally set in 1994 at $30 million
    (including $20 million in an earmarked Department of Defense
    appropriation). The 1995 appropriation was reduced in a rescission from
    $26 million to $18 million, and funding has been held at that level
    ever since. This funding cap has limited the number of people who can
    join NCCC. Positions in the NCCC are in high demand, but the
    opportunities are restricted by this out-of-date ceiling. Last year,
    the NCCC received 3,430 applications for some 850 slots.
        Further, because of the limit on funding, the NCCC will only be
    able to provide approximately one half of the teams sought by the Boys
    & Girls Clubs for major club renovation efforts this year. FEMA and the
    Red Cross sought four teams for every one that could be provided for
    the relief of flood victims in North Carolina. Similar requests have
    been made for other natural disasters. Our campuses also report that
    they have had to curtail projects requested by local educational
    institutions, food banks, environmental organizations, state and local
    parks, and other non-profit organizations. As a result of the $18
    million cap, fewer young people have the chance to serve in NCCC and
    fewer communities are being served.
        To allow NCCC to meet the demand for its teams, the fiscal year
    2001 budget requests $3 million in additional funding for this program.
    That will support 1,100 members, an increase of 230 NCCC members
    nationwide.
    Special AmeriCorps Initiatives
        AmeriCorps Promise Fellows.--This is our major joint initiative
    with General Colin Powell's America's Promise--the Alliance for Youth,
    the national mobilization for youth launched by Presidents Clinton,
    Bush, Carter, Ford, and Mrs. Reagan representing her husband, at the
    Presidents' Summit for America's Future. It is led by General Colin
    Powell and supported by Governors, Mayors, and coalitions of non-
    profits and civic leaders across the country. The five promises for
    youth declared at the Presidents' summit are: (1) an ongoing
    relationship with a caring adult--parent, mentor, tutor or coach; (2) a
    safe place with structured activities during non-school hours; (3) a
    healthy start; (4) an effective education that yields marketable
    skills; and (5) an opportunity to give back to their communities
    through service.
        AmeriCorps Promise Fellows are a special leadership cadre of
    talented AmeriCorps members dedicated to helping communities fulfill
    these five promises. They do not serve with the national America's
    Promise organization, but serve with and are selected and administered
    by national, state, and local non-profit organizations that are
    developing and coordinating large-scale activities intended to support
    children and youth. There will be more than 500 Promise Fellows
    nationwide in the 1999-2000 program year. In an August 9, 1999 op-ed
    piece in the Jackson, Miss. Clarion-Ledger, General Powell said that
    AmeriCorps Promise Fellows ``are an investment in young people, for the
    purpose of helping other young people, that promises to pay unlimited
    returns to our nation in the century ahead.''
        Indian Country Initiative.--In fiscal year 2001, the Corporation
    will replicate successful residential service program models in Indian
    Country by establishing up to three residential service corps on Indian
    reservations. Designed and operated by Indian tribes, these programs
    will provide up to 150 Native youth ages 18-25 with the opportunity to
    serve each year.

                            LEARN AND SERVE AMERICA
        Learn and Serve America supports service-learning programs in
    schools and community organizations that engage youth in meeting
    education, public safety, environmental, and other human needs. The
    goal of Learn and Serve America is to make service an integral part of
    the education and life experiences of young people, thereby building a
    lifelong ethic of responsibility and service. Learn and Serve America
    programs integrate community service with academic curriculum or with
    out-of-school time and extracurricular learning opportunities.
        Learn and Serve America makes grants to state government entities,
    Indian tribes, U.S. territories, and national nonprofit organizations.
    They in turn make subgrants for local service-learning projects. In
    addition, Learn and Serve America provides grants directly to
    institutions of higher education. State education agencies receive
    funds from Learn and Serve through a population-based formula.
    Nonprofit organizations, State Commissions, Indian tribes, U.S.
    territories, and institutions of higher education receive funds through
    a national competitive process, which includes set-aside funding for
    Indian tribes. All school and community-based grantees must demonstrate
    an increasing level of matching funds to qualify for continued federal
    support. Higher education grantees must provide a dollar-for-dollar
    match from the first day of the grant.
        Funding for Learn and Serve has been held steady at $43 million
    since fiscal year 1996. In the intervening years, service-learning has
    gained stature and importance in education at the elementary, secondary
    and post-secondary levels because of its demonstrated positive impact
    on academic achievement, school engagement, civic responsibility, and
    understanding of racial diversity. I attach a summary of the findings
    of numerous studies that show that service-learning has a positive
    affect on students' engagement in school and helps students acquire
    academic skills and knowledge. The research finds that students who
    participate in service-learning are less likely to engage in risk
    behaviors and that service-learning benefits communities.
    Community Coaches and Youth Empowerment Grants
        For fiscal year 2001 the Corporation is requesting an $8 million
    increase over the fiscal year 2000 funding level for the Learn and
    Serve America program. This modest increase will fund two new
    investments in community youth service: $5 million for the Community
    Coaches program and $3 million for Youth Empowerment grants.
        The funds sought in this budget request are to enable a Community
    Coach to serve in and estimated 1,000 schools across the country.
    Community Coaches will be teachers, counselors, and others, including
    in some cases AmeriCorps members, who can help students make the most
    of their service to the community and can act as a vital link between
    the school, the business sector, and the local community. These
    Community Coaches will help teachers and other school personnel to
    identify and to use the resources of their surrounding community to
    engage children in community service connected to their schoolwork.
    They will also work with individuals, organizations, and businesses in
    the community to encourage them to offer resources to the schools and
    to see the schools and students themselves as community resources. The
    Community Coaches initiative is based upon model programs pioneered by
    Do Something, a national non-profit organization for youth leadership.
        The Youth Empowerment Grants will be competitive fellowships that
    reward young social entrepreneurs dedicated to solving problems in
    their communities. The Corporation for National Service will make grant
    funds available to community-based organizations that sponsor young
    people who have designed and developed their own projects. These will
    include efforts to prevent youth violence, programs to improve civic
    participation, and initiatives that engage older students in tutoring
    and mentoring.
    The President's Student Service Scholarships
        The President's Student Service Scholarships for high school
    students who have given outstanding community service are now in their
    third year. Scholarships have been awarded to over 7,000 young people
    to date, but many more students are eligible and deserving. In fiscal
    year 2000, each high school in the country is being offered an
    opportunity to select a junior and a senior to receive the $1,000
    scholarships. Through the National Service Trust, the Corporation for
    National Service provides $500, which is matched with $500 from local
    scholarship sponsors such as civic organizations. Sponsoring
    organizations include Boys and Girl Clubs, Rotary, Kiwanis, local
    PTA's, faith-based organizations, and local businesses. For fiscal year
    2001, we propose using $7.5 million for up to 15,000 scholarships.

                        SPECIAL INITIATIVES AND PROGRAMS
    Literacy Programs
        We are grateful to you, Mr. Chairman, for your support of the
    Corporation's literacy efforts and your leadership in Congress on this
    issue. In its Report on the fiscal year 2000 budget, the Senate asked
    the Corporation to provide $40 million in assistance to literacy
    initiatives. The Corporation is currently in the process of awarding
    grants with fiscal year 2000 appropriations for the 2000-2001 program
    year. We will report on the use of these funds when the grant award
    process has been completed.
        While the grant award process for the 2000-2001 program year has
    not been completed, based on our prior experience I fully expect the
    Corporation to exceed $40 million in literacy assistance. In November
    1999, Abt Associates, under contract to the Corporation, completed an
    independent descriptive study of AmeriCorps Literacy Programs: State
    and National. The objectives of the study were to: describe
    AmeriCorps*State/National programs that conduct educational activities
    in terms of their programmatic structures and the literacy and tutoring
    activities they have implemented; identify programs using effective
    reading/literacy instructional models likely to improve children's
    reading abilities; and describe the target population receiving
    services.
        The study documented a substantial level of literacy activity. In
    1998-99, AmeriCorps*State/National programs engaged more than 10,000
    members, involving 40,000 volunteers, to provide literacy services to
    over 260,000 individuals, 90 percent of whom are children. The
    following details were noted concerning AmeriCorps*State/National
    programs:
      --Slightly more than half of all programs (54 percent) are involved
            in education.
      --Thirty-seven percent of all programs provide direct tutoring in
            reading.
      --Forty-two percent of all programs provide literacy services.
      --Most AmeriCorps*State/National literacy programs are sponsored by
            community-based organizations (61 percent) or educational
            institutions (29 percent).
      --Almost three-quarters of AmeriCorps*State/National literacy
            programs have been operating for two or more years. Almost half
            have received State/National grants since AmeriCorps' first
            year of implementation, 1994-95.
        By extrapolation from these data, programs providing literacy
    services received more than $97 million from the AmeriCorps State/
    National program in 1998-99, although some of these projects provided
    more than literacy services. This level of support far exceeds the
    requested level sought in the Senate Report.
        The Abt Associates Study also contained findings relevant to best
    practices in literacy programs:
      --Almost all literacy programs provide some training to members and
            volunteers in literacy instruction and in working with
            children. Typically, about 16 hours of training are provided
            before and 20 hours are provided during the delivery of
            literacy services. Training is provided by a combination of
            staff from the sponsoring agency, the AmeriCorps program, the
            school district, and/or outside experts.
      --Three-quarters of the programs conduct formal evaluations to assess
            the effectiveness of their literacy activities.
      --Over half of the tutoring programs report that tutors conduct
            decoding activities with students (i.e., activities that help
            beginning readers develop sound-symbol correspondences).
      --Most of the tutoring programs incorporate some of the structural
            and instructional features perceived by educators and
            researchers as important for positive reading outcomes. The
            features reported most frequently include:
        --Coordination of tutoring activities with the classroom
                curriculum;
        --Adequate intensity of tutoring activities-meeting at least twice
                weekly for at least 1.5 hours/week; and
        --Provision of training to members and volunteer tutors before and
                during service delivery in two important content areas: (1)
                reading and tutoring children; and (2) child development.
      --Almost half of the tutoring programs use well-known, widely-used
            instructional models (e.g., Reading Recovery, Reading One-to-
            One, Success for All).
        Abt Associates is also conducting a study to measure the outcomes
    of these literacy and reading efforts. That survey should be completed
    in the fall. We have conducted studies of other education and literacy
    programs. First, a study of tutoring in 16 District of Columbia schools
    concluded that tutored students made significant gains on a number of
    measures in reading performance and demonstrated greater gains on
    standardized achievement tests than did non-tutored students. A second
    study of the Corporation's senior demonstration programs, which are not
    funded by this Subcommittee, found similar positive results in reading
    scores, with many students showing dramatic improvements.
        In addition, we have data on some successful outcomes in individual
    programs:
      --Washington Reading Corps.--In the first year of operation of this
            State of Washington initiative launched by Governor Locke, some
            20,000 students at 196 elementary schools statewide received
            425,000 hours of tutoring help from AmeriCorps members. The
            number of fourth-graders who met the state reading standard
            rose 11 percent at the schools with AmeriCorps tutors, compared
            to 6 percent statewide.
      --Greensboro Elementary School, Gadsden Co., Florida.--As part of the
            Gadsden Reads program, AmeriCorps members have worked with
            students identified as being behind their grade levels in
            reading by 1\1/2\ grade levels or more. Since the Spring of
            1997, 198 elementary students who have participated in the
            program on average are barely half a grade level behind norms.
            Students who have been with the program for its full two years
            have improved their reading an average of nearly four grade
            levels.
        In addition to these impressive findings, we have previously
    testified about the successes for the Reading One-to-One program
    participants in Texas. Researchers have found documented gains of 0.4
    to 0.7 grade equivalents above what students would have attained
    without tutoring, a significant improvement. The program uses college
    students, AmeriCorps members, and community residents to tutor more
    than 6,000 students in more than 70 schools across ten school districts
    in Texas.
        Mr. Chairman, we will continue to work with you on emphasizing the
    importance of literacy in America through our service programs.
    Digital Divide
        Another special initiative in which many Members of Congress have
    shown a keen interest is closing the digital divide. Senator Mikulski
    is our special mentor in this area. She is a leader in recognizing that
    like literacy, the digital divide between the haves and have-nots in
    technology means that many Americans are unable to use the nation's
    abundant information resources. We are delighted by Senator Mikulski's
    proposal for an ``E-Corps,'' an effort to bring the needed ``people-
    power'' of AmeriCorps members to close the digital divide.
        President Clinton recently announced a special ``down payment'' on
    the E-Corps that has two parts. AmeriCorps will hold a special
    competition for $10 million in grants for projects specifically
    designed to help spread technology access and skills to those who might
    not otherwise have opportunities. Learn and Serve America is also
    making $2.5 million in grant funds available for service-learning
    projects devoted to bridging the digital divide. This investment of
    existing resources is a step toward making Senator Mikulski's vision of
    an E-Corps a powerful reality.
        The private sector is also engaged in supporting the E-Corps
    initiative. The President also announced that the Yahoo!, the Internet
    portal, has pledged up to $1 million in on-line public service
    announcements concerning our efforts to bridge the digital divide and
    to help recruit AmeriCorps members to serve in technology-related
    projects.
        Several AmeriCorps programs are already directly involved in
    efforts to close the digital divide at the national and local levels.
    AmeriCorps members are wiring schools to the Internet, training
    teachers on how to use technology in the classroom, and providing one-
    on-one instruction to children and adult learners. Here are a few
    examples receiving funding through this Subcommittee:
      --Project FIRST.--Under this initiative of the Public Education
            Network, one of our National Direct Grantees, AmeriCorps
            members are refurbishing and installing computers and other
            components in schools. They are assisting educators, students
            and adult learners in using the technology. Project FIRST
            achieves its objectives through a partnership with IBM.
      --A STAR.--This program, located in Western Maryland, is using the
            world-wide-web to enhance after-school programming.
      --Lyndon State College, Vt..--AmeriCorps members operate resource
            centers that provide residents of rural Vermont with computer
            resources, educational material, and courses on adult literacy
            and parenting skills.
      --City Year, Cleveland.--In partnership with the West Side Community
            Computer Center and the Salvation Army Computer Center,
            AmeriCorps members are developing and implementing an out of
            school computer program curriculum for children in Kindergarten
            through Grade 5.
        The NCCC is working in schools, YMCAs, and Boys & Girls Clubs
    across the country performing a number of tasks in support of bridging
    the digital divide, and complimenting the PowerUp program. This
    includes assisting in the wiring and setup of sites for computer use,
    installing computer labs, teaching students and low income adults how
    to use computers, introducing computers into schools, familiarizing
    teachers with computers, and tutoring students in other subjects with
    computers.
        Most of the Corporation's streams of service are involved in
    efforts to bridge the digital divide. Outside of this Subcommittee,
    AmeriCorps*VISTA also has an outstanding group of national and local
    projects focusing on this issue including PowerUP. PowerUP is a
    partnership with America's Promise, AOL, the YMCA, Boys and Girls
    Clubs, and other organizations, that will deploy up to 400
    AmeriCorps*VISTA members in community technology centers around the
    country. AOL, Gateway, Sun Microsystems and other corporate partners
    have pledged more than $10 million in support to this effort.
    AmeriCorps*VISTA is funded through the Labor-HHS Subcommittee.
    Service for America's Veterans
        Many AmeriCorps members practice their patriotism on the home front
    by serving those men and women whose patriotism was demonstrated
    through service in the armed forces. Mr. Chairman, you have been
    recognized for your leadership on Veterans issues, particularly the
    needs of homeless veterans.
        One of the most important initiatives that the Corporation funds
    through our National Direct grant program is the U.S. Veterans program,
    formerly the Los Angeles Veterans Initiative. U.S. Vets has a $1.1
    million grant supporting the service of more than 100 AmeriCorps
    members, many of them formerly homeless veterans themselves, in three
    cities: Los Angeles, Houston, and Washington, D.C. U.S. Vets works in
    partnership with property developers and managers, and human service
    agencies assisting homeless veterans to become self-sufficient. The
    program has reached more than 10,400 homeless veterans and provided
    more than half of those with referrals to shelters, treatment centers,
    transitional housing, as well as other necessary services.
        In addition to U.S. Vets, the Navajo Nation Department of Navajo
    Veterans Affairs has 30 AmeriCorps members helping veterans and their
    families get access to quality care services. The members serve in five
    Veterans' Affairs offices across the Navajo nation, the largest
    reservation with territory in Utah, Arizona, and New Mexico.
        As you know Mr. Chairman, many of our veterans are homeless. U.S.
    Vets have found that more than half of the homeless people they serve
    are veterans. The Corporation has numerous programs that assist
    homeless people. Programs such as the Catholic Network of Volunteer
    Service, an Education Awards program with over 1,000 AmeriCorps
    members, serves tens of thousands of homeless people, along with the
    other service of the AmeriCorps members.
        Many local AmeriCorps programs and their members serve veterans in
    a wide range of ways, from more institutional settings such as working
    in VA hospitals or Veterans retirement homes, or in more informal ways
    such as serving senior citizens who are veterans. Many of the
    participants in our Senior Companion program, Foster Grandparents, and
    the Retired Seniors in Volunteer Program are veterans. The Corporation
    is currently reviewing grant applications for the 2000--2001 program
    year. We will report on the grants awarded to veterans programs for the
    coming year.

    SUCCESSFUL COLLABORATIONS: THE POINTS OF LIGHT FOUNDATION AND AMERICA'S
                                    PROMISE
    The Points of Light Foundation
        In fiscal year 2001, the Corporation will continue its successful
    collaboration with the Points of Light Foundation. The budget request
    for the Foundation is sustained at last year's level of $7.5 million.
    The funding will be used by the Points of Light Foundation to carry out
    its fundamental purposes, as established by President Bush, endorsed by
    Congress, and continued with the support of President Clinton:
      --Encouraging every American and every American institution to help
            solve the nation's most critical social problems by
            volunteering their time, energies, and services through
            community service projects and initiatives.
      --Identifying successful and promising community service projects and
            initiatives with nonprofit organizations, corporations,
            families, and youth, and disseminating information concerning
            such projects and initiatives to other communities in order to
            promote their adoption nationwide.
      --Building the capacity of institutions to support volunteer service,
            and developing individuals as leaders to serve as strong
            examples of a commitment to serving others and to convince all
            Americans that a successful life includes serving others.
        The Points of Light Foundation supports a network of hundreds of
    Volunteer Centers nationwide. An increasing number of AmeriCorps
    members and AmeriCorps*VISTA members are working directly with, and
    under the leadership of, these centers for volunteer service. In fiscal
    year 2001, the Foundation will expand its efforts to build the
    capacity, visibility and sustainability of a unified nationwide network
    of local Volunteer Centers. The Points of Light Foundation is committed
    to working in close partnership with these local organizations in the
    implementation of its overall strategic plans. The result will be to
    build a strong, dependable ``delivery system'' that mobilizes
    volunteers and other resources to address local needs. Last year, with
    President Clinton's support, the award of daily Points of Light has
    resumed. These awards of recognition are made by the Foundation in
    cooperation with the Corporation for National Service and the Knights
    of Columbus.
    America's Promise--the Alliance for Youth
        The Corporation also works closely with America's Promise--the
    Alliance for Youth. This national mobilization for youth was
    established at the Presidents' Summit for America's Future convened by
    President Clinton and President Bush at Philadelphia in 1997, and
    chaired by General Colin Powell. The Corporation for National Service
    and the Points of Light Foundation were the two initiating and
    sponsoring organizations, joined by the United Way of America and other
    major service organizations. I attach the Declaration of Philadelphia
    with the five promises--or goals--for children and youth. Hundreds of
    organizations from all sectors of American life--nonprofit, volunteer,
    religious, business, and government--have made major commitments to the
    goals of America's Promise.
        The fiscal year 2001 budget proposes a $7.5 million grant to
    America's Promise to help fulfill its mission. The grant will support
    operational costs of the national organization, as well as activities
    consistent with the mission described above. It is anticipated that
    that these funds will supplement other ongoing activities and
    contributions toward the goals and objectives of America's Promise.

                                   EVALUATION
        The budget requests $5 million for evaluation, continuing the
    fiscal year 2000 level. Evaluation remains a high priority for the
    Corporation, as we continue to measure the impact our programs are
    having across the country and identifying areas that require
    improvement. Since 1994, the emphasis of the evaluation effort has been
    to determine the impact of Corporation programs in achieving the goals
    set for the Corporation in the National and Community Service Act. A
    priority in fiscal years 2000 and 2001 is to support studies identified
    in our performance plan, as required by the Government Performance and
    Results Act.
        We have completed a number of evaluations that show the value of
    national service to communities and to AmeriCorps members. An
    independent study by Aguirre International found that AmeriCorps
    service strengthens communities and nonprofit organizations,
    effectively prepares Americans for the future by improving job
    readiness skills, and that AmeriCorps provides $1.66 in benefits to
    communities for every dollar spent (See Attachment).
                   the martin luther king, jr. day of service
        This year, Americans across the country celebrated the King
    Holiday, honoring the life and work of Martin Luther King, Jr. For the
    past five years, the Corporation has sponsored the King Holiday day of
    service, pursuant to the mandate to the Corporation in the King Holiday
    and Service Act of 1994. The King Center for Nonviolent Social Change,
    the Points of Light Foundation, the United Way of America, Habitat for
    Humanity, Youth Service America, Best Buy Company, Do Something, and
    First Book were partners in the successful effort to make January 17,
    2000 ``a day on and not a day off.'' In consultation with the King
    Center, the Corporation provided grants to 137 public and non-profit
    organizations to assist in more than 300 service activities nationwide.
    Each year, the idea of service as the focus of the King holiday has
    been spreading; the community collaboration in doing this will grow
    further in 2001.

                                   CONCLUSION
        Mr. Chairman, this will probably be the last time in my current
    role that I appear before you. I have had the honor and privilege of
    working with the members of this Subcommittee. And it has been a
    privilege and honor to work with some of the finest professionals I
    have ever known on the Corporation staff, on our Board of Directors, at
    the Points of Light Foundation, at America's Promise, in state and
    local governments, and in America's great nonprofit organizations. I
    have also had the special opportunity to meet countless AmeriCorps
    members, students in service-learning, and seniors in service to their
    communities across the country. They are the new patriots on the home
    front that our country needs.
        Mr. Chairman, Americans can be proud of what national service has
    accomplished. They can also be proud of the dedicated, non-partisan
    organization that we have worked steadily, day-by-day to build. America
    is now positioned to make service to community a common expectation of
    all Americans. It has been a tremendous experience for me to serve in
    this enterprise. I look forward in the remaining months of this session
    to continuing our work together.
                                     ______

                                  Attachment A

                     National & Community Service Coalition

          SUPPORT FOR REAUTHORIZATION OF NATIONAL SERVICE LEGISLATION
        The undersigned members of the National and Community Service
    Coalition (Coalition) voice their strong support for reauthorization of
    the National and Community Service Act of 1990 and the Domestic
    Volunteer Service Act of 1973.
        Established in 1994, the Coalition is a network of 80 national,
    state and local organization which share a commitment to ensuring that
    Americans of all ages and backgrounds can contribute their time and
    talent to the public good. The Coalition represents the breadth and
    diversity of an evolving service movement and included representatives
    from:
      --Long-established voluntary organizations, such as Big Brothers/Big
            Sisters of America and Youth Service America;
      --The growing network of K-12 school-based and community-based
            service learning programs, such as the National Youth
            Leadership Council;
      --College and university-based service programs, such as Campus
            Compact;
      --Senior volunteer programs, such as the National Association of
            Retired Senior Volunteer Program Directors and the National
            Association of Foster Grandparent Program Directors;
      --Faith-based service organization, such as the Catholic Network of
            Volunteer Service; and
      --An array of national, state and local organizations which engage
            AmeriCorps member, VISTA Volunteers and thousands of other
            citizens in full-time service programs, such as City Year,
            Service and Conservation Corps, and YouthBuild USA.
        In recent years, we have seen firsthand how the federal investment
    has spurred the growth of service opportunities and mobilized hundreds
    of thousands of school-aged children, young adults and senior citizens
    to tackle an array of our nation's educational, social and
    environmental needs. They have contributed to the safety and well being
    of our most vulnerable citizens, the improvement of reading skills
    among young children, the protection of our endangered natural
    resources, the construction and renovation of homes for low-income
    families, and the restoration of individual neighborhoods and
    communities across the country.
        Federal funds constitute a small, but strategic, portion of the
    total resources which support national service. Moreover, the vast
    majority of federal funds pass straight through to State Commissions
    which, in turn, award grants to locally-controlled programs on a
    competitive basis that emphasizes both quality and cost effectiveness.
    Finally, the federal government's involvement in national service
    builds on the nation's well established tradition of volunteerism and
    on decades of painstaking development by grass-roots service programs--
    both of which have long enjoyed nonpartisan support from elected
    officials at every level of government.
        It is important to note that the sheer reality of federal
    legislation and leadership has brought heightened visibility, as well
    as a new state, local and private resources to the service movement.
    The Federal investment is reaping handsome dividends and should be
    continued.

    Alliance for Catholic Education
    American Association of Community Colleges
    American Association of Retired Persons
    American Red Cross
    American Youth Foundation
    American Youth Policy Forum
    AmeriCorps Alums
    Arkansas Commission on National Service
    ASPIRA Association, Inc.
    Association of Farmworker Opportunity Programs
    Big Brothers/Big Sisters of America
    California Commission on Improving Life through Service
    California Department of Education
    Campus Compact
    Catholic Network of Volunteer Service
    City Year
    Connecticut Commission on National and Community Service
    Constitutional Rights Foundation
    Earth Force
    East Coast Migrant Head Start Project
    Florida's Office of Collegiate Volunteerism
    Georgetown University--Volunteer & Public Service Center
    Girl Scouts of the USA
    Kentucky Department of Education
    Literacy Volunteers of America
    Louisville Youth Alliance
    Maine Commission on Community Service
    Maryland Governor's Commission on Service
    Maryland Student Service Alliance
    Massachusetts Campus Compact
    Mid-Atlantic Network of Youth and Family Services
    Minnesota Commission on National and Community Service
    National Association on Foster Grandparent Program Director
    National Association of Independent Colleges and Universities
    National Association for Public Interest Law
    National Association of RSVP Directors
    National Association of Senior Companion Directors
    National Association of Service and Conservation Corps
    National Crime Prevention Council
    National School & Community Corps
    National Society for Experimental Education
    National Youth Leadership Council
    Notre Dame Mission Volunteers, Inc.
    Pennsylvania Institute for Service Learning
    Points of Light Foundation
    Project Service Leadership
    Rhode Island Commission on National and Community Service
    Summerbridge National
    Teach for America
    United Cerebral Palsy Associations
    University of Pittsburgh--MARS Program
    Utah Commission on Volunteers
    West Virginia Commission for National and Community Service
    YMCA of the USA
    Youth Volunteer Corps of America
    YouthBuild USA
    Youth Service America
    Youth Service Coalition
                                     ______

       Statement of Tom Jones, Director, Washington Office, Habitat for
                                    Humanity

        Thank you members, colleagues, and friends. It really is a
    privilege and joy to be here to officially express the appreciation of
    Habitat for Humanity International for all of the programs of the
    Corporation for National Service, and for all that has gone before and
    for the huge expectations of what has yet to be as the result of this
    reauthorization.
        As Congressman Shays just said, all of our leaders at Habitat have
    not always been for AmeriCorps and the Corporation. But Millard Fuller,
    to his credit, has had a complete 180 degree turn, and he has said that
    publicly and literally today there is no one in this country that's
    more committed--not even Harris Wofford--to the Corporation for
    National Service.
        The frustration of this moment is there aren't enough minutes to
    tell all the facts about the difference the programs of the Corporation
    for National Service are making in the mission of Habitat for Humanity
    across this whole country. Just in terms of AmeriCorps National
    program, we now, I think, have about 775 service corps members
    involved. We are now heading towards 2 million service hours. We can
    now count 1,372 Habitat houses that have been built as the direct
    result just of national AmeriCorps. We know and can count over 177,000
    Habitat volunteers who have been supervised by AmeriCorps volunteers--
    the skills that are learned and all that is taught. And this doesn't
    begin to say all that has been involved with. Habitat is involved with
    VISTA and with state AmeriCorps and with NCCC. And now, as was
    indicated, Senior Corps, we have a wonderful model being developed in
    the Midwest of Senior Corps and Habitat for Humanity. And on and on it
    goes.
        The only criticism that we in Habitat, if you want to call it that,
    hear about AmeriCorps, about the other programs of the Corporation for
    National Service is, we need more. The problem it has created for us is
    we have 1530 affiliates across the United States each with its own
    local board, and each one of these is now clamoring, how can we get
    involved, how can we have AmeriCorps, and Senior Corps and VISTA
    workers doing it with us. The potential is unlimited.
        You know, even as we sit here right now, there are boys and girls
    and young people coming home from school, entering their own home that
    their families own--proud of this--to go to their own kitchens and have
    their after-school snacks, to head to their own bedrooms to do their
    homework, to sleep tonight in a decent home and to get up tomorrow
    refreshed and to head to school again. This and so much more of that is
    happening because of what all of us together in this great program
    called the Corporation for National Service are doing together.
        We are here to say thank you, we are here to say, let's take our
    hats off to the past, let's now take our coats off to the future
    together to make it even more and more significant in these years
    ahead. Thank you.

        BUILDING SKILLS AND COMMUNITIES: KEY FINDINGS ON THE IMPACT OF
                                   AMERICORPS
        An independent study performed by Aguirre International shows that
    AmeriCorps members are significantly improving communities in a cost-
    effective way. The main findings of the evaluation include the
    following:
    AmeriCorps Effectively Prepares Americans for the Future
      --AmeriCorps improves participants' job readiness skills in
            communications, interpersonal relations, analytic problem
            solving, understanding of organizational systems, and
            technology.
      --Members with low skills and little employment experience developed
            new skills and enhanced existing skills.
      --Members indicated that AmeriCorps had instilled in them a
            commitment to the ethic of service--99 per cent of members
            reported plans to continue some form of community service in
            the future, including careers in public service and community-
            oriented work.
    AmeriCorps Strengthens Communities
      --Regardless of specific assignment-tutoring children, running after-
            school programs, helping communities recover after natural
            disasters, improving health care services, or making
            neighborhoods safer-AmeriCorps members help bring communities
            together by providing needed services, strengthening nonprofit
            organizations, and getting children, families, and others more
            involved in solving local problems.
    The Benefits of AmeriCorps Outweigh the Costs
      --Direct benefits to communities and AmeriCorps members are at least
            $1.66 per dollar spent, showing that the program was ``a
            successful investment of federal and community funds.''
        The study by Aguirre International, Making a Difference: Impact of
    AmeriCorps*State/National Direct on Members and Communities 1994-95 and
    1995-96, was compiled from information from a survey of program
    accomplishments, interviews at 60 randomly selected programs, and case
    studies of eight sites. The report is available from the Corporation
    for National Service at (202) 606-5000 ext. 437.
                                     ______

                 [From the Albany Herald Opinion, Mar. 8, 1999]

                       Habitat, AmeriCorps Good Partners

                              (By Millard Fuller)

        I admit I was skeptical a few years back when a partnership between
    Habitat for Humanity and AmeriCorps was proposed. How could a
    nonprofit, nonpartisan organization such as ours, with faith in God at
    our core, work in tandem with a federally sponsored bureaucratic
    program?
        The whole notion struck me as a sure-fire recipe for inaction and
    red tape. Now, four years later, my concerns have vanished, replaced by
    the reality of a successful partnership between AmeriCorps and Habitat
    for Humanity affiliates across out nation.
        Since 1994, more than 50 Habitat affiliates have worked with more
    than 2,000 AmeriCorps members and participants in other national
    service programs sponsored by AmeriCorps' parent, the Corporation for
    National Service. This year, more than 500 AmeriCorps members are
    wielding hammers and recruiting more volunteers for Habitat for
    Humanity.
        This spring, AmeriCorps members are playing an exciting role in
    Habitat's Collegiate Challenge: Spring Break 1999. During Collegiate
    Challenge, more than 7,500 college students are dedicating their
    vacation time to building houses in partnership with God's people in
    need.
        Hundreds of college students are expected to arrive in Albany ready
    to put their muscle behind the efforts to house people in need.
    Projects are urban, as in Miami, and rural, as in Belen, N.M. At sites
    like these, AmeriCorps members provide helping hands and supervisory
    skills needed to get the job done.
        Helping people is what Habitat for Humanity is all about. Since
    1976, Habitat--now at work in 61 countries--has been helping people in
    need of shelter build or renovate simple, decent, affordable houses.
        Investing their ``sweat equity'' in the building process, then
    buying the houses through zero-interest loans, Habitat homeowners build
    not only homes, but also new lives for themselves and new hope for
    their communities.
        To date, more than 350,000 people are living in Habitat houses. But
    this is just a start. Habitat for Humanity, by working in partnership
    with future homeowner families and with other organizations that share
    our vision, is working toward a world free of poverty housing and
    homelessness.
        AmeriCorps has proven to be a good, reliable partner in many areas
    of the United States.
        By offering local nonprofit groups a network of full-time trained
    people available for one-or-two-year stint, AmeriCorps helps maximize
    local resources. That's important to volunteer organizations like
    Habitat for Humanity. Our affiliates find hundreds of good people who
    want to help build houses in their off-hours, but few know much about
    construction.
        That's where AmeriCorps has played such a vital role, AmeriCorps
    members help train local people in basic construction skills. They are
    there day in and day out, supervising and directing the part-time
    efforts of others.
        The continuity, leadership and knowledge that AmeriCorps members
    provide allow us to increase both the number of volunteers we are able
    to mobilize effectively and the overall productivity of our efforts.
        Habitat for Humanity and AmeriCorps have much in common. We share a
    goal of community-building. We share a belief in self-help and service,
    I no longer think of AmeriCorps as a bureaucratic program. AmeriCorps
    is a partner in the movement to eliminate poverty housing.
        Millard Fuller of Americus is founder and president of Habitat for
    Humanity International.
                                     ______

           The Impact of Service-Learning on Students and Communities

        A number of studies have examined the impact of service-learning
    programs across all levels of education, and Learn and Serve America
    programs in particular. The findings of these studies are positive and
    outcomes are quite consistent.
        Studies show that service-learning activities that are well-
    designed, linked to intentional learning outcomes, and engage students
    in significant amounts of service have strong benefits to student
    participants and to the communities they serve. The information
    provided below highlights only a few of the many positive outcomes of
    service-learning.
        In addition to having positive outcomes for students and
    communities, Lear and Serve America programs have been shown to be a
    good investment. For every federal dollar spent, $5.60 worth of
    services were provided to the community (Melchior, 1999).
    Service-Learning has a positive effect on students' engagement in
            school
        Students engaged in service-learning have higher attendance rates
    than their peers who are not (Shaffer 1993; Supik 1996; Shumer 1994).
        Students at all levels feel they learn more in service-learning
    classes than other classes (Weiler, LaGoy, Crane, and Rovner 1998;
    Berkas 1997)
        Students engaged in service-learning are more likely to graduate
    (Astin and Sax 1998; Roose, Daphne, Miller, Norris, Peacock, White and
    White 1997).
        Educators and students in schools with strong service-learning
    programs report a more positive school climate through a greater
    feeling of connectedness to the school (Billig and Conrad 1997; Wieler,
    et al 1999) and through decreased teacher turnover and increased
    teacher collegiality (Weiler, et al 1999)
    Service-Learning helps students acquire academic skills and knowledge
        Service-learning participation is associated with higher scores on
    the state test of basic skills (Anderson, Kinsley, Negroni, and Price
    1991) and higher grades (Shumer 1994; Shaffer 1993; Dean and Murdock
    1992; O'Bannon 1999).
        Students who participate in high quality service-learning programs
    show greater school engagement and achievement in mathematics than
    control groups (Melchior 1999).
        Middle and high school students who participate in service-learning
    tutoring programs increase their grade point averages and test scores
    in reading/language arts and math, and are less likely to drop out of
    school (Supik 1996; Rolzinski 1990)
        Students or faculty report that service-learning improves students'
    ability to apply what they have learned in the real world (Eyler and
    Giles 1999; Gray, Ondaatje, Zakaras 1998; Oliver 1997; Nigro and
    Wortham 1998).
    Students who participate in service-learning are less likely to engage
            in risk behaviors
        High school and middle school students engaged in service-learning
    are less likely to engage in behaviors that lead to pregnancy or arrest
    (Melchior 1999; Allen, Kuperminc, Philliber, and Herre 1994; Shaffer
    1993).
        Students who engage in service-learning are less likely to be
    referred to the office for disciplinary measures (Follman 1997; 1998).
    Service-learning has a positive impact on students' social and civic
            development
        Students who engage in service-learning programs report a greater
    acceptance of cultural diversity (Melchior 1999; Berkas 1997).
        High school students who participate in service-learning programs
    are more likely to develop bonds with more adults and agree that they
    could learn from and work with the elderly and disabled (Morgan and
    Streb 1999).
        Students who engage in service-learning increase their
    understanding of how government works (Berkas 1997).
        High school students who participate in service-learning are more
    likely to be engaged in a community organization and are more likely to
    vote fifteen years after their participation in a program than those
    who did not participate (Youniss, McClellan, and Yates 1997; Yates and
    Youniss 1998).
    Service-Learning benefits communities
        Community members who participate in service-learning as partners
    with the school see youth as valued resources and positive contributors
    to community (Billig and Conrad 1997; 1999; Weiler, et al 1999;
    Melchior 1999; Kinsley 1997).
        90 percent of agencies indicated that Learn and Serve America
    participants helped the agency improve their services to clients and
    the community (Melchior 1999).
                                     ______

                               Summit Declaration

        Two centuries ago, America was founded on the proposition that just
    as all people are endowed by their Creator with inalienable rights,
    citizenship entails undeniable responsibilities. As each of us has the
    right to Life, Liberty, and the Pursuit of Happiness, each of us has an
    obligation to give something back to country and community a duty to
    take responsibility not just for ourselves and our families, but for
    one another. We owe a debt of service to fulfill the God-given promise
    of America, and our children.
        In this time of opportunity at the dawn of a new century and a new
    millennium the need for shared responsibility is self-evident.
        The challenges of today, especially those that confront our
    children, require a special commitment of us all. People of all ages
    and from all walks of life must claim society's problems as their own,
    pulling together, leading by example, and lifting American lives.
        Our obligation, distinct and unmistakable, is to assure that all
    young Americans have
      --Caring adults in their lives, as parents, mentors, tutors, coaches
      --Safe places with structured activities in which to learn and grow
      --A healthy start and healthy future
      --An effective education that equips them with marketable skills
        An opportunity to give back to their communities through their own
    service
        As Americans and Presidents, we ask every caring citizen to pledge
    individual commitments of citizen service, voluntary action, the
    efforts of their organizations, or commitments to individual children
    in need. By doing so, this nation pledges the fulfillment of America's
    promise for every American child.
                                       Gerald R. Ford,
                                       James Earl Carter,
                                       Ronald W. Reagan/by Mrs. Nancy
                                           Reagan,
                                       George H.W. Bush,
                                       William Jefferson Clinton,
                                   The Presidents of the United States.

        Senator Bond. Thank you very much, Senator Wofford. And I
    would be remiss if I did not say that it has been a real
    pleasure to work with you during the period that you have
    served as head of the Corporation, and I certainly commend you.
    No one could have provided greater spirit, enthusiasm and
    commitment to the program than you have. And it has been a
    pleasure to work with you.
        Now, having said that, I move on to the questions.

                              FINANCIAL MANAGEMENT

        In your 21 pages of testimony and 9 pages of statements of
    support, you outline on the basis of the work of the
    Corporation, and the work of the participants, that the
    Corporation is able definitively to say that it has been able
    to achieve all of the goals of its programs.
        The testimony provides statistics on a number of State and
    national direct programs, and you cite articles from Habitat
    for Humanity in support of the Corps. For all of these reasons,
    the Corporation believes that its appropriated funds are being
    well spent and justifies a significant increase.
        While I appreciate the letters of support and the news
    articles, I am curious to know how the Corporation can
    definitively know how its programs are working when, one, the
    Corporation does not have a reliable cost accounting system in
    place, and your financial systems cannot effectively and
    efficiently provide reliable and timely information; two, your
    performance report seems to emphasize outputs rather than real
    outcomes; and, three, the OIG continues to identify a number of
    problems with your grantees.
        Senator Wofford. The grantees that you were referring to
    earlier, Mr. Chairman, are the governor-appointed State
    commissions, which is the essential structure that Congress set
    up. So each of those State commissions is the first body that
    makes the decisions, appraises, monitors and--it is not that
    they are troubled, but that they have major responsibilities
    under this structure that Congress set up.
        They are increasingly producing the evaluations themselves.
    Second, the devolution in the Corporation is to the non-profit
    sector; so the organizations that, in fact, select the
    AmeriCorps members, run the programs, themselves are developing
    an increasing record of evaluations on outcomes, not just
    input.
        We want to summarize for you and make sure that you have
    looked at the number of evaluations that are focused on
    outcomes such as the evaluation that was given on the District
    of Columbia literacy efforts, which is focused on outcomes. I
    think if we can put together the record of those evaluations
    this year, they will in many ways answer the question of the
    achievements of the AmeriCorps members and the other parts of
    National Service.
        We have, with the help of the State commissions, operated a
    program that has made the decisions on grants that have been
    made successfully in these last years. The outcome record is
    being developed, and I think we have to solve our management
    problems here. And we are on the road to doing so.
        But the programs themselves are extraordinarily successful,
    as recognized by the tremendous demand from the non-profit
    sector and from the governors of this State--of this country
    for more AmeriCorps members.
        [Clerk's note.--The program evaluations submitted by the
    Corporation can be found in the Subcommittee files.]

                                COST ACCOUNTING

        Senator Bond. OIG and KPMG auditors have recommended the
    Corporation install a cost accounting system. Would you agree
    with that recommendation?
        Senator Wofford. Well, I would like Tony Musick to speak to
    that. We are moving in that direction, but it has questions
    about it.
        Mr. Musick. Right. We would have no disagreement about
    installing a cost accounting system. Our issue has always been
    as to the timing. This past year, we just implemented a new
    finance system. We needed to get the core system in place.
        We are already in a position where there is new releases of
    this package by the--the vendor, because it is an off-the-shelf
    package. So we have to implement that. And then the other
    higher priority seemed to be a grant system.
        Cost accounting, it has been on our plate but, again, there
    is only so much that we can get done with the resources and the
    people. And we have tried to focus on what we think are the
    higher priority issues. But cost accounting would be on the
    list, but just at a later date.

                             PROGRAM ADMINISTRATION

        Senator Bond. For the past 2 years, the administration has
    requested additional administrative funds to address urgent
    program administration needs. And we have provided $3 million
    in fiscal year 1999 and $1.5 million last year. And the
    Corporation is still requesting another budget increase. I am
    concerned about how the Corporation can account for these funds
    in the absence of a cost accounting system.
        And second, in terms of the almost $8 million requested in
    additional funds for program administration, what workload
    analysis is this based on? In other words, does this amount
    take into account the administration's plan to increase the
    AmeriCorps membership by 12,000 in fiscal year 2001 and
    initiating new proposed programs?
        And I also would like you to address in terms of the budget
    submission, why 52 staff members in public liaison recruit and
    other programs? That is about 15 percent of the workforce, and
    I would like to know what the responsibilities of these staff
    members would be, and how much the positions pay. And is this a
    wise allocation when you still have management problems in the
    program?
        Senator Wofford. I would like Wendy Zenker to comment on
    that. But I will just make the point that much of the staff you
    are just pointing to is focused on developing the private
    sector partnerships and support from the private sector which
    has been so important to this success of ours.
        Ms. Zenker. There were several points that you made. I
    think some we can answer right now. Others, we might like to
    get back to you for the record.
        Senator Bond. Please, if you would.
        Ms. Zenker. With respect to the $3 million extra money that
    you gave us in 1999, we have been able to give expenditures
    reports to the Congress that have also been looked at by the
    Inspector General through an audit that KPMG did of the action
    plan, so that we generally think we have given you good
    information on how we spent that $3 million.
        When you look at our 2001 request, we are asking for more
    money for program administration. We have needs for both new
    systems to bring on line to continue the improvements that you
    have seen in 1999 and that we are working on now in 2000, as
    well as additional people.
        We are seeing the money you gave us in 1999 helped us to
    hire the people that made a difference in terms of reducing the
    material weaknesses and bringing new systems up. We would like
    to continue those improvements. We are doing it this year. We
    would like to continue it in 2001. But we can provide
    additional information for you.
        [The information follows:]

        The Corporation is requesting an additional $7.7 million for
    program administration in fiscal year 2001. This request is based on
    our analysis of current needs irrespective of any increase in
    AmeriCorps membership or new program initiatives. Of this, $4.1 million
    is requested to support additional management systems improvements and
    additional staff resources for the Corporation; and $3.6 million is for
    State Commissions.
        Corporation Program Administration Requirements.--The management
    system improvements that the Corporation is planning for 2001 include
    the implementation of additional modules to the financial management
    system. These include an accounts receivable subsystem, a travel
    management system, and an inter-agency electronic transfer interface.
        Our most important system initiative for 2000-2002 will be the
    design and implementation of an integrated grants management system. We
    have started work on a new grants management system. We are conducting
    the requirements analysis for the new system with funds made available
    in fiscal year 1999 and plan to contract for system design work in
    fiscal year 2000. Our plan is to build the system following a modular
    approach, designing and implementing the core modules first. Additional
    modules will be built with funds requested in the 2001 budget. In the
    fiscal year 1999 financial statement audit, the Inspector General noted
    the critical need for the Corporation to build the grants system.
        The Corporation also needs to meet the increased demand for
    information on our programs and service opportunities through the web.
    We are starting work on a web-based recruitment system that will allow
    individuals to express their interest in serving and be matched with
    service opportunities in all of AmeriCorps, including AmeriCorps*VISTA
    and AmeriCorps*NCCC. Corporation application forms and other documents
    will be available to grantees and the public through the web. We will
    also provide a repository of Corporation policies and procedures on the
    web for Corporation grantees. Funds requested in fiscal year 2001 will
    support these activities.
        Finally, of the funds requested for the Corporation, some
    additional resources will be directed towards hiring staff. The areas
    for increased attention include AmeriCorps program officers to support
    their efforts to better manage and monitor grantees; additional staff
    in the National Service Trust for customer service, data quality and
    payment processing; staff for the Grants Office, especially to work on
    grants closeout; and staff to support increased technology initiatives.
        State Commissions.--The remainder of the program administration
    increase ($3.6 million) is requested for grants to State Commissions
    for administration. The budget request states that these increased
    monies would not be subject to a match by State Commissions. (The
    fiscal year 2000 baseline of State Commission administrative funds will
    continue to be matched at 50 percent.) The Corporation believes that
    there have been increased responsibilities placed on State Commissions
    over the past several years. More authority has devolved to State
    Commissions including an education award-only portfolio; more inclusion
    of people with disabilities; more responsibility for member training;
    and more responsibility to act as the main state organizer/catalyst for
    volunteer activities, including the statewide America's Promise work.
    Starting this year, we are also requiring that States participate in
    the Administrative Standards review assessment, and they are responding
    to the pre-audit surveys and subsequent audits that will be performed
    by the Inspector General in the coming years. The State Commissions
    have been required to match their administrative grant at an increasing
    level--initially the match was 15 percent and has grown to the current
    50 percent match.
        For these reasons, we believe that increased program administration
    funds should be made available to State Commissions in fiscal year
    2001.
                                     ______

                               OIG CLARIFICATION
        OIG and KPMG did not audit the Action Plan. Instead we reviewed the
    plan and issued OIG report 00-13 on December 1, 1999. In that report,
    we clearly stated that the Corporation's reported expenditures were
    budget estimates and that the Corporation lacks a cost accounting
    system to track actual expenditures against the funds allocated to
    Action Plan activities in accordance with the Corporation's fiscal year
    1999 appropriation requirements.

        Senator Bond. Thank you, the 52 staff and public liaison?
        Ms. Zenker. The 52 staff and public liaison, if I can talk
    about the two functions that they perform: One, we have our
    recruitment function as part of that 52. And between the NCSA
    program and the DVSA recruitment actions, people work to find
    both VISTA members as well as to advertise AmeriCorps and try
    to bring in more AmeriCorps members.
        The public liaison function actually does good work for us
    in forming partnerships with private sector corporations. We
    are pleased to report, for example, that Best Buy contributed
    $100,000 this past year to the Martin Luther King grant
    program. So we were able to make more grants to local
    communities because we reached out to Best Buy and they wanted
    to partner with us.
        Likewise, we are building partnerships in the digital area
    with Yahoo, AOL, Microsoft, IBM. Our public liaison group
    reaches out to the private sector to form those partnerships.
        Senator Wofford. There are only six actually in what we
    call public liaison. There is the press information office, and
    then there is recruitment, and others that must be in that
    number that you gave, which we will look at it and we will
    respond on it.
        Senator Bond. Thank you very much.
        [The information follows:]

        Attached is a list of the 52 positions, including the office,
    position title and salary for each FTE. The staff are located in the
    Offices of Public Liaison; Leadership Development and Training;
    Recruitment; and AmeriCorps Leaders. Briefly, these offices are
    involved in the following activities:
      --The AmeriCorps Leaders program enables talented alumnae of
            AmeriCorps to serve as front-line leaders in programs enrolling
            AmeriCorps members.
      --The Leadership Development and Training office provides training
            and technical assistance for Corporation-funded programs and
            works with state and regional program staff to incorporate
            specific nationally developed curricula into locally sponsored
            training events.
      --The Recruitment Office of AmeriCorps attains a sufficient pool of
            applicants for the targeted number of members requested by
            AmeriCorps grantees, and processes and places national
            applicants for AmeriCorps*VISTA and AmeriCorps*National
            Civilian Community Corps.
      --The Office of Public Liaison does outreach to key partners in the
            private and non-profit sectors.
        These offices are integral to the entire operations of the
    Corporation. They represent about eight percent of our total staff
    complement.
        The following list provides the title and salary for each position
    within these offices:

    Office of Public Liaison:
        Director..................................................   100,000
        Associate Director........................................    79,721
        Associate Director........................................    63,188
        Associate Director........................................    63,188
        Special Assistant.........................................    36,640
        Public Liaison Associate..................................    32,614
        National Service Development Officer vacant...............   ( \1\ )
        Assistant Director........................................   ( \1\ )
    Office of Leadership, Development and Training:
        Director of Training and Technical Assistance.............   110,026
        Director, Leadership and Training.........................    96,186
        Assistant to the Director.................................    92,809
        Training Administrator....................................    89,948
        Program Officer...........................................    88,180
        Program Officer...........................................    85,624
        Director, National Service Leadership Institute...........    82,588
        Program Officer...........................................    80,011
        Training and Technical Assistance Specialist..............    75,794
        Senior Training Specialist................................    68,000
        Senior Training Specialist................................    67,879
        Training and Technical Assistance Specialist..............    63,535
        Training and Technical Assistance Specialist..............    63,381
        Senior Training Specialist................................    65,000
        Logistics Manager.........................................    50,905
        Administrative Officer....................................    47,515
        Training Logistics Assistant..............................    39,913
        Training Administrative Specialist........................    30,621
        Administrative Assistant..................................    28,298
        Program Officer...........................................   ( \1\ )
    Office of AmeriCorps Leaders:
        Director..................................................    76,211
        Deputy Director...........................................    61,425
        Associate Program Officer.................................    40,530
    Office of Recruitment:
        Director..................................................    95,587
        Senior Marketing Specialist...............................    80,736
        Recruitment and Placement Manager.........................    76,809
        Recruitment Coordinator...................................    48,505
        Recruitment Coordinator...................................    45,257
        Recruitment Coordinator...................................    43,864
        Outreach Coordinator......................................    40,304
        Recruitment Coordinator...................................    38,978
        Marketing Specialist......................................    35,678
        Marketing Specialist......................................    34,349
        Recruitment Coordinator...................................    33,330
        Recruitment Coordinator...................................    34,569
        Recruitment Coordinator...................................    32,856
        Recruitment Coordinator...................................    32,856
        Recruitment Coordinator...................................    31,561
        Recruitment Coordinator...................................    32,180
        Recruitment Coordinator...................................    31,290
        Marketing Assistant.......................................    22,639
        Recruitment Coordinator...................................   ( \1\ )
        Diversity Recruitment Specialist..........................   ( \1\ )
        Administrative Assistant..................................   ( \1\ )

    \1\ Vacant.
    ---------------------------------------------------------------------------

                         NATIONAL SERVICE DEMOGRAPHICS

        Senator Bond. Senator Mikulski.
        Senator Mikulski. Thank you, Chairman Bond.
        And, of course, Senator Wofford, we also want to offer our
    very sincere congratulations for your service. We know that
    throughout your entire life, you have been devoted to community
    service, whether it was your work in the Peace Corps, and the
    leadership that you brought to the Corporation for National
    Service. So we really want to thank you for all that you have
    done.
        And I would like to actually go over some of the questions
    about what we have done and then talk about digital. But there
    were two goals when we established National Service. And one
    was to really re-instill the habits of the heart in young
    people.
        There was an erosion of the ethic around really the
    volunteering in one's community. And in many instances, there
    were very serious shortfalls in the volunteer community. And
    then the other was the skyrocketing student debt that so many
    children--young people had. So it was how to bring those two--
    to instill an ethic of habits of the heart, and yet these
    tools.
        That is--you talked about some of the results, but let us
    go to the students themselves. Could you tell me how many
    students have actually utilized the paydown on their student
    debt and what that meant? And if you cannot answer it, anyone
    on your team, and any observations the IG might have.
        Senator Wofford. About 105,000 awards of the education
    trust have been made, have been earned by the AmeriCorps
    members in these last 5 years. So far, 61,000 have been drawn
    down in whole or in part. And the--it appears that since the
    people have 7 years to use their vouchers----
        Senator Mikulski. There is--there are two things: One, the
    drawing down of the student debt; and then the other is the
    voucher for many who will be, like, out of the Conservation
    Corps and so on, that--the ability to go on to school which
    they would have never had. So they learn skills. They learned a
    work ethic, as well as a volunteer ethic.
        Senator Wofford. Of the 78 percent who are using their
    education awards in the--so far, in the estimate we have, 56
    percent use their awards to go to school.
        Senator Mikulski. 56 percent to go.
        Senator Wofford. 56 percent use the awards to pay college
    costs. 33 percent are using their awards to pay student loans.
    And 9 percent use their awards both to pay student loans off
    and to pay for more education.
        Senator Mikulski. Well, that is totally different than what
    we thought originally would happen.
        Senator Wofford. In what way, Senator?
        Senator Mikulski. Oh, no, that is not a criticism. I mean,
    this is why the observation is so important, that really the
    recruitment would be from college graduates who would then give
    the two years in their community, somewhat along the Peace
    Corps model, or that part-time model for those who could not go
    away, but that it would be college graduates to reduce student
    debt.
        Now, what you are saying though is the people who are
    volunteering have not finished college, or may have--maybe have
    not started college.

                           AMERICORPS EDUCATION AWARD

        Senator Wofford. We have the figures here. Approximately a
    third have already earned college degrees and have loans. About
    a third--or if you get the actual figures, it is in three
    parts--have had some college, and take a year in AmeriCorps or
    part-time AmeriCorps during their college years. And about a
    third have not yet gone to college.
        Senator Mikulski. Well, I see that my time is up. But from
    the perspective of--do you think that without the--without
    either the student reduction, the loan reduction, or the
    voucher to be able to pursue higher ed, do you think you could
    recruit people to AmeriCorps?
        Senator Wofford. Could we recruit people for AmeriCorps?
        Senator Mikulski. Yes.
        Senator Wofford. It has a tremendous value in recruiting.
        Senator Mikulski. I am not for eliminating that.
        Please do not misunderstand me.
        Senator Wofford. Could we--could we recruit people? People
    are responding to AmeriCorps as patriots. And I think that the
    answer is: You could recruit without the education award.
        The education award is tremendously important to them,
    however, and makes the recruiting much easier and, secondly, is
    of tremendous benefit to those who have given service to get
    that kind of investment in their education.

                            AMERICORPS DEMOGRAPHICS

        Senator Mikulski. Well, I think what would be useful for me
    to see and for the record to show, who comes to AmeriCorps. And
    I know you have several different programs, like, essentially
    the Civilian Conservation Corps, AmeriCorps. But really a
    breakdown on gender, income, education, so that we get a
    profile of who comes, knowing that there is no typical
    volunteer.
        But it sounds like that there are about three to five
    different profiles of who volunteers. And then therefore, based
    on that, what were the elements of the program that attracted
    them, but then what are the tools?
        So if we are essentially attracting somebody who finished a
    community college as the first in their family ever to have
    gone, but they do not have the bucks to go on and would like to
    also do something with their life, come to AmeriCorps and then
    they get the voucher, then to go on to the University of
    Maryland, or other schools and so on.
        So am I on the right track here or----
        Senator Wofford. Yes, you are. And we will send you the--we
    will get to you the breakdown, remembering that the 900
    AmeriCorps programs using AmeriCorps members range from
    University of Notre Dame or Teach for America, where they get
    outstanding college graduates to teach for a year or two in
    hard-pressed school, to Youth Build which is designed for high
    school dropouts to both learn a skill and, in many cases, to go
    on to community college or to college. And in between are the
    bulk of the programs.
        So we will try to show you the different profiles that
    are--that when you look at the 900 programs using the 40,000--
        [The information follows:]
        [GRAPHIC] [TIFF OMITTED] T05AP12.001

        [GRAPHIC] [TIFF OMITTED] T05AP12.002

        Senator Mikulski. But I do not need to have all 900
    programs. What I am really looking at is: Of the 61,000 people
    who--first of all, 100,000 people have earned a voucher.
        Senator Wofford. We----
        Senator Mikulski. You have had 100,000 people----
        Senator Wofford. Yes.
        Senator Mikulski. 78,000 have already utilized----
        Senator Wofford. Not already, but that is what we estimate
    it will be. 60,000-some have already drawn down the voucher or
    paid off their college loan. But it looks like it will be 78
    percent by the end of 7 years. We have not had the full 7 years
    yet to know whether in the last year or two of--of the first
    AmeriCorps members, the numbers will go up. But it looks like
    it will be 78 percent, yes.
        Senator Mikulski. Okay.
        Thank you.
        Senator Bond. Do you have further questions, Senator
    Mikulski?
        Senator Mikulski. Yes, I do, if I could.
        Senator Bond. Go ahead.
        Senator Mikulski. Okay. Oh, okay.

                                 DIGITAL DIVIDE

        Then let me move quickly to the digital divide issues. And
    to be clear, when we hear about the 52 people in public
    affairs, not all are writing press releases. Some are doing
    recruitment, and then some, six, are actually liaisoning with
    the private sector.
        And that could be everything from the traditional United
    Way private sector agencies to the new high-tech crowd.
        Senator Wofford. Yes.
        Senator Mikulski. This then takes me to the digital issues.
    Could you just quickly list what liaisons AmeriCorps is already
    doing with the digital community, with the high-tech community?
    And what does that actually mean to the empowerment of children
    or adults?
        Senator Wofford. Yes. I think the first partnership was
    with IBM on the tech team. They have now renewed with the
    second major successful project in the digital and high-tech
    field.
        We then in the last year have developed with General Powell
    and America's Promise, partnerships with YMCA and the Boys and
    Girls Clubs, backed by AOL, Microsoft, Sun Systems. Just now
    Yahoo has----
        Senator Mikulski. Now, is that PowerUp?
        Senator Wofford. That is PowerUp, that particular program.
    We have--in our written testimony there that you have, we have
    on page 16, a listing of a number of the original projects that
    we have had, including STAR in Maryland in the field of digital
    divide. And we are ready, we are positioned, and we have had
    experience to move into the--in the directions we hope you will
    help shape for the E-Corps.
        Senator Mikulski. Now, are you finding requests from local
    school systems and non-profits like Boys and Girls Clubs, which
    I think all of us are just devoted to, that there is a real
    request for AmeriCorps volunteers with digital skills to come
    to communities?
        Senator Wofford. Yes. There is----
        Senator Mikulski. Is this----
        Senator Wofford [continuing]. A very large demand from both
    school systems and the--the two biggest organizations on the
    digital divide front are Boys and Girls Clubs and the YMCAs.
    And both of them already have some AmeriCorps members in their
    programs for computer teaching and computer access for those
    that do not have them for after school and on weekends and
    evenings. And the demand is tremendous to us. Hundreds and
    hundreds have been asked for.
        Senator Mikulski. Well, as you know, my idea for E-Corps is
    not to work directly with the children. It is to work side by
    side, but to train the people who will work with the children,
    teachers, teachers' assistants, many of whom cannot even afford
    to buy computers themselves.
        And often, though they take teacher training, it is kind of
    that one-shot deal like what you were talking about. You know,
    they can set us down, but unless it is repetition, repetition,
    repetition, we do not learn it. And so I am thinking about the
    40-year-old elementary school teacher who really might take the
    course and be eager, but needs help.
        Is--this is the way I envision it. So it is that when the
    volunteers leave, there is not a gap in who is going to teach
    the kids technology. We have then done the training even in
    often the volunteer communities.
        Senator Wofford. That makes a lot of sense, Senator. We
    want your help in shaping this. Some of the programs are doing
    something very close to that. The other thing that they are
    doing is not directly working with the students, but organizing
    the centers, the YMCAs and the Boys and Girls Clubs. We can
    show the local sites where that is----
        Senator Mikulski. Well, I do not----
        Senator Wofford [continuing]. Going on right now.
        Senator Mikulski [continuing]. Want to create something
    that duplicates what is already in existence.
        Senator Wofford. This is----
        Senator Mikulski. And I certainly do not want to duplicate
    what the private sector has shown a willingness to do, like the
    PowerUps and the IBMs and the Steve Cases and the AOLs.
        So we really do need advice about whether--I happen to
    think it is a good idea. You are not going to tell me it is a
    bad idea.
        Senator Wofford. It is a very good idea. You know I think
    it is a very good idea.
        Senator Bond. You came from the Senate, not from the turnip
    truck.
        Senator Wofford. Right.
        Senator Mikulski. So--but really, with all--I do--if we--I
    really do have a passion about helping cross this digital
    divide, but really in teaching the teachers. Do you----
        Senator Wofford. Yes.
        Senator Mikulski [continuing]. Think we are duplicating, or
    do you--please, I invite you to be candid.
        Senator Wofford. Yes. No, I just was trying to say that
    there are two fronts, one in the schools and in the school
    systems and, two, in the great community centers and community
    organizations like Boys and Girls Clubs and YMCAs.
        And in both cases, they need the E-Corps that you are
    talking about to help them get it started, to help train the
    people that will do it.
        Senator Mikulski. Thank you. I think that covers it.
        Thank you.
        Senator Bond. Thank you very much, Senator Mikulski.
        And we do appreciate your testimony and answers, Senator
    Wofford. And we look forward to continuing dialogue with your
    staff in addressing both this exciting new idea and the
    management issues.

                          OFFICE OF INSPECTOR GENERAL

        Now that we have heard from the Corporation on the issues
    and their efforts to correct management deficiencies, I now
    invite Ms. Luise Jordan, and Ms. Karyn Molnar to present their
    views in response to the testimony.
        Before I begin, I would recognize you, Ms. Jordan and Ms.
    Molnar, for the very hard work and time and effort that you
    have dedicated to overseeing the Corporation. Your independent
    and objective views are critically important to this
    subcommittee, and I trust also to the Corporation.
        Ms. Jordan, I understand that you have written testimony
    which will be made a part of the record, without objection. And
    we would like to invite you and then Ms. Molnar to use 5
    minutes each to summarize any oral remarks you wish to make.
        Ms. Jordan.

                          STATEMENT OF LUISE S. JORDAN

        Ms. Jordan. Mr. Chairman, Senator Mikulski, I appreciate
    the opportunity to testify again on the results of the audit of
    the Corporation's financial statements and other financial
    management issues.

                               CORPORATION AUDIT

        As you have heard, the opinion on the financial statements
    is similar to last year's, although improvements in management
    controls and the Corporation's new accounting system indicate
    progress.
        The Corporation is somewhat unhappy that it did not receive
    a clean opinion. Although a clean opinion is an important goal,
    it is only one of several goals that need to be achieved.
    Modern systems and good management controls are essential to
    reach the end goal of reliable, useful, timely financial
    information and to support ongoing management and
    accountability.
        Although--excuse me. Although implementation of its new
    accounting system indicates progress, the new system is a
    general ledger system, not a fully integrated management
    system.
        As you have heard, the Corporation's present systems cannot
    effectively and efficiently provide reliable and timely
    information to manage day-to-day operations.
        The Corporation lacks both a cost accounting system and an
    effective integrated grants management system. The Corporation
    still needs to correct problems in areas that are critical to a
    well-managed organization.
        The five areas cited as material weaknesses in 1999 were
    first reported as material weaknesses in 1996. The
    Corporation's guide for improvement is its Action Plan. Some of
    the plan's major tasks have been achieved. None of the goals
    have been attained.
        We are not sure that the plan is an effective road map for
    proactive improvement or for the optimum use of the
    Corporation's resources. We have recommended that the
    Corporation establish objective standards and measures for its
    corrective actions and its financial improvements. We have also
    recommended that the Corporation establish a process to
    determine that the Action Plan and other corrective actions are
    working as intended, rather than waiting for an external event
    or the next audit report to advise them of their next problem.
        If the Corporation wants assurance that it is going to work
    its way out of the maze of issues that confront it and
    effectively carry out its programs, it is time that management
    views this maze from the top down, rather than feeling their
    way through it and reacting to problems.
        Let me conclude by reiterating my statement that the
    Corporation has made progress. Now that the Corporation has its
    new accounting system and additional financial management
    staff, I want to also say that continued improvement is
    probable. It is OIG's hope that future audits will reveal the
    effectiveness of the new resources, the effectiveness of the
    corrective actions, as well as the Corporation's continued
    progress.

                               PREPARED STATEMENT

        I have one statement, however, from a personal point of
    view. Senator Mikulski, as the first person in my family to go
    to college, after being a community volunteer and graduating
    from Anne Arundel Community College, I did not have an
    education benefit. I ``clerked'' my way through Dart Drug in
    Laurel. It would have been very nice to have had an education
    benefit.
        Senator Bond. Thank you, Ms. Jordan.
        [The statement follows:]

                     Prepared Statement of Luise S. Jordan

        Mr. Chairman and Members of the Subcommittee, I appreciate this
    opportunity to testify on the results of the audit of the Corporation
    for National and Community Service's fiscal year 1999 financial
    statements \1\ and other financial management issues.
    ---------------------------------------------------------------------------
        \1\ OIG Audit Report 00-01: ``Audit of the Corporation for National
    and Community Service's Fiscal Year 1999 Financial Statements.
    ---------------------------------------------------------------------------
        The Corporation for National and Community Service is required by
    the Government Corporation Control Act (31 U.S.C. 9101 et seq.) to
    produce annual financial statements. The Act requires that the Office
    of Inspector General audit, or engage the services of an independent
    auditing firm to audit, the statements. CNS OIG engaged KPMG LLP to
    audit the fiscal year 1999 financial statements. Ms. Karyn Molnar, the
    KPMG engagement partner for the audit is also here today to testify.
        The audit was conducted in accordance with government auditing
    standards. Because of our knowledge of the Corporation and its
    operations, the audit included extensive audit procedures to overcome
    known material weaknesses and included tests of all three financial
    statements. As a result, KPMG was able to issue an unqualified opinion
    on the Corporation's Statement of Financial Position at September 30,
    1999. However, KPMG was unable to render an opinion on the Statement of
    Operations and Changes in Net Position, and the Statement of Cash Flows
    for the fiscal year.
        Although the opinion on the fiscal year 1999 statements is similar
    to that on the fiscal year 1998 statements, the Corporation has
    achieved improvements in the controls over its financial activities. As
    discussed in the Independent Auditors' Report and illustrated in
    Exhibit I, material weaknesses related to internal controls over
    financial reporting \2\ have been reduced from eight in fiscal year
    1998 to five; two of the eight are now classified as reportable
    conditions; and one has been corrected to the extent that we will
    provide recommendations for further improvement in our final report on
    this audit, the ``management letter'' (OIG Report 00-38 \3\). These
    improvements, and the Corporation's new accounting system implemented
    in September 1999, indicate continued progress toward producing
    auditable financial reports.
    ---------------------------------------------------------------------------
        \2\ The Corporation's procurement and contracting operations were
    found to be materially weak and vulnerable to fraud and abuse in OIG
    Audit Report 98-24: ``Audit of the Corporation's Procurement and
    Contracting Processes and Procedures,'' August 1998 and in several
    audits of Corporation contracts issued during fiscal year 1999. OIG has
    begun a follow-up study to determine the extent of the Corporation's
    corrective actions in this area.
        \3\ OIG Audit Report 00-38: ``Recommended Improvements to the
    Corporation's Internal Controls--Fiscal Year 1999 Financial Audit
    Management Letter'' is currently being prepared by KPMG and is expected
    to be issued within the third quarter of fiscal year 2000.
    ---------------------------------------------------------------------------
        However, the Corporation has yet to fully correct all of its
    financial management deficiencies. The five areas cited as material
    weaknesses in fiscal year 1999 were first reported as material
    weaknesses in 1996. They include: financial management and reporting,
    the Corporation's general control environment,\4\ grants management,
    net position reporting, and fund balance with Treasury. The integrity
    of data in the National Service Trust and matters related to the
    Corporation's new accounting system's controls and reports are cited as
    reportable conditions.
    ---------------------------------------------------------------------------
        \4\ Control environment factors include commitment to competence,
    management philosophy and operating style, organizational structure,
    and assignment of authority and responsibility. The control environment
    sets the tone of an organization, influences the level of control
    consciousness, and provides the discipline and structure of an
    organization.
    ---------------------------------------------------------------------------
        The Report on Compliance with Laws and Regulations also repeats two
    areas of non-compliance with laws and regulations: the Corporation's
    substantial non-compliance with Federal financial systems requirements
    during the majority of fiscal year 1999, and the Corporation's practice
    to carry over grant funds when renewing grants that is not always in
    compliance with appropriation laws related to the use of National and
    Community Service Act funds.
        As is our responsibility under the Government Corporation Control
    Act, CNS OIG participated in the planning of the auditors' work and
    evaluated the nature, timing and extent of the procedures performed,
    monitored progress throughout the audit, and reviewed the auditors'
    report and the work papers supporting its conclusions, with which we
    concur.
        The Corporation is unhappy that it did not receive a ``clean''
    opinion on its financial statements. However, the auditors' opinion is
    a matter of professional judgement and objectively considers all
    aspects of the work performed. The auditors test and consider the
    amounts and disclosures in the financial statements and the overall
    financial statement presentation. KPMG performed the audit, evaluated
    the results, and concluded that the conversion of data to a new
    accounting system and the lack of an audit trail to explain adjustments
    to certain accounting balances made it impossible to obtain
    satisfactory evidence to support $10.5 million reported as an increase
    in unexpended appropriations. KPMG concluded that they could not issue
    an opinion on the two financial statements that included this
    unexplained balance.\5\ OIG concurs.
    ---------------------------------------------------------------------------
        \5\ The $10.5 million impacts both the Statement of Operations and
    Changes in Net Position and the Statement of Cash Flows. On the
    Statement of Operations and Changes in Net Position, it is included in
    the $81.7 million reported as ``Increase in Unexpended Appropriations,
    Net.'' (Note 14 to the financial statements lists it as a $10.5 million
    ``other adjustment''). It is part of the $9.7 million balance described
    as ``Other Adjustments'' on the Statement of Cash Flows.
    ---------------------------------------------------------------------------
        Both the Corporation and KPMG believe the unknown amount results
    from a bookkeeping error that involves data converted from the
    Corporation's old system to the new. The Corporation does not know what
    comprises the $10.5 million. While the audit resulted in numerous
    adjustments to correct the financial statements, neither the
    Corporation nor KPMG was able to resolve this difference. We do not
    know what accounts are impacted, and absent evidence or an audit trail,
    there is no way to adjust and correct for it.
        A ``clean'' audit opinion is an important goal for the Corporation.
    However, it is only one of several goals that need to be achieved. As
    the Comptroller General recently testified, modern systems and good
    controls are essential to reach the end goal of reliable, useful, and
    timely financial information to support ongoing management and
    accountability.
        Although implementation of its new accounting system indicates
    progress, the new system is a general ledger system--not a fully
    integrated financial management system. The Corporation needs modern
    integrated financial systems that support financial and programmatic
    operations. As the audit report indicates, the Corporation admits to
    problems in obtaining mandatory reports from the new system.
        The Corporation still needs to acquire basic financial systems that
    are critical to its operations and accountability. The Corporation
    lacks a cost accounting system. In December 1999, OIG reported that the
    Corporation lacked a cost accounting system to account for the $3
    million in administrative funding earmarked for financial improvements,
    project or program costs.\6\ Even more fundamentally, the Corporation
    which relies on grants to carry out its major programs, lacks an
    effective, integrated grants management system.
    ---------------------------------------------------------------------------
        \6\ In OIG Audit Report 00-13: ``Review of the Corporation for
    National and Community Service Action Plan'' we reported that the
    amounts reported by the Corporation were based on initial budget
    estimates.
    ---------------------------------------------------------------------------
        Presently, the Corporation's financial systems cannot effectively
    and efficiently provide reliable and timely information to manage day
    to day operations. The current financial statements also need
    improvement if they are to provide meaningful information to Congress
    and other users. In the Independent Auditors' Report, KPMG states,
    ``The Corporation's financial statements do not currently provide
    information related to its many service programs, the administrative
    costs of those programs, or the separate operations of the National
    Service Trust.'' \7\
    ---------------------------------------------------------------------------
        \7\ OIG Audit Report 00-01, page 5.
    ---------------------------------------------------------------------------
        The audit results also indicate that the Corporation's management
    controls require additional improvement. The Corporation has corrected
    three of the eight material weaknesses disclosed by the audit of the
    Corporation's fiscal year 1998 financial statements. However, those
    that remain uncorrected are controls that are critical to a well-
    managed organization.
        The Corporation's primary guide for corrective action has been its
    Action Plan. Some major tasks under the plan have been achieved; for
    example, installation of the new accounting system, selection and
    hiring of a new CFO and new financial management staff, installation of
    the National Service Trust's imaging system, and the development of a
    management control plan. However, none of the Plan's goals has been
    attained.\8\
    ---------------------------------------------------------------------------
        \8\ Most recently, in its March 21, 2000 Action Plan report to
    Congress, the Corporation reported that none of the major financial
    management goals had been attained.
    ---------------------------------------------------------------------------
        OIG is also not sure that the Corporation's Action Plan is an
    effective ``road map'' that will result in proactive improvements or
    the optimum use of the Corporation's resources. In our Action Plan
    reports, in the current financial statement audit report and in
    previous ones, as well as in discussions with management, we have
    recommended that the Corporation establish objective standards and
    measures for corrective actions and financial improvements. We have
    also recommended that the Corporation establish a process to determine
    that the Action Plan and other corrective actions are working as
    intended--rather than waiting for an external event or an audit report
    to advise them of their next problem. Such a process should also be
    designed to result in reliable evidence that measures and documents
    progress toward its goals and that management controls assessments have
    been appropriately carried out. It should establish clear
    accountability. Finally, the plan and the process should assess
    resources and resource allocation including staffing and related
    issues. If the Corporation wants assurance that it is going to work its
    way out of the maze of issues that confront it, and effectively carry
    out its programs, it is time that management views the maze from the
    top down rather than feeling their way through it and reacting to
    problems as they occur or are brought to management's attention.
        For perspective, it is important to recall the extent of the
    problems that the Corporation has had to correct. Over the past several
    years, OIG's audit reports have classified numerous deficiencies into
    broad areas of material weaknesses that encompassed the most critical
    aspects of the Corporation's financial management. We also reported
    that the Corporation's legacy system could not produce reliable
    financial information. Given the pervasiveness of these deficiencies,
    it is not surprising that, although the Corporation has made progress,
    we are reporting that not all of the material weaknesses have been
    corrected.
        Let me conclude by reiterating my statement that the Corporation
    has made progress. Now that the Corporation has a new accounting system
    and additional financial management staff, I want to also say that
    continued improvement is probable. It is OIG's hope that future audits
    will reveal the effectiveness of these new resources, the achievements
    made in recent months, the effectiveness of the corrective actions put
    into place to respond to our findings and recommendations, as well as
    the Corporation's continued progress.

                          Statement of karyn l. Molnar

        Senator Bond. Ms. Molnar
        Ms. Molnar. Thank you, Mr. Chairman and Senator Mikulski.
        I am pleased to be here today to testify regarding KPMG's
    audit of the 1999 financial statements of the Corporation for
    National and Community Service. My comments will be brief since
    the overall results of the audit have already been presented
    during this hearing.

                               Corporation audit

        However, it is important to note that our audit of the
    Corporation's 1999 financial statements was conducted in
    accordance with generally accepted government auditing
    standards.
        Also, the nature, timing and extent of the audit procedures
    we performed was based on our assessment of the effectiveness
    of the Corporation's internal control environment which was in
    place during fiscal year 1999.
        Based on the results of prior year audits and our general
    knowledge of the Corporation, we determined we could not rely
    on internal controls to reduce the extent of audit tests for
    the 1999 audit. Therefore, we performed very extensive detailed
    tests of the 1999 financial statement account balances.

                             General ledger system

        Also during 1999, as you have heard, the Corporation
    implemented a new general ledger system. The conversion of
    financial data from the old to the new accounting system, and
    the training of Corporation personnel in the use of the new
    system, required a significant commitment of time and
    resources. The conversion was not completed until near the
    Corporation's fiscal year end.
        Attention focused on implementing the new system within a
    limited time frame also resulted in a shift of attention away
    from supervisory review of ongoing financial accounting
    activity.
        Our detailed audit procedures identified certain accounting
    errors. The Corporation did record all material adjustments
    that we proposed.
        And after all the adjustments were made to the 1999
    financial statements, we were able to satisfy ourselves that
    the statement of financial position was materially correct.
    However, the Corporation was unable to explain and we were
    unable to determine the financial statement effect of a $10.5
    million unidentified amount reported as an increase in
    unexpended appropriations. We and the Corporation both believe
    this is a result of difficulties encountered in the conversion
    to the new general ledger system.
        As a result, our independent auditor's report, which was
    dated March 3 of this year, included an unqualified opinion on
    the statement of financial position, and a disclaimer on the
    other financial statements. As you know, this is a similar
    result to last year's report.

                               Internal controls

        Our review of the Corporation's internal controls over
    financial reporting revealed that significant progress had been
    made in addressing the prior year reportable conditions. Our
    evaluation of internal controls considered the extent of those
    improvements which had a direct and material effect on the
    Corporation's financial operations during 1999.
        However, the new general ledger system, as I said, was in
    use for less than 1 month in 1999. A new Chief Financial
    Officer, and other new financial management personnel, did not
    assume their duties until after September 30, 1999. And other
    improvements in policies and procedures which were in the
    development or ``pilot-testing'' stage during 1999 did not
    become fully operational until fiscal year 2000.
        The scope of our 1999 audit procedures did not include
    tests of the effectiveness of these enhancements to the
    internal control environment. As a consequence, our report on
    internal controls included seven reportable conditions, five of
    which we considered to be material weaknesses. This is three
    less material weaknesses than reported in 1998.
        All of the reportable conditions are discussed in detail in
    our report, along with our recommendations for improvement.

                               PREPARED STATEMENT

        In conclusion, we do believe the Corporation has made
    notable progress in achieving its goals of improved financial
    management. Although much is left to be done, with the
    concerted effort of the new financial management team, and the
    successful operation of the new financial accounting system for
    a full year in fiscal year 2000, we believe the Corporation
    should be well positioned to demonstrate continued progress in
    the future.
        Thank you.
        Senator Bond. Thank you.
        [The statement follows:]

                     Prepared Statement of Karyn L. Molnar

        Mr. Chairman and Members of the Subcommittee: I am pleased to be
    here today to testify regarding KPMG's audit of the 1999 financial
    statements of the Corporation for National and Community Service.

                         REPORT ON FINANCIAL STATEMENTS
        Our audit of the Corporation's 1999 financial statements was
    conducted in accordance with generally accepted government auditing
    standards. Those standards require that the audit be planned and
    performed to provide reasonable assurance that the financial statements
    are free of material misstatement. Audit procedures are performed on a
    test basis to obtain evidence to support the amounts and disclosures in
    the financial statements. They are also performed to determine whether
    the accounting principles used are proper, and significant estimates
    made by management are reasonable in the circumstances. An audit must
    also determine if the information in the financial statements is
    presented in a meaningful manner for the intended users.
        The nature, timing and extent of audit tests to be performed
    depends on how much reliance an auditor can place on the internal
    controls established by management. Internal controls are designed to
    provide reasonable assurance that transactions are executed in
    accordance with laws and regulations; that assets are safeguarded
    against loss from unauthorized acquisition, use or disposition; and
    that transactions are properly recorded, processed, and summarized to
    permit the preparation of financial statements in accordance with
    generally accepted accounting principles. If internal controls are
    effective, the amount of detail testing can be reduced. If they are not
    effective, extensive detail testing is required to become satisfied as
    to the fair presentation of the financial statement amounts.
        Our initial assessment of the Corporation's internal control
    environment in place during fiscal year 1999 was based on the results
    of our 1997 and 1998 audit procedures. That assessment indicated that
    we could not rely on internal controls to reduce the extent of audit
    tests for the 1999 audit. Therefore, we again planned and performed
    very extensive detailed tests of the 1999 financial statement account
    balances in order to support our conclusion on the fair presentation of
    the 1999 financial statements.
        Additionally, during 1999, the Corporation converted its legacy
    financial accounting system to a new general ledger system. The
    conversion of financial data from the old to the new accounting system,
    and the training of Corporation personnel in the use of the new system,
    required a significant commitment of time and resources. The conversion
    was not completed until near the Corporation's fiscal year end. We
    believe the attention focused by the Corporation on implementing the
    new financial accounting system within a limited timeframe, also
    resulted in a shift of priorities away from supervisory review of
    ongoing financial accounting activity. Our audit procedures included a
    review of the conversion process.
        Our detailed audit procedures identified certain accounting errors.
    The Corporation recorded all material adjustments that we proposed. The
    Corporation also identified, and corrected other accounting errors it
    noted as a result of the general ledger conversion and the financial
    statement preparation processes. After all adjustments were made to the
    1999 financial statements, we were able to satisfy ourselves that the
    statement of financial position as of September 30, 1999 was materially
    correct. However, due to the complexity of the general ledger
    conversion process, and the lack of an adequate audit trail to support
    certain adjustments, we were unable to satisfy ourselves as to the
    propriety of $10.5 million reported as an increase in unexpended
    appropriations for the year ended September 30, 1999. This unlocated
    difference is a net amount. The ultimate effect on various line items
    included on the statement of operations and changes in net position and
    statement of cash flows, could not be determined.
        As a result, our independent auditors' report, dated March 3, 2000,
    included an unqualified opinion on the statement of financial position,
    and a disclaimer of opinion on the related statements of operations and
    changes in net position and cash flows. This is a similar result to
    that reported in our prior year report on the Corporation's fiscal year
    1998 financial statements.

                          REPORT ON INTERNAL CONTROLS
        Our review of the Corporation's internal controls over financial
    reporting for the fiscal year ended September 30, 1999 revealed that
    significant progress had been made in addressing the reportable
    conditions that had been reported in prior years. The most significant
    progress was noted in the areas of financial systems, with the
    conversion to a new general ledger system which complies with both Year
    2000 and OMB requirements related to federal financial systems, and
    improvements in the control environment surrounding the National
    Service Trust. Both of these areas were described as material
    weaknesses in 1998 and were downgraded to non-material reportable
    conditions in 1999. Significant progress was also made in the areas of
    financial management and reporting and in the general control
    environment with the addition of personnel with strong financial
    management backgrounds and the implementation of a process for self-
    assessment of management controls. Corporation management also
    developed an Action Plan for improvements in financial management, and
    is currently reporting on a regular basis to Congress on the status of
    the Plan's implementation.
        Our independent auditors' report on internal controls over
    financial reporting considered the extent of improvements made which
    directly impacted the Corporation's financial operations during 1999.
    As I mentioned earlier, the general ledger conversion was not completed
    until near the Corporation's fiscal year end; a new Chief Financial
    Officer, and other new financial management personnel, did not assume
    their duties until after September 30, 1999; and other improvements in
    policies and procedures which were in the development or ``pilot-
    testing'' stage during 1999 did not become fully operational until
    fiscal year 2000. The scope of our 1999 audit procedures did not
    include tests of the effectiveness of these enhancements to the
    internal control environment.
        As a consequence, our report on internal controls over financial
    reporting for the fiscal year ended September 30, 1999 included the
    following seven reportable conditions, five of which we considered to
    be material weaknesses. Reportable conditions are significant
    deficiencies in the design or operation of internal controls that could
    adversely affect the Corporation's ability to record, process,
    summarize, and report financial data consistent with the assertions of
    management in the financial statements. Material weaknesses are
    reportable conditions in which the design or operation of one or more
    of the internal control components does not reduce, to a relatively low
    level, the risk that material misstatements may occur and not be
    detected within a timely period by employees in the normal course of
    performing their assigned functions.
      --Financial Management and Reporting
      --General Control Environment
      --Grants Management
      --Fund Balance with Treasury
      --Net Position
      --National Service Trust
      --Financial Systems
        These matters are discussed in detail in our report, which also
    includes our recommendations for improvement. All of these matters
    deserve management's attention. However, in addition to the comments I
    have already made regarding financial reporting problems encountered
    during the 1999 audit, I would like to emphasize the following matters:
        First, we recognize that the Corporation has begun to take a more
    proactive approach to ensuring that an effective system of internal
    control is in place. The Corporation took steps in fiscal year 1999 to
    survey selected members of management to obtain relevant information to
    prepare the annual statement on internal accounting and administrative
    control systems, and plans to expand the survey process in fiscal year
    2000. However, it continues to rely heavily on issues being brought to
    its attention through audits conducted by the Office of the Inspector
    General and independent auditors. While this practice does provide
    independent insight into the effectiveness of internal controls at
    specific points in time, reliance on the work of the OIG and
    independent auditors to identify and report internal control risks for
    management's attention does not prevent or routinely detect matters
    during the year which could result in material misstatements of
    accounting and budgetary reports or instances of material noncompliance
    with laws and regulations.
        Second, the most significant expenditure of Corporation funding is
    for grant awards. Grantees are required to expend funds for allowable
    costs and provide periodic reports to the Corporation to demonstrate
    programmatic and financial compliance with the terms of the respective
    grant agreements. The Corporation's ability to effectively monitor
    grantee financial activity is hampered by the limitations of the
    current system used to track grant awards because it is not integrated
    with the new general ledger system. The current grants management
    system also can not produce reports which would be useful in assisting
    program managers in monitoring grantee performance. Additionally, our
    audit procedures revealed that a comprehensive, risk-based internal
    grants management program for performing grantee site visits to ensure
    financial and programmatic compliance was not in place during fiscal
    year 1999. Considering the size of grants awarded to state commissions
    and certain not-for-profit organizations, we believe implementing such
    a program should be a high priority for the Corporation.

                                   CONCLUSION
        We believe the Corporation has made notable progress in achieving
    its goals of improved financial management. Although much is left to be
    done, with the concerted effort of the new financial management team,
    and the successful operation of the new financial accounting system for
    a full year in fiscal year 2000, the Corporation should be well
    positioned to demonstrate continued progress in the future.
        I appreciate the opportunity to be here today and would be happy to
    answer any questions you may have.

        Senator Bond. Thank you for your comments, and particularly
    for your encouraging words about what is going to happen.
        I am a little rusty on my auditing, but it sounds to me
    like you raised some real flags there. And when you say you are
    looking forward to them doing better in the future, it is kind
    of like introducing a Senator for brief remarks. It is kind of
    the triumph of hope over experience.

                               INTERNAL CONTROLS

        But on the red flags, I mean, you could not rely on their
    internal controls. And you had to--you had to build the
    statement that you--you had to construct the statement that you
    said that you audited? Did you all have to put it together?
        Ms. Molnar. No, sir. We did not put it together. But as the
    Corporation prepared their financial statements, they had an
    unidentified amount that was reported as an increase in their
    unexpended appropriations. But it could not be identified as to
    what it represented. That is not a usual kind of an activity to
    be showing there.
        Senator Bond. Well, there were raised a number of questions
    about it. And I thought, Senator Wofford, we would give you or
    Mr. Musick an opportunity to respond, any comments you wanted
    to make about the comments of the OIG or the KPMG.
        Senator Wofford. My colleagues might like to do that.
        Ms. Zenker. We have looked at the audit report very closely
    for the last several weeks, as you can imagine. We think that
    we have made some good progress this past year in putting in
    our new financial management system. That was our major goal.
    We accomplished it. It took a lot of work, a lot of effort on
    our part.
        We did it in, what we think, is a record amount of time for
    a Federal agency. We are very hopeful I think, as are the
    auditors, that that new system is well positioning us for the
    changes and being able to produce good auditable statements for
    2000.
        There are other material weaknesses that we still need to
    correct. And those continue to be our highest priority in 2000.
    We provide a monthly report to the Congress on our progress. We
    would be happy to speak with your staff at any time to give
    additional information on what we are doing.
        Senator Bond. Mr. Musick.

                             GENERAL LEDGER SYSTEM

        Mr. Musick. If I might just add, I think one of the
    comments that was made earlier, we have a new system in place.
    It takes people time to learn this and to understand it. It
    might be a general ledger system, but it is what the government
    requirements are because we purchased it off the shelf that
    way.
        So what we are trying to do right now is to build
    interfaces of data that we can get in, because we have
    different people. We have--HHS makes our grant payments. The
    Agriculture Department makes our salary payments. So we have to
    bring that data into the system.
        And once that is populated, then it is a matter of teaching
    people how to use reports to get the information they need out
    of it to manage it. But that is just the learning curve that is
    going to take a little time.
        Senator Wofford. Could I make one comment, Mr. Chairman?
        Senator Bond. Please.
        Senator Wofford. If I understand what Ms. Molnar has
    testified, and has also said to me, the crux as to the clean
    opinion on the other two statements was this $10.5 million
    matter and what was behind it, the extra money that they could
    not solve.
        I heard her say that they and we believe it is a
    bookkeeping error in the transferring of information, or for
    whatever reason, from the old system to the new.
        Am I right in understanding that if that had been able to
    be solved, which we hope it will not be a problem again under
    the new system, there would have been a clean opinion on the
    other two statements?
        Senator Bond. Ms. Molnar.
        Ms. Molnar. I believe that that is correct. I mean, as a
    matter of fact, in starting their audit this year, I was very
    hopeful that we would get to that position, and I was
    disappointed that we did find an amount that could not be
    explained. But I do think that the new system should take care
    of that in the future.
        Senator Bond. Senator Mikulski.
        Senator Mikulski. Thank you.

                   ORIGIN OF CORPORATION OF NATIONAL SERVICE

        You know, some of these issues have been ongoing for some
    time. And let me go to my questions. When National Service was
    created--when the Corporation was created, essentially, it had
    a new Corporation for National Service and it also combined
    three long service--long-term programs.
        Now, I will tell you my--let me tell you my question,
    because, you see, it--are some of the problems we still have
    still the lingering effects of trying to merge programs in the
    past? When we put grand--Foster Grandparents, the Senior Corps,
    and then that chunk of VISTA in there, that really created an
    initial hybrid with different accounting systems, et cetera.
        In your professional opinion, do you think that like that
    $10 million, or whatever we keep talking about, is a vestige of
    that, and we should just take it as a charge, if you will, or
    something and just get on with it?
        Ms. Molnar. It is really very difficult to say what that
    $10 million is. It could relate to the old programs. The
    Corporation has been working over the last 2 to 3 years to
    clean up the old programs. And of course, as time passes, a lot
    of the members that were working under those programs, really
    it is all--it is going away slowly.
        So, yes, it could have something to do with that. It may
    not. That was the whole problem. If I had known what it was,
    and if the Corporation had known what it was, then you can
    correct it and you can have a clean opinion. So----
        Senator Mikulski. But we might not ever find this out. Do
    you think we will ever find this out?
        Ms. Molnar. Well, it was a--the $10 million this year, and
    we mentioned, you know, an amount last year--and it was not the
    same amount and probably is not the same problem. Those are
    current period amounts that are causing the problem. If the
    system works well for the whole year next year, since both of
    the financial statements--of the statements of financial
    position received an unqualified opinion, then the activity for
    the year really should fall out and be okay.
        This was an amount that just did not fall out between the 2
    years. And I would hope that, going forward, that will not
    happen again.

                    State Commission Program Administration

        Senator Mikulski. Well, I have both a question of you and--
    again, Ms. Jordan, you would have made a great National Service
    volunteer. Both of you would have.
        This is a really complicated program. As Senator Wofford
    has said, it is, what, 900 different programs and the States.
    And so much of what you rely upon is the relationship with the
    States.
        But here is my question: Are you satisfied with the way
    we--this goes to the States. Are you satisfied that the
    financial controls and management mechanisms are in place for
    our relationship with the States and these 900 programs; or is
    the weakness also--or is there a weakness in our relationship--
    the Corporation's relationship with States?
        Ms. Jordan. My office has begun an initiative to review and
    audit the State commissions. We began that initiative because
    what we had seen with the National Direct grants indicated that
    there were problems in more than 50 percent of the National
    Direct grants.
        We have surveyed so far 24 State commissions. We have
    issued 7 final reports. The conditions that we are finding most
    often (each commission is different, and the findings vary).
    But the conditions that we are finding the most often are in
    fiscal management, fiscal administration of the Federal funds,
    and monitoring of sub-grantees and AmeriCorps member service
    hours.
        We will report back to you periodically on the results of
    what we are learning about how the State commissions are using
    the Federal funding. The mechanism that we have established
    requires and will result in reports each time. We will submit a
    summary report to Congress and CNS after we review 18 of the
    commissions. We have also begun audits of the state
    commissions, based on risk. Those assessments are coming out of
    the pre-audit surveys we are doing.
        So at this time, I do not have a lot of information, but I
    do know that there are some conditions that we are finding when
    we see--when we go out and look at the State commissions.

                          STATE COMMISSION GUIDELINES

        Senator Mikulski. Well, I honestly believe that all States
    wish to comply but, again, States are uneven in their own
    fiscal management and technology.
        And also one of things I would like you to consider as you
    uncover these issues, really what kind of technical assistance
    and guiding principles national needs to give the States so
    that they can comply. I have to believe that all 50 governors
    want to comply and be spit-and-polish in terms of their records
    and so on.
        But I think we also need to be very clear about what are
    the expectations, and what are the requirements and, therefore,
    what technical assistance national needs to provide the States,
    particularly some that might be at risk.
        Ms. Jordan. We are doing that. Each of our reports includes
    recommendations to the Corporation, particularly where we find
    that the guidance is not clear, as well as recommendations to
    the commission.
        So each pre-audit survey results in a report. Each report
    has recommendations for the Corporation as well as the State
    commission.
        Senator Wofford. Wendy Zenker would like to make a brief
    comment to your question, Senator.
        Senator Mikulski. Sure.
        Ms. Zenker. And I know we are underscoring ``brief.'' I
    just wanted to let you know that we have developed State
    commission administrative standards which we will be happy to
    share with you, that set forth what the guidelines are, what
    the criteria are, what State commissions should be doing to
    manage their funds.
        We are going out and reviewing each State commission, using
    independent reviewers, as well as our own staff. State
    commissions are participating. They are actively engaged in
    this. When we produce a report of strength and weaknesses, we
    provide technical assistance to deal with the weaknesses.
        Senator Bond. Thank you.
        [Clerk's note.--The State Administrative Standards
    submitted by the Agency can be found in the Subcommittee
    files.]

                         ADDITIONAL COMMITTEE QUESTIONS

        Senator Mikulski. Well, I think--I think, then you are on
    the right track, really, you know.
        So that concludes my questions.
        Senator Bond. Thank you very much, Senator Mikulski.
        Thank you, Senator Wofford, and the other witnesses.
        Senator Wofford. Thank you.
        [The following questions were not asked at the hearing, but
    were submitted to the Corporation for response subsequent to
    the hearing:]

           Questions Submitted to the Office of the Inspector General

               Questions Submitted by Senator Christopher S. Bond

                                  OIG FUNDING
        Question. At my request, an additional $2 million in funds were
    provided in the Senate's VA/HUD bill for your office to review and
    audit state commissions. Unfortunately, only half of that increase
    survived conference. Nevertheless, I am interested to hear how these
    additional funds have been spent and if you have any preliminary
    findings you can share with us.
        Answer. The table below provides information on funding for OIG's
    state commission reviews and audits. A discussion of preliminary
    findings follows.

    ----------------------------------------------------------------------------------------------------------------
                                                                                                       Total funding
                                                                                                          for St.
                             Description                            Planned    Committed  Obligated/    commission
                                                                                           expended     surveys and
                                                                                                          audits
    ----------------------------------------------------------------------------------------------------------------
    State Commission Pre-Audit Survey Methodology...............  ..........  ..........     $12,474         $12,474
    Pre-Audit Surveys of 24 State Commissions...................  ..........  ..........     548,571         548,571
                                                                 ---------------------------------------------------
          Total Funding from Fiscal Year 1999 Appropriation.....  ..........  ..........     561,045         561,045
                                                                 ===================================================
    State Commission Audit Methodology..........................  ..........  ..........       7,400           7,400
    Pre-Audit Survey & Audit of Oregon State Commission.........  ..........    $200,000      34,986         234,986
    Audit of the Delaware State Commission......................  ..........  ..........      82,926          82,926
    Pre-Audit Surveys of 12 State Commissions...................  ..........     300,000  ..........         300,000
    Audits of 4 State Commissions...............................    $750,000  ..........  ..........         750,000
                                                                 ---------------------------------------------------
          Total Funding from Fiscal Year 2000 Appropriation.....     750,000     500,000     117,912       1,367,912
                                                                 ===================================================
          Total Funding for State Commission Pre-Audit Surveys &  ..........  ..........  ..........      1,928, 957
           Audits...............................................
    ----------------------------------------------------------------------------------------------------------------

                                   BACKGROUND
        State commissions play an important role in the oversight of
    AmeriCorps programs and expenditures. The Corporation has indicated
    that it intends to give them greater responsibility. However, the
    Corporation lacks a management information system that maintains
    comprehensive information on its grants, including those to state
    commissions and subgrantees. Moreover, although the Corporation began
    state commission administrative reviews in 1999, the Corporation,
    historically, has not carried out a comprehensive, risk-based program
    for grantee financial and programmatic oversight and monitoring. It is
    also unlikely that AmeriCorps programs are subject to compliance
    testing as part of state-wide audits under the Single Audit Act due to
    their size relative to other state programs.
        CNS OIG has initiated a series of pre-audit surveys intended to
    provide basic information on the state commissions' operations and
    funding. The surveys are designed to provide a preliminary assessment
    of the commissions' pre-award and grant selection procedures, fiscal
    administration, monitoring of subgrantees (including AmeriCorps Member
    activities and service hour reporting), and the use of training and
    technical assistance funds. The surveys are also intended to provide
    information on other audit coverage that may be afforded by the Single
    Audit Act requirements. Using this information OIG produces an initial
    risk assessment. Generally, further OIG audit work and the timing
    thereof, will be based on the information gathered during the surveys
    and the risk assessments.
        We are issuing a report to the state commission and to the
    Corporation communicating the results and making recommendations for
    improvement, as appropriate, for each pre-audit survey as well as each
    audit that we perform.

                                     STATUS
        As of May 31, 2000, we have developed the pre-audit survey
    methodology and completed field work for all 24 of the state commission
    in our first round of surveys. We have issued final reports for 12 and
    draft reports for nine. We plan to issue reports for all 24 by the end
    of this quarter. We will also perform a cross sectional analysis of the
    information we have gathered and the related findings and
    recommendations and then issue a ``capping'' report summarizing what we
    have learned.
        We have issued a statement of work for pre-audit surveys of 12
    additional state commissions and anticipate that these pre-audit
    surveys will begin in August.
        We have developed the methodology for the audits of state
    commissions and have begun full-scope audits of two state commissions.
    We plan to initiate the audits of another four state commissions during
    the final quarter of this fiscal year.

                              PRELIMINARY RESULTS
        We selected the first 24 commissions for survey work intending to
    cover large and small commissions and commissions that were considered
    by the Corporation to be well-run and those reputed to be in other
    categories. Review of the first twelve reports indicates that we
    achieved the cross section that we were seeking.
        Considering the results of the first twelve reviews, we found that
    three of the 12 commissions have established systems that provide
    reasonable assurance that pre-award and grant selection procedures,
    fiscal administration, monitoring of subgrantees (including AmeriCorps
    Member activities and service hour reporting), and the use of training
    and technical assistance funds are adequate. Our limited survey
    procedures also revealed that most of the commissions administered an
    open, competitive process to select national service subgrantees.
    However, for several state commissions, we identified areas for
    improvement related to the assessment of applicants' financial systems
    during the selection process as well as issues related to retention of
    documentation to support the grant making process. All twelve state
    commissions had established systems to provide reasonable assurance
    that training and technical assistance is made available and provided
    to subgrantees.
        On the other hand, we found that fiscal administration and
    subgrantee monitoring needed improvement at the majority of 12 state
    commissions. We made recommendations for improvement of policies and
    procedures for grant and subgranteee fiscal administration in nine of
    the 12 reports.
        Likewise, we recommended improvements in the monitoring processes
    and procedures at 11 of 12 state commissions. Most often, we were
    unable to determine the extent and effectiveness of commission
    monitoring efforts due to lack of adequate documentation. In addition
    to the specific recommendations addressed to each state commission, we
    have recommended that the Corporation revise its guidance to state
    commissions to specify minimum monitoring procedures to be performed,
    as well as minimum documentation requirements. We also found that eight
    of the 12 commissions did not routinely obtain and review, or document
    the review of, subgrantee audit reports--although the audits are
    required by Federal law and regulations.
        Finally, we confirmed our premise that, due to the size of CNS
    funding compared to that of other Federal agencies, the Single Audit
    Act audits at the state level are providing little audit coverage of
    CNS funding. Only two of the 12 commissions had been tested as major
    programs as defined by OMB Circular A-133, ``Audit of States, Local
    Governments, and Non-Profit Organizations.''

               RESPONSES BY STATE COMMISSIONS AND THE CORPORATION
        We provide drafts reports to the state commission and to the
    Corporation and consider their responses when finalizing the reports.
    Each final report includes the responses received. In some cases, the
    state commissions have disagreed with our reports, but six of the 12
    indicated that they have initiated corrective actions in response to
    our findings and recommendations.
        Because we are scheduling commissions for audit based on risk and
    are somewhat constrained by resources, each of our reports recommends
    that the Corporation follow-up to see that our recommendations have
    been appropriately implemented. The Corporation has responded to six of
    the 12 reports. The Corporation has indicated that they will consider
    the reports during their administrative monitoring and oversight
    reviews which are performed on three year cycle. The Corporation's
    response also indicates that it will request the Commissions to report
    corrective actions to them on a semiannual basis.
        Question. In the Corporation's fiscal year 2001 budget submission,
    the Corporation states that it has conducted compliance monitoring and
    oversight visits to six state commission in fiscal year 1999. Do you
    have an opinion on this?
        Answer. In my view, six in fiscal year 1999 is not enough. The
    Corporation has had a responsibility to monitor its grantees since it
    was established. Numerous OIG audit reports over the past five years
    have cited the Corporation's grant oversight as materially weak.
        The Corporation initiated its state commission administrative
    reviews in fiscal year 1999. It plans to perform such reviews on a
    three year cycle. My office has not routinely been provided with copies
    of the reports that result from the administrative reviews, nor have we
    received a schedule that indicates how the Corporation plans to
    complete the reviews of all state commissions within the three year
    cycle.

                                ROLE OF AUDITORS
        Question. Ms. Molnar, in response to a question I submitted to you
    last year, you indicated that KPMG has indicated to the Corporation
    that you were ``available to answer questions and provide technical
    advice, within reason, on a year-round basis, free of additional
    charge.'' You further stated that you would be ``willing to work with
    the Corporation on special projects to assist them in designing and/or
    implementing corrective actions to the extent such assistance would not
    impair'' your independence. However, last year, you noted that your
    advice had been sought only on a very limited basis.
        Has the Corporation taken you up on your offer more seriously since
    last year?
        What has been your experience with other agencies in this area?
        Answer. The Corporation has, from time to time, asked for our
    advice on certain technical issues. However, requests for such advice
    during fiscal year 1999 remained relatively limited. Requests for
    technical advice or assistance were made primarily related to the year-
    end general ledger closing process and financial reporting matters. For
    example, we were asked to make an independent review of the process
    used to prepare the statement of cash flows. We did so and provided our
    comments to the Corporation regarding the report format and content.
    Additionally, the Corporation asked for our concurrence with procedures
    they were planning to use in preparing accounts payable and grant
    accruals.
        KPMG's experience in this area with other agencies varies widely.
    The level of assistance requested by other agencies depends
    significantly on the level of accounting expertise contained within the
    respective agency itself and on the degree to which the agency relies
    on its own Office of Inspector General (OIG) to provide this assistance
    internally. In general, agencies try to address routine technical
    issues on their own, in collaboration with internal OIG personnel, and
    consult with KPMG on matters only during the regular audit period. In
    this way, resources for outside contracting can be reserved for any
    unusual or nonroutine matters that might arise.
                 CHEMICAL SAFETY AND HAZARD INVESTIGATION BOARD

    STATEMENT OF DR. ANDREA KIDD TAYLOR, DR.P.H., MEMBER
    ACCOMPANIED BY:
            DR. PAUL L. HILL, JR., BOARD MEMBER
            DR. GERALD V. POJE, BOARD MEMBER
            DR. ISADORE ROSENTHAL, BOARD MEMBER
        Senator Bond. We would now invite the Chemical Safety Board
    representatives to come forward.
        If you will take your seats, we will now move to the
    Chemical Safety Board, its first appearance before this
    subcommittee. We welcome Dr. Andrea Kidd Taylor, who will be
    presenting testimony on behalf of the board, Dr. Paul Hill, Dr.
    Gerald Poje, and Dr. Irv Rosenthal.
        It will come as no surprise, I trust, that I am very, very
    troubled by the lack of results from this agency in the past
    two-and-a-half years and the seemingly chaotic environment that
    apparently has existed for some time. We did not know about it
    until we read about the problems in the paper.
        Starting up a new agency is a tough task, but to have
    produced only three reports and not initiate any new
    investigations in the past year is below the level of
    acceptable. The board members implemented a new management
    structure a few months ago and are attempting to make this
    arrangement functional. We have testimony from GAO today, and
    which will be made a part of the record, in which they observed
    that the task the board has identified for this year ``are
    critical ones that the board must accomplish to demonstrate
    that it is a viable agency.''
        Frankly, it remains to be seen whether the board, working
    in the absence of the chairman and using interim operating
    procedures, can actually accomplish these tasks. At this point,
    I am not at all convinced that the agency is on a glide path to
    improved performance. I must tell you that the board members
    need to demonstrate that they can put their differences aside
    and bring about cooperation that is essential to the board's
    future.
        To obtain my support for any future appropriations, I need
    to see improvements in this agency's operations in a timely
    manner. If this does not happen, I may advocate defunding and
    disbanding this agency.
        With that, I would call on Senator Mikulski for her
    statement.
        [The information follows:]

                  [General Accounting Office, April 12, 2000]

      Chemical Safety Board Realigned Management Faces Serious Challenges

                               (By David G. Wood)

        Mr. Chairman and Members of the Subcommittee: We appreciate this
    opportunity to provide a statement for the record for use in the
    Subcommittee's hearing on the fiscal year 2001 budget request for the
    Chemical Safety and Hazard Investigation Board (the Board), an
    independent agency. Currently in its third year of operation, the
    Board's mission is to enhance the health and safety of the public,
    workers, and the environment by determining the causes of accidental
    chemical releases and using these findings to promote preventive
    actions by the private and public sectors. The authorizing statute
    provides for five Board members, including a chairperson, all appointed
    by the President. The staff includes investigators, attorneys, and
    program analysts. The Board is required to submit its budget request to
    the Congress and the Office of Management and Budget concurrently. For
    fiscal year 2001, the Board has requested $9 million, an increase of $1
    million over the prior year's funding. However, the President's Budget
    requests $8 million for the Board.
        Mr. Chairman, our statement is based on ongoing work for you and
    Senator Lautenberg. As agreed with your offices, this work is focused
    on determining the status of the Board's (1) organization; (2)
    operations; and (3) efforts to update and develop plans, policies, and
    procedures for accomplishing the Board's mission. Our statement today
    reflects our work to date and includes information supplementing our
    recent testimony for the House Appropriations Committee.\1\ We expect
    to complete our work and issue a final report in June 2000.
    ---------------------------------------------------------------------------
        \1\ Chemical Safety Board: Recent Organizational Changes and Status
    of Operations (GAO/T-RCED-00-101, Mar. 2, 2000).
    ---------------------------------------------------------------------------
        In summary, to date we have found the following:
        The Board is currently operating under a significantly different
    organizational structure than was in effect during most of its first 2
    years of operation. This new structure requires a majority vote of the
    Board members for substantive management decisions and delegates some
    specific responsibilities, such as personnel matters, to individual
    Board members. The current structure represents an interim solution to
    address two governance issues: the lack of an appointed chairperson
    since January 2000 and disagreements concerning the roles of the
    chairperson and Board members. During the first 2 years of operation,
    the Chairman had individually made substantive management decisions. In
    addition, the Board has implemented an organizational realignment that
    dedicates an increased proportion of the Board's staffing resources to
    its investigations and safety programs, rather than supporting
    activities. However, only 7 of the 17 investigative and safety
    positions are currently filled because of, among other things,
    difficulties in recruiting qualified staff.
        In terms of operations, the Board has made minimal progress in
    addressing the backlog of incomplete investigations that existed as of
    April 1999, when we last reported on the Board to this Subcommittee.\2\
    Specifically, since then, only one of nine outstanding investigations
    has been completed, and no new investigations were initiated. Most of
    the Board's current operations and plans are directed at completing its
    backlog of investigations and the related policies and procedures that
    support investigations. The Board also plans to initiate two new
    investigations and one as yet undefined safety study in fiscal year
    2000.
    ---------------------------------------------------------------------------
        \2\ Chemical Safety Board: Status of Implementation Efforts (GAO/T-
    RCED-99-167, Apr. 29, 1999).
    ---------------------------------------------------------------------------
        The Board has made some progress in developing needed plans,
    policies, and procedures, such as those for awarding and managing
    contracts. However, all of the Board's larger contracts ($100,000 or
    more) were executed before the current contracting policies and
    procedures were established. According to Board officials, the agency
    has received limited benefit from some of these contracts. For example,
    the Board is not currently using--and may never use--an information
    system that cost about $636,000 to develop. Also, the interim criteria
    for selecting incidents to investigate are not yet ready for use, and
    the Board plans to continue to work with external stakeholders
    representing companies, employees, and the public to refine the process
    for selecting incidents to investigate. We believe that the Board's
    initial steps since the management realignment appear to be
    appropriately targeted to addressing the Board's key problems. However,
    the success of these steps continues to be hampered by difficulties in
    hiring and retaining investigators.

                                   BACKGROUND
        Chemical incidents--the accidental release of toxic and hazardous
    chemicals--occur frequently and often have serious consequences.
    However, according to Board officials, reliable national statistics on
    the number of accidents, injuries, and deaths do not exist.\3\ The
    Board is an independent agency created under the Clean Air Act
    Amendments of 1990.\4\ The act directs the Board to (1) investigate and
    report on the circumstances and the probable causes of chemical
    incidents resulting in a fatality, serious injury, or substantial
    property damages; (2) recommend measures to reduce the likelihood or
    the consequences of such accidents and to propose corrective measures;
    and (3) establish regulations for reporting accidental releases.
    ---------------------------------------------------------------------------
        \3\ In 1999, the Board compiled statistics from five federal
    databases, which indicated that about 60,000 chemical incidents occur
    each year, resulting in about 2,300 injuries and more than 100 deaths.
    However, the Board recognizes there are serious limitations with these
    statistics and is developing a plan to determine a more reliable
    estimate.
        \4\ The Board did not become operational until 1998 because of
    funding constraints.
    ---------------------------------------------------------------------------
        The Board has no enforcement authority and a very limited
    regulatory role. According to a relevant legislative committee report,
    the Board is modeled after the National Transportation Safety Board,
    which retained the lead role in investigating transportation-related
    chemical incidents.
        The Board is to consist of five members, including a chairperson,
    appointed by the President and confirmed by the Senate. The chairperson
    is the Chief Executive Officer (CEO) of the Board. As of April 2000,
    the Board has four members but does not have an appointed chairperson.
        To accomplish its primary mission, the Board has conducted both
    full-scale investigations of chemical accidents as well as limited
    investigations, called reviews. In our April 1999 statement for the
    record before this Subcommittee, we identified a backlog of incomplete
    investigations. Furthermore, we determined that significant portions of
    the Board's actual and planned resources were dedicated to activities,
    such as external relations, that did not directly support the conduct
    of its investigations.

                       STATUS OF THE BOARD'S ORGANIZATION
        Recently, the Board changed its management responsibilities and
    functional alignment to address, among other things, conflicts that had
    arisen over the roles and responsibilities of the Board members.
    Specifically, in December 1999 and January 2000, the Board developed
    interim solutions to important organizational issues regarding the
    roles and the management responsibilities of the Board members. In
    addition, changes in functional alignment made in 1999 and early 2000
    increased the proportion of staffing resources to be allocated to the
    Board's primary mission of conducting investigations and reduced
    staffing allocated for other activities, such as external relations and
    information technology.

    Conflicts Arose Over the Roles and the Responsibilities of Board
            Members
        In 1999, the Chairman and the other members of the Board disagreed
    over their respective roles and responsibilities for managing the
    agency. In essence, the Chairman asserted that he had sole control over
    many significant agency decisions, while the other Board members
    believed that making these decisions was the collective responsibility
    of the Board. Consequently, the Board members did not necessarily
    support the actions taken by the Chairman. For example, they were
    concerned about the initial fiscal year 2001 budget request the
    Chairman had sent to the appropriations committees in October 1999 that
    would have doubled the Board's funding to $16 million.\5\ In addition,
    according to a Board directive, the Chairman and the Chief Operating
    Officer did not comply with requests from the other Board members for
    contracting documents that they wanted to review in order to identify
    the goods and services that had been provided under the contracts.\6\
    ---------------------------------------------------------------------------
        \5\ On November 16, 1999, the Board members sent a letter to the
    appropriations committees to state their reservations about the budget
    request and ask that the Chairman's request be disregarded.
        \6\ The former Chairman told us that he did not agree with the
    Board members' assertion that they were denied access to contracting
    files.
    ---------------------------------------------------------------------------
        The Board members asked the agency's General Counsel to provide a
    legal opinion on the roles and the responsibilities of Board members.
    In an August 1999 memorandum, the agency's Office of General Counsel
    concluded that, for a number of important agency functions, there
    should be at least some amount of shared responsibility between the
    Chairman and the other Board members. For example, the memorandum
    concluded that while the Chairman and his staff were responsible for
    preparing the agency's budget request, it must be approved by the full
    Board before being transmitted to the Congress and OMB. Similarly, the
    memorandum stated that while the use and the distribution of the
    agency's funds for contracting purposes falls within the scope of the
    Chairman's administrative functions, the exercise of this authority is
    subject to the oversight of the other Board members.
        In October 1999, the Board members accepted the General Counsel's
    opinion, but the Chairman requested further legal clarification before
    implementing the opinion. The Chairman interpreted the Board's
    authorizing statute as giving him authority, as CEO, over a number of
    agency functions, including all budget and contracting issues, subject
    to review only by the President and the Congress. In November 1999, the
    Board members requested an opinion from the Department of Justice's
    Office of Legal Counsel on the legal accuracy of the General Counsel's
    memorandum and agreed to be bound by the opinion.\7\ In addition, on
    December 1, 1999, the Chairman also requested that the Office of Legal
    Counsel review the Board's authorizing statute to determine the precise
    roles and responsibilities of the chairperson and the Board, and he
    agreed to be bound by the Office's conclusion. On the same day, the
    Chairman and the Board members developed an agreement specifying the
    interim measures to be taken until the Department of Justice provided
    its legal opinion. This agreement expanded the roles and the
    responsibilities of the Board members.\8\
    ---------------------------------------------------------------------------
        \7\ The former Chairman told us that prior to the November 1999
    letter, he sought assistance from White House officials to help resolve
    the matter. The officials referred him to Justice's Office of Legal
    Counsel.
        \8\ On December 1, 1999, Senator Lautenberg sent a letter to the
    Board stating that his understanding of the statute creating the Board
    was that it intended the Board as a whole to direct and approve the
    executive and administrative functions performed by the chairperson.
    ---------------------------------------------------------------------------
        The Board's disagreement about its governance became a matter of
    public record, reported in newspapers and periodicals. In January 2000,
    the Chairman submitted his resignation as Chairman and CEO, effective
    January 12, 2000, but retained his position as a Board member. The
    President has not appointed a new chairperson, and the Board is
    currently operating without a chairperson and CEO.
        On January 14, 2000, the Board members established and implemented
    interim operating procedures that delineate their roles and
    responsibilities whenever the position of chairperson is vacant. The
    procedures delegate specific responsibilities, such as personnel
    matters and allocating resources, to individual Board members. In
    addition, the procedures identify the specific responsibilities,
    including developing budgets and awarding contracts exceeding $10,000,
    that require a majority vote of the Board members for approval.
    Current Functional Alignment Emphasizes Investigations, but Many
            Positions Are Vacant
        During fiscal year 1999 and the early part of fiscal year 2000, the
    Board made organizational changes to better carry out its mission.
    Among other things, the Board increased the proportion of staffing
    resources to be allocated to its investigative function. However,
    because of difficulties in recruiting qualified staff, many vacancies
    exist in the Office of Investigations and Safety Programs. The Board
    also shifted several key personnel. The former Chief Operating Officer
    has been assigned to an interim position of special assistant to a
    Board member, and the General Counsel is assuming the position of Chief
    Operating Officer in addition to his legal responsibilities. Also, on
    February 2, 2000, the Board named a staff member to the position of
    Director of the Office of Investigations and Safety Programs.
    Increased Resources Allocated for Investigations and Safety
        Currently, the Board has 24 staff, including the 4 Board members
    and a special assistant to the Board. The Board expects to grow to a
    staff of 40 by the end of fiscal year 2000, with almost all of the
    growth in the areas of investigations and safety. Table 1 identifies
    the Board's offices and staffing allocations, both current and planned.

         TABLE 1.--THE BOARD'S CURRENT AND PROJECTED STAFFING LEVELS, BY
                     FUNCTIONAL OFFICE, AS OF APRIL 7, 2000
    ------------------------------------------------------------------------
                                                                   Projected
                                                                   staffing
                          Office                         Current  by the end
                                                        staffing   of fiscal
                                                                   year 2000
    ------------------------------------------------------------------------
    Board members and staff...........................         5       \1\ 7
    Chief Operating Officer...........................     \2\ 1           2
    Investigations and Safety Programs................         7          17
    General Counsel...................................     \2\ 3           3
    External Relations................................         2           2
    Information Technology Services...................         2           4
    Administration....................................         4           5
                                                       ---------------------
          Total.......................................        24         40
    ------------------------------------------------------------------------
    \1\ Currently, the Board has four members and one special assistant.
      Projected staffing includes the fifth Board member as provided by the
      Board's authorizing statute.
    \2\ The head of the Office of General Counsel also serves as the Chief
      Operating Officer. This individual is included only in the staffing
      allocated to the Office of General Counsel.

        The projected staffing differs markedly from the staffing
    associated with the Board's budget request for fiscal year 2000.
    Specifically, in February 1999, the Board expected to grow to a staff
    level of 60 by the end of fiscal year 2000, compared with current plans
    to grow to 40 staff.\9\ In addition, last year a greater proportion of
    staff was planned for organizational units that did not directly
    support the Board's investigative mission. For example, last year, 33
    percent of the Board's projected staffing resources at the end of
    fiscal year 2000 was allocated to investigations and safety programs,
    compared with the current projections of 43 percent. Currently, the
    Board plans to allocate two staff to the Office of External Relations
    compared with the planned allocation of nine staff a year ago.
    ---------------------------------------------------------------------------
        \9\ The Board's budget request for fiscal year 2000 was $12.5
    million. However, the Congress provided $8 million for fiscal year
    2000. This amount does not support the planned staffing growth to 60
    staff.
    ---------------------------------------------------------------------------
    Vacancies Exist in the Investigations Area
        As shown in table 1, 10 of the 17 positions planned for the Office
    of Investigations and Safety Programs are vacant. Six of the positions
    are for investigators, and the other vacancies are for two program
    analysts, one library/researcher, and one administrative assistant.
    Board officials told us that the vacancies exist because of recruitment
    difficulties and the loss of two investigators. According to the Board,
    potential recruits with the requisite chemical safety skills--primarily
    from the oil and chemical process industries--are highly paid and
    typically located in areas far from Washington, D.C. Board officials
    said that it has been difficult to get prospective staff to relocate.
    In addition, the Board has found that it takes 6 months or longer to
    recruit and hire staff. This time frame for hiring staff is longer than
    the Board anticipated. Moreover, according to Board officials, one
    investigator resigned and another was terminated.
        The newly constituted Board has stated its intent to focus on
    personnel management issues in fiscal year 2000. The Board will
    concentrate on retaining and retraining current staff and on hiring and
    training qualified professional staff. Specifically, the Board has
    identified development of hiring and training plans as priorities for
    fiscal year 2000.\10\ The Office of Personnel Management (OPM) approved
    the Board's March 17, 2000, request to reinstate through December 2000
    special hiring authority (termed Schedule A) that the Board had been
    granted previously. According to Board officials, this special hiring
    authority, which it had until December 31, is typically granted to new
    federal agencies for a limited time period and expedites the hiring
    process.
    ---------------------------------------------------------------------------
        \10\ As of March 2000, the Board has identified eight priorities
    for fiscal year 2000. The other six priorities--completing three
    investigative reports, revising its investigation protocol and incident
    selection criteria, and initiating new investigations--are discussed in
    the following sections.
    ---------------------------------------------------------------------------
        In its letter to OPM requesting special hiring authority, the Board
    stated that it had an urgent need to expedite the hiring of
    investigative and safety personnel to complete its work backlog. The
    Board's letter stated that with some of its investigations more than 2
    years old, it is under pressure from the Congress, stakeholders, and
    the public to complete the eight outstanding investigations as soon as
    possible. The letter acknowledged that the Board could face serious
    consequences, including the possible loss of funding, if it does not
    hire the additional staff needed to make substantive progress on its
    investigative backlog.
        In its fiscal year 2001 budget request, the Board acknowledged that
    it may not be able to achieve its fiscal year 2000 hiring goals. The
    Board has also acknowledged that the governance problems and the
    management difficulties stemming from them contributed to staff
    turnover.\11\ In addition, the Board believes that more initiatives
    than the agency could effectively handle were undertaken hastily in its
    first year of operation in an effort to quickly demonstrate that the
    Board was meeting its congressional mandate.
    ---------------------------------------------------------------------------
        \11\ In addition to the loss of two investigators, Board officials
    said that five staff from other offices have resigned from the Board.
    ---------------------------------------------------------------------------

                        STATUS OF THE BOARD'S OPERATIONS
        The Board has not made progress in addressing its investigations
    backlog this past year and has not initiated a new investigation since
    March 1999. In addition, the more limited review program was terminated
    because of problems encountered in performing these reviews. The Board
    plans to initiate two investigations in fiscal year 2000 and four or
    five investigations each year beginning in fiscal year 2001. Similarly,
    in fiscal year 2000 the Board plans to initiate a safety study to
    better understand the nature and causes of specific safety problems
    that are beyond the scope of any one particular incident under review
    and another safety study next year. Also, contracting activities have
    primarily supported information technology and investigations, but
    according to Board officials, the agency has received limited benefits
    for some of its contracts. To avoid contracting for work of limited
    utility, the Board decided to require a majority vote of the Board
    members to execute small as well as large contracts that is, approval
    is required for contracts exceeding $10,000.
    Progress Has Been Slow in Initiating and Completing Investigations
        The Board investigates accidental chemical releases resulting in a
    fatality, serious injury, or substantial property damage. These
    investigations often involve extensive site visits, evidence
    collection, and analytical work. The Board started five full-scale
    investigations in 1998 and six in 1999, although none have been
    initiated since March 1999. Of the 11 investigations, 3 from 1998 have
    been completed. One report has been completed since March 1999.
        Draft reports are in process for three investigations that were
    started in March 1998, April 1998, and March 1999. Completion of these
    reports by September 30, 2000, represents three of the Board's eight
    priorities for fiscal year 2000. The Board has not determined what
    decisions it will make concerning the other five outstanding
    investigations. Alternatives include developing investigative reports,
    issuing summary reports, or concluding the investigations without
    reports. In addition to the personnel issues discussed above, the Board
    believes one of the causes of the investigations backlog was an over
    reliance on contractors to investigate accidents. According to the
    Board, this over reliance on contractors resulted in some poor
    investigations and reports because of insufficient Board staff or
    inadequate procedures to monitor the contractors' personnel to ensure
    their activities met the Board's investigative needs.
        In terms of future investigations, the Board plans to initiate two
    investigations during fiscal year 2000 and four or five investigations
    each year beginning in fiscal year 2001.
    Review Program Has Been Terminated
        The more limited review program was developed to provide
    information to prevent future incidents by using an approach that was
    less resource-intensive than full investigations. The protocol for
    these reviews provided for a limited, office-based review of
    investigative reports prepared by the organizations that responded to
    the incident. The Board initiated a total of 23 reviews in 1998 and
    1999. However, Board officials told us that they effectively terminated
    this program in July 1999 when they decided to add the factual data
    about these reviews to an existing incidents database maintained by the
    Board and that the program was officially terminated in September 1999.
    This decision was made because of problems encountered in performing
    these reviews, including the longer-than-anticipated time spent in
    collecting the information and drafting the reports as well as the
    possibility of duplicating work done by other government agencies.
    Safety Studies Planned
        Although they are not among the Board's eight identified priorities
    for fiscal year 2000, 6 percent of its fiscal year 2000 funding
    $488,000 and seven percent of the Board's budget request for fiscal
    year 2001 $670,000 are allocated for special safety studies and
    technical guidance. The Board plans to use safety studies to better
    understand the nature and causes of specific safety problems that are
    beyond the scope of any one incident under investigation. The Board
    plans to initiate one safety study in fiscal year 2000 and another in
    fiscal year 2001. As of March 2000, the Board had not selected the
    study to be initiated this fiscal year, but officials said it would
    likely evolve from one of the three investigations to be completed in
    fiscal year 2000. Board officials said that safety studies selected
    would likely stem from research needs identified in recommendations
    developed by the Board in its investigative reports. They indicated
    they would receive, at a minimum, input from other parties to ensure
    the studies are useful.
    Limited Benefits for Some Contracting Activities
        Since it began operations in January 1998, the Board has obligated
    about $4.7 million to 16 contracts of $100,000 or more.\12\ A
    significant portion--$2.4 million--of these contracting obligations
    have supported information technology, such as the creation of data
    systems and databases, compared with $1.4 million for investigative
    support (see app. I). These activities were contracted before the
    management alignments in December 1999 and January 2000 and the
    establishment of contracting policies and procedures in December 1999.
    Prior to the management alignment, contracting actions were the
    responsibility of the former Chairman and the former Chief Operating
    Officer, and the other Board members did not have a role in reviewing
    or approving contracts. In addition, these contracts were made prior to
    being directed--in the House conference committee report accompanying
    the Board's fiscal year 2000 appropriations bill--to spend the
    preponderance of its resources, including contract resources, on
    investigations and safety instead of on information technology or
    external affairs.
    ---------------------------------------------------------------------------
        \12\ Contracts for office space or telephone charges are not
    included.
    ---------------------------------------------------------------------------
        According to Board officials, the agency has received limited
    benefits for some of its contracting activities. For example, the Board
    is not currently using--and may never use--the $636,000 Incident and
    Investigation Information System developed by Oak Ridge National
    Laboratory in 1999 that would catalog information from the Board's
    accident investigations. The officials said that the investigators and
    safety program staff who would use this system had limited input into
    its design. According to Board officials, the system is overly complex
    and an off-the-shelf database may better meet the Board's needs. While
    the Board plans to formally evaluate the system to determine its value
    to the Board, this evaluation is on indefinite hold because of higher
    priority work for fiscal year 2000.
        In addition, Board officials acknowledged that other contracting
    activities may be of limited value to the Board, such as:
        Baseline of Chemical Accidents.--The Board spent more than $450,000
    under two contracts to develop a 10-year baseline of chemical
    accidents. However, the Board believes these statistics have serious
    data quality limitations and is developing a plan to determine a more
    reliable estimate of the universe of chemical accidents.
        Pressure Relief Systems.--The Board paid about $326,000 for
    information on pressure relief systems that are used in chemical
    processing operations. Board officials said that the information from
    the study appears to be of limited use to them. A Board member stated
    that while the contract was designed to assist the Board's
    investigators and safety staff in their work, the contract proposal was
    not reviewed by the Board members or the safety and investigations
    staff for design, purpose, and outcomes. As a result, the product is of
    lesser value than could have been attained if input from the users and
    the Board members had been obtained. The Board member said that the
    other pressing priorities have precluded them from completing their
    review of the information provided under the contract. He said,
    however, that the agency needs to develop procedures for the internal
    technical review of goods and services provided to the Board under
    contracts.
        As discussed earlier, Board officials also believe that the agency
    relied too heavily on contractors to investigate accidents, resulting
    in some poor investigations and reports. They attribute this primarily
    to insufficient Board staff or inadequate procedures to monitor the
    contractors' personnel to ensure their activities met the Board's
    investigative needs.
        In addition, given its limited productivity and workload
    challenges, we have questions about the Board's use of funds to develop
    an informational video demonstrating the Board's purpose and
    activities. To date, the Board has paid $80,000 of the $160,000
    obligated in 1998 for the video. One Board member told us that he did
    not believe it was appropriate to develop a video at this time. In
    response to our questions about the views.14 of the Board members on
    the need for a video, he said he would raise this issue at the next
    meeting of the Board.
        In January 2000, to ensure that future contracting activities
    contribute to their overall goals, the Board approved interim operating
    procedures that require contracts exceeding $10,000 be approved by a
    majority vote of the Board members. In addition, one Board member is
    assigned the responsibility for supervising the use and expenditure of
    funds, including authorizing contracts between $2,500 and $10,000. A
    Board member said that this new policy will provide greater
    transparency of proposed contracting actions and avoid contracting for
    work of limited utility to the Board. In addition, the Board is
    changing the way it uses contracting support for its investigations.
    Rather than retaining contractors to perform the investigations, the
    Board is contracting for specific expertise or tests needed for
    investigations that are led by Board investigators.

     STATUS OF THE BOARD'S EFFORTS TO UPDATE AND DEVELOP PLANS, POLICIES,
                                 AND PROCEDURES
        In our April 1999 statement for this Subcommittee, we identified
    two concerns about the Board's actions.\13\ One concern related to the
    backlog of investigations and the fact that the Board had not updated
    its initial business plan to reflect the backlog and examine how to
    address this problem, for example, by reallocating existing and planned
    resources. The second concern stemmed from the problems with
    contracting that developed shortly after the Board began operations. We
    indicated the need for formal procedures for its staff to follow in
    awarding and managing contracts. As discussed earlier, the House
    conference committee report accompanying the Board's fiscal year 2000
    appropriations act directed the Board to spend the preponderance of its
    resources, including contract resources, on investigations and safety
    instead of on external affairs or information technology. This report
    also directed the Board to complete, by December 31, 1999, an updated
    business plan, formal policies and procedures for awarding and managing
    contracts, and formal procedures for selecting and performing
    investigations. The Board has made some progress in complying with
    these directives. Specifically,
    ---------------------------------------------------------------------------
        \13\ See footnote 2.
    ---------------------------------------------------------------------------
        On December 27, 1999, the Board issued formal written procedures
    for awarding and managing contracts. Also, as discussed above, in
    January 2000, the Board approved procedures that include requiring
    contracts exceeding $10,000 be approved by a majority vote of the Board
    members.
        On December 27, 1999, the Board issued interim procedures for
    selecting incidents to investigate and an interim investigative
    protocol for conducting accident investigations. As of March 2000, the
    interim selection criteria are being reviewed and thus are not ready
    for use in selecting incidents to investigate. The Board plans to
    revise the process for selecting incidents to investigate, continuing
    to work with stakeholders from industry, public interest groups,
    government agencies, and labor unions. Similarly, the Board plans to
    revise its investigation protocol through reviews with stakeholders and
    external experts on investigative practices. These efforts are among
    the Board's eight priorities for fiscal year 2000.
        The Board requested an extension of time in developing an update to
    its business plan because of the former Chairman's announced
    resignation from that position and the related governance issues. This
    update will be accomplished by the development of strategic and
    performance plans required by the Government Performance and Results
    Act. On February 7, 2000, the Board provided a performance plan for
    fiscal year 2001 along with its budget request for fiscal year 2001.
    The Board plans to develop a strategic plan by September 2000.

                                  OBSERVATIONS
        The governance issues that arose in 1999 limited the Board's
    ability to effectively address the problems that we identified almost a
    year ago--the backlog of investigations and the lack of key plans,
    policies, and procedures to guide this new agency. The Board's initial
    steps since the management realignments in December 1999 and January
    2000 appear to.16 be appropriately targeted to addressing these issues.
    The priorities the Board has established for (1) hiring and training
    staff and (2) completing investigations and key policies and procedures
    to support the selection and conduct of investigations are critical
    ones that the Board must accomplish to demonstrate that it is a viable
    agency capable of accomplishing its important safety mission in an
    efficient and effective manner. Along these lines, the Board's decision
    to review and approve contracts appears prudent given the amount of
    money that has been spent on contracting activities without apparent
    direct or immediate benefit to the Board.
        The Board is facing many challenges as it seeks to accomplish a
    number of important tasks with a limited number of personnel to conduct
    them. While the Board plans to provide more resources to its
    investigations and safety programs, it is not clear how the backlog
    will be addressed or when the agency will be in a position to
    realistically initiate any new investigations. The Board's progress in
    these areas is limited by difficulties in hiring and retaining
    investigators and the need to dedicate some of these resources to other
    priorities, such as revising accident selection criteria and the
    investigation protocol and developing its strategic plan. Finally, in
    our view, initiating a safety study this year does not appear essential
    to the operations of the Board in the short run--as it seeks to
    establish its credibility--and will divert resources from its
    priorities.

                             SCOPE AND METHODOLOGY
        To review the status of the Board's efforts to carry out its
    mission, we reviewed documents supplied by the Board related to its
    organization, planning, budgeting, and programs; personnel data; and
    contract files. We also interviewed Board employees, including Board
    members, attorneys, and investigators. We discussed the contents of
    this statement with Board members, the Chief Operating Officer, and
    other Board staff, who generally agreed with the facts presented. Based
    on our discussions, we made revisions as appropriate to reflect the
    clarifications the Board requested. We conducted our work between
    January and April 2000 in accordance with generally accepted government
    auditing standards.

                          CONTACT AND ACKNOWLEDGEMENTS
        For additional information, please contact David G. Wood at (202)
    512-6111. Individuals making key contributions to this statement
    included Gregory Carroll, Harriet Drummings, and Christine Fishkin.
                                     ______

                                   Appendix I

                        Chemical Safety Board Contracts

        The Chemical Safety and Hazard Investigation Board has contracted
    with a number of vendors since it became operational in fiscal year
    1998 using contracts, purchases orders, and agreements. The contracts,
    purchase orders, and agreements of $100,000 or more (excluding those
    for office space and telephone charges) are identified in table 2. The
    Board obligated about $4.7 million under these contracts in fiscal
    years 1998, 1999, and 2000 (up to March 1, 2000). Only one contract
    over $100,000 has been executed in fiscal year 2000. As of March 1,
    2000, total expenditures under these contracts were about $3.5 million.
    The contracts in table 2 are categorized according to (1) information
    technology, database, and network support; (2) investigative support;
    and (3) other activities.

      TABLE 2.--TOTAL OBLIGATIONS AND EXPENDITURES FROM JANUARY 1998 THROUGH MARCH 1, 2000, FOR CONTRACTS, PURCHASE
                                       ORDERS, AND AGREEMENTS OF $100,000 OR MORE
    ----------------------------------------------------------------------------------------------------------------
                                                                                            Total          Total
                        Vendor                                Description \1\            obligations   expenditures
    ----------------------------------------------------------------------------------------------------------------

     Information technology, database, and network

    Oak Ridge National Laboratory (ORNL) \1\ \2\..  Information Technology                  $658,000        $636,000
                                                     Infrastructure. Identify
                                                     functional requirements and
                                                     develop the Investigation and
                                                     Incident Notification System to
                                                     capture information developed and
                                                     collected from investigations.
    Tri-Data......................................  Establishment of chemical incident       350,000         350,000
                                                     baseline and database. Analyze and
                                                     prepare a summary report on 10
                                                     years of data from five federal
                                                     agencies' databases to establish a
                                                     chemical incident baseline.
    ORNL \1\ \2\..................................  Technical support. Assist the Board      332,000          60,000
                                                     with library and research work,
                                                     and regulatory analyses. Strategic
                                                     Plan. Assist in the development of
                                                     a 5-year information technology
                                                     plan.
    AAC Associates................................  Network/Helpdesk Support. Provide a      308,000          39,000
                                                     senior engineer and support
                                                     specialist to cover helpdesk
                                                     support and local area network
                                                     support.
    Bell Atlantic.................................  Internet and Intranet web site.          231,000         223,000
                                                     Provide one dedicated staff to
                                                     develop, manage, and administer
                                                     the web database.
    Federal Emergency Management Agency...........  Internet service. Host, update, and      137,000         137,000
                                                     administer the Board's web site
                                                     and e-mail. Provide a 24-hour, 7
                                                     days-a-week communications center.
    Bell Atlantic.................................  Helpdesk support. Provide helpdesk       130,000         116,000
                                                     support and local area network
                                                     support.
    General Service...............................  Administration Database support.         120,000          51,000
                                                     Provide one dedicated database
                                                     administrator/developer to
                                                     develop, manage and administer
                                                     database requirements, including
                                                     technical support.
    Dun & Bradstreet..............................  Baseline study support. Assist the       108,000         108,000
                                                     Board in improving the data
                                                     quality of the five databases used
                                                     to develop a universe of chemical
                                                     incidents for 1987 to 1996.
                                                                                        ----------------------------
          Subtotal................................  ...................................    2,374,000       1,720,000
                                                                                        ============================
                 Investigative support

    ORNL \1\ \2\..................................  Investigative support. Assist the      1,006,000         799,000
                                                     Board in conducting several
                                                     investigation.
    Battelle......................................  Investigative support. Assist the        410,000         385,000
                                                     Board in conducting the Sierra
                                                     Chemical investigation in Nevada.
                                                                                        ----------------------------
          Subtotal................................  ...................................    1,416,000       1,184,000
                                                                                        ============================
                   Other activities

    ORNL \1\ \2\..................................  Study. Develop training program and      300,000         326,000
                                                     reference materials on process
                                                     pressure relief systems since many
                                                     incidents that occur are due to
                                                     inadequate assessment, design, and
                                                     installation of these systems.
    Bureau of Public Debt.........................  Furniture, equipment and support.        255,000          33,000
                                                     Provide furniture and equipment in
                                                     addition to technical support
                                                     services and organizational
                                                     development.
    Rowland Productions...........................  Informational video. Provide a           160,000          80,000
                                                     video to publicize the Board's
                                                     purpose and activities.
    National Ground Intelligence Center...........  Software development. Develop a          100,000         100,000
                                                     civilian version of military
                                                     intelligence software to help
                                                     facilities determine where safety
                                                     systems were prone to failure and
                                                     how to best address the problems.
                                                     Initially planned as a multi-year
                                                     effort, this contract has been
                                                     suspended.
    FPMI Communications, Inc......................  Resources support. Provide a full        100,000          19,000
                                                     spectrum of personnel management
                                                     services, including but not
                                                     limited to, writing position
                                                     descriptions and preparing
                                                     recruiting analyses and
                                                     recommendations.
                                                                                        ----------------------------
          Subtotal................................  ...................................      915,000         558,000
                                                                                        ============================
          Total...................................  ...................................    4,705,000       3,462,000

    ----------------------------------------------------------------------------------------------------------------
    Note: Dollar amounts rounded to the nearest thousand. Obligations over $100,000 for office space and telephone
      charges are not included.

    \1\ ORNL conducts work for the Board under one agreement with specific tasks. The Board has been unable to
      confirm the costs associated with some of the tasks listed in the table. The Board has found discrepancies
      between the monthly cost reports received from ORNL for work performed on specific tasks and the monthly
      billing amounts. It is currently attempting to reconcile these differences. For example, expenditures appear
      to exceed obligations for the task relating to the study on pressure relief systems, but actual expenditures
      have not yet been confirmed. Because of these problems, on February 15, 2000, the Chief Operating Officer
      instructed ORNL to stop all work under the agreement temporarily.
    \2\ All expenditures are as of March 1, 2000, except for Oak Ridge National Laboratory, which is as of March 7,
      2000.

        Senator Mikulski. Well, thank you very much, Mr. Chairman.
    I know we have a lot of ground to cover with this panel.
        I would like to bring to your attention that Dr. Andrea
    Kidd Taylor is a Marylander and a graduate of our great School
    of Public Health at Hopkins. And I know she and the others will
    bring their views on really how to improve the Chemical Safety
    and Hazard Board.
        I agree the mission of the board is important. And we have
    to then see really how we are going to implement this mission
    and how we are going to be able to move forward. So rather than
    us talking, I think we should move right to the testimony.
        Senator Bond. Thank you, Senator Mikulski.
        Dr. Taylor.

                        STATEMENT OF ANDREA KIDD TAYLOR

        Dr. Taylor. Thank you. Mr. Chairman, Senator Mikulski, I am
    honored to come before you today representing my fellow board
    members in support of the U.S. Chemical Safety and Hazard
    Investigation Board's fiscal year 2001 appropriations request.
    Seated at the table with me are my colleagues on the Board. To
    my immediate left and your immediate right is Dr. Paul Hill. To
    my right, immediate right, Dr. Gerald Poje. And to my far
    right, Dr. Isadore Rosenthal. My comments are those of the full
    board.
        Mr. Chairman, as I begin my abbreviated remarks on behalf
    of my colleagues, I ask that the board's previously submitted
    and more detailed written testimony be entered into the record.
        Senator Bond. Without objection, it will be. Thank you.

                            FISCAL YEAR 2001 REQUEST

        Dr. Taylor. In fiscal year 2001, the CSB is seeking an
    appropriation of $9 million, which represents an increase of $1
    million over our fiscal year 2000 appropriation. This amount
    represents the funding necessary for the board to maintain a
    stable operating program and perform a modest number of
    incident investigations. It will also allow the board to
    evaluate and revise its incident selection criteria,
    investigation protocol, and procedures for tracking
    recommendations.
        In addition, the board will be able to initiate one safety
    study to complement its investigation and related activities
    Finally, the increase will permit the board to conduct monthly
    public meetings and hire two additional staff members in its
    Office of Investigations and Safety Programs.
        The mission of the board is no less critical now than it
    was in 1990, when it was first created in legislation. Chemical
    incidents are costly, both in economic and human terms.
    According to a recent study of more than 14,000 facilities that
    filed risk management plans under the EPA's new risk management
    program, less than 10 percent of these facilities reported
    1,900 major chemical release accidents over the 5-year period.

                           CHEMICAL INCIDENT'S COSTS

        Nearly 1,900 injuries and 33 deaths to workers resulted
    from these incidents. Members of the insurance industry have
    recently estimated direct losses from chemical releases within
    the purview of the CSB as being about $1 billion per year.
        Just 3 months ago, the chairman and chief executive officer
    of the board resigned his position. This change in management
    represented an opportunity for the board to refine its vision,
    structure and mode of operation to achieve its mission. As a
    part of the effort, the board is reassessing the manner in
    which it both defines and performs its mission and concurrently
    is implementing changes derived from such evaluations.
        The mission of the U.S. Chemical Safety and Hazard
    Investigation Board is to enhance the health and safety of
    workers and the public and to protect the environment by
    uncovering the underlying causes of accidental chemical
    releases and using these findings and supporting research to
    promote preventive actions by both the private and public
    sectors.
        The mission is accomplished by conducting state-of-the-art
    investigations, producing high-quality investigation reports,
    conducting hazard safety and data studies, issuing targeted
    recommendations, and advocating effectively for these
    recommendations.

                           EMPHASIS ON INVESTIGATIONS

        As you review the fiscal year 2001 budget request, you will
    see that it precisely tracks our stated objectives and
    priorities. The emphasis is on funds and personnel necessary
    for the conduct of investigations and safety program
    activities. This emphasis began this year and is carried
    forward in our fiscal year 2001 budget request.
        Specifically in fiscal year 2001, we propose devoting 19.2
    work years and just under $4.2 million for incident
    investigation and related activities. This compares with 10.7
    work years and just under $2.5 million in fiscal year 1999. A
    similar increase in special safety studies and technical
    guidance is proposed in fiscal year 2001, where 4.1 work years
    and $670,000 is proposed compared to 1 work year and $284,000
    in fiscal year 1999.
        We have also decreased the resources devoted to areas not
    directly supporting the conduct of investigations in the area
    of technical information and assistance from 4.1 work years and
    slightly over $1 million in fiscal year 1999 to 2.7 work years
    and $730,000 in fiscal year 2001.

                                 STRATEGIC PLAN

        The CSB is in the process of developing a strategic plan
    that will describe in detail the goals, objectives and
    performance measures that will help it attain this goal. In the
    interim, CSB's annual performance plan sets forth two strategic
    goals. First, to reduce the reoccurrence of chemical incidents
    addressed by the board and minimize the adverse effects on
    life, health and property. Second, to be a progressive 21st
    century Federal agency, which facilitates the accomplishment of
    the board's mission.
        The specific performance goals associated with these two
    strategic goals are detailed both in our written testimony and
    the fiscal year 2001 performance plan, both of which have been
    previously submitted to the subcommittee.
        Following the leadership changes in January of this year,
    the board restated the board's mission as a basis for
    restructuring its priorities, this year establishing a better
    foundation for its activities in fiscal year 2001 and beyond.
        In directing more focused activities in fiscal year 2000,
    the board has adopted eight critical objectives in order to
    achieve its mission this fiscal year. They are detailed in our
    written testimony. Our struggles have been offset by
    significant successes and, of course, lessons learned.

                              REACTION TO REPORTS

        Our completed incident investigation reports and safety
    study have been widely applauded for their scientific
    correctness, their readability and usability and applicability
    and practicality of their safety recommendations.
    Significantly, we can point to acceptance and use of the safety
    recommendations by State governors, legislators, trade
    associations, companies and emergency responders.
        For example, on January 7, 1998, two explosions in rapid
    succession destroyed the Sierra Chemical Company Kean Canyon
    plant near Mustang, Nevada, killing four workers and injuring
    six others.
        Based on the board's findings, Nevada's occupational safety
    and health enforcement section, which enforces Federal safety
    regulations, increased the frequency of safety inspections at
    explosives facilities. The governor's executive order mandated
    safety inspections of explosives manufacturing facilities at
    least twice a year. Furthermore, in May 1999, the governor
    signed four additional measures aimed at improving safety of
    facilities where hazardous substances are produced.
        On March 27, 1998, one Union Carbide worker was killed, an
    independent contractor was seriously injured, due to nitrogen
    asphyxiation. The Hazardous Materials Training Department of
    the International Association of Fire Fighters, a labor union
    representing more than 225,000 professional career fire
    fighters and emergency medical personnel, used the board's
    report as an interactive case study on its distance learning
    website.
        On April 9, 1998, at the Herrig Brothers Farm in Albert
    City, Iowa, two volunteer firefighters were killed and seven
    other emergency response personnel were injured. In response to
    a CSB recommendation, the National Propane Gas Association
    improved their emergency response training materials to better
    address the hazards of BLEVEs, an especially dangerous type of
    explosion.
        In addition, the Fire Service Institute of Iowa State
    University revised their training program to provide better
    guidance for responding to BLEVEs. At the request of Congress,
    the board led a multi-stakeholder special safety study
    initiative to build awareness of Y2K chemical safety problems.
        We collaborated with the chemical industry, particularly
    small-and medium-sized enterprises, warning them of the
    potential for Y2K-related computer problems that might lead to
    an accidental chemical release. The board also testified before
    Congress.

                               PREPARED STATEMENT

        Mr. Chairman, Senator Mikulski, and members of the
    subcommittee, this morning and through our written testimony,
    we have shared with you an assessment of both the board's
    accomplishments, problems to date. We have charted a new
    course, guided by all of the members of the board and supported
    by professional staff. We have obtained the support of key
    stakeholders and request the continued support of this
    subcommittee.
        Thank you.
        [The statement follows:]

                    Prepared Statement of Andrea Kidd Taylor

        Mister Chairman, Senator Mikulski and other Distinguished Members
    of the Subcommittee: I am honored to come before you today representing
    my fellow board members in support of the U.S. Chemical Safety and
    Hazard Investigation Board's (CSB, or the Board) fiscal year 2001
    appropriations request. Seated at the table with me are my colleagues
    on the Board, Dr. Paul L. Hill, Jr., Dr. Gerald V. Poje, and Dr.
    Isadore Rosenthal. My comments are those of the full Board.
        In fiscal year 2001, the CSB is seeking an appropriation of $9
    million, which represents an increase of one million dollars over our
    fiscal year 2000 appropriation.\1\ This amount represents the funding
    necessary for the Board to maintain a stable operating program and
    perform a modest number of incident investigations. It will also allow
    the Board to evaluate and revise its incident selection criteria,
    investigation protocol, and procedures for tracking recommendations. In
    addition, the Board will be able to initiate one safety study to
    complement its investigation and related activities. Finally, the
    increase will permit the Board to conduct monthly public meetings and
    hire two additional staff members in its Office of Investigations and
    Safety Programs.
    ---------------------------------------------------------------------------
        \1\ As stated in its enabling statute, the Board, as an independent
    agency, is authorized to submit its own budget request directly to the
    Congress, simultaneously transmitting a copy to the Executive Branch.
    ---------------------------------------------------------------------------
        In this testimony, the CSB will present how it plans to responsibly
    move forward to provide value to the public in contributing to the
    prevention of chemical incidents and minimization of their effects, and
    how it has worked towards fulfilling its mission, including its
    successes and struggles in this regard.

                     HUMAN AND FINANCIAL COSTS OF INCIDENTS
        The mission of the Board is no less critical now than it was in
    1990 when it was first created in legislation. Chemical incidents are
    costly both in economic and human terms. According to a recent study by
    the Wharton Center for Risk Management and Decision Processes,\2\ of
    14,500 facilities that filed risk management plans in 1999 under the
    EPA's new Risk Management Program (RMP) rule 1,145 of these facilities
    (7.9 percent) reported 1,913 major chemical release accidents over the
    five-year period from June 21, 1994 through June 20, 1999.\3\ A total
    of 1,897 injuries and 33 deaths to workers/employees resulted from
    these incidents.
    ---------------------------------------------------------------------------
        \2\ P. Kleindorfer, H. Feldman, and R. Lowe. Accident Epidemiology
    and the U.S. Chemical Industry. Preliminary Results from RMP*Info.
    Working Paper 00-01-15. Center for Risk Management and Decision
    Processes. The Wharton School, University of Pennsylvania.
    Philadelphia, Pennsylvania. 1999.
        \3\ The RMP rule covers a wide range of industries including
    chemical manufacturing, petroleum, refining and processing industries,
    agriculture, pulp and paper mills, food processors, warehouses, and
    water treatment plants. Facilities are required to submit a risk
    management plan for processes that fall in one of the covered SIC codes
    and if the process contains a threshold quantity of one of the
    regulated toxic or flammable chemicals listed in 40 CFR Sec. 68.130,
    Regulated Substances for Accidental Release Prevention.
    ---------------------------------------------------------------------------
        Members of the insurance industry have recently estimated direct
    losses from chemical releases within the purview of the CSB as being
    about $1 billion per year.
        This information was presented at a Roundtable meeting sponsored by
    the National Safety Council on October 6, 1999. Discussion by business
    members after this presentation noted that neither retained company
    losses (deductibles), losses by companies that were self-insured, or
    indirect losses were included in this total. If such losses were taken
    into account the number would be conservatively estimated at least
    three to four times larger or three to four billion dollars annually.
    Independent analysis by another insurance company after the October 6th
    meeting confirmed these loss estimates.\4\
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        \4\ A paper on this work will be presented publicly at an
    international conference sponsored by the Center for Chemical Process
    Safety (CCPS) meeting in October of this year.
    ---------------------------------------------------------------------------

                          REFINING THE BOARD'S MISSION
        Just under two months ago the Chairman and Chief Executive Officer
    of the Board resigned his position. This change in management
    represented an opportunity for the Board to refine its vision,
    structure, and mode of operation to achieve its mission. As part of the
    effort, the Board is reassessing the manner in which it both defines
    and performs its mission, and concurrently is implementing changes
    derived from such evaluations.
        As one of the first steps towards evaluation and improvement, the
    Board reviewed the mission statement that was created when we began
    operations in January 1998. The Board considered this evaluation a
    priority since this statement drives the strategic planning and
    functional structure of the Board. In revising the mission statement,
    the Board strove for greater precision in describing its purpose and
    authority.
        The new statement, based on our statutory mandate, is:
    Mission statement
        The mission of the U.S. Chemical Safety and Hazard Investigation
    Board is to enhance the health and safety of workers and the public and
    to protect the environment by uncovering the underlying causes of
    accidental chemical releases and using these findings and supporting
    research to promote preventive actions by both the private and public
    sectors.
    How the mission is accomplished
        Conduct state-of-the art investigations of carefully selected major
    incidents involving the accidental release of hazardous chemicals.
        Produce high quality, easy-to-read, and timely investigation
    reports that identify the root and contributing causes of these
    incidents.
        Conduct hazard, safety and data studies designed to complement CSB
    investigation report and recommendation activities.
        Issue well-reasoned and precisely targeted recommendations.
        Conduct effective advocacy activity for these recommendations.\5\
    ---------------------------------------------------------------------------
        \5\ Mission statement adopted by notation vote of the Board on
    February 4, 2000.
    ---------------------------------------------------------------------------

                           BOARD'S MISSION SUPPORTED
        We are pleased to report that key stakeholder representatives have
    issued public statements of support at Board public meetings in
    December and January. Among those speaking in support of the CSB
    mission were the American Petroleum Institute, the Chemical
    Manufacturers Association, the National Association of Chemical
    Distributors, The Chlorine Institute, the International Union of
    Operating Engineers, Environmental Defense (formerly the Environmental
    Defense Fund), and the Working Group on Community Right-to-Know.
        We heard and appreciate these expressions of support, but we also
    took seriously the accompanying statements urging the Board to move
    beyond its governance dispute to refocus its energies on its mission.

                  PREVENTING INCIDENTS THROUGH SCIENTIFIC WORK
        The purpose of the CSB's investigation of incidents is to prevent
    future similar events. We do this by focusing scientific scrutiny on
    the incidents and all of the circumstances preceding them, not merely
    on laws that may have been broken. We must be familiar not only with
    the technologies and human factors that apply today, but those that are
    just emerging or that may be on the horizon. Because the CSB has no
    enforcement powers, it must conduct an effective advocacy program to
    generate support for its recommendations and in so doing enhance
    chemical safety. Prevention of chemical accidents, then, requires the
    careful application of resources to the conduct of quality scientific
    investigations, formulation of sound safety recommendations, and
    effective advocacy in support of them.

        FISCAL YEAR 2001 APPROPRIATIONS REQUEST PROPOSES SLIGHT INCREASE
        The Board's budget request for fiscal year 2001 is $9,000,000. This
    represents a 12.9 percent increase over its fiscal year 2000
    appropriation of $7,969,600. This amount represents the funding
    necessary for the Board to maintain a stable operating program and
    perform a modest number of incident investigations. It will also allow
    the Board to evaluate and revise its incident selection criteria,
    investigation protocol, and procedures for tracking recommendations. In
    addition, the Board will be able to initiate one safety study to
    complement its investigation and related activities. Finally, the
    increase will permit the Board to conduct monthly public meetings and
    hire two additional staff members in its investigation and safety
    office.
    [GRAPHIC] [TIFF OMITTED] T05AP12.003

        The requested fiscal year 2001 budget represents a forward-looking
    vision that recognizes the Board's responsibility to create and
    demonstrate its value to the public consistent with its mission of
    enhancing chemical safety. The fiscal year 2001 Budget Justification
    that was submitted to this Subcommittee last month includes a frank
    assessment of the CSB's performance to date and the lessons that have
    been learned from our successes and failures. It also discusses how the
    CSB plans to implement those lessons and meet current challenges to
    ready itself for taking on the important tasks identified for fiscal
    year 2001.
        As you examine our fiscal year 2001 budget request you will see
    that it precisely tracks our restated objectives and priorities. The
    emphasis is on funds and personnel necessary for the conduct of
    investigations and safety program activities. This emphasis began this
    year, and is carried forward in our fiscal year 2001 budget request.
        Specifically, in fiscal year 2001 we propose devoting 19.2
    workyears and just under $4.2 million for incident investigation and
    related activities. This compares with 10.7 workyears and just under
    $2.5 million in fiscal year 1999.
        A similar increase in Special Safety Studies and Technical Guidance
    is proposed in fiscal year 2001, where 4.1 workyears and $670,000 is
    proposed, compared to one workyear and $284,000 in fiscal year 1999.
    [GRAPHIC] [TIFF OMITTED] T05AP12.004

        We have also decreased the resources devoted to areas not directly
    supporting the conduct of investigations in the area of technical
    information and assistance from 4.1 workyears and slightly over $1
    million in fiscal year 1999 to 2.7 workyears and $730,000 in fiscal
    year 2001.

                   FISCAL YEAR 2001 ANNUAL PERFORMANCE PLAN
        The CSB is in the process of developing a strategic plan that will
    describe in detail the goals, objectives and performance measures that
    will help it attain this goal. In the interim, the CSB released an
    Annual Performance Plan that describes how the CSB will make progress
    toward its long-term goals in fiscal year 2001. The plan sets forth two
    strategic goals as follows:
        Strategic goal 1.--To reduce the reoccurrence of chemical incidents
    addressed by the Board and minimize the adverse effects on life,
    health, and property.
        Accomplishing the Board's mission depends on the development and
    application of state-of-the art investigative procedures, well-reasoned
    and precisely targeted recommendations, production of timely
    investigation reports, design and completion of complementary safety
    studies, and interaction with the professional and technical
    organizations involved in the prevention of accidental chemical
    releases. Investigative and research efforts need to be focused on
    those opportunities that will provide the greatest benefit to chemical
    incident prevention strategies across the broad spectrum of chemical
    users. As a new investigative agency, development and implementation of
    our processes and procedures will require ongoing evaluation and
    improvement to ensure that the resources provided are justified and
    give value to the public.
        Performance goals under this strategic goal include the initiation
    of four major chemical incident investigations, issuance of two final
    investigative reports, completion of one safety study, and delivery of
    at least two technical papers at scientific meetings and/or symposiums
    involving the leading organizations in the chemical accident prevention
    arena. In addition, the Board will participate on at least two
    technical committees involved in the continuous improvement of chemical
    accident prevention in areas such as incident investigation techniques,
    chemical process safety, human factors of accident causation, and
    inherently safer technology.
        Strategic goal 2.--To be a progressive 21st century federal agency,
    which facilitates the accomplishment of the Board's mission.
        The Board believes that, if best management practices are
    emphasized every day throughout every activity, then a professional,
    efficient, and effective atmosphere will exist where our other program
    goals can be accomplished. Good management practices dictate that the
    organization be well run, competent, technically accurate, flexible,
    and timely, to ultimately benefit both the employees and the taxpayers.
        Performance goals under this strategic goal include attracting and
    keeping the best and brightest employees, and reducing the time it
    takes to hire staff and maintain a professional workforce, and
    promulgating federally required administrative regulations and
    complying with other legal obligations in administrative areas.

       POTENTIAL CONSTRAINTS ON ACHIEVING CERTAIN FISCAL YEAR 2001 GOALS
        Infrastructure.--The Board began operations in fiscal year 1998 and
    anticipated a three-year start-up period. However, limited resources
    were available for establishing the infrastructure. As a result, the
    Board projects that at current levels of funding it will not be fully
    operational for a number of years. Board staff will have to promulgate
    proposed final regulations, finalize interagency coordination memoranda
    of understanding (MOU) with other government agencies, evaluate and
    finalize internal operating procedures, and conduct strategic planning
    for future program emphasis and resource requirements.
        Personnel.--Although the Board will focus on personnel management
    efforts in fiscal year 2000, the Board may not be able to hire and
    train all the investigation and safety program staff as planned for
    fiscal year 2000. Some of the hiring and training activities may
    continue into fiscal year 2001, and may affect the expected workload in
    the investigation and related activities function.
        Recruiting and hiring qualified investigations and safety programs
    staff remains one of the Board's most difficult challenges. The small
    talent pool available for the Board's recruitment needs is primarily
    found in the oil and chemical-process industries. These potential
    recruits are highly paid and typically live in areas located far from
    Washington, DC. The Board, therefore, must now devote extensive time
    and resources to recruit in order to hire and retain staff with
    chemical-process safety expertise.
        Capacity to conduct investigations of catastrophic incidents.--
    Because of the difficulty in hiring adequate numbers of qualified
    technical personnel this fiscal year, the Board likely will not possess
    adequate resources to launch a new investigation of a major
    catastrophic chemical incident. Examples of catastrophic chemical
    incidents are the 1984 chemical release in Bhopal, India, that killed
    4,000 within days, and killed or injured thousands of others in
    subsequent years, or the 1989 petrochemical explosion in Pasadena,
    Texas that killed 22 and injured more than 80 persons. The total
    commitment of existing resources, and the acquisition of significant
    external resources, would be required to undertake such an
    investigation. Completion of fiscal year 2000 and fiscal year 2001
    hiring plans and implementation of training plans will greatly bolster
    the Board's ability to meet this challenge.

                WHAT THE RESOURCES WILL ACHIEVE THIS FISCAL YEAR
        In fiscal year 2000 we are concentrating our resources on building
    our safety and investigations staffs, refining our investigation
    process and procedures, formalizing training, aggressively recruiting
    qualified investigators, and limiting the number of new investigations
    undertaken to a more modest, realistic number. We will not ask for
    significantly expanded fiscal resources until we can demonstrate the
    results that you, and we, are both seeking.
        Following the leadership changes in January of this year the Board
    restated the Board's mission as a basis for restructuring its
    priorities this year and establishing a better foundation for its
    activities in fiscal year 2001 and beyond. In directing more focused
    activities in fiscal year 2000, the Board has adopted the following
    critical objectives in order to achieve its mission this fiscal year:
      --Complete two investigation reports.
      --Build capacity to launch two new investigations late in the fiscal
            year.
      --Refine the incident investigation protocol and selection criteria
            for CSB investigations.
      --Develop and implement a strategic hiring plan and recruit
            additional investigations and safety staff to ensure adequate
            resources to support its investigative work.
      --Complete a staff-training plan.
      --Initiate one new safety study.
      --Complete the Board's Strategic Plan.

                 CAREFUL SELECTION OF INVESTIGATION PRIORITIES
        Investigative and research efforts need to be focused on those
    opportunities that will provide the greatest benefit to chemical
    incident prevention strategies across the broad spectrum of chemical
    users. As a new investigative agency, development and implementation of
    our processes and procedures will require ongoing evaluation and
    improvement to ensure that the resources provided are justified and
    give value to the public.
        In selecting the first two investigation reports to be completed
    this fiscal year, the Board has chosen those with the most significant
    safety lessons with wide future applicability. The incidents at Morton
    International Specialty Chemicals, Paterson, New Jersey, and Tosco
    Refinery, Martinez, California fit these criteria. The two
    investigations below allow the Board to pursue this strategy.
        Morton International, Paterson, New Jersey.--On April 8, 1998, an
    explosion and fire occurred at the Morton International, Inc. plant in
    Paterson, New Jersey. The explosion and fire were the consequence of a
    runaway chemical reaction that over-pressurized a 2000-gallon reactor
    and released flammable material, which ignited as a result. Nine
    employees were injured, two seriously, and the plant sustained
    considerable damage. Chemicals from the reactor were released into the
    neighborhood.
        The Morton incident involved reactive chemicals. Reactive chemicals
    may be innocuous individually or at room temperature, but may react
    violently when combined with other chemicals or when heated. Improper
    handling of reactive chemicals has been the cause of many chemical
    accidents. Two of the more significant incidents involving reactive
    chemical explosions in recent years include: the Napp Technologies,
    Inc. incident in Lodi, New Jersey, that killed five people and injured
    many others in 1995, and the Georgia-Pacific Resins, Inc. incident in
    Columbus, Ohio, that killed one worker and injured four others in 1997.
        The CSB is examining the following safety issues in the Morton
    case:
      --practices used by the chemical processing industry to evaluate the
            chemical reactivity of the materials it uses and produces
      --design of industrial process equipment for the safe handling of
            chemical reactivity hazards
      --process safety management tools used by industry to address the
            hazards of reactive chemicals
        The CSB is currently finishing chemical testing which will complete
    its investigative effort. The draft Morton report will then be reviewed
    by other organizations that participated in investigations of the
    Morton incident. The CSB anticipates releasing the Morton investigation
    report by the early summer.
        Tosco Refinery Fire, Martinez, California.--On February 23, 1999, a
    fire occurred at the Tosco Avon Refinery in Martinez, California.
    Workers were attempting to replace piping attached to a 150-foot tall
    tower while the process unit was in operation. Process equipment had
    not been shut down to perform the repair. During the removal of the
    piping, naphtha was released onto the hot fractionator tower where it
    ignited. The flames engulfed five workers located at different heights
    on the tower. Four were killed and one sustained serious injuries.
        The piping contained flammable naphtha liquid that was not drained
    and purged before the work began. Piping was still connected to the
    system and under process pressure because a closed valve was leaking
    significantly.
        The CSB is examining the following safety issues in the Tosco case:
      --formal management decision protocol to assess when maintenance
            activities can be safely conducted without the shutting down of
            process equipment
      --effective implementation of management oversight of process
            operations and maintenance activities involving hazardous
            chemicals
      --effective implementation of process safety procedures for
            maintenance and operations
      --consistent implementation of Management of Change procedures in
            mechanical corrosion control programs
        The CSB is currently reviewing Tosco documentation, oil industry
    good practices and industry regulatory coverage to complete its
    investigative effort. When the draft Tosco report is completed, it will
    then be reviewed for factual accuracy by other organizations that
    investigated the incident. The CSB anticipates releasing the Tosco
    investigation report by late summer.

               NEW INVESTIGATION PROTOCOL AND SELECTION CRITERIA
        As the Board builds the new foundation upon which to base its
    current and future activities, the full and open conduct of its
    business is one of its core strategies. Frequent public meetings will
    be an important part of the Board's operations. The first public
    meeting was held in December 1999, and subsequent meetings were held in
    January and February 2000.
        An important part of maintaining public confidence in CSB
    investigations is the use of best practice methods in our Investigation
    Protocol and Incident Selection Criteria that are open to public review
    and scrutiny by all potential stakeholders.
        In December 1999, the CSB completed the development of protocol
    documents that will be used to organize and direct investigation
    activities in the future. In our early investigative work, the CSB
    relied on a Department of Energy protocol that did not provide the
    focus on root cause analysis that is central to the CSB's mission. We
    will refine the protocol during fiscal year 2000 through reviews with
    CSB stakeholders and external experts on investigative practices
        The CSB also worked with stakeholders in developing a process that,
    given the CSB's limited investigative resources, would identify
    incidents whose investigation would have the greatest potential
    prevention value. To stimulate stakeholder inputs, the CSB engaged the
    American Institute of Chemical Engineers' Center for Chemical Process
    Safety (CCPS) to develop and conduct a survey of industry stakeholders.
    The CSB also conducted an all-day Roundtable on this subject on
    November 9, 1999, attended by a wide range of stakeholders from labor
    unions, public interest groups, and government agencies. The CSB issued
    criteria for selecting incidents and plans to bring additional
    stakeholders into public discussion on the key issues to further refine
    the selection process.

                          FIRST TWO YEARS OF OPERATION
        The CSB was created by the Clean Air Act Amendments of 1990.
    However, the Board was not funded, and did not begin operations, until
    January 1998. As the legislative history states: ``The principle role
    of the new chemical safety board is to investigate accidents to
    determine the conditions and circumstances which led up to the event
    and to identify the underlying cause or causes so that similar events
    might be prevented.'' \6\
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        \6\ Senate Report No. 101-228 (page 3615).
    ---------------------------------------------------------------------------
        Significantly, when operations began in 1998 no personnel or other
    resources were inherited from other agencies. So, the first two years
    of the CSB's existence have been characterized by the significant
    challenges of initiating the operations of a federal agency where none
    previously existed. There have been notable successes, and, it must be
    admitted, time-consuming problems, associated with our early
    development. But our focus has been, and will remain, on the prevention
    of serious chemical incidents through investigation, scientific study,
    and effective advocacy of prevention measures.
        In an effort to quickly demonstrate that the Board was implementing
    its Congressional mandate, more investigations, incident reviews, and
    studies were initiated than could be effectively managed or brought to
    a timely conclusion. For example, in two years 11 major investigations
    were authorized, but to date reports have been issued for only three of
    these investigations. In addition, very substantial Board resources
    were initially devoted to activities that did not directly support the
    conduct and completion of investigations.
        Under such circumstances and pressures, problems emerged. As a
    result, in its first two years the Board lost seven senior personnel.

                          BOARD GROWTH AND DEVELOPMENT
        The Board's enabling legislation authorizes five Board Members
    appointed by the President, by and with the advice and consent of the
    Senate. One of the Board Members also serves as a Chairperson and Chief
    Executive Officer. For the first eleven months of operations, the Board
    only had two Members--a Chairperson and one other Board Member. During
    this first year, the Chairperson exercised unilateral control over all
    aspects of the Board's operations. At the beginning of the second year,
    two additional Board Members joined the Board.\7\ However, all
    substantive Board decisions (except for voting on investigation
    reports) were still made solely by the Chairperson.
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        \7\ The Clean Air Act provides for a Board of five Board Members,
    one of whom is the Chairperson. At this time only four of the five
    Members are appointed. A fifth Board Member is needed to assist in the
    development of the Board.
    ---------------------------------------------------------------------------
        Several Board Members questioned this allocation of decision-making
    power, and the General Counsel was asked to render an opinion about the
    proper roles and responsibilities of the Board Members. In August 1999,
    the General Counsel issued a comprehensive memorandum explaining that,
    legally, the Board as a whole was to make most substantive decisions,
    while the Chairperson was responsible for day-to-day management and
    work assignments and implementing Board policy. In October 1999, three
    of the Board Members accepted the General Counsel's opinion, but the
    Chairperson requested further legal clarification before implementing
    the opinion. Over the next three months, a conflict with the other
    Board Members ensued on this issue. Ultimately, the Chairperson
    resigned his position, and the full Board has requested that the
    Department of Justice review the General Counsel's opinion. The full
    Board awaits that opinion. In the meantime, the full Board voted in
    January 2000 to allocate governing responsibilities among the four
    Board Members until a new Chairperson is appointed by the President, by
    and with the advice and consent of the Senate. Thus, all substantive
    decisions are now made by the full Board.

                       DISPOSITION OF OPEN INVESTIGATIONS
        In addition, in the last year the previous management encountered a
    series of problems that hindered the Board from developing the
    institutional framework and processes necessary to ensure efficient and
    timely production of quality reports and other information. In
    particular, it encountered difficulties in obtaining an appropriate
    focus consistent with its limited resources. The Board started fiscal
    year 1999 with three investigators, all hired at the end of fiscal year
    1998, and four major investigations \8\ and 14 reviews \9\ to complete.
    In the months leading up to March 1999, the Board proceeded to take on
    an additional six investigations and nine reviews. In March 1999 the
    Congress was notified that the CSB was unable to initiate any new
    investigations. The original vision of the Board had been to utilize
    contractors to help augment the Board's ability to complete
    investigation reports; however, difficulties in managing contractors
    undermined implementation of this concept.
    ---------------------------------------------------------------------------
        \8\ The Board launched two additional major investigations during
    the month of October, 1998 making a total of six major investigations
    remaining to be completed as of the end of the month.
        \9\ The Board initiated one additional incident review during the
    month of October, 1998 making a total of 15 incident reviews remaining
    to be completed as of the end of the month.
    ---------------------------------------------------------------------------
        Having over-committed its resources, the Board failed to meet
    commitments on a number of fronts, in particular in the completion of
    reports, in launching new investigations, and in establishing
    appropriate processes and policies for running an efficient and
    effective government agency. As a result, the Board started fiscal year
    2000 with eight on-going investigations.
        In July 1999, the Board voted to reallocate investigative resources
    away from review cases to focus on the eight full CSB investigations.
    The review case concept was for the CSB to assess the results of
    investigations conducted by other organizations and publicize the
    safety lessons learned. The CSB believes that recommendations are
    better received and produce greater results when backed by the fully
    researched, full investigation findings in CSB major investigation
    reports.

                      BOARD'S CHEMICAL SAFETY ACHIEVEMENTS
        Our struggles have been offset by significant successes and, of
    course, lessons learned. Our three completed incident investigation
    reports have been widely applauded for their scientific correctness,
    their readability and usability, and the applicability and practicality
    of their safety recommendations. Significantly, we can point to
    acceptance and use of the safety recommendations by state governors,
    legislators, trade associations, companies, and emergency responders,
    to name a few. So while we share the concern of others with the
    quantity of investigation reports, we also share the pride expressed in
    their quality. That quality is contributing to the enhancement of
    chemical safety, the prevention of chemical accidents and the
    fulfillment of our mission.
        We have issued three investigation reports and each report has had
    a tangible impact, in some cases, because one or more recommendations
    in the report have been accepted and implemented. In many other cases,
    the reports have spawned educational efforts by other organizations to
    enhance the safety awareness of specific audiences.
        CSB Report 98-001-I-NV, Sierra Chemical Company, Mustang, Nevada.
    On January 7, 1998, two explosions in rapid succession destroyed the
    Sierra Chemical Company Kean Canyon plant near Mustang, Nevada, killing
    four workers and injuring six others.
      --Based on the Board's preliminary findings released at its Board of
            Inquiry, Nevada's Occupational Safety and Health Enforcement
            Section, which enforces federal safety regulations, increased
            the frequency of safety inspections at explosives facilities.
            An Executive Order signed by then-Governor Bob Miller on June
            10, 1998, mandated safety inspections of explosives
            manufacturing facilities at least twice a year.
      --Furthermore, in May 1999 Nevada Governor Kenny Guinn signed four
            additional measures aimed at improving safety at facilities
            where hazardous substances are produced. Signed into law were
            four bills prompted by the Sierra Chemical Company incident:
            AB111, that requires employers to provide safety training to
            their workers in the workers' own language or by a videotape in
            a language they understand; AB173 and AB535 that both revise
            standards for regulating facilities where highly hazardous
            substances are produced, used, stored or handled; and AB 603
            that requires a conditional use permit for the same facilities.
      --Chemical Health and Safety magazine, a publication of the American
            Chemical Society, featured the CSB's investigation report as
            its cover story in its January-February 2000 edition. The
            publication urged safety professionals to implement the safety
            recommendations made as a result of such root cause
            investigations. (See attached Exhibit A.)
      --The Hazardous Materials (HazMat) Training Department of the
            International Association of Fire Fighters (IAFF), a labor
            union representing more than 225,000 professional career fire
            fighters and emergency medical personnel, used the Board's
            report as an ``interactive case study'' on its Distance
            Learning website. The exercise requires the user to read a
            summary of the report and answer questions about responding to
            a ``real-world'' hazardous materials incident.
      --The Bureau of Alcohol, Tobacco and Firearms uses the report as a
            case study in its training program for recertification of
            explosive investigators.
      --The Institute of Makers of Explosives (IME), a recipient of Board
            recommendations, last month informed us that they are currently
            developing, for approval by their Board of Governors, a set of
            training guidelines for employees engaged in the manufacture of
            commercial explosives. Their stated goal is to produce final
            training guidelines as an IME Safety Library Publication.

                         NITROGEN AND PROPANE INCIDENTS
        CSB Report No. 98-05-I-LA, Union Carbide Corporation, Hahnville,
    Louisiana, March 27, 1998. One Union Carbide worker was killed and an
    independent contractor was seriously injured due to nitrogen
    asphyxiation.
      --The Hazmat Training Department of the IAFF also used this report as
            an interactive case study on its Distance Learning website.
      --CSB met with the Confined Space Committee of the American
            Industrial Hygiene Association (AIHA) and has established an
            on-going process to discuss the less recognized risks
            associated with temporary confined spaces and the feasibility
            of adding warning properties to nitrogen used in confined
            spaces.
      --The Institution of Chemical Engineers (IchemE), based in the United
            Kingdom, requested and was granted permission by the Board to
            reprint this report for IchemE members.
        CSB Report No. 98-007-I-IA, Herrig Brothers Farm, Albert City,
    Iowa. Two volunteer fire fighters were killed and seven other emergency
    response personnel were injured.
      --In response to a CSB recommendation, the National Propane Gas
            Association improved their emergency response training
            materials to better address the hazards of BLEVEs, an
            especially dangerous type of explosion.
      --Also in response to a CSB recommendation, the Fire Service
            Institute of Iowa State University revised their training
            program to provide better guidance for responding to BLEVEs.
      --The report was used by a local volunteer fire department's safety
            officer to successfully challenge the placement of a 14,000-
            gallon propane tank 50 feet from a new high school and just 10
            feet from a roadway. Using the report, and other information,
            the school board in Hagerman, Idaho, finally agreed that the
            community did not have adequate emergency responder personnel
            to effectively control the explosion that would result from
            such a large propane tank. The town instead decided to install
            a 2,000-gallon tank as a result.
      --A homeowner in Florida also found the report useful in helping to
            identify concerns about a propane tank planned for installation
            in his neighborhood.
      --A fire chief in Florida indicated that he was using the report (and
            the CSB's on-line reports of propane incidents) to prepare
            comments on proposed standards being considered by the National
            Fire Protection Association. Other emergency responders have
            indicated that the reported has contributed to ongoing
            discussions about Boiling Liquid Expanding Vapor Explosions,
            known as BLEVEs, similar to the one featured in this report.

                     SPECIAL SAFETY STUDY INITIATIVE ON Y2K
        At the request of the (Senate Special Committee on the Year 2000
    Technology Problem), the Board led a multi-stakeholder special safety
    study initiative to build awareness of Y2K chemical safety problems.
    Among it efforts, the Board collaborated with the chemical industry,
    particularly small and medium-sized enterprises, warning them of the
    potential for Y2K-related computer problems that might lead to an
    accidental chemical release or inhibit automated safety protection and
    response systems. The Board also initiated diverse activities with
    Congress and a wide-range of stakeholders, including:
      --Testifying before Senate hearings in Washington, D.C. and New
            Jersey
      --Frequent interaction with the President's Council on Y2K
            Conversion, including presentation at a special roundtable on
            the chemical sector and a press briefing
      --Issuing a Y2K safety alert to the Governors of the 50 states,
            Puerto Rico, Guam and the U.S. Virgin Islands
      --Issuing safety alerts to emergency response organizations,
            including the International Association of Firefighters, the
            International Association of Fire Chiefs, the International
            Association of Emergency Managers, the National Emergency
            Management Association
      --Development of a worker training initiative in partnership with the
            National Institute of Environmental Health Sciences (NIEHS) and
            the National Clearinghouse for Worker Safety & Health Training
      --Working with a foundation and an academic research center to
            further characterize the vulnerabilities and status of smaller
            businesses
      --Establishing a Y2K Chemical Safety information clearinghouse on the
            Board's web site
        In June 1999 a working group consisting of the Board, EPA and eight
    trade associations produced and distributed a pamphlet entitled
    Addressing Year 2000 issues in Small and Medium-Sized Facilities that
    Handle Chemicals.

                  CHEMICAL SAFETY INFORMATION ON THE INTERNET
        The CSB's website has proved to be an important avenue for reaching
    a large and diverse public audience. Few other websites are devoted
    solely to providing information on chemical incidents and chemical
    incident prevention. In 1999, Government Executive magazine named the
    site one of the 16 best federal websites.
        The CSB website is intended to serve as a virtual library on
    chemical safety where safety experts and other stakeholders can do one-
    stop-shopping to learn more about particular aspects of chemical
    safety, from the very general to very specific technical works. The
    Board updates the site daily with new information on chemical
    incidents, chemical safety publications from various sources,
    investigation news, links to other sites with chemical safety
    information, and events related to chemical safety. It also hosts the
    Chemical Incident Reports Center (CIRC).
        The CIRC is a searchable online database of chemical incidents that
    is intended to enable or inspire actions by a researcher, a government
    agency or others in support of improving chemical safety. Throughout
    the day, every day, the CSB receives initial reports about chemical
    incidents that have occurred around the world. The information comes
    from the news media, eyewitnesses, companies and others. The sheer
    volume of incident reports received each day exceeds the investigative
    resources of the CSB or any other single organization. Yet, through the
    CIRC database, sharing knowledge of these incidents may make it
    possible for others to take actions that may contribute to improving
    chemical safety.
        Mr. Chairman, Senator Mikulski, and other members of the
    Subcommittee: this morning we have shared with you a frank assessment
    of both the Board's accomplishments and problems to date. While
    admitting that mistakes have been made in the past two years, we have
    shown that we have both learned from past errors and have achieved
    significant accomplishments in fulfillment of the Board's mandate to
    help prevent accidental chemical releases and protect workers, the
    public and the environment.
        We have charted a new course today, guided by all of the members of
    the Board, and supported by a professional staff. We have retained the
    support of key stakeholders, and we request the continued support of
    this subcommittee. We ask that rather than trust us, you track us as we
    implement a more focused set of objectives supported by a more
    disciplined allocation of resources.

                             INVESTIGATION BACKLOG

        Senator Bond. Thank you very much, Dr. Taylor. There is no
    question that your mission is very important. You have outlined
    very persuasively some of the problems and you have talked
    about the inputs. But I am looking at the GAO reports. The
    board has not made any progress in addressing its
    investigations backlog and has not initiated a new
    investigation since March 1999.
        It seems to me we have wasted a tremendous amount of
    taxpayer funds here. Why should we not just shut the agency
    down and revert the responsibilities to EPA and OSHA to conduct
    chemical accident investigations?
        Dr. Taylor. In response to that, Mr. Chairman, I would like
    to first say that we are an independent body. And we get the
    support of all our stakeholders, including the chemical
    industry, the chemical associations, as well as labor support,
    as well as public interest groups. And they all support us in
    our efforts. We are not an enforcement agency. And we conduct
    root cause investigations.
        So in doing that, we perform a different function, I
    believe, from OSHA or EPA. Having said that--and I understand
    that we have not conducted any investigations since last year
    or earlier this year--our plan is to focus on our eight
    priorities, which I mentioned in my testimony. Those are our
    hiring plan, completing two investigation reports, launching
    two new investigations before the end of fiscal year 2000,
    refining our incident investigation protocol and our selection
    criteria, developing a strategic hiring plan and recruiting
    additional investigative and safety program staff, also
    initiating a new safety study and completing the board's
    strategic plan.
        We have a set of criteria that we want to complete.
        Senator Bond. With respect to the management of the agency,
    how effectively does the joint governance arrangement work?
        Dr. Taylor. We have had 3 months now, and it seems to be
    working well. Dr. Poje is responsible for personnel. I am
    responsible for holding and conducting the public meetings that
    we hold, as well as our meetings in-house. Dr. Irv Rosenthal is
    responsible for reviewing the contracts that are $10,000 and
    below. All other matters come before the full board. And Dr.
    Hill is responsible for completing the annual reports.
        Senator Bond. Dr. Hill, in your view, is the current
    arrangement functional? Can the agency produce results?
        Dr. Hill. There is certainly some question, Mr. Bond.
    Senator, I do believe that under the original business plan
    that we developed, there was a fundamental difference in the
    approach that we are taking now. Certainly we were relying on
    contract support to complete that backlog of investigations.
        The approach now with my colleagues is quite different,
    relying on all in-house. And as we admit in our testimony,
    hiring people into the agency has been very difficult in
    recruiting. Therefore, we are projecting a couple of
    investigations this year, but, quite frankly, those dates are
    pushed back further and further as we have experienced problems
    recruiting those people and getting that done in house.
        Senator Bond. Dr. Poje, do you have a comment?

                          INTERNAL MANAGEMENT CHANGES

        Dr. Poje. Senator Bond, thank you. I am in charge of
    personnel matters. In addition to the board reorganizing,
    fractionating the job of the chairman, dividing it amongst the
    four board members, we also made two very significant changes
    in the internal management structure.
        We appointed a new chief operating officer, elevating our
    general counsel to that position, and we consolidated two
    separate programs, the Office of Investigation and the Office
    of Safety. They are now directed by a single director.
        The conduct of the board's past activities in investigation
    prove the urgency with which we needed to master our own
    domain. The charging of the task of investigation to
    contractors from other Federal agencies or in the private
    sector without internal cohesive guidance from staff fully
    trained by the board and operating on behalf of the board has
    proven to take far more time to complete an investigation than
    we are projecting for the future.
        We are onto a course of now hiring internally. We are still
    using contracted support for specialized services. But we think
    that this will put us in good stead for the future conduct of
    investigations. All the hires for the coming year are put into
    investigation and safety.
        With the new director of that program and a comprehensive
    plan of hiring and performance evaluation, we think we are
    going to build a department that can actually accomplish the
    work in a more timely fashion.
        Senator Bond. Dr. Poje, let me ask you, it seems to me that
    you have been hemorrhaging staff departures. And I would ask if
    you are able to get people on board.
        And also, I would ask the broader question to Dr. Taylor:
    We understand the agency will lapse as much as half of its
    funding this year. And if we are having problems with personnel
    departing, and being able to spend the money we appropriated
    last year, why should we increase your budget next year?

                                 LOSS OF STAFF

        Dr. Poje. Senator, this year we actually have lost very
    recently two staff in the information technology arena. This
    was an area of early development of the board, that preceded
    full board accedence in the movement towards that direction. It
    is my intention, and the intention of the other board members,
    to put the highest emphasis on safety and investigation
    programs. And this requires some degree of restructuring. We
    are evaluating every staff position, and we want to see how
    those staff positions intersect with the core mission of
    investigation and safety.
        That is something we certainly are not proud of having to
    do in our third year. But unless we do it, we think we will
    never be able to achieve the mission of investigating and
    producing the quality products that I think three to date have
    demonstrated the value of this board as an independent agency
    to do.
        Dr. Rosenthal. Thank you. Mr. Chairman, I think that your
    initial statement as to the fact that lest the board completed
    its objectives this year, you would have significant problems.
    We will----
        Senator Bond. One good thing the board has going for it is,
    we share the same initials. My initials are CSB as well.
    Outside of that, we have some problems.
        Dr. Rosenthal. If we had known that, we could have taken
    credit for great planning.
        But we will meet our objectives this year. At the same
    time, we have to understand, without going back as to who did
    what to whom or why, the fact that we have failings is an
    existent condition. I do not believe it is productive to go
    back into great detail of who did what to whom. We will solve
    those problems, but you do not solve problems without
    disruption and some loss.
        There is a good reason for not going back to OSHA and EPA.
    If the board does not do this job properly, my suggestion is
    you get rid of the board members and start over again. But the
    original mission, the original reason, for doing this that
    drove the Congress to create the board remains.
        OSHA and EPA are basically agencies that are, by their very
    nature, looking out to get enforcement. We are an agency that
    is dedicated to working with the information in the private
    sector to motivate changes in the basic approach of our country
    to accidents. So throw us out. Do not throw the law out.
        The last comment I wanted to make was that it takes time to
    correct the condition. We could have acceded to the public
    demand that you start new investigations. We thought it was
    better to pause, clean up the investigations we had, recover
    some value, before we started adding more and more--started
    investigations, which are just expenses, rather than turning
    those expenses and those investigations into meaningful
    recommendations.
        Senator Bond. Thank you very much, Dr. Rosenthal. I had
    kind of suggested that approach to another agency that was here
    earlier this morning.
        Senator Mikulski.
        Senator Mikulski. Thank you, Dr. Taylor and all of those
    who participated in this, both testimony and questions and
    answers. I am really troubled by our situation here, and I was
    an enthusiastic supporter of creating the board in the 1990-ish
    clean air amendments.
        And I had hoped that it would rise to the stature of the
    National Transportation Safety Board, that America knows that
    when a tragedy happens, a thorough investigation will be made
    and lessons learned will emerge from it. And then advocacy
    steps can be taken, both voluntarily by the private sector, as
    well as those of us in the statutory area.
        This has not happened. Three years, three investigation
    reports, no new investigations since February 1999, and a
    pretty strong GAO report. And I agree, let us not get into the
    finger-pointing business. But what would be, if we were again
    talking about getting on track, talking about this committee
    and that committee and all of this, but if we are going to fund
    it, even if we follow your recommendations, Doctor, the
    question is that we have to get results. And the results are
    not three investigations over 3 years and $18 million. That is
    $6 million an investigation.
        And maybe some investigations cost that. You know, we
    cannot minimize that investigating chemical accidents is a very
    sophisticated type of investigation. It is not gumshoe in a tan
    raincoat. It is really a sophisticated scientist.

                                ORIGINAL MISSION

        So what assurances could you give the subcommittee about
    steps to be taken to get us on track? What would be the top,
    say, three to five assurances that we could have that would be
    in place both short range and long range to be able to follow
    the original mission?
        And Dr. Taylor, I understand you are the voice of the panel
    today, but it does not have a chairman. And is this one of the
    issues?
        Dr. Taylor. I do not think not having a chairman has been
    one of the issues in the short term. We have been able to
    operate, I believe, effectively in making progress and the
    changes that need to be made at the agency with our current
    structure, as far as governance and who does what in the
    agency.
        As I mentioned, Dr. Poje is responsible for personnel. I am
    responsible for a task, and so are Dr. Rosenthal and Dr. Hill.
    And with that, we are hoping that we can progress with our
    investigation protocol, which we already have, that we want to
    update and refine. And our plan is that once we have hired the
    appropriate staff--we do not have enough staff people in our
    investigations and safety programs, enough competent staff, to
    actually go out in the field and conduct a strong
    investigation. And that is where we are starting, with our
    hiring plan, to really develop that.
        And with that, I would like Dr. Poje to come in and give us
    more information.
        Dr. Poje. Senator, if I can say, for the first time the
    board has detailed time plans for completing three
    investigations this fiscal year. Those have milestones. The
    board is regularly reviewing the performance of the staff in
    the completion of those. And that is the model for any future
    investigation.
        There will be no open-ended single investigator reviewed
    product coming before the board. It will be part of a
    management program that has already in place, in the 3 months
    that we have been operating under this fashion, a regular
    schedule. We will have a report done in early summer, one in
    midsummer and one by late summer, is the way we are projecting
    it right now.
        We also have a hiring plan as our highest priority. This is
    involved in either our office of general counsel, our
    administrative office and the investigation and safety program,
    to work closely with a professional contracting agency on
    personnel matters in the Federal Government, drawing talent and
    knowledge and skills from the National Transportation Safety
    Board arena, Defense Nuclear Facility Safety Board arena, to
    guide us in the development of such a program.
        We have milestones that we have established, and we have
    achieved some. We have returned to a schedule A hiring
    authority, which will accelerate our ability to get the good
    people in.
        And we have a review process that I have reviewed, that the
    senior staff has reviewed, for the interviews, the
    advertisements, for the programs that would lower the hurdles,
    the relocation programs and policies that would need to be put
    into place in order to draw in talent coming from the Texas or
    the California area where there are concentrations of chemical
    industries and safety professionals with the skills that this
    agency needs.
        We have time lines for that. And the board meets regularly
    to review those time lines and to challenge the staff, if we
    see them out of kilter with our urgent needs for fiscal year
    2000, to be assured that we can achieve and merit your
    consideration for our budget for 2001.
        Senator Mikulski. Thank you.
        I know my time is up. I turn to my colleague.
        Senator Bond. Senator Lautenberg.
        Senator Lautenberg. Thanks, Mr. Chairman. And I regret that
    I was not here for the earlier hearing to see our friend,
    Senator Wofford, who works very hard at his job. And I regret I
    was unable to hear the testimony earlier.
        But I listened with interest here. And as I read the GAO
    report, Mr. Chairman, Senator Mikulski, the fact of the matter
    is I think that I have probably been one of the strongest
    advocates for this board and function. I come from the City of
    Paterson, New Jersey. I was born in a city that has a lot of
    chemical operations within it, some of it illustrious and some
    of it dismal in terms of what happened with staff, with
    employees, over the years.

                                BEHIND SCHEDULE

        And though I see in the GAO report--and I thank Dr. Kidd
    for--Dr. Taylor, I am sorry--for your presentation. I think it
    was very good. But the fact of the matter is that we are
    terribly, terribly behind. And I know the chairman admonished
    the board and the organization for its lack of activity to get
    the job going, the too few investigations.
        I mean, if someone looked at this picture from the outside,
    one would say that it presents a picture of squabbling and
    disorientation. That is not the kind of thing that either any
    of you want or that I fought so hard for, and my colleagues
    here, also.
        I want to point out the claim that reliable their
    statistics are not available. But according to the insurance
    industry estimate--and I am sure it is available generally--
    each year there are about 225 people die, 10,000 injured on the
    job, a billion dollars in direct losses each year, almost $3.5
    billion indirectly. And these are horrendous statistics.
        And I know that you are taking steps, and I would urge you
    to speed up the process and do not let yourselves get caught up
    in a bureaucratic maze of deciding who and where. The fact of
    the matter is that we are all in this together, you and we
    here. And if something does not happen positively, I think
    something awful could happen, because I believe in your
    functioning. I believe in the mission. I think it is essential.
        And I ask you a question that is very specific about an
    incident in Paterson, New Jersey, one that relates to the
    Morton Salt Company.
        I stood in Lodi, the plant that exploded in 1995. I went up
    and I made a promise to people, to working people, the union.
    Labor groups held demonstrations out there, pleading for the
    lives of these people who were sent back into the building
    after the fire had started, and nobody knew what to do. It
    killed four at the time.
        Now in April 1998, I visited another site, which was the
    Morton chemical plant. I think it used to be called Morton
    Salt. Nine people injured. And I remember that we toured the
    plant a couple days later, with members of the Chemical Safety
    Board. And the board launched an investigation. Is that
    investigation complete?
        Dr. Taylor. With reference to Morton Chemical, we plan to
    at least have the completed draft report ready in June. That is
    our target date for completing that.
        Senator Lautenberg. Okay. Let me ask you a question. Is
    that--we are now talking about 2 years of time. Does that seem
    slow?

                           ACCELERATING REPORT SOUGHT

        Dr. Poje. Senator, that is not a time that any of us would
    be proud of or say that that is the direction that we want to
    move into. We hope we can produce reports at a much more
    accelerated rate. But we have to have our own trained and
    competent people overseeing the conduct of everybody in an
    investigation in order to bring it home in a way that does
    honor and helps promote the system of safety.
        The Morton incident that you have pointed to is--bears a
    degree of legacy from the Napp incident in Lodi. It was a
    reactive chemical incident, a very fundamental issue to the
    system of safety right now. Our sister Federal agencies, EPA
    and OSHA, are investigating their own competencies in such
    matters and are looking at the bigger picture of how do we
    shore up the national system of safety.
        This is why the Morton incident is being directed as one of
    our highest and our next case to come down the line. We have
    completed the initial draft gathering of the evidence. The
    material has been reviewed by the company and by the union for
    confidential business information protections. And we think we
    are on course right now for framing ultimate recommendations to
    shore up the bigger system of safety out of that one single
    incident.
        Senator Lautenberg. Well, if the chairman will indulge me
    for just a minute more.
        Senator Bond. Sure.
        Senator Lautenberg. Thank you.
        The projected staffing is 40, including the members of the
    board.
        Dr. Taylor. Yes.

                                RECRUITING STAFF

        Senator Lautenberg. That is the end of the fiscal year, 4
    months away, 5 months away from that. And if you could in short
    form, whomever would like to answer, tell me what is the
    difficulty--or why is it taking so long, and what is the
    principal difficulty in getting people to do the job?
        Dr. Poje. Part of what we are trying to do right now,
    Senator, is build a department of investigation and safety.
    That means you want to have every position identified within a
    department structure. You want to know what are junior people,
    what are senior people, what their roles and responsibilities
    will be. And you want to staff it with people who have
    expertise and competencies in the chemical, oil refining
    industries, those that are at the core business of this board.
        That means we have had to develop an advertising plan,
    which was just launched last week. We have developed a number
    of procedures to reduce the time and the cost by which we can
    bring people into the board for interviews. We have to have a
    procedure under way for the interviewing process.
        Collecting resumes is one thing. Going through 150 of them
    to find the one candidate who you think should be on the board
    is the challenge that we are going through right now.
        We have a management team in place that is doing that. We
    have already brought in this past week candidates for
    interviewing, physical interviewing, in our offices. And we
    have slated a number for next week.
        Now we will be working with the trade associations, trade
    unions, private companies, to get the word out about our hiring
    needs. And we have a few additional policies that the board as
    a whole will have to be considering for enhancing the
    opportunity to draw people from the private sector into Federal
    service.
        Senator Lautenberg. Well, you are all talented people. And
    I would hope that you could move this process. The things, Dr.
    Poje, that you said now are things that would have applied a
    year ago. So straighten up and fly right, as I think the
    chairman earlier said. Otherwise, we are not going to be able
    to continue your funding.
        Dr. Taylor. And that is what we plan to do.
        Senator Lautenberg. Thank you very much.
        Senator Bond. Thank you very much, Senator Lautenberg. That
    was kind of the general drift of my message.
        We thank the board. Before closing, let me do say we expect
    timely completion on final action investigation protocol and
    selection criteria. That was supposed to have been completed
    back in December last year. But we agree with you, that you do
    need to hire people in investigations and safety programs. This
    is the basis of it. And we will have questions for the record
    and will be following closely your activities.
        Thank you very much for your thoughtful comments today. And
    we wish you greater success in the future.
        Dr. Taylor. Thank you.
        Senator Bond. Thank you very much.

                           DEPARTMENT OF THE TREASURY

                  Community Development Financial Institution

    STATEMENT OF ELLEN W. LAZAR, DIRECTOR
    ACCOMPANIED BY MAURICE JONES, DEPUTY DIRECTOR FOR POLICY AND PROGRAMS

        Senator Bond. Now I would call the CDFI panel forward.
        Our last panel today consists of Ms. Ellen Lazar, Director
    of the CDFI Fund, accompanied by Deputy Director for Policy and
    Programs, Mr. Maurice Jones. And we welcome both of our
    witnesses today.
        The administration's budget request for the CDFI Fund asks
    for an increase of $30 million, from $95 million for fiscal
    year 2000 to $125 million for fiscal year 2001. I remain
    concerned about the amount and purposes of the CDFI funding
    request, especially as we prioritize the funding needs and the
    primary programs and activities under this subcommittee.
        It will be critically important not only to understand what
    the Fund has achieved, but also how cost effective and
    efficient these programs are, especially in comparison to other
    similar Federal activities.
        You heard me today outline the pressing needs elsewhere in
    this subcommittee, which is going to make it a difficult year.
    The CDFI Fund has made a greater effort to measure its
    performance, but its track record is still unclear. And some of
    its activities appear to overlap with those of other Federal
    programs designed to revitalize distressed communities.
        I am pleased that the fund is working with the Small
    Business Administration and other agencies to coordinate the
    work of the Federal Government in the area of micro-enterprise
    development. It is my hope that the Fund will continue working
    on this effort and other economic development areas in order to
    minimize duplicative and overlapping Federal activities, such
    as those under HUD and NCUA.
        With regard to management and operation of the Fund's
    independent auditors, KPMG have provided an unqualified opinion
    on its financial statements and reported no material
    weaknesses. You all are shining stars today in this group. You
    get the big star.
        As we know, the CDFI Fund had a rocky beginning. That seems
    to be a thing of the past. Ms. Lazar, you and your staff
    deserve credit for cleaning up mistakes, and I heartily commend
    you. Thank you for what you have done.
        I would also like to hear how well the Fund is meeting its
    performance goals and objectives through its programs. I am
    especially interested in the ability of the Fund to monitor and
    evaluate programs. In past reports, GAO found that your
    programs emphasized outputs rather than outcomes.
        Lastly, I am concerned about the Fund's efforts in
    addressing distressed communities in rural areas. Many members
    of this subcommittee share this concern and would like to hear
    how the Fund has addressed this issue.
        Senator Mikulski, any comments on this?
        Senator Mikulski. Thank you very much. And of course, we
    want to welcome Ms. Lazar and her team for their testimony. Ms.
    Lazar is also another system Marylander. You can see we have a
    lot of talent in this State.
        Senator Bond. We would like to put a couple agencies in
    Missouri, too.
        Senator Mikulski. Well, the agency is not in, but many of
    the people who run the agencies are, including men who want to
    be president. Like Jack Kemp and Alan Keys live in Maryland.
    Moving right along----
        Senator Bond. I would stick with the agency heads.
        Senator Mikulski. Moving right along, we do look forward to
    hearing your budget justification. But Senator Bond raises the
    issue of outputs versus outcomes. And what I am tremendously
    interested in is your system for oversight to measure what we
    really are doing in communities.
        One of my concerns is that often we have noble goals and
    push to achieve those goals. And then we have unintended
    negative consequences. The great passion for creating home
    ownership, and particularly in engaging the poor in an
    opportunity structure for home ownership, has resulted in great
    opportunity for some, but predatory lending and flipping in
    Maryland in another, for those who game the system.
        I am not saying yours have gamed it, but often we push
    people into home--there are people being pushed into home
    ownership that were not ready. And it has turned out to be a
    hollow opportunity for them.
        So what we want to do know is: What is the CDFI
    accomplishing in terms of people's lives and people's
    communities? But enough said from me. Let us go forward with
    hearing from you.
        Senator Bond. Thank you very much, Senator Mikulski.
        Ms. Lazar.

                          STATEMENT OF ELLEN W. LAZAR

        Ms. Lazar. Thank you. Good morning to all of you, Chairman
    Bond, ranking member Mikulski. I am Ellen Lazar, the director
    of the CDFI Fund. And at the table with me is our deputy
    director for policy and program, Maurice Jones.
        For the purpose of time, I will keep my testimony brief. I
    would ask that the Chair submit my complete written statement
    for the record.
        Senator Bond. Without objection, it will be made a part of
    the record. We thank you for summarizing it.
        Ms. Lazar. Thank you.

                              MANAGING FOR RESULTS

        Today I would like to highlight the CDFI Fund's programs
    and management, the impact of the fund's awards on CDFIs in
    distressed communities, the demand for fund awards for fiscal
    year 2000, and the fund's priorities for fiscal year 2001. The
    fund's vision is an American one, which all people have access
    to capital and financial services.
        Our mission is to promote access to capital and local
    economic growth by directly investing in and supporting CDFIs
    and by expanded financial service organizations' lending,
    investment and services within underserved markets.
        I am happy to report that for the third consecutive year,
    the fund received an unqualified audit opinion, which you have
    already acknowledged. Our independent audit, prepared by KPMG
    Peat Marwick, contained no material weaknesses nor reportable
    conditions. Our commitment to strong management has resulted in
    high levels of productivity for the fund.

                             CDFI FUND INITIATIVES

        The fund has certified over 395 CDFIs in 48 States, the
    District of Columbia, the Virgin Islands and Puerto Rico. Our
    funding has helped promote access to capital and local economic
    growth through the development of community-based lenders and
    incentives for traditional financial institutions to increase
    their activities in low income communities.
        To date, the fund has provided approximately 375 awards
    totaling $215 million directly to CDFIs. These award dollars
    are significantly leveraged by other public and private
    resources. Most notably, core awardees are required to provide
    a dollar-for-dollar match of non-Federal funds before they
    receive their award.
        The fund has also provided 274 awards totaling $89 million
    to banks and thrifts for increasing their investments in CDFIs
    in distressed communities. This $89 million in awards reflects
    roughly $1.8 billion in investments that banks and thrifts have
    made in CDFIs in distressed communities, or over 20 times the
    amount of the fund's awards.
        Even more impressive is the impact that our investments
    have had on CDFIs in the communities that they serve. We
    recently administered a survey to all of our 1996 and 1997 core
    awardees, a total of 71 organizations, to determine the impact
    of the fund's investments. To date, we have received and
    analyzed responses from 53 awardees. Together, these 53
    organizations received $50 million in assistance from the fund.
        Preliminary data indicates that these organizations made
    $1.5 billion in community development loans and investments,
    supported as many as 6,200 micro-enterprises and businesses,
    created or maintained as many as 37,000 jobs, developed or
    rehabilitated up to 28,000 units of affordable housing,
    developed or supported up to 745 community facilities,
    including child care centers, health care centers, charter
    schools, and job training centers. They have provided business
    training, credit counseling, home buyer training and other
    development services to over 33,000 individuals and
    organizations.
        These CDFIs have also strengthened their own capacity to
    deliver services. Their assets have grown by 119 percent from
    $643 million in the aggregate before receiving an award to
    close to $1.5 billion in the aggregate in 1999. The average
    awardee's client base is 72 percent low income, 59 percent
    minority, 51 percent female, 55 percent from the central city,
    35 percent from rural communities, and 10 percent from suburban
    communities. Clearly, we are enthusiastic about these results.
        In fiscal year 2000, we are experiencing the greatest
    demand since the inception of the fund. To help meet this
    demand, we were able to use a small carry-over from fiscal year
    1999 to add to the $95 million that you appropriated last year,
    bringing our total funds available to $105 million in fiscal
    year 2000. This $105 million is well below the demand for our
    programs.
        In fiscal year 2000, the fund announced that we would make
    $50 million available for our Core Program. The fund received
    $264 million in requests. The fund announced that we would make
    $6 million available----
        Senator Mikulski. Could you repeat that number?
        Ms. Lazar. Certainly. We announced that we would make
    available $50 million for our Core Program. We received $264
    million in requests.
        We announced that we would make $6 million available for
    our Intermediary Program and received $9 million in requests.
    We announced $25 million would be available for the Bank
    Enterprise Award Program. Our preliminary review of the
    applications received showed that if the banks complete all of
    their projected activities, they would qualify for a total of
    $109 million in awards. We also expect our Technical Assistance
    Program to be over-subscribed this year.

                        FISCAL YEAR 2001 BUDGET REQUEST

        Each year we have more and more demand for our programs,
    which brings me to our fiscal year 2001 request. Because we do
    not anticipate having a carry-over in fiscal year 2001, and
    because we expect the demand to continue to grow, it is
    important that the fund receives the President's full request
    of $125 million in fiscal year 2001.
        These funds will be used to continue to meet the high
    demand for our programs and to cover our related administrative
    expenses. Within our fiscal year 2001 budget, we have also
    included some initiatives to reach populations that we want to
    serve more effectively. Our budget request for 2001 includes a
    $5 million set-aside to establish training and technical
    assistance programs that serve Native American, Alaska Native
    and Native Hawaiian communities. This has evolved from the
    Native American lending study, which Congress asked us to
    undertake in our original statute.
        Furthermore, in fiscal year 2001 we intend to continue our
    outreach to rural areas that are not adequately served by
    CDFIs. Already in fiscal year 2000, we have conducted either
    live or by satellite information sessions in 55 rural
    communities, two-and-a-half times the number reached in fiscal
    year 1999.
        Finally, we plan on making additional innovations in our
    programs that will enable us to better serve small and emerging
    CDFIs and respond to last year's conference report language
    encouraging us to develop programmatic initiatives that serve
    this market.

                                   CONCLUSION

        In conclusion, the fund is being managed effectively, as
    evidenced by our clean audit and by marked improvement in the
    disbursements of funds. The fund is committed to supporting
    CDFIs in the distressed communities that they serve and is
    demonstrating a significant effect upon their operations. Fund
    programs are over-subscribed to the extent that we cannot fully
    support the needs of many qualified institutions.

                               PREPARED STATEMENT

        I am hopeful that the subcommittee will approve the
    President's $125 million budget request for the Fund so that we
    may continue to work on creating jobs, affordable housing,
    child care facilities, small businesses and economic
    revitalization across America.
        [The statement follows:]

                      Prepared Statement of Ellen W. Lazar

                                  INTRODUCTION
        Chairman Bond, Senator Mikulski and distinguished Members of the
    Subcommittee, it is a pleasure to be before you today to represent the
    Community Development Financial Institutions (CDFI) Fund. I am Ellen
    Lazar, the Director of the Fund. Before I begin my testimony, I would
    like to introduce to you another key member of the Fund who is with me
    today; Maurice Jones, Deputy Director for Policy and Programs at the
    Fund.
        My testimony today will focus on four major areas: (1) the
    principles underlying the operations of the CDFI Fund; (2) the Fund's
    management systems; (3) the performance of the Fund so far; and (4)
    Fund objectives for fiscal year 2001.

                     THE CDFI FUND: PRINCIPLES OF OPERATION
        The CDFI Fund, working with private sector partners across the
    country, operates on four basic principles: (1) its programs and
    initiatives are highly targeted, focusing on areas and individuals
    inadequately served by conventional financial markets; (2) its funds
    are recycled within communities in need; (3) its Federal resources
    leverage private sector and other non-Federal resources into
    underserved places; and (4) its programs stress performance in the form
    of both outputs and outcomes.
        CDFI Fund programs strive to address gaps in the marketplace by
    targeting resources to financial institutions that serve individuals
    and communities that cannot adequately access capital from the
    traditional marketplace. For example, funds are used to support: (1)
    small business loan funds that originate loans, sometimes as small as
    $500, that are difficult for mainstream financial institutions to
    offer; (2) housing loan funds that provide downpayment and closing
    costs assistance, subordinated debt, pre-development grants, bridge
    loans and other sources of financing that increase the supply of
    affordable housing and enable poor people to get mortgages; (3)
    community development banks and credit unions that offer Individual
    Development Accounts, Electronic Transfer Accounts, and other products
    targeted to underserved populations; and (4) community development
    venture capital firms whose highly targeted investments facilitate the
    creation and retention of jobs in distressed areas across America.
        To ensure that CDFI funds support institutions serving those most
    in need, the Fund requires all organizations designated by the Fund as
    CDFIs to demonstrate that at least 60 percent of their activities are
    targeted to distressed communities, low-income individuals, or other
    individuals that have been denied access to mainstream financial
    services. The Fund further requires that these organizations provide
    technical assistance and training to their borrowers. This requirement
    benefits CDFIs as well as their borrowers. CDFIs will enjoy higher
    rates of repayment and larger returns on their investments, and
    borrowers will acquire general financial and business skills and
    develop positive credit histories. As a result, both the CDFIs and the
    borrowers they serve become more attractive to mainstream financial
    institutions.
        The CDFI Fund's assistance to needy communities supports community
    and economic development activities for years after the Fund's initial
    investment. The Fund requires applicants seeking designation as a CDFI
    to demonstrate that their predominant business activity is the
    provision of loans, equity investments, deposit accounts or other
    sources of capital that can be invested, repaid, and then recycled to
    other individuals or organizations in need. In addition, the Fund
    provides investments that directly support the long-term growth and
    viability of lending-based institutions. Fund awards enable
    institutions to build their capacity to better administer their
    programs and provide them with the capital needed to grow their loan
    funds and make their products more affordable to their borrowers.
        The CDFI Fund leverages investments from other public and private
    institutions. Under several of the Fund's programs, applicants must
    demonstrate that they have significant community partnerships in place.
    In addition, certain awardees are required to provide a dollar for
    dollar match of non-Federal assistance for each dollar of Fund
    assistance provided. These matching funds come from a variety of
    sources, including local governments, banks, insurance companies,
    foundations, individuals and non-profit institutions. The match
    requirement helps to ensure that the awardee coordinates the use of
    Fund assistance with other entities in the community, and that these
    other entities will be involved in supporting the ongoing operations of
    the CDFI.
        The Fund also encourages mainstream financial institutions to
    invest in CDFIs. Regulated financial institutions may receive awards
    from the Fund for, among other things, increasing their provision of
    grants, equity investments, loans, deposits or other investments to
    certified CDFIs.
        The CDFI Fund's programs are designed to achieve maximum community
    and economic development impact. When a CDFI applies to the Fund for
    assistance, it must submit a business plan that includes its projected
    levels of activity and the anticipated impact of these activities upon
    the community. Prior to receiving a Fund award, an awardee must agree
    to meet performance standards that are based upon the activities and
    impacts outlined in its business plan. For example, a housing loan fund
    that receives an award would have to meet minimal thresholds not only
    for the number and dollar amount of loans it originates, but also for
    the number of housing units created as a result of its financing.
    Similarly, a business loan fund may be monitored based not only upon
    the number and dollar amounts of loans it disburses, but also upon the
    number of jobs created or retained by its borrowers. This type of
    ``performance-based monitoring'' helps ensure that the Fund is
    achieving a high degree of community development impact as a result of
    its investments.

                              MANAGING FOR RESULTS
        I am pleased to report that our independent auditors (KPMG, LLP)
    provided an unqualified opinion on the Fund's financial statements for
    the fiscal year that ended September 30, 1999. KPMG's opinion affirms
    that the Fund's Statements of Financial Position, Operations, and
    Changes in Net Position and Cash Flow are fairly presented. This marks
    the third consecutive year in which the Fund has received an
    unqualified audit opinion. In addition, for the second year in a row,
    the Fund's independent auditors identified no material weaknesses.
    Also, the Fund has no reportable conditions. These findings reflect the
    tireless commitment of the Fund's staff to sustaining and improving
    upon its internal controls, operating policies and procedures, and
    awards monitoring.
        The Fund continues to comply with the Federal Managers' Financial
    Integrity Act (FMFIA) and the Federal Financial Management Improvement
    Act (FFMIA). The Fund's system of internal management, accounting and
    administrative control has been strengthened and is operating
    effectively. Enhanced policies and procedures ensure that Fund programs
    achieve their intended results; Fund resources continue to be used in a
    manner that is consistent with its mission; and Fund programs and
    resources are protected from waste, fraud, and mismanagement.
        Enhanced internal efficiencies and improved staff capacity have
    resulted in unprecedented levels of productivity at the Fund. In fiscal
    year 1999, we selected 260 institutions to receive $112 million in
    awards, a 32 percent increase in the dollar amount of awards made in
    1998. Our carry-over into fiscal year 2000 was approximately $10
    million--a nearly four fold reduction from the $36 million carried-over
    in fiscal year 1999. We anticipate having no carry-over into fiscal
    year 2001.
        As I discussed with the Subcommittee in previous years, the Fund is
    committed to managing for results. Its mission is to promote access to
    capital and local economic growth by directly investing in and
    supporting CDFIs and expanding banks' and thrifts' lending, investment,
    and services within underserved markets. I would like to highlight some
    of the progress we have made in achieving this important mission.

                 CDFI FUND INITIATIVES--PUTTING CAPITAL TO WORK
        The CDFI Fund pursues its mission goals through seven initiatives:
    (1) CDFI Certification; (2) the CDFI Program, which includes the Core,
    Technical Assistance and Intermediary Components; (3) the Bank
    Enterprise Award (BEA) Program; (4) the Training Program; (5)
    Microenterprise Initiatives; (6) Policy and Research Efforts; and (7)
    the Native American Lending Study/Action Plan.

                               CDFI CERTIFICATION
        To help recognize and support the growing CDFI industry, the Fund
    reviews the applications of organizations wishing to become Federally
    certified CDFIs. In order for the Fund to certify an organization as a
    CDFI, the organization must meet each of the following six criteria:
        1. The organization and its affiliates must collectively have a
    primary mission of promoting community development;
        2. The organization must be a financing entity (either an insured
    depository institution or an institution that principally provides
    loans or equity investments);
        3. The organization must principally serve a target market
    consisting of distressed neighborhoods, low-income people, or other
    underserved populations;
        4. The organization must provide training or technical assistance
    in conjunction with its financing activities;
        5. The organization must maintain accountability to its identified
    target market; and
        6. The organization must be a non-governmental entity.
        There are several potential benefits of CDFI certification. First,
    certification enables an organization to be eligible to receive
    assistance from the Fund. Second, certified CDFIs may increase their
    capital by becoming partners with regulated financial institutions
    seeking awards from the Fund for investments in CDFIs. Third, CDFI
    certification may increase an organization's ability to raise funds
    from sources such as corporations, foundations and state and local
    governments. Finally, certified CDFIs may receive technical assistance
    from the Fund and training support from organizations sponsored by the
    Fund.
        To date, the Fund has certified over 380 organizations as CDFIs.
    These organizations are headquartered in 47 states, the District of
    Columbia and Puerto Rico. CDFIs include community development banks,
    community development credit unions, housing loan funds, facilities
    loan funds, small business loan funds, micro-enterprise loan funds,
    multi-bank community development corporations, intermediaries and
    community development venture capital funds. On average, the Fund
    certifies approximately 75 new CDFIs each year.

                                THE CDFI PROGRAM
        The CDFI Program has three funding components: Core, Intermediary
    and Technical Assistance. These three components promote the Fund's
    goals, articulated in its strategic plan, of strengthening the
    expertise and the financial and organizational capacity of CDFIs to
    address the needs of the communities that they serve. The Fund engages
    in targeted outreach to inform potential applicants to these funding
    components. The Fund also provides debriefings to applicants that are
    not selected for awards.
        The Core Component builds the financial capacity of CDFIs by
    providing equity investments, grants, loans or deposits to enhance the
    capital base--the underlying financial strength--of these organizations
    so that they can better address the unmet community development needs
    of their target markets. In addition, under the Core Component, the
    Fund provides technical assistance grants in order to build the
    capacity of awardees and maximize the community development impact of
    the Fund's awards.
        The Fund selects awardees that clearly demonstrate private sector
    market discipline and the capacity to positively impact underserved
    communities. The Core Component leverages additional private and public
    sector investments into these same organizations through the Fund's
    application requirements, particularly the one-to-one non-Federal
    matching funds requirement.
        In fiscal year 1999, the Fund provided 78 Core Component awards
    totaling over $78 million. This represents an 86 percent increase over
    the number of Core Awards provided in fiscal year 1998 (42 awards), and
    a 77 percent increase over the total amount of dollars awarded under
    the Core Component in 1998 ($44 million). Since inception, the Fund has
    made approximately 200 Core Awards totaling over $193 million.
        On November 1, 1999, the Fund published a Notice of Funds
    Availability (NOFA) announcing the availability of $50 million in Core
    Component awards for fiscal year 2000. We expect to make approximately
    50-70 awards under this NOFA. The application deadline was January 20,
    and, as has been the case in every year, we are over-subscribed. The
    Fund received 160 applications requesting a total of $264 million, over
    five times the amount of money the Fund announced as available under
    this program in fiscal year 2000.
        The Intermediary Component allows the Fund to invest in CDFIs
    indirectly, through intermediary organizations that support CDFIs and
    emerging CDFIs. These intermediary entities, which are also CDFIs,
    generally provide intensive financial and technical assistance to small
    and growing CDFIs, thereby strengthening the industry's financial and
    institutional capacity. Like Core awardees, Intermediary awardees are
    required to obtain matching funds in comparable form and value to the
    financial assistance they receive from the Fund.
        Since inception, the Fund has made Intermediary Awards totaling
    over $15 million to five different institutions. On November 1, 1999,
    the Fund published a NOFA announcing the availability of $6 million in
    Intermediary Component awards for fiscal year 2000. The application
    deadline for this NOFA was January 18, and the Fund received seven
    applications requesting over $9 million in assistance.
        The Technical Assistance (TA) Component of the CDFI Program was
    first introduced in 1998. This component builds the capacity of
    ``start-up'', young and small institutions. The TA Component allows the
    Fund to direct relatively small amounts of funds--generally $50,000 or
    less--to CDFIs that demonstrate significant potential for generating
    community development impact, but whose institutional capacity needs to
    be strengthened before they can fully realize this potential. Some
    typical uses of our TA grants include: achieving operating efficiencies
    through computer system upgrades and software acquisition; producing
    internal policies and procedures; evaluating current loan products and
    developing new ones; and training staff in operations essential to the
    success of the organization.
        In fiscal year 1999, the Fund provided 88 Technical Assistance
    Component awards totaling over $4 million. This represents a 24 percent
    increase over the number of TA awards provided in fiscal year 1998 (71
    awards), and a 33 percent increase over the total amount of dollars
    awarded under the Technical Assistance Component in 1998 (approximately
    $3 million). Since inception, the Fund has made 159 Technical
    Assistance Awards totaling over $7 million.
        On January 4, 2000, the Fund published a NOFA announcing the
    availability of $4.5 million in Technical Assistance awards for fiscal
    year 2000. Commencing this year, the Fund will make award decisions
    regarding fiscal year 2000 TA applications on a rolling basis with four
    separate application deadlines. In this manner, we hope to expedite
    both the approval and disbursement of TA awards and give TA applicants
    more flexibility in terms of when they apply for funds. We expect to
    issue approximately 80-90 TA awards in fiscal year 2000.
        Outreach.--To date, institutions in 47 states plus the District of
    Columbia, Puerto Rico and the Virgin Islands have received CDFI Program
    awards. To inform potential applicants about the Fund's programs, the
    Fund conducts informational workshops throughout the country. In
    preparation for the fiscal year 2000 round of applications, the Fund
    conducted 13 Core/Intermediary Component outreach sessions, including
    one that was broadcast by satellite to 73 locations; and 7 Technical
    Assistance Component outreach sessions, including one that was
    broadcast by satellite to 85 locations. The live sessions were held in
    regions of the country where there are relatively fewer CDFIs,
    including four sessions specifically targeted to organizations serving
    Native American populations.
        The Fund is particularly interested in reaching out to
    organizations that provide capital and technical assistance to rural
    communities. In the past few months, we have conducted, either live or
    by satellite, information sessions in 55 rural communities--two and a
    half times the number reached in fiscal year 1999. We will continue to
    increase our efforts to reach rural communities.
        Debriefings.--To further our goal of building the institutional
    capacity of the CDFI field, we provide debriefings to applicants that
    were not selected for CDFI Program awards. Applicants are given
    valuable feedback about strengths and weaknesses of their applications
    as observed by those community development professionals involved in
    reviewing their requests for funding. Many of these applicants use the
    information gathered from the debriefing to build the strength of their
    operations and to improve their performance. In fiscal year 1999, the
    Fund provided debriefings to 110 institutions that had been
    unsuccessful in seeking awards under the fiscal year 1998 funding
    round. Already in fiscal year 2000, we have provided debriefings to 62
    organizations that were not selected to receive an award in fiscal year
    1999.

                       THE BANK ENTERPRISE AWARD PROGRAM
        The Bank Enterprise Award (BEA) Program is the principal means by
    which the Fund achieves its strategic goal of expanding financial
    service organizations' community development lending and investments.
    The BEA Program recognizes the key role played by mainstream depository
    institutions in promoting the revitalization of distressed communities.
        The BEA Program provides monetary incentives for banks and thrifts
    to expand their investments in CDFIs and/or to increase their lending,
    investment and service activities in distressed communities. BEA awards
    vary in size, depending upon the type and amount of assistance provided
    by the bank and the activities being funded through the bank's
    investments. In general, banks that provide equity investments to CDFIs
    are likely to receive the largest awards relative to the size of their
    investments.
        The leveraging involved in the BEA Program is impressive. To date,
    274 awards totaling over $89 million have been announced for banks and
    thrifts investing in CDFIs and distressed communities throughout the
    country. This $89 million actually reflects investments in CDFIs and
    underserved communities of $1.87 billion, over 20 times the amount of
    the Fund's investment. To date, banks and thrifts receiving BEA awards
    have provided $439 million directly to CDFIs, and $1.43 billion to
    distressed communities in the form of direct loans, investments and
    services.
        In fiscal year 1999, as in every year since the program's
    inception, the Fund increased both the number and the total amount of
    our BEA awards. In fiscal year 1999, we made 103 awards totaling $31.7
    million. This represents an increase of 30 percent over the number of
    awards made in 1998 (79 awards), and 13 percent over the dollar amount
    of the awards made in 1998 ($28.1 million).
        On September 1, 1999, the Fund published a NOFA announcing the
    availability of $25 million in BEA Program funds for fiscal year 2000.
    The application deadline for this NOFA was November 23, 1999. We
    received 228 applications, a 64 percent increase over the 138
    applications that were received in fiscal year 1999. If the applicant
    institutions complete all of the activities proposed in their
    applications, we estimate that they would be eligible for awards
    totaling approximately $109 million--over four times the amount of
    money currently available for the BEA Program.

                              THE TRAINING PROGRAM
        The Training Program, begun in fiscal year 1999, enhances the
    Fund's ability to achieve its strategic goal of strengthening the
    organizational capacity and expertise of CDFIs. The Training Program
    provides funds that support the development and delivery of training
    products to CDFIs and other financial service organizations engaged in
    community development finance. Training needs will be addressed via
    classroom instruction, web-based distance learning, and other
    electronic formats. In addition, the Fund will explore supporting other
    types of capacity building training opportunities, including structured
    internships.
        In fiscal year 1999, the Fund initiated its first activity under
    this program. We undertook a market analysis of the training needs and
    resources of CDFIs and community-focused financial service
    organizations. The purpose of the market analysis was to determine: (1)
    the quality and extent of training available for CDFIs and financial
    service organizations engaged in community development lending; (2) the
    training needs of such organizations; (3) impediments to obtaining
    needed and adequate training for such organizations; and (4) strategies
    for eliminating those impediments. We recently received the results of
    this analysis and expect it to inform our future training initiatives.
        In fiscal year 2000, the Fund anticipates awarding, through
    competitive procurement processes, up to $6 million in contracts to
    entities for the purpose of developing and delivering specific training
    products to CDFIs and eligible financial service organizations. Funding
    will be made available to entities that provide training in a number of
    disciplines, including market analysis, financial projections, program
    development and organizational development.
        Currently the Fund has received and is reviewing proposals from
    training providers offering the development and delivery of training
    for three specific areas: preparation of financial projections;
    preparing a market analysis; and the fundamentals of lending
    operations. We anticipate that the proposals will result in over $1
    million in contracts. Training provided under these contracts will
    begin this year.

                          MICROENTERPRISE INITIATIVES
        As part of its strategy to democratize access to capital, the Fund
    works to strengthen the field of microenterprise development and
    microentrepreneurs. In addition to providing assistance to
    microenterprise loan funds under the CDFI Program, the Fund administers
    two initiatives specifically targeting microenterprise organizations
    and microentrepreneurs: (1) the Presidential Awards for Excellence in
    Microenterprise Development; and (2) the Interagency Workgroup on
    Microenterprise Development.
        The Presidential Awards for Excellence in Microenterprise
    Development is an annual non-monetary awards program that recognizes
    organizations that have demonstrated excellence and leadership in
    promoting microenterprise development. These awards reflect the
    Administration's on-going commitment to advancing the role of
    microenterprise development in enhancing economic opportunities for all
    Americans--particularly low-income people and others who lack access to
    traditional sources of credit and business development assistance. By
    recognizing outstanding organizations, the program promotes ``best
    practices'' within the microenterprise development field in the United
    States and brings wider public attention to the important role of
    microenterprise development in the domestic economy.
        Awards are given to practitioner organizations--entities that
    provide microentrepreneurs access to credit, training, counseling and
    technical assistance--for demonstrating excellence in providing access
    to capital; alleviating poverty; developing entrepreneurial skills; and
    innovative programming. In addition, organizations that support the
    effort of practitioner organizations through financial assistance,
    technical assistance, research, or other activities are eligible for
    awards for demonstrating excellence in public or private support.
        The Fund is co-chairing, with the Small Business Administration,
    the Interagency Workgroup on Microenterprise Development. The workgroup
    was established in 1998 to coordinate the work of Federal agencies
    involved in microenterprise efforts, and to develop a coherent
    framework for Federal government efforts to promote microenterprise.
    The Workgroup includes participants from several Federal agencies and
    departments. It is examining Federal policies that affect the
    microenterprise field and is harmonizing discrepancies in definitions
    and reporting standards among Federal programs that support
    microenterprise development. This year the workgroup expects to publish
    a policy paper, a matrix of microenterprise programs at the Federal
    level, a listing of needs of the field, and case studies highlighting
    examples of microenterprise best practices.

                        POLICY AND RESEARCH INITIATIVES
        The Fund's Policy and Research initiatives focus on three areas:
    (1) measuring and reporting on the performance of awardees; (2)
    promoting industry-wide research and development activities; and (3)
    instituting policies that maximize the effectiveness of the Fund's
    programs.
    Reporting on Performance and Outcomes:
        Core Component Survey.--For the second consecutive year, the Fund
    conducted a survey of its Core Component awardees to determine the
    impact of these awardees on the communities that they serve. We
    evaluated only 1996 and 1997 awardees because they have had at least
    one year to absorb the Fund's investments and put them to work. As of
    today, we have received and analyzed responses from 53 of 71
    organizations. Together, these awardees received $50 million in Fund
    awards. What has our $50 million helped these institutions to
    accomplish?
        Our preliminary findings demonstrate that these awardees have
    generated significant community development impact. Since the time of
    their award, our Awardees have made $1.5 billion in community
    development loans and investments, which have helped to: create or
    expand up to 4,123 microenterprises and 2,063 businesses; create or
    maintain up to 36,718 jobs; develop or rehabilitate up to 28,166 units
    of affordable housing; and develop or support up to 745 community
    facilities. These facilities have the capacity to provide child care to
    as many as 14,255 children, health care to as many as 52,614 patients
    and education to as many as 8,381 students.
        Our credit union and community development bank awardees provided
    76,554 checking and savings accounts totaling $126 million in 1999.
    Seventy six percent (76 percent) of these accounts are held by low-
    income individuals. These institutions have also provided 372
    Individual Development Accounts (IDAs) with deposits totaling $384,000.
        Since receiving their Fund awards, the 53 awardees have also
    strengthened their capacities to deliver products and services to their
    target communities. Our awardees provided business training, credit
    counseling, homebuyer training and other development services to up to
    32,915 individuals and organizations. Their total assets have increased
    by 119 percent, growing from $685 million in the aggregate before they
    received their awards to close to $1.5 billion in the aggregate in
    1999. The average awardee's client base is 72 percent low-income, 59
    percent minority, 51 percent female, 55 percent central city, 35
    percent rural, and 10 percent suburban.
        Finally, Fund awardees have leveraged significant additional
    capital. They estimate that an additional $215 million in capital over
    and above the $50 million raised as part of our 1:1 matching funds
    requirement can be directly attributed to receipt of a Fund award. In
    most cases, their community development loans and investments were part
    of a larger deal. In 1999, for every $1 our awardees loaned or invested
    in their communities, $1.30 was invested by other entities.
        BEA Program Survey.--This past year, the Fund developed a pilot
    survey and administered it to a sample of 30 banks and thrifts that
    received BEA awards in 1998. Thus far, we have received responses from
    23 institutions. Among other things, the survey asked: (1) how the
    promise of a BEA award influenced the lending policies or products of
    the awardee; (2) how the awardee spent its BEA award. We are still
    collecting and analyzing surveys, but the preliminary findings indicate
    that the BEA Program is a valuable tool for encouraging banks to
    increase their community investments.
        The pilot survey indicates that the BEA Program has been successful
    in helping banks to offer more flexible products to organizations and
    individuals. The vast majority of the respondents reported that the
    likelihood of a BEA award allowed them to offer or develop products
    they otherwise wouldn't have. These include longer term, lower interest
    rate loans; below market rate deposits; and new products such as pre-
    development loans. Many of the respondents also indicated that the
    prospect of a BEA award allowed them to offset risks of return, and
    thus fund projects that they would not have otherwise supported. A
    majority of respondents also reported that they increased their
    investments in CDFIs and/or built new relationships with CDFIs as a
    consequence of participating in the BEA Program.
        Twenty-one (21) of the 23 respondents reported that they used their
    BEA award monies to fund additional community development initiatives.
    This is an impressive outcome, given that awardees are under no
    obligation to reinvest BEA Program award funds in this fashion. Many of
    the respondents reported using their BEA awards to increase their
    grants and investments in CDFIs and in other non-profit community
    development organizations. Others used their award money to subsidize
    below market rate loans to community development institutions and low-
    income borrowers, or to increase the provision of technical assistance
    to borrowers.
        The Fund is encouraged by the preliminary results of this survey,
    as well as the response rate we achieved. These findings suggest that
    the BEA Program is an effective incentive for banks to increase their
    community development finance activities.
        Reporting on Certified CDFIs.--With over 380 organizations
    certified as CDFIs and new applications for certification arriving
    regularly, the Fund has information on more CDFIs than any other entity
    in the country. This past year, the Fund worked with CDFI industry
    groups to develop a brief questionnaire that will produce aggregate,
    standardized data from every certified CDFI. This data will enable the
    Fund to report on the total volume of CDFI lending and investing,
    portfolio quality, community development impact indicators, capital
    managed by CDFIs, and basic CDFI financial indicators. As of November
    1, 1999, all entities seeking certification or re-certification with
    the CDFI Fund are required to complete this brief questionnaire.
        Promoting Industry-Wide Research and Development.--The Fund has
    begun working with CDFI industry groups and other major funders to
    develop an industry-wide research agenda. The Fund has solicited input
    from practitioners, funders and academics to identify gaps in existing
    research and will work with the industry to establish a coordinated
    research program that addresses the needs identified by the industry
    and its investors. The Fund has also initiated, and will continue to
    pursue, in-house research activities that examine various aspects of
    our awardees' work.
        Developing Fund Policies.--The Fund is constantly seeking to
    improve upon its programs and policies to obtain higher levels of
    efficiency, and to be more responsive to the needs of our applicants
    and awardees. In 1999, the Fund performed a comprehensive review of its
    certification and funding processes. The Fund solicited input from
    applicants and awardees, external reviewers, and Fund staff about ways
    to improve documents and processes to ensure that they are well
    coordinated and transparent. With this feedback, the Fund implemented
    significant revisions to its certification, Core, Intermediary and TA
    applications, application review criteria, awards closings procedures
    and reporting requirements. These changes were codified as revised
    interim regulations, published on November 1, 1999. As a result,
    applicants for certification or for funding in fiscal year 2000 and in
    future years will benefit from more transparent and efficient policies,
    procedures and application materials.

                   NATIVE AMERICAN LENDING STUDY/ACTION PLAN
        Our Native American Lending Study/Action Plan is intended to
    stimulate private investment on Native American reservations and other
    lands held in trust by the United States. The first step in
    accomplishing this goal is to identify the barriers to private
    financing in these areas. To this end, the Fund conducted 13 regional
    workshops across the country. The workshops included participants from
    Native American communities, financial institutions, Federal and state
    agencies, and community development organizations. Participants in
    these workshops identified barriers to investments in Native American
    communities and developed strategies and actions for eliminating these
    barriers. The Fund is also administering a national survey to collect
    additional data from Native American organizations and financial
    institutions regarding barriers to accessing capital in Native American
    communities. The products from these workshops and the results of this
    survey will assist the Fund in completing the Study. It is anticipated
    that the final report will be submitted to the Congress and the
    President by the end of this year. This report will contain
    recommendations regarding policy, legal, statutory and regulatory
    changes needed to spur more investment within Native American
    communities.

                        THE YEAR AHEAD: FISCAL YEAR 2001
        The President's fiscal year 2001 budget request includes $125
    million in appropriations for the Fund. This request is $30 million
    above fiscal year 2000 funding levels. Of the $30 million in additional
    funding requested, the Fund proposes to use $28,360,000 to fund its
    various programs and $1,640,000 to cover administrative expenses. These
    additional appropriations will assist the Fund in its efforts to
    continue to meet the great demand for its programs. In the past, we
    have addressed this demand with a combination of new appropriations and
    funds carried over from previous fiscal year appropriations. However,
    because we do not anticipate carrying over any appropriations into
    fiscal year 2001, the Fund will need all of the President's fiscal year
    2001 budget request to address the demand for its programs.
        In every year since the Fund's inception, interest in our programs
    has increased. This year has been no exception to that rule. In fiscal
    year 2000, the Fund received 167 Core and Intermediary Component
    applications requesting a total of $273 million in awards--or 37
    percent more than the $200 million requested under these Components in
    fiscal year 1999. The Fund also experienced a 64 percent increase in
    the number of BEA Program applications received in fiscal year 2000 as
    compared with fiscal year 1999. The additional appropriations requested
    for the Fund by the President's fiscal year 2001 budget will enable the
    Fund to continue to invest in worthy organizations and proposals at
    approximately the same rate as it has done up to now.
        The Fund is requesting an additional $1.6 million in appropriations
    for fiscal year 2001 to cover administrative costs. These funds will be
    used to support 10 new FTE positions and to cover the salary cost of
    living increase for existing staff. Consistent with our appropriations
    requests outlined above, we anticipate that most of these new hires
    will be used to administer Fund programs. Current Fund staff work
    tirelessly to ensure that the Fund makes prudent investments and that
    our awards are disbursed in a timely fashion. However, the increasing
    demand for our programs and a growing portfolio of investments to
    monitor makes it necessary to hire additional staff. Sufficient staff
    ensures that we will continue to make sound investment decisions and
    retain the capacity to monitor the growing number of awardees in our
    portfolio.
        The Fund's budget request for fiscal year 2001 also includes a $5
    million set-aside for the purpose of establishing training and
    technical assistance programs to increase access to capital in Native
    American, Alaskan Natives and Native Hawaiian communities. The need for
    this set-aside was identified in the workshops related to the
    development of the Native American Lending Study/Action Plan. This set-
    aside would fund educational and other programs that: (1) enable
    financial institutions currently serving these communities to enhance
    their capacity to provide access to capital and credit; (2) assist
    financial institutions contemplating serving these underserved
    communities to do so; and (3) assist these communities in establishing
    their own community development financial institutions.
        We anticipate making additional innovations in our programs that
    will enable us to better serve small, emerging and rural CDFIs in
    fiscal year 2001. We plan to amend our Technical Assistance Component
    to allow small and emerging CDFIs to compete for both technical
    assistance and financial assistance in amounts up to $150,000 to
    $200,000 per round. This innovation addresses the Small and Emerging
    CDFI Access Program idea that Congress encouraged the Fund to consider
    last Fall. We are also looking forward to expanding some of our current
    research initiatives. We intend to fund a research project this year
    that examines the feasibility of creating a secondary market for
    community development loans. Pending the outcome of this study, we hope
    to be able to fund a secondary market pilot project in fiscal year
    2001.
        Finally, we anticipate that our nascent Training Program will
    facilitate the development and delivery of several new training and
    technical assistance products by 2001. The Fund will solicit bids from
    prospective developers and providers of training products in fiscal
    year 2000, with the intent that they will complete their products and
    make them available to CDFIs and other community development financial
    service organizations early in 2001.

                                   CONCLUSION
        Mr. Chairman and members of the Committee, thank you for giving me
    the opportunity to provide this information on the Fund's current
    activities and fiscal year 2001 budget. I am hopeful that this
    Committee will approve the President's $125 million budget request for
    the Fund, so that we may continue to work on creating jobs, affordable
    housing, childcare facilities, small businesses and economic
    revitalization across America.

        Senator Bond. Thank you very much, Ms. Lazar.
        Ms. Lazar. Thank you.
        Senator Bond. I mentioned briefly the potential overlap
    with other agencies. I understand NCUA has requested $1 million
    in training in technical assistance to assist low income credit
    unions. At the same time, CDFI is also providing assistance.
    What kind of coordination and communication do you have with
    HUD and NCUA on these issues?
        Ms. Lazar. We talk with them quite regularly. Cardell
    Cooper, who is the assistant secretary at HUD, serves on our
    advisory board. The advisory board meets three times a year.
    And we do have an opportunity to talk with him fairly
    regularly.
        We also speak with NCUA on a regular basis on a host of
    matters. And I will let Maurice continue on.
        Senator Bond. Mr. Jones.
        Mr. Jones. Thank you. With respect to NCUA, what we have to
    do by statute is, prior to providing an award to an institution
    that they regulate, we have to notify them that we are going to
    make the award, ask them for comments on both the propriety of
    the award and also the financial and managerial standing of the
    institution.
        They then comment back to us whether they think the award
    is appropriate, whether the uses of the award will be helpful
    for the institution, duplicativeness, et cetera.
        We do not make the award until we get their approval. If
    they disapprove, then we go back to NCUA and the institution
    and try to work out whatever issues are there. And we have to
    do that by statute.
        Senator Bond. Thank you, Mr. Jones. In the testimony and
    report you talk about the information sessions in 55 rural
    communities during 2000. Looking at it in detail, though, we
    saw only 17 of those sessions were in States of less than 2
    million, and that was one of the focuses that members of the
    committee had asked you to make. And of the 55 sites, there
    were rural poverty areas, like Phoenix, Denver, Cincinnati,
    Indianapolis, San Antonio and Seattle.
        Could you just very briefly talk about the nature of the
    information sessions and how these sessions address the needs
    of the rural areas? And do you have any other ideas for
    addressing those needs?
        Mr. Jones. Sure. The info sessions essentially--at the
    beginning of each round of awards, what we do is we hold
    information sessions whereby we go through the details of the
    award round that is applicable. So if it is--let us say it is
    technical assistance. What we do is we hold educational
    workshops across the country and through satellite whereby we
    essentially walk through the applications. We talk about
    eligibility criteria. We talk about the evaluation criteria.
        We give applicants a sense of the timing for the due dates.
    We give them a sense of timing for the types of awards they can
    apply for. And most importantly, we engage in a back and forth
    with them. We answer all of their questions to the extent that
    we can. And we do this with respect to each of our programs.
        With respect to reaching out to more rural areas, several
    of those video teleconferences were broadcast via the USDA
    network. So we reached rural areas that way. In addition, we
    had about 83 sites or so via the video teleconferencing.
        What we are doing with respect to trying to reach out
    further in rural areas, we have already made one change in our
    regulations. We noticed that our regulations--we had a
    provision in our regulation that said if you are a rural area,
    you could qualify if the population loss over a 10-year period
    were 10 percent.
        What that was doing for rural areas, we learned, is it was
    not accounting for the differences that births and deaths were
    making. So we added another feature, which allowed rural areas
    to qualify if the net migration loss was 5 percent over a 5-
    year period. And we did that as of November 1 of last year. And
    we will continue to do, as we learn more and more about how our
    programs affect rural areas, we will continue to try to do
    those things.
        Senator Bond. Thank you very much, Mr. Jones.
        I have another question, so I will submit that for the
    record and turn the questions to Senator Mikulski.
        Senator Mikulski. Thank you.
        First of all, I was delighted to hear about the way the
    mandate works with coordinating with the credit unions over
    applications. My question, Ms. Lazar, is: How does CDFI work
    with community development corporations?
        Ms. Lazar. We work in many ways with community development
    corporations. The CDFIs that we certify and fund do a lot of
    their lending and investment activity with CDCs directly. A
    number of the CDFIs are outgrowths, in fact, of CDCs
    themselves.
        Some of them have separated off their lending and
    investment activity to establish a CDFI in their community. So
    they are both working from a lending standpoint and also
    customers and clients of CDFIs for their development
    activities.
        Senator Mikulski. Because in many instances they do not
    exist in certain areas. I mean, there continues to be a wide
    gap between the demand for lending and so on.
        Let me go then to another issue that Senator Bond and I are
    tremendously interested in. You have heard one side of the
    flipping, the predatory lending where they really gouge the
    poor. And they are despicable predators. That name is accurate.
    But of the legacies of predatory lending is FHA or so-called
    HUD houses in communities that are often wastelands themselves.
    And in like my own hometown, HUD in some ways is one of the
    biggest slum landlords, holding boarded up property.
        Do you--one of the recommendations Cuomo is considering is
    giving these houses to community corporations or to cities
    themselves. I made the comment, you cannot flip to them because
    in many instances they are poor themselves, particularly the
    non-profits.
        My question is: Do you now play a role in helping deal with
    FHA disposal properties, with community groups? Do you see a
    role that CDFI could play if so-called asset zones were created
    or so on? Because we just do not want to shift HUD's problem on
    to either a city or a non-profit without resources, because it
    is going to take us nowhere. And I am wondering what--have you
    thought about this? Have you heard about this?
        Ms. Lazar. A little bit, actually. A lot of the CDFIs are
    working on predatory lending issues in their communities. Self-
    help down in North Carolina has been very active in focusing
    attention on predatory lending activities in their community.
    We could certainly spend more time talking about this, but my
    initial look at this is that CDFIs could play a significant
    role in helping to facilitate moving the properties out of the
    HUD portfolio into CDCs, and the CDFIs helping to finance
    rehabilitation activity and mortgage activity for the CDCs in
    development positions.
        Senator Mikulski. Have you been asked to serve on the Cuomo
    task force?
        Ms. Lazar. No, I have not.
        Senator Mikulski. Well, I am going to recommend that, only
    because I think we are looking at two issues here. One, the
    actual lending and how the poor are gouged and faulty
    appraisals and mortgage bounty hunters, all of that. And then
    there is the FHA disposal or the so-called HUD houses.
        And we think your expertise, both in what you have seen in
    terms of lending or whatever, would be useful, but how we
    ultimately could get to the core problems, one of which is even
    the kind of consumer education that needs to go on through
    community groups that then--that helps avoid people heading to
    the scams in the first place.
        Mr. Chairman, I am out of time. But one of the reasons you
    had predatory lending was they had--it was not the banks. The
    banks in Baltimore are not overseeing a lot of this. In fact,
    many of them have instituted controls and are helping solve the
    problem. But there are these institutions that look like banks,
    spend like banks, lend like banks, but are not regulated like
    banks.
        Now I am not in a position to propose a new regulatory
    framework, but you filled the gap where banks could not go or
    whatever. But you bring a lot of ``banking experience,'' both
    in the area of consumer protection and education, as well as
    working with institutions and local communities that could deal
    with it. Because FHA disposal is not only due to predatories,
    but it is due to a lot of other things connected to buying home
    ownership.
        A melancholy figure was, of the 10,000 houses that were
    sold in Baltimore last year, 4,000 are now in default. And of
    those 4,000, it is not all predatory lending. So something got
    pretty screwed up somewhere. And it has been terrible for the
    poor and terrible for the community where those houses have
    been vacant.
        Ms. Lazar. Well, we would certainly be very happy to
    participate in any way you would suggest.
        Senator Mikulski. Thank you.
        Mr. Jones. Could I just add, I think your conclusion that
    trying to dump, if you will, these properties on the non-profit
    institutions is not a wise thing for them. One, they are
    financially strapped. But two, this is not their--CDFI's at
    least--this is not their core competency. Where they can play a
    role is educating consumers and providing finance where banks
    are not providing it. That is their competency, and that is
    what they do as well as anybody.
        Senator Mikulski. Well, thank you.
        I know that our time is up. We are going to suggest your
    membership. The second thing is that whatever you have--what I
    am looking for are some of the--how you work--after someone
    gets the money, how do you stay in touch with them to see what
    they are doing to accomplish the results of what we bankrolled
    in the first place. So thank you.

                              SUBCOMMITTEE RECESS

        Senator Bond. Thank you very much, Senator Mikulski.
        And my thanks to you, Ms. Lazar and Mr. Jones.
        The hearing is recessed. We will keep the record open for
    further comments or questions for the record.
        [Whereupon, at 11:35 a.m., Wednesday, April 12, the
    subcommittee was recessed, to reconvene subject to the call of
    the Chair.]

     DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT AND
            INDEPENDENT AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2001

                                  ----------

                            THURSDAY, APRIL 13, 2000

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 9:30 a.m., in room SD-138, Dirksen
    Senate Office Building, Hon. Christopher S. Bond (chairman)
    presiding.
        Present: Senators Shelby, Craig, and Mikulski.

                 NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

    STATEMENT OF DANIEL S. GOLDIN, ADMINISTRATOR
    ACCOMPANIED BY:
            LEE B. HOLCOMB, CHIEF INFORMATION OFFICER
            ARNOLD G. HOLZ, CHIEF FINANACIAL OFFICER
            MALCOLM L. PETERSON, COMPTROLLER
            VICKI A. NOVAK, ASSOCIATE ADMINISTRATOR FOR HUMAN RESOURCES AND
                EDUCATION
            JOHN D. SHUMACHER, ASSOCIATE ADMINISTRATOR FOR EXTERNAL
                RELATIONS
            JEFFREY E. SUTTON, ASSOCIATE ADMINISTRATOR FOR MANAGEMENT
                SYSTEMS AND FACILITIES
            EDWARD HEFFERNAN, ASSOCIATE ADMINISTRATOR FOR LEGISLATIVE
                AFFAIRS
            JOSEPH H. ROTHENBERG, ASSOCIATE ADMINISTRATOR FOR SPACE FLIGHT
            SAMUEL L. VENNERI, ASSOCIATE ADMINISTRATOR FOR AEROSPACE
                TECHNOLOGY
            EDWARD J. WEILER, ASSOCIATE ADMINISTRATOR FOR SPACE SCIENCE
            ARNAULD E. NICOGOSSIAN, ASSOCIATE ADMINISTRATOR FOR LIFE AND
                MICROGRAVITY SCIENCES AND APPLICATIONS
            ROBERTA L. GROSS, INSPECTOR GENERAL
            GHASSEM ASRAR, ASSOCIATE ADMINISTRATOR FOR EARTH SCIENCE
            LORI A. GARVER, ASSOCIATE ADMINISTRATOR FOR POLICY & PLANS

                 OPENING STATEMENT OF SENATOR CHRISTOPHER BOND

        Senator Bond. Good morning. The hearing of the Senate, VA-
    HUD, and Independent Agency Subcommittee will come to order.
    The Subcommittee meets today to review the 2001 budget request
    of the National Aeronautics and Space Administration. We
    welcome Dan Goldin, the NASA Administrator, and his staff.
        I also should acknowledge Roberta Gross, the NASA Inspector
    General, and thank her for her good work on computer security
    issues. These are very, very important issues, and we thank you
    for your diligence and attention to these issues at NASA.
        I always look forward to the NASA hearing. NASA has the
    unique position and opportunity to lead us into the 21st
    century in the exploration of our last frontier, the universe.
    We are on the cusp of the bicentennial of the Lewis and Clark
    expedition that was the first step in the exploration of what
    was to become our Nation. This is a bicentennial in which I
    have particular interest, since my State was part of the
    Louisiana Purchase and my great, great grandfather poled the
    boats up the river for them--he didn't make it in Steven
    Ambrose's book, but he was out there plugging away.
        In some ways, NASA has a similar opportunity to be the
    Lewis and Clark of the 21st century, through its history of
    putting men and women in space and on the moon, with the
    assembly of the International Space Station and ultimately as
    we reach out to the ends of the universe through both manned
    and unmanned missions. NASA will help to redefine the measure
    of our people as the discoverers and explorers of the 21st
    century.
        I congratulate you also on the tenth anniversary of the
    Hubble Space Telescope. That in itself is a remarkable story of
    the little telescope that could. And someday soon we will be
    able to look to the far corners of the universe and ironically
    see the beginning of time. These are very exciting challenges,
    and I applaud the efforts of all the people at NASA.
        Having said that, we again have a lot of hard work to do as
    we prepare the VA-HUD Appropriations bill for fiscal year 2001.
    Despite the rosy optimism of some, we as usual have a number of
    hard funding decisions to make. We work with the budget people
    and with the Appropriations Committee to assure that we have
    the allocations necessary; and we don't have them yet, but
    that's not new either. So this will be another struggle.
        In NASA's case, the Administration is requesting some $14
    billion, an increase of $434.5 million over the fiscal year
    2000 funding level of $13.6 billion. This is a significant
    increase at a time in which we have to balance a number of
    significant other funding priorities, including the need to
    provide increased funding for VA medical care and increased
    funding for the renewal of all expiring section 8 rental
    assistance contracts. Nevertheless, NASA is an important part
    of the subcommittee, and as always we will work hard to meet
    the budget needs of all of our agencies and try to be as
    generous as we can.
        NASA's biggest priority remains the International Space
    Station, and we continue to have concerns regarding the large
    cost overruns and delays in the assembly schedule, as well as
    fears that our Russian partners are not going to shoulder their
    fair share and meet their commitments.
        In particular, as of last year, Boeing had cost overruns of
    almost $1 billion. In addition, the cost of the International
    Space Station had grown from an estimated $17.4 billion in cost
    to some $26 billion currently, and this does not include the
    cost of operation. Unfortunately, this makes the space station
    a poster child of bad government budgeting and poor decision-
    making.
        These are big problems, and as you know, the more the ISS
    is delayed the more the costs will increase, which ultimately
    means that we are losing money that could go to many other
    important projects. I hope that you will be able to provide us
    today, Mr. Administrator, with some confidence and good news
    about the status of the International Space Station.
        I also remain concerned about the need to provide safety
    upgrades to the space shuttle. I know that shuttle safety is a
    priority, but I remain disturbed by recent concerns raised in
    the 1999 annual report of the Aerospace Safety Advisory Panel
    that warned about risks to the shuttle fleet because of
    obsolescence and projected increases in flight rates.
        I know that NASA is being proactive with regard to these
    concerns as well as problems identified because of workforce
    reductions, and I emphasize our continuing support for this
    vital component of your mission.
        I consider the future of space transportation the next big
    debate at NASA. I think we all agree that the cost of going
    into space is too expensive to ensure the success of a
    commercial space industry, and that the next challenge is the
    development of a reusable launch vehicle that should
    dramatically lower the cost of accessing space. NASA had
    expected to make a decision on a reusable launch vehicle as a
    replacement to the space shuttle by this time. While NASA
    continues to work with industry on a reusable launch vehicle
    such as the Venture Star, we have a long way to go.
        NASA currently is proposing a new Integrated Space
    Transportation program. Under this program, NASA intends to
    commit some $4.4 billion between now and 2005 to develop a
    technology base for the replacement of the space shuttle. The
    program is designed to attract the investment of the private
    sector in the development of new space transportation options,
    with the private sector taking the lead in development and
    funding after 2005.
        NASA plans to use this program to solicit new ideas and
    build on the X-33 program, the X-34, and the Venture Star as a
    technology base for the development of new technologies and
    vehicles. Nevertheless, it's not clear whether there is
    adequate private interest to support the amount of private
    financial commitment that will be necessary to finance
    successfully and complete a shuttle replacement.
        Finally, I am concerned about the loss of two consecutive
    Mars missions in the Mars Surveyor program, and what this means
    to NASA's philosophy of ``faster, better, cheaper''. These
    losses could have been avoided. In particular, the $125 million
    Mars Climate Orbiter was lost on September 23, 1999 because of
    a failure by Lockheed Martin/JPL to convert English units into
    metric units. I think you would fail high school freshman math
    if you made that mistake.
        More recently, the $165 million Mars Polar Lander likely
    was lost because of a coding failure that never should have
    occurred. Both programs had histories of cost overruns and
    schedule delays. These failures follow last year's losses of
    the Lewis and the Wide-field Infrared Explorer or WIRE
    missions.
        Since 1992, NASA has launched 16 robotic space exploration
    missions under the ``faster, better, cheaper'' policy, and
    seven of these missions have either failed or had serious
    problems post-launch.
        While the Mars Program Independent Assessment Team Report,
    released on March 14, 2000, acknowledged the value of the Mars
    program as well as the viability of the ``faster, better,
    cheaper'' philosophy, I want to be sure that the right lessons
    are learned and applied. In particular, I believe the report
    emphasized the need to establish protocols that minimize risk,
    including the need to provide experienced leadership, standards
    for risk assessment, and the development of realistic budgets
    and reserves for each mission, which also tie decision-making
    to appropriate headquarter oversight. In other words, the
    reasonable test must be made to ensure that the suckers work.
    And when we don't do that, we have some very expensive and very
    embarrassing losses for all of us.
        The bottom line is that NASA missions and activities have
    inherent risk, that pushing the envelope of human knowledge
    requires some risk and must allow for failure. Nevertheless,
    any failure must be smart failure, not stupid failure. And by
    that I mean we need to take every reasonable step that is
    foreseeable to ensure success. If something totally unknown
    happens, that's understandable. But let's at least take all the
    reasonable steps we can to avoid it.
        I look forward to hearing your views on this issue. I now
    turn to Senator Mikulski for her opening statement and
    comments.

                OPENING STATEMENT OF SENATOR BARBARA A. MIKULSKI

        Senator Mikulski. Thank you very much, Mr. Chairman, and
    many of the flashing yellow lights that you raised about the
    budget are also very much in my own thinking, particularly the
    conflict that we will have within our own VA-HUD appropriations
    about meeting our responsibilities.
        Dr. Goldin, I am going to welcome you today for your eighth
    appearance before this subcommittee, and I want to thank you
    for your many years of service. I know that when you took the
    job of being the NASA administrator at the request of President
    George H. Bush, that you made many sacrifices, both financial
    and others, to assume this responsibility.
        And now you've served two presidents; President Bush and
    President Clinton, and in my mind, this is the way the
    administrator of a science program should be. Science is not
    about a party platform, science is not about ideology, science
    is about discovery and our product is knowledge.
        This is again, what it says to me is that as we work
    together, that hopefully that we view our science programs that
    way. We have certainly tried to do this in our appropriations
    committee. I can't ever say enough about what it meant for me
    to come and work with Senator Garn, who was a great teacher to
    me in space, and now this excellent relationship that I share
    with this chairman as we look at science. We share the same
    populist views and somewhat the same pugnacious style.
        Senator Bond. I'm flattered, Senator.
        Senator Mikulski. So pugnacious and populist, that's kind
    of a--heppy would be another one that I would add.
        But your dedication and leadership has helped make NASA
    ready to meet many of the new challenges for the new century,
    and like anything related to discovery, we've had some big hits
    and we've had some big misses. And I know we'll talk about
    those, but I could not let this hearing come to an end without
    thanking you for what you've done and the team that supports
    you, and I also want to acknowledge the role that your family
    has played, because they had to be very supportive of the
    sacrifices that you made, leaving the private sector to come
    here.
        You and I just celebrated the tenth anniversary of the
    Hubble Space Telescope. It was a great day for NASA and Goddard
    and affirmed the wider role that science does play in our
    lives. I was very proud of the men and women at Goddard, the
    astronauts, technicians, engineers and the staff at the Space
    Telescope Institute, which also is very proud of the team that
    supports that.
        NASA though is not only a science agency, it's also a
    technology agency. Thanks to NASA, we are not only exploring
    the far reaches of our universe, we are pushing the envelope of
    technology. There are many aspects we could talk about, but one
    I know that I'm particularly happy about is that through the
    Hubble Space Telescope there have been new techniques developed
    in X-ray technology; and because of that we will be able to do
    better MRIs, we will be able to do better mammographies; so
    while we explore the outer space, we are also using the
    technology of NASA to explore the inner space, and this I think
    is what helps the American people be so supportive of what we
    do.
        The support also has to come financially. The
    administration, I know, has proposed a $400 million increase in
    NASA's budget for 2001. This is one of the largest increases in
    NASA's history, but considering that it's been flatlined for
    some time, the rise is really in keeping with where we should
    have been all along.
        I really do hope we get a 302B allocation that enables us
    to sustain the president's request, and I know we'll be working
    very vigorously to do this. Why? There is a lot to be done at
    NASA. Much is needed in this budget for the safety upgrades in
    the space shuttle. I am committed to do whatever is necessary
    to ensure the safety of our shuttle astronauts, and I support
    the funding increases for the new hardware and additional
    staffing to be able to do that.
        We must make every effort to reduce human error in the
    shuttle program so that we not only can launch on time, but
    it's that: send someone to space and return them safely with
    what we asked them to do.
        While the shuttle remains the workhorse of our launch
    capacity, we do need reliable launch systems that dramatically
    reduce the cost of getting to space. One of the biggest
    barriers to expanding telecommunications capabilities is the
    cost of launching satellites. If we can reduce the cost of
    launch, we can further expand our telecommunications market. I
    do believe that NASA's new Space Launch Initiative is one of
    the best ways to determine the most feasible system for the
    next generation of the reusable launch systems, and I think
    we're all tremendously interested in this.
        Over the next 5 years, I know that NASA will assess the
    viability and feasibility of new launch systems that will cost
    less than the space shuttle, and I think this is very
    important. I know that there will be a 5-year competition among
    contractors to see what's the best vehicle and the best
    alternative to the shuttle. Cheaper, more reliable launch
    systems are the key to unlocking the commercial activity.
        While we look ahead at the safety of the astronauts, we
    also have to look at some of the issues that I know that we are
    confronting. I share the concerns that Senator Bond has raised
    about the Mars losses; those were three big losses. They were a
    loss of science, they were a loss of time, they were a loss of
    money and in some ways a loss of confidence in really this
    whole Mars approach.
        We look forward to hearing from you about what you really
    think is the analysis of the ``faster, quicker, cheaper'' and
    what worked and what perhaps are the lessons learned from it. I
    know that NASA's budget also includes an increase for space
    science. One of the new programs is ``Living With A Star''
    initiative; I am going to commend you and Dr. Ed Weiler, the
    Administrator for Space Science, for this program and look
    forward to hearing more about it.
        As I understand it, ``Living With A Star'' will be a series
    of missions to better understand how the sun interacts with the
    earth; and this is not only a great intellectual and scientific
    exercise, but could be very crucial in providing longer
    advanced warning of solar storms to protect power grids and
    telecommunications.
        Two other things: One is, I look forward to discussing with
    you nanotechnology, this new breakthrough in technology
    development that could take the United States of America so far
    into the future with new breakthroughs, and I look forward to
    being with you today when you do an agreement with the Cancer
    Institute on this exploration of outer space and inner space.
        Earth science, unfortunately the 5 year budget outlook
    shows a cut in funding of $100 million by the year 2005. This
    is the only science program that shows a cut in funding, and it
    has raised my concerns about NASA's long term plan for space
    science. I do believe that NASA needs a post-EOSDIS vision for
    earth science, and would like to discuss that with you.
        I am also concerned, once again, about Russian
    participation in the International Space Station. There are
    consistent reports that the Russians now have diverted money
    from the station, and it's gotten into the hands of their
    biological warfare program. I am deeply troubled by the fact
    that the Russians continually do not deliver, we have to
    continually do the backup, they did go to Iran with their
    rocket technology, and I sure hope you can tell me that they
    haven't taken some of our space money and put it into
    biological warfare.
        So with that, I am going to conclude my remarks and move
    on.
        [The information follows:]

                    Verification of Payments to Biopreparat

                                  INTRODUCTION
        On January 27, 2000, the NASA Associate Administrator for Space
    Flight directed that a NASA team be formed to review the funding
    process for biotechnology research under the Russian Space Agency (RSA)
    \1\ contract (NAS15-10110) to determine whether NASA funds were used
    for their intended purpose. NASA directed the review because a January
    25, 2000, New York Times article reported an allegation by certain
    Russian scientists that some of the $1.65 million that NASA provided to
    fund biotechnology research may have been inappropriately redirected by
    Biopreparat, a major Russian pharmaceutical firm, to fund biological
    warfare research. The NASA team included financial, procurement, and
    technical officials from the Lyndon B. Johnson Space Center (JSC) and
    an auditor from the NASA Office of the Inspector General. (A list of
    the participants is at the end of this report.) The team performed the
    verification at JSC in late January and early February 2000 and at
    Rosaviakosmos during February 7-11, 2000. Appendix A provides details
    on scope and methodology.
    ---------------------------------------------------------------------------
        \1\ Now known as the Russian Aviation and Space Agency
    (Rosaviakosmos).
    ---------------------------------------------------------------------------

                                   BACKGROUND
        The RSA contract is a firm-fixed-price contract, originally priced
    at $400 million, initiated in December 1993 via letter contract, and
    definitized in June 1994. As of February 2000, the contract value was
    about $537 million, of which $529 million has been obligated and $523
    million has been spent. The RSA contract includes two phases. Phase I
    involved Shuttle missions to the Russian Mir space station. Phase II
    involves Russian services and supplies for the International Space
    Station (ISS).
        The RSA contract specifies a variety of deliverable items and
    services to be provided to NASA by RSA (Appendix B describes the
    acceptance and payment process for deliverable items). These include
    not only U.S. crew missions and Shuttle docking at Mir, but also crew
    training; integration, accommodation, and operation of U.S. research
    hardware on Mir; cosmonaut time for the operation of experiments; and
    technical data regarding the characteristics of Mir. The research
    program to be conducted on Mir was coordinated between the NASA and RSA
    by a joint Mission Science Working Group. In addition to the flight
    research program on Mir, the contract required a separate program of
    predominately ground-based research to be conducted by Russian
    investigators.
        The contract earmarked funding of $20 million for the solicitation,
    selection, administration, and execution of a research program to be
    carried out under the RSA Scientific and Technical Advisory Council
    (STAC). The contract also identified specific deliverable items, which
    RSA was to complete between August 1994 and August 1997 (Appendix C
    shows the list of deliverable items). A total of $18.2 million was
    available for distribution to investigators (scientists), with the
    remainder of $1.8 million allocated for administrative and reporting
    expenses, including the solicitation, review, and selection of project
    proposals. The contract provided that RSA, through STAC, would use the
    proposals to develop an integrated research plan containing scientific
    investigations to be performed, milestones, goals, objectives, and
    cost. The Deputy Associate Administrator, Office of Life and
    Microgravity Sciences and Applications, was responsible for reviewing
    the research plan for NASA.
        STAC was organized into ten discipline sections (Appendix D shows
    the ten discipline sections); each section was chaired by an
    acknowledged leader in the field who was the director (or, in some
    cases, a senior official) of a research institute or design bureau.
    Each section had multiple investigations, representing a variety of
    research institutions. One of the sections was Biotechnology, which was
    led by Biopreparat and which had funding requirements of about $1.65
    million.

                            RESULTS OF VERIFICATION
        Between February 1995 and January 1998, NASA paid RSA $20 million
    for space-related scientific research under terms of the RSA contract.
    Of the $20 million, RSA paid Biopreparat $1.529 million \2\ for space
    biotechnology scientific research.\3\ Of the $1.529 million,
    Biopreparat distributed $1.368 million (89.5 percent) to its eight
    subcontractors and retained $0.161 million (10.5 percent). (Appendix E
    shows the distribution of the $1.529 million.) The activities
    associated with the $0.161 million were carried out directly by
    Biopreparat under terms of an RSA contract with Biopreparat. The
    contract price structure showed how Biopreparat planned to use the
    funds that they retained. Also, RSA submitted periodic reports to NASA
    as contract deliverable items, which NASA accepted as satisfactory
    completion of the planned research. Within the scope of our
    verification, we saw no indication that the funds were used for other
    than the intended purpose.\4\ We concluded, based on the evidence
    collected, that there was no need to expand the scope of the
    verification.
    ---------------------------------------------------------------------------
        \2\ The $1.529 million was actually paid in rubles (about 7.904
    billion) at an average pre-1998 conversion rate of about 5,170 rubles
    to a dollar.
        \3\ RSA also paid about $0.121 million to the Shemyaking
    Ovchinnikov Institute of Bioorganic Chemistry, which constitutes the
    balance of the $1.65 million that NASA paid for biotechnology research.
        \4\ A verification of the funding process can determine the
    sources, recipients, and amount of funds paid. However, only through
    additional steps, such as gaining an understanding of the entity,
    observing its operations, and obtaining independent third party
    information, might a positive assurance be given on how the funds were
    actually used. Contractual access is limited to examination of
    financial information of RSA and its first-tier subcontractors.
    ---------------------------------------------------------------------------

                       APPENDIX A.--SCOPE AND METHODOLOGY

        We selected our sample of payments and performed initial
    verification steps at JSC. We then met with Rosaviakosmos
    representatives in Moscow to discuss their financial process and
    perform further verification steps.

                  STEPS PERFORMED AT THE JOHNSON SPACE CENTER
        Before we visited Rosaviakosmos, the JSC Financial Management
    Division identified all payments made for implementation of scientific
    and research activities under the scientific program of contract NAS15-
    10110 between NASA and RSA, carried out by Biopreparat under
    subcontract with RSA. The Financial Management Division identified 18
    contract milestone payments to RSA totaling $20 million, with which RSA
    paid Biopreparat $1.529 million for 6 subcontract milestones (Appendix
    C shows the contract milestones). We reviewed contract payment records
    from November 1994 through January 1997 and subcontract payment records
    from September 1995 to February 1998. To verify payment amounts and
    dates, we compared the amounts and dates of the six invoices to JSC
    payment records.\5\
    ---------------------------------------------------------------------------
        \5\ The payment records were the EFT Tape Transmission Report
    (R81P6C20) and the Cash Management Detail Schedule Listing (R81P6C04),
    which were generated by the JSC Cash Management System.
    ---------------------------------------------------------------------------

                  STEPS PERFORMED AT THE RUSSIAN SPACE AGENCY
        At Rosaviakosmos, we compared our data to RSA financial records to
    verify NASA payments to RSA and the funding flow to Biopreparat.
    Through discussions with Rosaviakosmos representatives, we gained an
    understanding of the financial processes and procedures used by RSA to
    disburse funds to the subcontractors for biotechnology research.
    Rosaviakosmos assembled all associated financial records, contract
    files, and the bank payment orders associated with the six milestones.
    In addition, Rosaviakosmos and Biopreparat presented copies of
    subcontractor payment orders that supported the transfer of funds from
    Biopreparat to its subcontractors.
        We reviewed RSA documentation supporting applicable milestones,
    associated payment orders, and bank transfer notices. To determine how
    Biopreparat planned to distribute and use the funding provided by NASA,
    we reviewed the RSA/Biopreparat price structure and related subcontract
    documents. We examined ten funding transfers from RSA to Biopreparat,
    which represented the $1.529 million paid by NASA. We also examined and
    summarized 140 funding transfers from Biopreparat to its eight
    subcontractors, which represented $1.368 million paid by NASA, and
    thereby calculated the $0.161 million retained by Biopreparat (Appendix
    E shows the calculation).

       APPENDIX B.--ACCEPTANCE AND PAYMENT PROCESS FOR DELIVERABLE ITEMS

        The RSA contract includes a schedule of deliverable items showing
    the amounts NASA will pay RSA for providing specific goods and
    services. NASA acknowledges receipt of a deliverable item when the NASA
    contracting officer's technical representative determines that the item
    conforms to contract requirements and notifies the NASA contracting
    officer at JSC. The contracting officer prepares and sends an
    acceptance document to RSA, which in turn prepares and sends an invoice
    back to the contracting officer. The invoice specifies where NASA
    should make payment, usually to the RSA account at the Bank of New
    York.\6\
    ---------------------------------------------------------------------------
        \6\ Invoices for reimbursable travel expenses and for support of
    RSA offices in Houston and Washington DC specify the RSA account at the
    F&M Bank of Northern Virginia. These funds stay in the United States.
    The payment process described in this report refers only to the Bank of
    New York since those funds are routed to Russia.
    ---------------------------------------------------------------------------
        When NASA receives an invoice from RSA, the contracting officer
    matches it to the acceptance document, approves the invoice for
    payment, and sends the invoice to the certifying officer at JSC. The
    certifying officer certifies the payment of funds (in dollars) to RSA
    by the Department of the Treasury. The payment usually covers several
    invoices. The certifying officer electronically transmits a payment
    schedule to the Austin Regional Finance Center, which routes the funds
    through the Federal Reserve System to the RSA account at the Bank of
    New York. The Bank of New York receives the funds from the Treasury,
    electronically transfers the funds to the RSA account at the Bank of
    Foreign Trade, Moscow (Vneshtorgbank), and notifies RSA of the
    transactions. Vneshtorgbank receives the transfer from the Bank of New
    York and then notifies RSA of the transaction.
        RSA directs Vneshtorgbank to convert dollars into rubles in the
    amount needed to pay its subcontractors and to comply with conversion
    requirements of the Central Bank of the Russian Federation (the Central
    Bank).\7\ Since 1999, the Central Bank has required Russian entities to
    convert at least 75 percent of foreign currency (dollars) into rubles
    within 14 days.\8\ If an entity does not direct the Central Bank to
    convert the dollars within the 14 days, the Central Bank executes the
    mandatory conversion on the 15th day. RSA timing of the remaining
    conversion depends on the requirements to pay its subcontractors and
    the expectation of the exchange rate fluctuation. After conversion, RSA
    transfers the rubles to RSA accounts at various Russian banks,
    primarily the Mir Bank in Moscow.
    ---------------------------------------------------------------------------
        \7\ Before August 1998, Vneshtorgbank charged its customers a
    currency exchange commission of not more than about one-half percent
    per transaction.
        \8\ Before 1999, the mandatory conversion amount was 50 percent.
    ---------------------------------------------------------------------------
        RSA pays its subcontractors in rubles. The amount RSA must pay its
    subcontractors is initially established in both dollars and rubles in
    agreements between RSA and its subcontractors. However, because of
    volatile fluctuations in the dollar/ruble exchange rate, soon after RSA
    converts dollars to rubles for a milestone payment, RSA and its
    subcontractors amend their agreements to reflect the current amount of
    rubles payable.\9\ Upon receipt of a valid invoice from a
    subcontractor, RSA makes payment by transferring the rubles to a
    subcontractor bank account.
    ---------------------------------------------------------------------------
        \9\ When Vneshtorgbank charged a currency exchange commission or
    fee, RSA decreased its payments to subcontractors by the amount it paid
    Vneshtorgbank.

               APPENDIX C.--DELIVERABLE ITEMS FOR SCIENCE RESEARCH
    ------------------------------------------------------------------------
      Line                                             Completion   Funding,
    Item No.                Description                   date         $M
    ------------------------------------------------------------------------
     0003C3a Solicited Requests for Proposal            8/1/94         0.2
              Report
     0003C3b Integrated Plan for Science Research      11/1/94         0.2
              (initial)
     0003C3c Implementation of Integrated Plan for     11/1/94         3.2
              Science Research (installment 1 of
              6)
     0003C3d Administrative Expenses                   11/1/94         0.2
     0003C3e Integrated Plan for Science Research       2/1/95         0.1
              (final)
     0003C3f Interim Research Report                    8/1/95         0.1
      0003C4 Implementation of Integrated Plan for      8/1/95         3.0
              Science Research (installment 2 of
              6)
      0003C5 Administrative Expenses                    8/1/95         0.2
      0003C6 Interim Research Report                    2/1/96         0.1
      0003C7 Implementation of Integrated Plan for      2/1/96         3.0
              Science Research (installment 3 of
              6)
      0003C8 Administrative Expenses                    2/1/96         0.2
      0003C9 Interim Research Report                    8/1/96         0.1
     0003C10 Implementation of Integrated Plan          8/1/96         3.0
              Science Research (installment 5 of
              6)
     0003C11 Interim Research Report                    2/1/97         0.1
     0003C12 Implementation of Integrated Plan for      2/1/97         3.0
              Science Research (installment 5 of
              6)
     0003C13 Administrative Expenses                    2/1/97         0.2
     0003C14 Interim Research Report                    8/1/97         0.1
     0003C15 Implementation of Integrated Plan for      8/1/97         3.0
              Science Research (installment 6 of
              6)
                                                   -------------------------
                   Total                            ...........       20.0
    ------------------------------------------------------------------------
             Note: Shaded areas denote the six line items (milestones) that
               included payments for research done by Biopreparat.

                         APPENDIX D.--SECTIONS OF THE SCIENTIFIC AND TECHNICAL ADVISORY COUNCIL
    ----------------------------------------------------------------------------------------------------------------
                                                                          No.            No.
                     Discipline/Lead Organization                   Investigations  Institutions      Funding, $K
    ----------------------------------------------------------------------------------------------------------------
    Space Technology and Materials Science; Institute of                     17             16              2450.0
     Crystallography, Russian Academy of Science..................
    Geophysical Studies; Institute of Earth Magnetism and                     6              4              1019.32
     Radiowaves, RAS..............................................
    Space Biomedicine; State Scientific Center-Institute of                  71             17              6230.0
     Biomedical Problems..........................................
    Earth Natural Resources and Environment Monitoring; Institute            21             11              3086.786
     of Radioengineering and Electronics, RAS.....................
    Investigations of Planets and Small Bodies; Space Research               10              3              1203.55
     Institute, RAS...............................................
    Space Biotechnology;\1\ RAO ``Biopreparat''...................           13              7              1649.465
    Technical Studies and Experiments; Rocket-Space Corporation               8              7               708.86
     ``Energia''..................................................
    Space Astronomy; Institute of Astronomy, RAS..................            5              5               370.65
    Program Integrated Analysis & Formation Effectiveness                     6              2               806.45
     Analysis, Consortium ``Space Regatta''.......................
    Problems of Space Power and Propulsion; Keldysh Research                  4              2               674.95
     Center, RAS..................................................
                                                                                                 -------------------
          Total...................................................  ..............  ............          18,200.031
    ----------------------------------------------------------------------------------------------------------------
    \1\ Space Biotechnology: Diverse set of investigations similar to U.S. biotechnology interests, including
      protein crystal growth, effect of microgravity on genetic and cellular processes, antibodies, and polymers;
      electrophoresis, etc.

                                APPENDIX E.--DISTRIBUTION OF PAYMENTS TO BIOPREPARAT \10\
    ----------------------------------------------------------------------------------------------------------------
                                                                            Amount/Percent         Amount/Percent
    ----------------------------------------------------------------------------------------------------------------
    Total Amount Paid by RSA to Biopreparat...........................  .....................     $1,528,865 (100.0)
    Less: Amounts Distributed by Biopreparat:
        Joint Stock Company, ``Komposit''.............................          $97,686 (6.4)  .....................
        State Research Institute of Applied Microbiology..............         287,373 (18.8)  .....................
        Scientific Technical Center, Ecology and Space................           95,010 (6.2)  .....................
        State Research Institute of Highly Pure Biopreparations.......           94,784 (6.2)  .....................
        Joint Stock Company, ``Biochimmash''..........................           91,671 (6.0)  .....................
        Saint Petersburg Vaccine and Serum Research Institute.........           90,567 (5.9)  .....................
        Joint Stock Company, The Institute of Engineering Immunology..         228,658 (15.0)  .....................
        State Research Center of Virology and Biotechnology                    381,961 (25.0)       1,367,710 (89.5)
         (``Vector'').................................................
                                                                       ---------------------------------------------
            Amount Retained by Biopreparat............................  .....................         161,155 (10.5)
    ----------------------------------------------------------------------------------------------------------------
    \10\ Although payments are shown in dollars, the payments were actually made in rubles at an average pre-1998
      conversion rate of about 5,170 rubles to a dollar.

                                  TEAM MEMBERS
        John H. Beall, Chief Financial Officer, Johnson Space Center;
    Dennis E. Coldren, Program Director, Human Exploration and Development
    of Space Audits, NASA Office of the Inspector General; Thomas E.
    Cremins, Deputy to the Assistant to the Director for Human Space
    Flight, Russia; and K. Lee Pagel, Administrative Contracting Officer.

                                    PROTOCOL
        ON NAS15-10110 BIOPREPARAT FUNDING INFORMATION EXCHANGE MOSCOW,
                          FEBRUARY 7-FEBRUARY 11, 2000
    General Purpose:
        To verify and confirm the correctness of the financial relationship
    and obtain an understanding of Rosaviakosmos' (previously RSA)
    financial activities and business process associated with Russian firm
    Biopreparat under contract NAS15-10110. Also, to verify NASA funding
    transferred through Rosaviakosmos to Biopreparat and the resulting
    flow-through of funding to subcontractors.
    Specifically:
        1. Review Rosaviakosmos' internal documents supporting the transfer
    of payments to Biopreparat.
        2. Review the support for the individual cost elements contained in
    the Rosaviakosmos contract with Biopreparat.
        3. Verify the receipt of NASA funds by Biopreparat and subsequent
    transfer of those funds to subcontractors (research institutes).
    Participants:
        Tom Cremins--NASA; Anatoly Ermolaev--Rosaviakosmos; John Beall--
    NASA; Roman Yakimenko--Rosaviakosmos; Lee Pagel--NASA; Alla Nazarova--
    Rosaviakosmos; Dennis Coldren--NASA/OIG; Larisa Lazutina--Biopreparat;
    and Anna Andreeva--TTI (interpreter).
    Methodology:
        Prior to arrival at Rosaviakosmos headquarters, the NASA team
    identified all payments made for implementation of scientific and
    research activities under the scientific program of contract NAS15-
    10110, between NASA and Rosaviakosmos, carried out by Biopreparat under
    subcontract with Rosaviakosmos. Six contract milestone payments paid to
    Biopreparat were identified for review. Verification covered records
    for the period from November 1994 through January 1997. The scope of
    financing in accordance with the terms of contract totaled $1.529
    million.
        Rosaviakosmos assembled all associated financial records, contract
    files, and the bank payment orders associated with the six milestones.
    In addition, Rosaviakosmos (with the assistance of Biopreparat)
    presented copies of subcontractor payment orders that supported the
    transfer of funds from Biopreparat to its subcontractors.
        The team verified the flow of NASA funds from Rosaviakosmos to
    Biopreparat. From Biopreparat documentation, the team verified 140
    funding transfers to subcontractors for the six milestones.
        To identify how Biopreparat planned to distribute and use the
    funding provided by NASA, appropriate contract documents were reviewed
    as well as price computation on the basis of the Rosaviakosmos/
    Biopreparat price structure.
    Conclusion:
        NASA funds of $1.529 million, which were paid under the
    Rosaviakosmos/NASA contract, were received by Biopreparat. Biopreparat
    distributed $1.368 million between its subcontractors and retained
    $0.161 million. The activities associated with the $0.161 million,
    which were carried out directly by Biopreparat, amounted to 10.5
    percent of the amount under the Rosaviakosmos/Biopreparat contract for
    space biotechnology scientific research.
        The contract price structure showed how Biopreparat planned to use
    the funds that they retained. The NASA team saw no indication that the
    funds were used for other than the intended purpose.
        Of special note, Rosaviakosmos and Biopreparat representatives were
    extremely cooperative and cordial in providing explanations of
    Rosaviakosmos financial process and supporting documentation for the
    transactions reviewed. Representatives of Rosaviakosmos and Biopreparat
    expeditiously submitted all the necessary supporting documentation.
        Done in Moscow on February 11, 2000, in English and in Russian with
    wordings in both languages in the equal force.

        Senator Bond. Thank you, Senator Mikulski.
        Senator Craig, do you have an opening statement?
        Senator Craig. I do not. I'm here to listen. Thank you, Mr.
    Chairman.
        Senator Bond. All right. Thank you very much, and Mr.
    Goldin, we will now have your presentation followed by your
    multimedia show.

                           STATEMENT OF DANIEL GOLDIN

        Mr. Goldin. First, Mr. Chairman, I submitted formal
    testimony. I'd like it to be put in the record.
        Senator Bond. I should make the statement that we will
    accept your full statement as submitted. We will also hold the
    record open so that members of the committee may offer
    additional questions, and I have far more than I can ask in a
    hearing of any reasonable length, and other members may have,
    and we invite you to add, in addition to your responses to the
    questions submitted to you, any further comments that you think
    would be helpful.
        Please proceed.

                        FISCAL YEAR 2001 BUDGET REQUEST

        Mr. Goldin. Thank you, Mr. Chairman.
        The President's fiscal year 2001 request of $14,035 million
    is an increase of 3.2 percent over last year's appropriation,
    and reflects future year increases that exceed slightly the
    rate of inflation.
        It includes an $1.5 billion increase over 6 years to
    address Space Shuttle safety improvements through hardware and
    software upgrades and other efforts. This investment should
    improve the Space Shuttle safety by about a factor of two.
        Thanks to support from this committee, the two highest
    priority upgrades have already been initiated, and we are
    studying a broad range of other upgrades for implementation by
    2005.
        Funding is included for additional personnel for NASA's
    Human Space Flight Centers. We told the committee that if we
    found we had cut too far, we would come back and tell you.
    After internal and external reviews, we have concluded that we
    had cut too far. This funding will stabilize and revitalize our
    workforce to ensure that the right skills and staffing are in
    place to operate the Space Shuttle safely, and to assemble the
    space station.
        This year will be a landmark year for the International
    Space Station. We are confident that the first crew will begin
    to live on board the station. Because of the Russian Proton
    rocket failures, launch of the Russian Service Module has been
    delayed until July.
        I am particularly enthused that the budget includes funding
    for Living With A Star, a new scientific research initiative to
    understand the sun's impact on earth and the space environment
    around it.
        It also reflects robust funding for initiation of a
    critical new Space Launch Initiative with investment of $4.5
    billion over 5 years.
        The budget includes a broad range of new initiatives in
    science and technology, including additional funding for the
    Mars program, in anticipation of the findings of the various
    reviews just completed, and investments in biotechnology,
    nanotechnology, and information technology that Senator
    Mikulski referred to.

                                 NASA SETBACKS

        Mr. Chairman, I should note that during the past year NASA
    experienced some severe disappointments and problems,
    particularly the back-to-back losses of the Mars Climate
    Orbiter and the Mars Polar Lander and the Deep Space 2 probes.
        NASA deliberately commissioned a number of independent
    reviews to examine the problem, search for root causes, and
    recommend changes. In the past month, NASA has issued and
    submitted to the committee several reports, including those of
    the Mars Climate Orbiter Mishap Investigation Board, the
    ``faster, better, cheaper'' review, and the Mars Program
    Independent Assessment Team led by Tom Young.

                                  YOUNG REPORT

        I would like to take a moment to address the Young report
    in particular. When I was sworn in as NASA Administrator in
    1992, I set out on a new agenda. NASA had outstanding people
    and incredible support from the American people, but NASA had a
    problem, it was clinging very tightly to the past. NASA's
    robotic missions were taking too long, taking too little risk,
    and costing too much money.
        Instead, I proposed empowering the NASA workforce, asking
    them to tell us how we can implement our missions in a more
    cost-effective manner. How can we do everything better, faster,
    cheaper without compromising safety?
        Knowing that change is difficult, even when there is little
    or no choice, I pledged to the workforce that we would not be
    overly prescriptive, we would not micromanage, and we would
    encourage them to take risks, do things differently, even
    deviate from past practice, so long as it followed sound
    principles.
        But I reminded them that, in pressing the boundaries they
    would encounter failure. In replacing billion-dollar robotic
    missions with multiple smaller robotic missions and flying them
    more frequently, they could expect two or three failures in
    every 10 attempts. But 10 successes out of 10 attempts would
    mean that they would not be adequately pushing the boundaries.
    And more than two or three failures out of 10 attempts would be
    too many.

                                NASA'S SUCCESSES

        Since that time, the revolution has taken hold and NASA has
    had spectacular successes. Here's our report card: Since 1992,
    NASA has launched 146 payloads valued at a total of $18
    billion. Of this number, 136 payloads were successful. Our
    total losses amounted to 10 payloads at about a half billion
    dollars, or less than 3 percent. Planetary spacecraft, once
    launched twice a decade at a cost measured in billions, are now
    routinely launched each year at a small fraction of that cost.
    This is worldclass performance by any reasonable standard.
        We wanted to demonstrate to the world that NASA could do
    things much better, and NASA delivered; with Mars Pathfinder,
    with Mars Global Surveyor, with Deep Space 1. We pushed the
    boundaries as never before and had not yet reached our limit.

                                    MARS 98

        Not until Mars 98. We are examining the Mars 98 failures in
    microscopic detail, and I might just say, we are probably
    punishing ourselves more than anyone from the outside could do
    it, because we're such, so focused on success.
        We established Red Teams to evaluate the launch readiness
    of all our missions for this year, and since we launched the
    Mars 98 missions, we have had 12 spectacular successes: XMM,
    FUSE, QuikSCAT, ACRIMSat, Stardust, Landsat-7, Terra, ISS
    Servicing mission, Chandra, the Hubble servicing mission, the
    Shuttle Radar Topography Mission, and IMAGE. Those are $4.6
    billion worth of space missions launched successfully.
        We have concluded that, in spite of our overall success
    rate and the fact that we are still roughly within the bounds I
    set, the warning bells of a trend are sounding. So we will take
    a pause, but we will not go back.

                                  YOUNG REPORT

        I agree with the conclusions of the Young report. In fact,
    I told the leaders of the Mars 98 team that in my effort to
    empower people I, Dan Goldin, pushed too hard, and in doing so
    stretched the system too thin. As NASA Administrator, I accept
    responsibility. Mistakes were made that could have been avoided
    and must be corrected.
        The Young report reminds us how important it is to have
    adequate margins in planning and executing programs, but that
    is not a license to turn on the funding spigot. There are many
    things that we can do that do not involve money.
        We know that we have three main areas to work on:
    communication, training and mentoring, oversight and review. We
    will implement improvement in these areas by focusing upon
    people, processes, execution, and advanced tools and
    technology. I want to remind this committee how strongly I
    believe that we should not throw money at these challenges.
    Where it is appropriate, we will add funding, but at this point
    in time, I am not asking this committee for any more than our
    present presidential request.

                          ADDRESSING THE YOUNG REPORT

        We are already taking steps to address the Young report. We
    have streamlined management of the Mars Surveyor program at
    NASA Headquarters and JPL, and we just announced two
    outstanding Americans to take charge and have better
    communications. We are redefining the entire Mars program
    architecture, and we will be able to discuss it with you later
    this year.
        NASA's Chief Engineer, Brian Keegan, is putting together a
    matrix that will incorporate NASA's responses to all
    recommendations concerning program management to ensure
    consistency of best practices and update our processes to take
    into account what we have learned.
        As has been the case at various times throughout this
    Agency's 40-year history, we are committed to learn everything
    we can from these losses, alter our approach where prudent, and
    move on.

                             HUBBLE SPACE TELESCOPE

        Senator Mikulski, as you mentioned, we just celebrated 10
    years of the Hubble Space Telescope operation. The Hubble
    started out on orbit as a failure, but NASA overcame that
    failure, drawing upon the expertise of the entire agency and
    the wonderful people at NASA Goddard. And the world has been
    rewarded with 10 years of spectacular discovery.
        As was the case with Hubble and a broad range of other
    programs, NASA has undertaken a journey towards revolutionary
    change with unbelievable support from this committee. And we
    are resolved to continue to merit that support.

                               PREPARED STATEMENT

        Mr. Chairman, I am compelled one more time to tell you how
    crucial it is for NASA's 2001 request to be fully funded. It is
    an affirmation of what the NASA workforce has been striving for
    over the last several years. I committed to the dedicated and
    courageous employees across the country that I would press
    NASA's case with you today and make this plea. Given the
    sacrifices this workforce has made in streamlining NASA's
    budget since 1993--and you can see the chart there--I hope you
    will do all you can to make this very good budget request a
    reality.
        Mr. Chairman, I am prepared to respond to your questions.
        [The statement follows:]

                     PREPARED STATEMENT OF DANIEL S. GOLDIN

        Mr. Chairman and Members of the Subcommittee: I am pleased to be
    here to present to you NASA's budget request for fiscal year 2001. This
    is a great budget. It fully funds NASA's priorities in fiscal year
    2001: make investments in improving Space Shuttle safety; build the
    International Space Station (ISS); reduce the cost of access to space
    through a new Space Launch Initiative; invest in outstanding science
    and technology; and, revitalize the NASA workforce and facilities.
        The fiscal year 2001 request of $14.035 billion represents an
    increase of 3.2 percent over the fiscal year 2000 enacted level, and
    reflects future year increases that exceed the rate of inflation. If
    the Administration's vision for NASA is enacted by Congress, funding
    for NASA will increase from an fiscal year 2000 appropriation of $13.6
    billion to $15.6 billion in fiscal year 2005. That is an endorsement of
    our Strategic Plan of a balanced space and aeronautics program and a
    tremendous tribute to the NASA team. The percentage of our fiscal year
    2001 budget devoted to science and technology has increased from 31
    percent in fiscal year 1991 to 42 percent, and is planned to grow to 51
    percent by fiscal year 2005. It represents a strong commitment by this
    Administration to invest in science and technology, which is the
    Nation's foundation for future discoveries and economic prosperity.
        Before I discuss NASA's exciting future and the new programs
    provided for in this budget, I would like to share with the Committee
    NASA's achievements, as well as our disappointments, since the last
    time I appeared before you. It is this history on which the fiscal year
    2001 budget is built, which prepares us for the future, and which
    provides the lessons and character to accomplish what was previously
    only imaginable.
        We had a very exciting year in fiscal year 1999, full of exciting
    missions and discoveries as we transitioned into the New Millennium.
    The achievements in fiscal year 1999 extended from improvements in
    aeronautics applications to benefit the FAA and the air-faring public
    to the far reaches of the universe, which addressed scientific
    objectives ranging from the environmental to the cosmological.
        The list of accomplishments was impressive:
        We started off the year with the launch of Deep Space One, a
    mission to test 12 revolutionary technologies including spacecraft
    autonomy and ion propulsion. The Submillimeter Wave Astronomy Satellite
    (SWAS), a small explorer mission, was launched to study the chemical
    composition of interstellar gas clouds. We launched Stardust on
    February 7, 1999, to rendezvous with comet Wild-2 in 2004, and bring
    back to Earth a sample of comet dust in 2006. In Earth Science, we
    launched Landsat-7, the continuation of the successful Landsat
    program;Terra, our flagship mission to study the Earth as a system;
    Acrimsat the latest in a series of instruments used to study the sun's
    energy, and QuikSCAT to tell us how the wind blows over the oceans.
    FUSE, the Far Ultraviolet Spectroscopic Explorer, was launched on June
    24, 1999, to observe the universe in the ultraviolet and try to answer
    questions such as what conditions existed in the universe a few minutes
    after the Big Bang.
        The first two ISS assembly missions were launched in November and
    December. In July, the Space Shuttle Columbia, commanded by the first
    female Shuttle commander, Colonel Eileen Collins, deployed the Chandra
    X-ray Observatory. The Hubble Space Telescope scientists calculated a
    value for how fast the universe is expanding, after 8 years of
    painstaking measurement. Astronomers funded by NASA witnessed for the
    first time a distant planet passing in front of its star, providing
    direct and independent confirmation of the existence of extrasolar
    planets. Mars Global Surveyor provided the first global 3-dimensional
    map of Mars, and the Compton Gamma Ray Observatory enabled the first
    ever optical image of one of the most powerful explosions in the
    universe.
        NASA and its industry partners developed new technology to allow
    planes to land safely in bad weather on parallel runways. The test
    version of the X-34 rocket plane, made its first captive-carry flight
    toward certification in preparation for testing new technologies and
    methods of operation needed to develop low-cost reusable space
    vehicles. We worked with the launch industry on the Space
    Transportation Architecture Studies, the fruits of which are reflected
    in this budget plan. Although safety has always been of foremost
    concern in NASA, we increased our focus on the need for a safe,
    healthy, and productive workforce and environment, and strengthened our
    resolve to reduce program costs as a result of focussing on improving
    safety. That philosophy is reflected throughout this budget.
        At the end of 1999, NASA safely and smoothly transitioned to the
    Year 2000 with no significant problems. NASA's success was due to the
    hard work of hundreds of dedicated employees, contractors, and our
    international partners. During the transition period and the first few
    business weeks of 2000, we experienced only minor anomalies that were
    easily addressed. None of the anomalies had any significant impact on
    critical operations or functions. Computer hacking was at normal
    levels, and no Y2K-related attacks were detected.
        In 1999, we also experienced some severe disappointments and
    problems: in the Mars Surveyor Program, with the loss of the Mars
    Climate Orbiter, the Mars Polar Lander and the Deep Space-2 probes, and
    in the Space Shuttle Program, with wiring problems affecting all of the
    orbiters, resulting in grounding of the entire fleet from August until
    December, as well as a hydrogen leak found in one of the Space Shuttle
    main engines. The TERRIERS and Wide Infrared Explorer missions failed.
    The X-33 composite hydrogen tank did not pass its qualification tests
    and the launch plans for the assembly of the ISS were delayed. We
    experienced deferrals in achieving a launch-ready position for the U.S.
    laboratory module and other components, although I am pleased to report
    these have now been overcome and we will be ready to launch. Our
    Russian partners also made good progress in readying the Service Module
    for launch, although their funding challenges continue to cause concern
    about their ability to fully meet their commitments. In addition, Sea
    Launch just experienced its first launch failure, losing an ICO
    payload.
        1999 also was marked by continuing launch vehicle failures that
    directly and indirectly impacted NASA programs. The Russian Proton
    failures have had a significant impact on the readiness to launch the
    ISS Service Module. The Russians were not alone in experiencing launch
    failures, as the Japanese, Europeans, and the United States struggled
    as well to achieve safe and reliable access to space. And, as recently
    as February 10, a Japanese launch vehicle failed, taking with it NASA's
    investment in the Astro-E X-ray spectroscopy mission.
        There have been a number of independent reviews to examine these
    problems, search for the root causes, and recommend changes. NASA
    worked closely with the Department of Defense and others on the Broad
    Area Review. We chartered reviews of the Shuttle wiring problems, the
    WIRE and Terriers failures, and of course the Mars Surveyor Program
    failures. As a result of the Mars failures, I commissioned a Mars
    Program Independent Assessment Team in December 1999 led by A. Thomas
    Young. That team was charged to review and assess the entire Mars
    program architecture, management, content and recent failures. The team
    had complete authority to delve into any and every aspect of NASA's
    program management. That report was released on March 28, and has been
    provided to the Committee. Also, the Mars Climate Orbiter Mishap
    Investigation Board Report led by the Director of the Marshall Space
    Flight Center, Arthur Stephenson, and the Faster, Better, Cheaper
    Review, headed by Tony Spear were released on March 13, 2000.
        These reports make several valuable recommendations as a result of
    assessing both the recent failures and recent successes, and the
    practices that made them such. We have tasked an Agency-wide NASA
    Integrated Action Team (NIAT), led by Brian Keegan, NASA's Chief
    Engineer, to define a plan to mitigate the root causes for these
    failures and enhance the probability of future success. The NIAT has
    divided the assessment of all recommendations into four key areas:
    people, processes, process implementation, and advanced tools and
    technology. An action set will be formulated for each area.
        On September 7, 1999, Joseph H. Rothenberg, Associate Administrator
    for Space Flight, chartered a Space Shuttle Independent Assessment Team
    (SIAT). The SIAT performed an independent technical review of Space
    Shuttle systems and maintenance practices. Dr. Henry McDonald, Director
    of the Ames Research Center, chaired this joint NASA/DOD/contractor
    team. The SIAT concluded their activities and submitted a written
    report to Mr. Rothenberg on March 7, 2000. NASA forwarded copies of the
    report to Congress on March 9, 2000. The President's fiscal year 2001
    budget request has significant increases for investing in Shuttle
    safety that could be used to address these issues.
        Each of these teams has made recommendations that will help us
    improve our processes and make our operations safer and better. After
    careful review of these reports, NASA will share our plans to address
    the recommendations contained in the reports with the Congress and work
    with you and the Administration to ensure their timely implementation.
    We must continue to learn, not only from our successes, but also from
    our failures.
        Mr. Chairman, in spite of our difficulties, I believe the report
    card on NASA's performance reflects well on the support of the
    Committee and on behalf of the American people. While we accomplished a
    great deal in 1999, I see an even brighter future ahead. That does not
    mean we will not experience difficulties. We will. The ambitious
    programs we undertake are intolerant of human error and stress our
    human capabilities to detect and respond to anomalies. Our strategy to
    achieve major improvements in safety, taking advantage of emergent
    technical tools, such as the Intelligent Synthesis Environment,
    includes improving our systems management approaches, and continuing to
    infuse the philosophy and practice of safety in all that we undertake.
    This budget provides funding for the research into and development of
    the technologies that will improve the probability of mission success.
    The additional funding requested for personnel and facilities, Shuttle
    safety investments, the next generations of launch vehicles, general
    aviation aircraft, Intelligent Systems, Bioastronautics, and
    nanotechnologies should all be understood as key players in improving
    Safety.

                        FISCAL YEAR 2001 BUDGET OVERVIEW
        The fiscal year 2001 budget represents a vote of confidence from
    the President that NASA is ready to tackle new challenges and
    opportunities in the New Millennium. This budget funds NASA's
    priorities and makes critical new investments to improve Space Shuttle
    safety, continue to build the ISS, enable a new generation of reusable
    launch vehicles that will improve the safety and reduce the cost of
    access to space through a new Space Launch Initiative, undertake new
    science and technology initiatives to enhance our understanding of our
    planet, the solar system and the universe, and invest in aeronautics,
    education, our workforce and facilities.
        First, the fiscal year 2001 budget includes a $300 million increase
    through fiscal year 2005 for additional personnel at NASA's Human Space
    Flight Centers to ensure that the right skills and staffing levels are
    in place to operate the Space Shuttle safely and to launch and assemble
    the ISS. Over the past five years, we completed an exercise to
    streamline and downsize the NASA workforce. We told you that if we cut
    too far we would come back and tell you. After reviews by both internal
    and external groups, we concluded that continuing on our current plan
    would indeed cut too far, in light of the increased activity planned
    over the next several years as we continue to build the ISS. This
    budget includes the necessary funding to stabilize and revitalize our
    workforce, particularly at the Human Space Flight Centers.
        Thanks to Administration investments, this budget includes a $1.5
    billion increase for Space Shuttle safety improvements over six years.
    This increase, when combined with $600 million for upgrades in this
    year's budget, totals $2.1 billion from fiscal year 2000 through fiscal
    year 2005. This will allow us to address Space Shuttle safety
    improvements through hardware/software upgrades and personnel,
    facility, and other safety investments. This $2.1 billion will improve
    Space Shuttle safety by nearly a factor of two. The safety upgrades
    will be integrated into the Shuttle fleet by 2005 to be completed in
    time to pay benefits, and all safety investments will be managed within
    the safety allocation budget.
        Thanks to support from the Congress, the two highest priority
    safety upgrades have already been initiated: the electric auxiliary
    power unit (EAPU), and advanced health monitoring for the Space Shuttle
    main engines (SSME). We are studying a broad range of additional safety
    investments, including upgrades, personnel, facilities, and other
    safety investments. The recommendations of the SIAT Report will provide
    an important source of input for identifying these additional safety
    investments. The NASA Advisory Council will undertake a review of our
    comprehensive safety investment strategy, to ensure that these
    investments will generate the most effective safety improvements as
    quickly as possible.
        This year will be a landmark year for the ISS. We have high
    expectations that the first crew will begin to live aboard the Station,
    as the United States and our partners begin to reap the benefits of
    long-duration research in space. We anticipate that, as planned
    research gets underway, opportunities for new unforeseen paths of study
    will arise. While we have a number of challenges in the ISS program, we
    are committed to its expeditious completion. Because of Russian Proton
    rocket failures, the launch of the Service Module (SM) has been
    delayed, and we are faced with adding a shuttle mission to service the
    station elements on orbit because those elements are operating longer
    than planned without the Service Module in place. We are working
    closely with the Russian Aviation and Space Agency to understand their
    plans for return to flight of the Proton launch vehicle and scheduled
    launch of the Russian SM. The Russians have reported that the SM is now
    scheduled to launch in a window between July 8-14, and the first
    successful Proton launch since last year's failures occurred on
    February 12. NASA is proceeding with preparations to launch the Interim
    Control Module in December 2000 should SM delays continue. The United
    States is leading a 15-nation partnership in building a cutting-edge
    on-orbit research facility. We will work through these current
    difficulties, and will continue building the ISS. We continue to
    strongly support the ISS program as an important investment in
    America's long-term future in science and technology.
        I am particularly pleased to report to the Committee that this
    budget reflects robust funding for initiation of a new Space Launch
    Initiative. Safe, cost effective space transportation remains the key
    enabler of a more aggressive civil space program, and I believe the
    Space Launch Initiative puts us on the track to accomplish this. This
    initiative is a result of NASA's Integrated Space Transportation Plan
    that consolidated Space Shuttle Safety Upgrades, 2nd and 3rd Generation
    Reusable Launch vehicle technology programs, Alternate Access to Space
    Station and Aero-Space Base programs into a unified Agency strategy. It
    makes the critical investments that will enable major safety,
    reliability and affordability improvements for future generations of
    space transportation systems. The Space Launch Initiative makes an
    investment of $4.5 billion over 5 years for the 2nd generation RLV.
        The Space Launch Initiative program is focused on initiating full
    scale development of a 2nd generation RLV architecture. It supports a
    2005 competition to meet NASA's launch needs through purchase of
    commercial launch services by 2010, with the specific goal of achieving
    commercial ownership and operation of any new RLVs as early as 2010 if
    industry performs as promised. NASA's investments will focus on
    reducing technical, design and other programmatic risks through the use
    of large scale, long-life ground and flight tests and other risk
    reduction activities. We will also invest in reducing risk associated
    with systems that would be used for NASA-unique needs. The Space Launch
    Initiative is the product of more than a year of study and interaction
    between NASA and industry. The focus of the study has been on
    developing an integrated space transportation plan to meet NASA's needs
    for human and cargo delivery, while seeking synergy with the commercial
    space sector. The Initiative also includes procurement of near-term
    alternative access to the ISS for cargo transport needs on commercial
    vehicles.
        This year we will undertake bold new science and technology
    initiatives in biotechnology, nanotechnology, and information
    technology. Three key emerging, interrelated technologies will provide
    NASA with a new pathway to revolutionize our missions and the
    scientific and engineering systems that enable them: biotechnology,
    nanotechnology and information technology. Over the past decade, there
    have been tremendous scientific breakthroughs in the understanding of
    these fundamental processes. We are now ready for our technology to
    move out and exploit what we are learning. We will develop and execute
    our missions with greater safety, performance and robustness, while
    continuously decreasing design cycle time and life cycle cost.
        The first tier of NASA's technology strategy is biotechnology--the
    true revolutionary technology of the 21st century. Since the formation
    of the first cells on Earth, all living systems have developed an
    extraordinary capacity to adapt to rapidly changing conditions, build-
    in a high degree of resilience enabling them to overcome damage and
    evolve in response to new environments. In terms of size, memory,
    processing speed and energy consumption biological systems are up to a
    billion times better than the systems we build today. These are the
    characteristics NASA will build into its future missions and systems.
    NASA will apply the underlying principles of biological processes to
    all our missions. We will develop biologically-inspired materials that
    self-repair when damaged, structures that self-assemble to achieve near
    perfect final shapes. We will develop concepts for aircraft that change
    their shape in flight like birds to optimize performance or perform
    complex maneuvers in complete safety.
        Nanotechnology provides the capability to manipulate matter at the
    atomic level. In the future, we will measure the way we design and
    build our systems by the atom, not by the pound. Today, we are
    developing material systems, at the molecular level, that are 100 times
    stronger than steel at 1/6 the weight. We will also develop sensors and
    detectors capable of responding to a single photon of light or the
    stimulus from a single electron. Using nanotechnology, we will build
    systems on a scale 1000 times smaller than today--at true molecular
    level. They will be based on concepts emerging from biology, quantum
    mechanics and chemistry, all of which have no current parallel.
    Following this hearing, in this very room, Dr. Richard Klaussner and I
    will sign a memorandum of understanding between NASA and the National
    Cancer Institute to develop new biomedical technologies related to
    nano-explorers that can detect, diagnose and treat disease here on
    Earth and in space.
        NASA is also on a path to ``revolutionize'' the information
    technology revolution and apply it to our unique mission needs. Humans
    can process the equivalent of about a terabyte of data every second--
    that is equivalent to about 24 hours of television--as we process the
    data from our multi-sensory systems--sight, sound, smell, touch. We do
    this because we do not simply compute, we think. This third tier of our
    technology strategy will blur the notion of computer hardware and
    software and systems built from chips and black boxes. Our future
    systems will look and operate more like living systems than machines.
    We will build them with distributed sensory systems--like a central
    nervous systems--to allow us to monitor and control every function. Our
    computer systems will more resemble the human brain, with the capacity
    to learn.
        The safety, productivity and health of the human in space supported
    by these technology tools are the foundation of our vision to explore.
    To catalyze this human-technology interaction, we will base our designs
    on biological processes and principles proven over the existence of
    mankind to adapt to changing and dynamic environments. The development
    and deployment of such technological tools will serve as extensions and
    expansions of human cognitive processes and blend inextricably with the
    human user.
        The Bioastronautics Initiative will significantly improve long-term
    crew safety and health, and is the forcing function that focuses the
    research already underway to solving operational health and safety
    problems. Medical support systems will be developed by accelerating
    development and validation of countermeasures for the diagnosis,
    therapy, prevention and rehabilitation of crew on long duration
    missions aboard the ISS. Solutions to these space health problems find
    ready application to a multitude of health problems on Earth.
        We are making new investments to enhance our Mars exploration
    strategy with funding to establish a Mars Communication Network, a
    system of communication satellites around Mars that will greatly
    increase the science return and overall success of future Mars
    missions. Eventually, this Network will enable researchers and the
    public to explore and experience Mars firsthand through live video
    links. The Administration has recognized the inherent risk in space
    exploration, and given NASA a vote of confidence by providing a total
    of almost $350 million in additional funding for Mars. In combination
    with the Mars Communication Network, these funds will allow us to
    pursue a sustained presence at multiple locations in and around Mars
    and build incrementally to support aggressive future goals. If
    successful, this approach to Mars could become a model for future
    missions to other research targets. As the President said in his State
    of the Union address, we must ``set great goals worthy of a great
    nation.'' We are doing just that. This budget also contains new funding
    for new Discovery Program micromissions to facilitate new low-cost
    solar system research opportunities, and restores Space Science funding
    for the Flight Validation Program (formerly the New Millennium Program)
    that will enable us to develop and test revolutionary technologies to
    enable future missions.
        A new Space Science program I am particularly excited about is
    Living With a Star, a new scientific research initiative to understand
    the Sun's impact on the Earth and space environment. The fiscal year
    2001 budget includes funding to begin Living With a Star. The program
    will deploy some of the most creative and advanced technologies to
    construct a network of spacecraft aimed at helping us understand our
    star, the Sun, and how it influences the Earth. We cannot talk about
    sending people to other planets without first understanding how
    astronauts would be affected by the Sun's radiation. How can we fully
    understand the Earth's climate system without understanding solar
    variability and its affect on the Earth's atmosphere? Using multiple
    spacecraft, these Solar Sentinels will be able to track Earth-directed
    coronal mass ejections and pave the way for future systems that can
    warn of impending danger to terrestrial power grids, our astronauts,
    and air passengers flying at high altitudes, and to national security
    and civil space assets. Given the importance of understanding and
    predicting solar variability to fundamental science, terrestrial
    climate, national defense, and technology, NASA has begun to develop
    collaborations with NSF, DOD agencies, FAA, and NOAA, and will pursue
    collaborations with the commercial space industry as well.
        In Earth Science, we will continue to develop a full and
    comprehensive understanding of the total Earth system and the impacts
    of natural and human-induced changes on the global environment. Through
    recent technology efforts, we will shrink the size, cost, and
    development time for our missions planned for this decade. Following
    decades will see a web of sensors over the Earth in a variety of
    orbits, including constellations of intelligent microsatellites that
    target resources or major events happening on the Earth's surface.
    While pursuing our core Earth Science objectives, we will also provide
    the tools to apply satellite imagery and technology to generate the
    next great advances in weather and climate prediction, improve
    agricultural productivity, and advance the growth of the U.S.
    commercial remote sensing industry. These applications have the
    potential to enhance our quality of life and stimulate the development
    of new commercial products and services based on NASA-developed
    technology.
        This budget includes funding for new initiatives in Aeronautics.
    Over the 5-year period from fiscal year 2001 through fiscal year 2005,
    the new Small Aircraft Transportation System (SATS) Program is funded
    at $69 million. The budget also supports a funding increase of $100
    million for noise and emissions research over the same 5-year period,
    including the new Quiet Aircraft Technology (QAT) Program. SATS will
    develop vehicle and infrastructure technologies to reduce the accident
    rate of small aircraft to that of commercial transports, utilize the
    Nation's under-used airspace and landing facilities at non-hub airports
    in all weather conditions, and increase capacity for efficient
    operations of commuter, regional and runway independent aircraft at hub
    airports. QAT will provide the technology to meet the NASA/FAA vision
    for a noise-constraint-free air transportation system that would
    contain the decibel contour within the airport boundaries, a 10 decibel
    reduction from 1997.
        The fiscal year 2001 budget makes necessary investments in NASA's
    workforce and the NASA institution by providing additional funding for
    stabilizing civil service personnel levels at NASA's Space Flight
    Centers and addressing pressing facility issues. This will help keep
    NASA's highly skilled workforce safe and healthy by spreading the
    tremendous workload among more people. In addition, it will help NASA
    improve the safety and reliability of our unique assets by ensuring the
    right staffing levels are in place to improve the Space Shuttle and
    assemble the ISS. An increase of almost $600 million over 5 years will
    cover not only increased personnel salary and expense costs but also an
    FTE increase over the previous downsizing plans until 2004. The effect
    is to hold personnel levels steady at the fiscal year 1999 level at
    NASA's Space Flight Centers. An increase of almost $200 million over 5
    years is included for facilities revitalization in order to reverse a
    long-term trend of declining facility condition, which is impacting
    safety and productivity. We have completed a Core Capabilities
    Assessment that identified the physical and human assets required to
    accomplish the Mission Areas and Center of Excellence assignments
    identified in our Strategic Plan. With this as a basis, we can now make
    investments in facilities with the assurance that those in which we are
    investing are essential for success of our missions and the safety of
    our personnel.
        One of the many ways in which NASA establishes our relevance to the
    American people is through our education program. The NASA Education
    Program is comprehensive, addressing all levels of the education system
    from K-12 schools to colleges and universities. In all our education
    activities we strive to achieve education excellence by involving the
    educational community in our endeavors to inspire America's students,
    create learning opportunities, and enlighten inquisitive minds.
        Included in the budget for fiscal year 2001 is a request for $1
    million to begin a coordinated, Agency-wide internship program for
    undergraduate students. Through this program, we anticipate providing a
    diverse group of 200 students a 10-week internship program at a NASA
    Field Center. This program is critical to complete a continuum of
    student programs that currently begin in high school and continue
    through graduate and post-graduate education. We have also listened to
    the Congress, and increased our baseline funding for Space Grant in
    this budget. The funding level represents an increase of $5.6 million
    over our previous request and is maintained in the outyears. An
    additional $7.4 million is included for the Minority University
    Research Program to continue the Science, Engineering, Mathematics and
    Aeronautics Academy (SEMAA) Program through competitive selections and
    to continue partnerships with other institutions in support of math,
    science, and technology education at all levels of education for under
    represented groups. While our budget for Academic Programs in fiscal
    year 2001 is below the overall fiscal year 2000 enacted level, it
    maintains our base level funding for our core programs but does not
    continue funding for Congressional earmarks.
        NASA's proposed fiscal year 2001 budget of $14.035 billion
    signifies a strong commitment by this Administration to science and
    technology and recognizes the critical role it plays in stimulating the
    economy and developing the jobs of tomorrow. Now I would like to
    discuss in detail each of the Strategic Enterprises and major program
    areas.
                             NASA ENTERPRISE DETAIL
    Human Exploration and Development of Space Enterprise
                International Space Station
        Compared to the fiscal year 2000 budget, the fiscal year 2001
    budget request reflects an overall reduction in the budget and runout
    estimates through fiscal year 2005 of about $1.2 billion. Roughly $0.8
    billion of this reduction is due to the movement of funding for the
    Phase 2 production of the ISS Crew Return Vehicle (CRV) to the Science,
    Aeronautics and Technology budget account. The fiscal year 2002-2005
    funding estimates will reside in that account pending a decision in the
    next two years on whether to proceed with an X-38-based CRV design, in
    the context of broader decisions that NASA and the Administration will
    make regarding future space transportation architectures. There is also
    an approximate $0.4 billion reduction in other ISS funding over 5
    years, in order to fund Agency needs and other high-priority activities
    such as the Bioastronautics initiative.
        In 1998, we celebrated the birth of the ISS, as the first 2
    elements were successfully launched and mated; the combined stack has
    now completed over 6,700 orbits. In 1999, flight hardware continued to
    be delivered to the Kennedy Space Center (KSC). We just successfully
    completed the most comprehensive systems integration test and
    evaluation at NASA since STS-1. It worked flawlessly. The Mission
    Sequence Test sequentially exercised all nominal crew and mission
    control interfaces planned for deployment of the U.S. laboratory, per
    the 5A flight plan, with actual hardware and software response. The
    test was performed as close to the in-flight configuration as possible.
    It included additional mission control to ISS interfaces not performed
    during previous multi-element tests, allowing engineers to validate
    operational flight plans and procedures. These tests--while critical to
    ensuring that the ISS will work in space as planned--have taken longer
    than planned, resulting in slips last year. However, as a result, we
    can now confidently say that we will be ready to launch the American
    equipment. Also, last October, on-orbit assembly planning paused after
    Russia encountered two setbacks in its long history of over 250 Proton
    launches, 95 percent of which have been successful. While these launch
    delays are unfortunate, they illustrate both the importance of
    integrated testing and the need for redundant launch systems, as the
    ISS program has with the Shuttle and Proton.
        Decisions made at the General Designers Review in Russia on
    February 11 place the SM on a path to launch this summer in a launch
    window of July 8-14. Should the SM experience further delays or mission
    failure, we will launch the ICM in December 2000. Should the SM be
    successfully launched this summer, we will reconfigure the ICM to
    enable docking with the SM as early as 2001. I have clearly
    communicated to Mr. Koptev that the ISS program will move forward in
    2000, regardless of whether the SM is ready for launch.
        Relative to the Proton failure, its return to launch, and plans for
    launch of the SM (SM), RSA provided their plan and technical
    considerations at the General Designers Review. The failure was
    attributed to contamination and manufacturing non-compliances during
    1992/93 timeframe. None of these engines is slated for future launch.
    However, several commercial parties have agreed to launch on inspected
    engines from later production sets. The plan for the SM is to launch it
    on engines upgraded to increase their resilience against these types of
    failures. The SM launch will follow 2 precursor flights using the same
    Proton modifications and upgraded engines, as well as other commercial
    Proton flights. NASA propulsion experts have reviewed these plans and
    are in agreement that the Russian approach provides a high degree of
    launch confidence. NASA has also asked the NASA Advisory Council
    (Stafford) Task Force on ISS Operational Readiness to review the
    findings of various Proton launch failure investigation teams with
    RSA's Advisory Expert Council and provide their views on the SM launch
    plan.
        Delay in the SM launch also impacts Zarya, in that its flight
    certification period must be extended. NASA's plans include a Space
    Shuttle mission to the on-orbit ISS this Spring to perform critical
    maintenance on some of Zarya's systems to re-certify it for flight
    through December 2000, consistent with ICM contingency planning. This
    approach requires splitting the presently planned mission following the
    Service Module launch, 2A.2, into two missions designated 2A.2a and
    2A.2b. The 2A.2a mission would occur this Spring to provide the needed
    maintenance on Zarya. The 2A.2b mission will be similar to the
    currently manifested 2A.2 mission in that it will prepare the SM for
    the arrival of its first resident crew in late 2000. Shuttle Orbiter
    Atlantis will be used for both missions, minimizing mission unique
    costs and enabling a reduced turnaround time for the second flight.
    Since some Shuttle missions have been delayed due to the Service
    Module/Proton problem, the addition of 2A.2a would not increase the
    annual Space Shuttle flight rate, nor materially affect our budget.
        Program momentum is being maintained as KSC is taking delivery of
    new flight hardware with each passing month. Last year I told you of
    the on-going transition from development work into operations. This
    trend has accelerated in earnest with many elements for flights through
    12A having been delivered to KSC including truss segments, attitude
    control system, communications system, the first solar arrays, thermal
    radiators, integrated electronics, and the U.S. Laboratory,
    ``Destiny.''
        We have significantly reduced the amount of risk as elements have
    moved through the first set of integrated testing. These multi-element
    tests, while critical to ensuring that the ISS will work in space as
    planned, have taken longer than expected, resulting in slips to the
    U.S. Flight Elements Schedules. This summer, we will move into the
    second major set of integrated testing activity. This activity will
    verify ISS flight hardware to each other and to the orbiters. Also
    included in the test will be the mobile transporter, a movable base of
    the Station's Canadian mechanical arm that allows it to travel along
    the Station truss.
        Progress on U.S. items has not been without challenges. Just last
    fall we determined the likely cause for a component failure in the ISS
    DC to DC Converter Unit (DDCU), the U.S. pacing component for flights
    3A-5A. We are now working delivery of alternate parts to maintain our
    schedules.
        U.S. flight elements are now prepared for the next major steps in
    the ISS assembly. By this fall, Flight 3A will carry the Z-1 Truss
    Segment, Control Moment Gyros (CMG), the third Pressurized Mating
    Adapter (PMA-3), Ku-band and S-band equipment, and extravehicular
    activity subsystem components. The Z-1 truss will provide a base for
    temporary installation of the P-6 photovoltaic module to Node 1. That
    will provide U.S.-based electrical power early in the Station's
    assembly process. PMA-3 will provide a Space Shuttle docking location
    for installation of the laboratory on Flight 5A. Russian Flight 2R will
    deliver the first long-duration crew, Commander Bill Shepherd, Soyuz
    Commander Yuri Gidzenko, and Flight Engineer Sergei Krikalev. We will
    also see the arrival of the first crew in a Soyuz spacecraft; it will
    remain attached to the ISS and provide an emergency return capability
    for the crew. Permanent human presence aboard the ISS begins with this
    expeditionary crew. By the close of Fall, Flight 4A is scheduled for
    launch, and includes the P6 Truss structure containing the long spacer,
    the Integrated Electronic Assembly (IEA), the P6 photovoltaic array,
    External Active Thermal Control System (EATCS) and additional S-band
    equipment. This launch will establish initial U.S. user capability by
    providing power generation and photovoltaic thermal control. In January
    2001, the U.S. laboratory will be launched on flight 5A along with 5
    integrated systems racks and the Human Research Facility (HRF) rack.
    The capability to conduct research aboard the ISS will begin with
    delivery and outfitting of the HRF. Flight 5A.1, is to be launched to
    continue the outfitting of the U.S. laboratory with 6 additional lab
    system racks and one HRF payload rack. The Italian-built Multi-Purpose
    Logistics Module (MPLM) will be used as the pressurized carrier for
    this hardware. Flight 6A will be launched to continue the outfitting of
    the U.S. laboratory with the addition of 2 stowage and 2 EXPRESS
    payload racks. Also included are the UHF antenna and the Canadian Space
    Station Remote Manipulator System (SSRMS), the ``arm'' that will help
    with Station assembly. MPLM-2, known as Leonardo, will be used as the
    pressurized carrier on this flight. The UHF antenna will provide space-
    to-space communications capability for U.S.-based EVA, while the SSRMS
    will be used to perform assembly operations on future flights. Flight
    7A will launch the airlock and high-pressure oxygen and nitrogen. The
    addition of the airlock to the on-orbit stack permits ISS-based EVA
    without the loss of environmental consumables such as oxygen. Flight 7A
    completes Phase 2 of the ISS Program. Finally, Flight 7A.1, and the
    initial utilization flight (UF-1) will complete the fiscal year 2001
    schedule of activities.
        As the program transitions into the assembly and operations phase,
    manufacturing activities are declining. Over 90 percent of the U.S. ISS
    development contract is complete, with the majority of flight hardware
    scheduled to be delivered to the launch site this year. With these
    changes, it is in the best interest of the Government to concentrate
    resources on assembly planning, operations and utilization readiness,
    and on the on-orbit assembly of the ISS. As such, NASA restructured the
    Prime contract to focus resources on the work remaining in the most
    efficient manner. The restructure provides the Government and Boeing
    flexibility in directing the work force at a time when fast responses
    to unanticipated problems are desirable. The restructure also provides
    incentive for Boeing to improve performance through a revised award fee
    system for the remaining work.
        Relative to operations, the communications systems between Mission
    Control Center (MCC)-Houston, MCC-Moscow, and the ISS have been
    successfully demonstrated and avoided Y2K related issues. The U.S.-led
    international control teams have been vigorously exercised as they
    worked anomaly resolution, avoidance maneuvers, an ISS reboost and the
    first docking with the ISS.
        NASA continues to evaluate program progress and take contingency
    steps to mitigate risk in case any partners have problems meeting their
    commitments. NASA is making good progress toward completing these
    steps. A key element in this plan is the development of the U.S.
    Propulsion Module. The Preliminary Design Review process for the
    Propulsion Module will be completed in June, leading to initiation of
    its critical design phase.
        A second set of contingency plan activities is the purchase of
    unique Russian goods and services. As ISS development, assembly and
    operations have progressed, NASA has identified goods and services that
    would allow the implementation of the next steps of NASA's Contingency
    Plan and provide improved crew training and operational capabilities.
    The goods and services NASA intends to purchase are:
      --outside the scope of what Russia has agreed to provide as part of
            its commitment to the ISS;
      --uniquely available from Russia, and would be much more costly and
            significantly delayed, if purchased from U.S. or other sources;
            and
      --needed to ensure timely availability of U.S. contingency
            capabilities.
        Russia has a good record of on-schedule and on-budget delivery of
    items purchased, and NASA is confident in the timely delivery of these
    needed items. I believe that the provision of these goods and services
    will reduce risk to our crew and to the overall ISS program. Protecting
    the ultimate safety of our ISS crew and the investment of the American
    people is paramount in our decision to embark on this transaction. An
    Operating Plan change request was submitted to the Committee on
    February 11, and I thank you for your expeditious response. The most
    time-critical of the hardware, specifically a pressure dome and an
    Androgynous Peripheral Docking Adapter (APAS), need to be purchased in
    the very near future to support contingency scenarios. While the recent
    enactment of HR 1883, the Iran Nonproliferation Act of 2000, will
    affect the process by which NASA purchases these items from the
    Rosaviakosmos, HR 1883 provides for a streamlined reporting procedure
    to the Congress for the hardware of most immediate interest to NASA.
        In the United States, development of Crew Return Vehicle (CRV)
    operational technologies through the X-38 program is progressing well,
    with testing of two 83 percent scale atmospheric flight vehicles,
    construction of a full scale space reentry vehicle, and testing of a
    full operational scale 7500 sq. ft. parafoil, the largest in the world.
    The first test flight of the full-scale parafoil was successfully
    completed in January 2000, with flawless deployment dynamics and a safe
    touchdown--a major project milestone. In a future Operating Plan
    adjustment, we plan to reallocate an additional $21 million in fiscal
    year 2000 for CRV Phase I development to assure success of critical
    validation tests and design. We are proceeding toward an fiscal year
    2002 competition down-select to 2 contractors to get ready for a
    production decision. We will work with the Aerospace Safety Advisory
    Panel (ASAP) to make sure we have the safest design.
        While NASA works aggressively toward deployment of a U.S. crew
    return capability, we have decided to move funding for the CRV
    production phase into the Science, Aeronautics and Technology funding
    line. Production funding will remain in this line while we work toward
    validation of the X-38/CRV approach as the safest way to provide the
    crew return function, and evaluate the potential of Crew Transfer
    Vehicle (CTV) concepts as an alternative approach. Until the arrival of
    the CRV, the Russian Soyuz will be the only means of crew rescue. The
    CRV was planned to be available in May 2004 (based on the June 1, 1999
    Revision E assembly sequence), but X-38 program delays and a cut in
    fiscal year 2000 appropriations to the CRV project has delayed
    availability by 12 to 18 months. Given the delays in assembly since the
    Rev. E assembly sequence was released, and the impact of those delays
    on 6-person readiness, most of the 12-18 month slip in CRV delivery
    should be accommodated in the new assembly schedule. If 6-person
    capability is achieved prior to availability of a U.S. crew return
    capability, the launch of a 6-person crew could be deferred a few
    months, or additional Soyuz crew return services could be purchased to
    fill the gap.
        The contributions of our other International Partners will become
    more prominent as assembly progresses throughout this year. Two of the
    3 Italian Multi-Purpose Logistics Modules (MPLM) and the Canadian Space
    Station Remote Manipulator System (SSRMS) have been delivered to KSC
    and are in preparation for launch. The third MPLM is in assembly in
    Turin. In late 2001, initial deliveries of the Japanese Experimental
    Module (JEM) begin to arrive in the United States. The European
    Columbus Orbital Facility is in production and is on schedule for
    delivery in early 2004.
                Economic Development of Space
        While much of the early effort regarding the economic development
    of space was focused on the ISS due to its enormous potential in
    scientific and business applications, NASA has also reached out into
    other space opportunities. We believe that the key to increasing and
    accelerating space commercialization, not just maximizing what is
    currently available or achievable, is to bring in new players--
    investors, customers, suppliers, and users--and make it easy for them
    to include space as part of their business strategies and operations.
    We solicited and incorporated inputs from all sectors of the economy as
    we worked on our approach for enabling the economic development of
    space.
        Beginning in 1998, NASA committed to set aside at least 30 percent
    of the ISS payload capacity for commercial development. During 1999, we
    put in place the necessary management systems and processes with which
    to conduct a vigorous economic development program for the ISS. Process
    improvements made in the past year included: single point of entry
    process for all entrepreneurial offers; policies to protect private
    intellectual property and proprietary data; an ISS demonstration
    pricing policy to stimulate commercial investment and government/
    industry partnership; and, a soon-to-be published price list for using
    ISS resources such as research racks, crew time, power, and other
    resources. This integrated and inclusive approach has resulted in
    entrepreneurial offers from private companies wanting to use part of
    the ISS and related infrastructure for non-Government businesses. Most
    offers involve private investment and non-Government use of space
    assets.
        We are also working on the development of a Non Government
    Organization (NGO) for ISS utilization management. This has the
    potential to greatly enhance the scientific and commercial uses of the
    ISS, while at the same time freeing up precious NASA resources to
    concentrate on pushing the boundaries of science and technology.
        Near term commercialization opportunities include NASA TV and its
    related multi-media infrastructure; commercial habitation module;
    reimbursable space shuttle flights; remote sensing, multiple use
    research centers; and solar power platform for communications and
    surveillance. With the help of the Administration and Congress, we have
    an exciting start in our initiative for the economic development of
    space. The pending launch of the ISS laboratory module, and the start
    of the permanent human presence in space should take us to yet another
    level in our quest to open up space to increasingly more people and
    applications. Our next step is the inclusion of and coordination with
    our international partners to further expand the commercial
    opportunities and reach of our assets.
        All recent policies, reports, and procedures can be found at http:/
    /commercial.nasa.gov/.
                Space Shuttle
        The fiscal year 2001 Space Shuttle budget is $3.165 billion, a 6.2
    percent increase over the fiscal year 2000 budget. The Space Shuttle
    continues to prove that it is the safest and most versatile launch
    vehicle ever built. The team has proven again that safety, not
    schedule, dictates launch readiness. I salute them.
        The Space Shuttle manifest currently reflects 9 missions scheduled
    to fly during fiscal year 2001--7 ISS assembly flights, the second half
    of the Hubble Space Telescope's third servicing mission, and a research
    flight. This is a significant increase over the 4 missions that were
    conducted in both fiscal year 1998 and fiscal year 1999, and a further
    increase over the 5 missions currently manifested for flight in fiscal
    year 2000. The fiscal year 2001 budget of $3.165 billion will enable
    the system to successfully meet its goals to: (1) fly safely; (2) meet
    the flight manifest serving diverse customers; (3) improve the system;
    and, (4) improve supportability. This year, and in the near-term, the
    manifest is dominated by ISS assembly.
        We must continue to ensure the Space Shuttle's viability as a safe,
    effective transportation system and scientific platform. The Space
    Shuttle will need to be capable of supporting the critical human space
    transportation requirements for ISS assembly and operations and through
    at least a significant portion of the 10 years of the completed Space
    Station's life. To accomplish this, we must continue to invest in the
    system's safety and supportability until a replacement vehicle is
    available. We have found that investing in upgrades provides, not only
    a safer vehicle, but one that is more reliable and one that is easier
    to maintain.
        I appreciate the additional $25 million that the Congress provided
    in fiscal year 2000 to invest in high priority safety upgrades and
    start the process. In addition, we reprioritized the existing budget
    within Human Space Flight to bring the total fiscal year 2000 budget
    for high priority safety upgrades to $50 million. The Space Shuttle
    program is initiating two high priority safety upgrades and has
    recommended additional investments for study. In the fiscal year 2001
    request, the Administration has provided additional funding to continue
    the initiatives that started in fiscal year 2000, as well as additional
    high priority safety upgrades that are being funded in fiscal year
    2001.
        I have directed that safety upgrades be developed and implemented
    into the Orbiter fleet no later than 2005 to realize the benefits of
    these high priority safety upgrades to the fullest before we transition
    to a Space Shuttle replacement. I am happy to be able to report that
    work on these upgrades in currently underway. Because safety and
    reliability benefits can be realized from investing in the Space
    Shuttle, additional investment candidates have been identified for the
    Orbiter and propulsion elements of the vehicle. Examples include the
    Block III Space Shuttle Main Engine (SSME), the Solid Rocket Booster
    (SRB) Advanced Thrust Vector Control (TVC), and the Electric APU or
    Solid Propellant Gas Generator (SPGG). These candidates will be
    studied, along with other upgrades, personnel, facility or other safety
    investments, to validate priorities and cost in fiscal year 2000 prior
    to decisions whether to initiate their implementation or development in
    fiscal year 2001 as part of the Shuttle safety allocation. Additional
    studies are being conducted in several areas such as the Space
    Shuttle's Thermal Protection System (TPS) lower surface tile upgrades,
    propulsion system, and hazard protection during processing. Completion
    of these studies is vital to successfully supporting our safety efforts
    and will be complemented by outside reviews.
        The Administration's fiscal year 2001 budget proposes to redirect
    funding identified in the fiscal year 2000 appropriation bill to
    partially pay for another dedicated research mission into safety
    investments by hiring additional civil service personnel at the Human
    Space Flight Centers, and accelerating the development of the Space
    Shuttle safety upgrades. These are very high priorities for this
    Agency. I am also a firm believer in the value of providing sufficient
    research opportunities to the science community impacted by the delays
    in the Space Station's assembly. I agree with Congress on the merits of
    doing so. That is why we have plans to fly a research mission (STS-107)
    in early fiscal year 2001, and use increased Shuttle middeck locker
    opportunities during Shuttle assembly flights. Over the next five
    years, we plan to increase the number of investigators in Life and
    Microgravity research to enable us to take advantage of every flight
    opportunity and we must continue to focus limited resources on getting
    ISS built and its research hardware developed as soon as possible.
                Space Shuttle Independent Assessment Team
        As a result of the ascent anomalies experienced on STS-93, on
    September 7, 1999, Associate Administrator for Space Flight, Mr. Joseph
    H. Rothenberg, chartered the Space Shuttle Independent Assessment Team
    (SIAT). Dr. Henry McDonald, Director of the Ames Research Center,
    chaired an independent technical team to review the Space Shuttle
    systems and maintenance practices. The team was comprised of NASA,
    contractor, and DOD personnel and examined NASA practices, Shuttle
    anomalies, and civilian and military experience.''
        The SIAT began work on October 4, 1999, and concluded their
    activities with a written report, submitted to Mr. Rothenberg on March
    7, 2000. The SIAT focused their activities in the following technical
    areas: Avionics, Human Factors, Hydraulics, Hypergolics and Auxiliary
    Power Unit, Problem Reporting and Tracking Process, Propulsion, Risk
    Assessment and Management, Safety and Mission Assurance, Software,
    Structures, and Wiring. The Team's goal was to bring to Shuttle
    maintenance and operations processes a perspective from the best
    practices of the external aviation community. The Johnson Space Center,
    the Lead Center for Human Space Flight and the Space Shuttle Program,
    will provide a plan or response to the short term recommendations in
    June. The Program's responses to the intermediate and long-term
    recommendations will follow in August and October, respectively. Four
    team recommendations were reviewed and closed prior to return to flight
    in December 1999. The fiscal year 2001 budget includes significant
    increases for investments in Shuttle safety that could be used to
    address these issues.
                Human Space Flight Workforce
        As NASA builds the ISS and supports the infrastructure and upgrades
    to the Space Shuttle program as well as its Expendable Launch Vehicle
    (ELV) commitments over the next 5 years, the workload will increase
    steadily. Internal and external workforce assessments have convinced
    NASA management that civil service FTE targets at NASA's Human Space
    Flight (HSF) Centers must be adjusted. As mentioned earlier, from
    internal reviews, such as the Core Capabilities Study, to external
    evaluations by the ASAP and the Space Shuttle Independent Assessment
    (McDonald) Team, it became apparent that the HSF workforce required
    immediate revitalization. Five years of buyouts and downsizing have led
    to serious skill imbalances and an overtaxed core workforce. As more
    people leave, the workload and stress remaining increase, with a
    corresponding increase in the potential for impacts to operational
    capacity and safety. HSF Centers will begin to accelerate hiring in
    fiscal year 2000, in order to address immediate critical skill
    shortfalls. After the initial hiring of 500 new personnel across the
    four HSF Centers in fiscal year 2000, HSF workforce trends will begin a
    one-for-one replacement process and will allow HSF Centers to attain a
    steady state in civil service employment by fiscal year 2001. We will
    continue to monitor HSF Center hires and attrition, ensuring that
    workforce skill balances are achieved and maintained.
        NASA will work with OMB in the coming months, to conduct a
    personnel review with an eye towards the future. This review will
    assess management tools and innovative approaches for personnel
    management that might best equip NASA to evolve and adapt our civil
    service workforce in the future. This will be particularly important as
    we continue our transition from operations to a focus on advancing the
    frontier with cutting edge research and development in science and
    technology.
                Expendable Launch Vehicle Mission Support
        NASA's Expendable Launch Vehicle (ELV) team coordinated the launch
    of 10 ELV missions during the past year. The team supported launches
    from Cape Canaveral Air Station, including the Mars Polar Lander in
    January, Stardust spacecraft in February and the Far Ultraviolet
    Spectroscopic Explorer (FUSE) spacecraft in June. The NASA ELV team
    also supports launches from Vandenberg Air Force Base in California
    making it a bi-coastal team. The team supported the successful launch
    of ARGOS in February, the Wide-Field Infrared Explorer (WIRE)
    spacecraft in March, Landsat 7 in April, the TERRIERS satellite in May,
    the Quick Scatterometer (QuikSCAT) mission in June, and the Terra and
    AcrimSat spacecrafts in December.
        There are 2 launch services competitions in work this year. The
    NASA Launch Services (NLS) acquisition providing launch services for
    future NASA missions will be completed. These contracts provide for
    awards to multiple suppliers with vehicles that have a demonstrated
    flight history. Also, the Next Generation Launch Services (NGLS)
    acquisition will be initiated. NGLS will enable competition for the
    emerging launch services companies with little or no flight history to
    offer launch services to NASA. Last year, I met with the CEOs of
    entrepreneurial startup companies, and NASA has taken a number of steps
    to ensure that we can create an opportunity for them to compete with
    the major launch companies. The ELV Mission support budget for fiscal
    year 2001 is $30.6 million. The fiscal year 2001 budget provides
    funding to support NASA's intention to award as many as five indefinite
    delivery/indefinite quantity launch service contracts to provide launch
    opportunities for university, science and technology payloads.
                Space Operations (SOMO)
        A new era in space communications began in January 1999, with the
    implementation of the Consolidated Space Operations Contract (CSOC). A
    major objective of the CSOC is to reduce NASA's space operations costs
    while continuing to deliver high quality services. Operations
    performance has continued to be of high quality in this first full year
    of the SCOC contract. With respect to savings, in the fiscal year 1998
    budget to Congress, NASA reduced its budget in anticipation of CSOC
    savings and we do not expect to see any significant additional savings
    in the first few years of the contract.
        Consistent with Congressional direction, NASA provided a CSOC
    commercialization plan in November. The plan addresses the purchase of
    space communications services from the private sector as well as the
    sale of available capacity from our existing NASA capabilities. As an
    example of this commercialization effort, CSOC is obtaining the use of
    commercial facilities to supplement the current NASA polar ground
    network. Additionally, all wide area network telecommunications are now
    being provided through commercial arrangements. We will be conducting a
    vigorous effort in fiscal year 2000 to increase the use of emerging
    commercial capabilities to meet our space communications and operations
    needs.
                HEDS Technology/Commercialization Initiative
        The Human Exploration and Development of Space (HEDS) Technology/
    Commercialization Initiative (HTCI) will support studies, technology
    developments and demonstrations that advance safe, affordable and
    effective future programs and projects of human exploration and
    discovery, while advancing the commercial development of space. The
    HTCI will pursue technologies and infrastructures for the future human
    exploration of space that also support commercial space development by
    making high-leverage investments that will enable progress toward
    innovative systems concepts and breakthrough technologies.
    Life and Microgravity Science and Applications
        NASA's Life and Microgravity Sciences and Applications Program is a
    partner in NASA's Human Exploration and Development of Space (HEDS)
    Enterprise. The program conducts ground- and space-based investigations
    to gain new knowledge to advance the health and safety of the
    astronauts in space. This interdisciplinary research will also increase
    the fundamental knowledge of biological, physical, and chemical
    processes; enable the development of space for human enterprise; and
    create new products and services. This knowledge and new technologies
    will be transferred to the private and government sectors as broadly as
    possible within the United States.
        The fiscal year 2001 budget request of $302.4 million for Life and
    Microgravity Sciences and Applications is 10 percent higher than fiscal
    year 2000, and will support a research base attracting new
    investigators (for a total of 986), as well as expanding cooperation
    with other agencies. This program will take advantage of the
    opportunities presented by the deployment of the Destiny laboratory to
    the ISS and other opportunities to access space. Early in the assembly
    phase of the ISS, research will concentrate on investigations taking
    advantage of the Human Research Facility (HRF) and the EXPRESS racks.
    This research will focus on identifying and improving the spacecraft
    environment, habitability and crew health. To help maintain NASA's
    research communities during the ISS build-up, NASA plans to fly a
    research mission (STS-107) in early fiscal year 2001, and use increased
    Shuttle middeck locker opportunities during Shuttle assembly flights.
        A new effort this year is the Bioastronautics Initiative, which
    will significantly improve crew safety and health aboard the ISS, and
    further strengthens research already underway to focus on the health,
    safety, and performance of humans in space. This initiative will
    accelerate research and development of solutions for diagnosis,
    therapy, prevention, and rehabilitation of crew on long duration
    missions aboard the ISS.
        The Life and Microgravity Science and Applications program has
    embarked on a focused program to develop advanced technologies that are
    critical for long-duration space flights to monitor and enhance human
    health, safety and performance. This research in biologically inspired
    technology is being fostered through dedicated NASA Research
    Announcements (NRAs). These fields of research have great potential for
    application to health care issues here on Earth. I have also
    established a formal collaboration with the National Cancer Institute
    (NCI) in the area of biologically inspired technology. This is part of
    the Bioastronautics initiative and is being led by the NASA Chief
    Scientist.
        A major portion of the Bioastronautics Initiative will support the
    National Space Biomedical Research Institute (NSBRI). It is a
    consortium of 12 U.S. medical research academic institutions led by
    Baylor College of Medicine. These institutions and others will use the
    knowledge gained by working with NASA to improve health maintenance and
    care for patients on Earth. NASA is currently evaluating options for
    and benefits of integrating facilities and capabilities where
    astronauts, medical professionals, scientists, engineers, and
    operational specialists could interact as a team in accomplishing this
    Bioastronautics Initiative.
        NASA's Life and Microgravity Science and Applications research and
    development activities have also provided benefits in other areas such
    as improvements for the visually impaired which have been advanced by
    the development of an optical detector by the NASA Space Vacuum Epitaxy
    Commercial Space Center. Growth of 3-dimensional active heart tissue in
    the NASA bioreactor has also been accomplished. Successful engineering
    of heart tissue could eventually be used to repair damaged heart tissue
    inside the body, test new drugs on heart diseases, and study general
    heart development and function.
    Space Science Enterprise
        The fiscal year 2001 Space Science budget of $2.4 billion
    represents an increase of 10 percent over the fiscal year 2000 enacted
    level. The Space Science Enterprise is the arm of NASA that looks up,
    out, and back in time . . . at planets, stars, galaxies and other
    phenomena that populate our Universe. Despite the vastness and
    complexity of the Universe, the ultimate goal of all Space Science
    missions and research can be narrowed down to pursuing answers to three
    fundamental questions: How did the Universe begin and evolve? How did
    we get here? Are we alone?
        Mission by mission and scientific discovery by scientific
    discovery, we are getting closer to the answers we seek. In recent
    years, space science discoveries have rewritten textbooks, challenged
    long-standing scientific beliefs, and inspired a sense of awe in the
    inhabitants of planet earth as we contemplate our place in this amazing
    cosmos.
        Though there were both ups and downs for NASA's Space Science
    Enterprise this year, overall there was a wealth of compelling science
    delivered by this program.
        Losing Mars Climate Orbiter and Mars Polar Lander back-to-back was
    a blow not only for the Space Science Enterprise, but also for NASA as
    a whole. However, as has been the case at various times throughout this
    Agency's 40-year history, we are going to learn what we can from these
    losses, change our approach where it is prudent to do so, and move on.
    Right now we have an expert team studying these failures and our entire
    Mars program architecture. This is a very important study for NASA, and
    we look forward to having their analyses and recommendations. One of
    the most exciting Space Science events of the past year was the launch
    of the long-awaited Chandra X-ray Observatory (CXO), the third of
    NASA's four Great Observatories. In July, the Space Shuttle Columbia,
    commanded by Colonel Eileen Collins, carried the CXO to space and sent
    it on its way to a highly elliptical orbit, where it is studying the
    wonders of the Universe in the X-ray part of the spectrum. As you have
    already seen, the images from Chandra taken during its short time in
    space are phenomenal and are a wonderful complement to the dazzling
    images and important scientific discoveries that the Hubble Space
    Telescope (HST) has delivered in the ultraviolet, visible, and near
    infrared wavelengths.
        I am pleased to report that following the successful mission of
    STS-103 in December, the Hubble Space Telescope is back and better than
    ever. Thanks to new gyroscopes, a new computer, and a host of other
    upgrades, HST is more powerful and robust than at any other time in its
    almost-ten-year history. In addition to the thousands of breathtaking
    images that the telescope delivered last year, one result was a long-
    awaited, scientific coup: after eight years of painstaking measurement,
    Hubble scientists found a value for how fast the universe is expanding.
    This rate of expansion, called the Hubble Constant, is essential to
    determining the age and size of the Universe, which scientists now
    believe to be about 12 billion years. Measuring the Hubble Constant was
    one of the 3 major goals for the telescope when it was launched in
    1990.
        In planetary news, the Mars Global Surveyor spacecraft has given us
    the first global, three-dimensional map of the Martian surface. This
    incredible database means that we now know the topography of Mars
    better than many continental regions of Earth. This mapping mission has
    revealed many new insights about Mars' varying topography including an
    impact basin deep enough to swallow Mount Everest, mysterious magnetic
    lines on the ancient surface reminiscent of plate tectonics on Earth,
    and weather patterns raging across the North Pole. This new global map
    of Mars is changing our fundamental understanding of the red planet and
    will likely influence scientific research of Mars for years to come.
    The increasingly detailed high-resolution map represents 250 million
    elevation measurements gathered in 1998 and 1999.
        The Cassini spacecraft, currently on a journey to Saturn, completed
    a highly accurate swing-by of Earth in August. This fly-by was
    necessary to give Cassini a boost in speed, sending it toward a
    rendezvous with Saturn and its moon Titan in 2004. Cassini will flyby
    Jupiter in December 2000.
        Astronomers, racing the clock, managed to take the first-ever,
    optical images of one of the most powerful explosions in the Universe--
    a gamma ray burst--just as it was occurring on January 23, 1999. Such
    bursts occur with no warning and typically last just for a few seconds.
        We also had some exciting news about our own star, the Sun. NASA-
    sponsored scientists have discovered that an S-shaped structure often
    appears on the Sun in advance of a violent eruption, called a coronal
    mass ejection, which is as powerful as billions of nuclear explosions.
    Early warnings of approaching solar storms will prove useful to power
    companies, the satellite communications industry and organizations that
    operate spacecraft, including NASA.
        I think most of us, on a day-to-day basis, take the Sun for
    granted. We know it is always there . . . big and yellow and warm. Kind
    of like a friend we are always happy to see. But, I want to remind you
    that the same Sun is also a huge, violent ball of energy. The Sun gives
    off about a million tons of matter every second--and that is just on an
    average day. Occasionally, the Sun has explosions known as coronal mass
    ejections, the largest of which can have the energy of 1 billion
    megatons of TNT and eject 10 billion tons of solar gas. Even though by
    the time this solar matter reaches the Earth's magnetic field it is
    diluted by its 93-million-mile journey, its effects can still be
    dramatic and far-reaching. Solar disturbances can affect civilian and
    military space systems, human space flight, electric power grids, GPS
    signals, high-frequency radio communications, long-range radar,
    microelectronics and humans in high-altitude aircraft, and terrestrial
    climate.
        Recognizing the critical role that solar events can have on Earth,
    the fiscal year 2001 budget includes an exciting new initiative. As I
    mentioned earlier in my testimony, this new initiative is called
    ``Living with a Star,'' and it will undertake the most comprehensive
    study of the Sun and its interaction with the Earth to date. This is a
    major initiative that will take the talents of many, many people--
    people at NASA, in other Government agencies, academia, and the private
    sector. Working together, I know we will reach the ultimate goal of
    this program, which is to help astronomers understand and predict
    storms and other solar phenomena that can have a direct and often
    critical impact on Earth and its citizens.
        This budget includes an increase of 17 percent for continued
    aggressive programs in Solar System Exploration that will enhance the
    science return and overall success of future mission to Mars and other
    key research targets. This is a vote of confidence from the
    Administration on behalf of the American public that we will fix what
    is wrong, develop a more robust program, and continue to explore the
    red planet. The budget supports a Mars Communication Network and other
    potential sustained presence concepts that will enable us to build
    incrementally towards aggressive future goals at multiple locations in
    and around Mars. The budget also includes additional outyear funding
    that will enable us to apply such research capabilities to other future
    solar system targets.
        The budget request also features funding for a new branch of an
    existing program. Called ``Discovery Micromissions,'' this series of
    missions to various Solar System targets will be similar to our Small
    Explorers program, enabling regular small, low cost missions throughout
    the solar system and creating new opportunities for university-based
    research.
        NASA's fiscal year 2001 budget request provides strong support for
    a robust technology base, as evidenced by funding for the Intelligent
    Systems Initiative. Although this funding will allow the Agency to
    pursue a broad range of information technology investments, we will
    place highest priority on investments to enable robotic networks that
    support new approaches to our Solar System exploration programs. In a
    related field, NASA has increased the budget for nanotechnology. This
    investment in microminiaturization and related technologies is crucial
    for future exploration and allows us to participate in the new
    interagency nanotechnology initiative. And finally, this budget request
    provides for Astrobiology instrumentation and technology research and
    for a restructured Flight Validation Program through fiscal year 2005.
        The President's proposed fiscal year 2001 budget supports a robust
    and scientifically diverse Space Science program with nine planned
    launches this calendar year. It allows us to continue studying the
    Universe we live in and develop the technologies necessary to expand
    our presence in it. Profound scientific discoveries and glimpses of new
    phenomena occurring in the Universe have long been hallmarks of this
    great program. This budget request ensures that the Space Science
    Enterprise will continue to bring value and wonder to the American
    public.
    Earth Science Enterprise
        The President's budget request for Earth Science in fiscal year
    2001 is $1,405.8 million, down $37.6 million from $1,443.4 million in
    fiscal year 2000. This budget reflects a decrease in funds for
    observing systems and an increase in research and technology as we pass
    the peak of development of the Earth Observing System (EOS). Fiscal
    year 2001 continues formulation of the National Polar-orbiting
    Operational Environmental Satellite System (NPOESS) Preparatory Program
    (NPP), a cooperative program between DOD, NASA and NOAA, that will be
    launched in 2005. NPP will simultaneously continue the Terra and Aqua
    mission research measurements and demonstrate new and innovative
    sensors for the NPOESS.
        From our birth as the Nation's civilian space agency, NASA has used
    the vantage point of space to view the Earth in order to understand how
    it functions as a dynamic system of land, oceans, ice, atmosphere, and
    life. We give people a ``window on the world'' to understand how it
    changes, and what the impacts of those changes might be on human
    civilization.
        The year 1999 marked a milestone in humanity's quest to understand
    our home planet. We began deployment of the EOS series of satellites,
    the first attempt to examine all major interactions among the key
    components of the Earth system. Deployment of the EOS began with the
    launch of Landsat 7, the cornerstone of the world's space-based land
    remote sensing efforts, with wide application in agriculture, forestry
    and regional planning in addition to its scientific value. Terra, the
    flagship satellite of the EOS, was successfully launched in December
    and the activation and checkout of its instruments are proceeding. In
    April, NASA launched the QuikSCAT satellite to resume global
    measurement of winds at the ocean surface to improve short-term weather
    prediction and tracking of major hurricanes and tropical storms
    globally. Also in December, we launched AcrimSat, an instrument that
    extends our measurement of variability in the output of the Sun.
        Fiscal year 1999 was a year of substantial scientific
    accomplishment in our understanding of the major elements that comprise
    the Earth system using satellites launched in prior years, along with a
    variety of aircraft campaigns and ground-based research. Using data
    from the NASA/Japan Tropical Rainfall Measuring Mission (TRMM), the
    Earth Science Enterprise (ESE) reduced the uncertainty in measuring
    rainfall over the tropics by one half, thus improving short-term
    weather prediction and availability of fresh water globally. Over the
    ice caps, NASA and other researchers determined the thinning and
    thickening rates for the Greenland ice sheet. We conducted an
    international field experiment in the Amazon to help understand the
    role of vegetation on Earth in removing carbon dioxide from the
    atmosphere.
        This year promises to be equally exciting, as we begin to see the
    first results from the Terra mission. Eight Earth science missions are
    planned for launch this calendar year, including 3 deferred from 1999
    to assure mission success. Among these 9 missions are several important
    complements to the EOS. The Shuttle Radar Topography Mission, completed
    in February, will provide a 3 dimensional digital map of nearly all the
    inhabited portions of the Earth's land surface. The QuikTOMS mission
    will continue our fulfillment of our Congressional mandate for ozone
    monitoring. The first Earth-oriented New Millennium Program mission is
    scheduled to fly this calendar year, and will demonstrate new and lower
    cost land imaging technologies.
        Within the President's fiscal year 2001 budget request for Earth
    Science, the largest activity is the continued deployment of the EOS
    ($447.1 million). This calendar year will see the launch of the Aqua
    satellite, the second of the three major components of EOS (along with
    Terra in 1999 and Chem in 2002). Aqua will provide highly accurate
    atmospheric temperature and humidity measurements essential for climate
    change research. Other EOS components in fiscal year 2001 are ICEsat,
    which will measure the topography of the world's major ice sheets, and
    the SeaWinds instrument that will continue the ocean winds measurements
    currently taken by QuikSCAT. Fiscal year 2001 EOS funds will also
    continue development of Chem and SORCE.
        This budget also includes $120.4 million for Earth Probes, a series
    of small, rapidly developed missions such as the ESSP that explore
    unfamiliar Earth system processes. Fiscal year 2001 will see the launch
    of the Gravity Recovery and Climate Experiment (GRACE) which will
    provide a precise mapping of the Earth's geoid, thus substantially
    improving the accuracy of our satellite measurements of sea level. The
    Triana mission has just completed a review by the National Academy of
    Sciences, with very favorable results. Triana will detect sunrise-to-
    sunset changes in ozone, aerosols, clouds and surface ultraviolet
    radiation as well as provide warning of space weather events.
    Development will continue on two new ESSP missions, PICASSO and
    Cloudsat, which will make 3-dimensional measurements of aerosols and
    clouds in the atmosphere.
        Implementation of the Earth Observing System Data and Information
    System (EOSDIS) will continue and is funded at $252.0 million in fiscal
    year 2001. Problems encountered in 1999 have been overcome, and EOSDIS
    is meeting its requirements for operation of Terra and management of
    the already extensive set of Earth remote sensing data collected from
    existing satellites.
        Within a nearly level budget, the ESE is increasing its investment
    in research and advanced technology development by $63.9 million over
    last year to $533.3 million in fiscal year 2001. The ESE has updated
    its research strategy for the next decade, highlighting specific
    questions about forces of change acting on the Earth system, and how
    the Earth responds.
        The fiscal year 2001 budget also funds a series of partnerships
    that may turn our scientific results into practical applications. Topic
    areas of these partnerships include fire hazard prediction and water
    availability in the West, farming and forestry in the upper Midwest and
    the South, as well as urban and regional planning in the Northeast. The
    standard of success for applications and commercial partnerships is
    that they become self-sustaining entities based on the quality and
    utility of the applications products we help them demonstrate. In
    keeping with NASA's continued commitment to meet research needs, to the
    extent possible, through scientific data purchases, the Commercial
    Remote Sensing Program expects to identify new commercial sources of
    Earth Science data.
        Fiscal year 2001 promises to be a year of substantial payoff from
    prior investments in the EOS program, as well as a year of new
    opportunities from small missions and from partnerships that
    demonstrate new uses of Earth remote sensing data across the Nation.
    Aero-Space Technology Enterprise
        The President's fiscal year 2001 request for NASA's Aero-Space
    Technology Program is $1.193 billion, which represents an increase of
    $68 million increase over fiscal year 2000. We have restructured this
    budget to reflect our priorities and to maximize the benefit arising
    from synergy between aeronautics and space transportation technologies.
    The increase represents expanded investments in existing programs
    (Aviation Safety, Flight Research, and Information Technology) and new
    programs (Space Launch Initiative, Small Aircraft Transportation
    System, and Quiet Aircraft Technology). These increased investments and
    new initiatives reflect our priority objectives in safety, aviation
    systems capacity, noise reduction, next-generation design tools,
    experimental aircraft and access to space. These investments also
    support out collaborative effort with the FAA and DOD to achieve the
    national aviation goals described in the National Science and
    Technology Council's ``National Research and Development Plan for
    Aviation Safety, Security, Efficiency and Environmental
    Compatibility.''
                Aero-Space Technology Programs
        The Enterprise is making great progress in accomplishing all 3 of
    its major goals, which we refer to as ``Pillars for Success''--Global
    Civil Aviation, Revolutionary Technology Leaps, and Access to Space.
        Pillar One, Global Civil Aviation.--Over the years, NASA has
    embraced safety as its number one core value, articulating an
    unwavering commitment to safety for the public, astronauts and pilots,
    and the NASA workforce, as well as for high value equipment and
    property. Although flying is the safest of all the major modes of
    transportation, the predicted tripling of air traffic over the next 20
    years will render even today's low rate of less than two accidents per
    million flights unacceptable. Therefore, as part of our commitment to
    the public, we have taken dramatic steps, through joint FAA and NASA
    research, to assure unquestioned safety for both travelers and crew on
    our Nation's commercial airlines. The goal of NASA's Aviation Safety
    Program is to reduce the aircraft accident rate by a factor of five
    within 10 years, and by a factor of 10 within 25 years.
        Of the many technologies now under development, two may have
    profound impacts on aviation safety. The first is Synthetic Vision,
    which will turn every flight into a clear daylight flight and alert the
    crew to any safety hazard. This system will greatly reduce the single
    most critical factor impairing the safety of worldwide aviation
    operations--controlled flight into terrain (CFIT). The second is Flight
    Data Analysis Tools, which will be used by airlines and governments to
    identify and fix problems before they cause incidents or accidents. The
    Agency is also collaborating with the Canadian Atmospheric
    Environmental Services and the Federal Aviation Administration (FAA) in
    researching the formation of ice on aircraft wings. In the area of
    weather prediction and adaptation, NASA researchers continued their
    work on the Advanced Vortex Sensing System (AVOSS)--a key to both
    improving the safety of flight and reducing the impact of the growing
    demand for air travel. New features included improvements in wake
    prediction, observational weather systems, and real-time weather
    forecasting.
        With regard to environmental issues, NASA's collaborative
    initiative with Pratt & Whitney demonstrated that the company's low-
    emission combustor can reduce nitrogen oxide (NOX) levels by
    half during landing and take-off cycles. It also showed comparable
    reductions in cruise NOX emissions, carbon monoxide, and
    unburned hydrocarbons. NASA has also been effectively addressing noise
    pollution, through development of a new aircraft noise impact model
    that help reduce noise by optimizing aircraft approach trajectories.
    The new Quiet Aircraft Technology program will extend this research by
    developing technologies for engine and airframe noise source reduction
    and advanced operations to reduce community noise impact.
        Another important development is NASA's increasing cooperation with
    the U.S. Air Force, exemplified by the creation of a new Air Force-NASA
    Partnership Council for Aeronautics. The Council is initially focusing
    on six areas, one of which is classified. The five non-classified areas
    are: Aging Aircraft, Propulsion, Concurrent Airspace Operation of
    Autonomous Aircraft, Simulation-Based Acquisition /Intelligent
    Synthesis Environment, and Advanced Vehicle concepts.
        Pillar Two, Revolutionary Technology Leaps.--Progress continued
    during fiscal year 1999 in NASA's general aviation initiatives.
    Researchers completed assembly and initial performance and operability
    testing on a new advanced internal combustion engine will be
    demonstrated on experimental aircraft at the Summer 2000 Oshkosh Fly-In
    in Wisconsin. Also, in the context of NASA's Advanced General Aviation
    Transport Experiment (AGATE) program, researchers made final selections
    of systems deemed most suitable for future integration into an
    experimental general aviation aircraft. Selected systems include both
    improved structural materials and an Intuitive Pilot Interface, which
    provides pilots with a graphic depiction of a desired flight path--or
    ``Highway in the Sky''--taking into account weather, traffic, terrain
    and any airspace issues, without the use of voice communications. The
    new Small Aircraft Transportation System (SATS) program will apply this
    research in a focused demonstration of how increased use of safer,
    small aircraft could improve air system crowding. This new initiative
    has the potential in the long-term to change the way people in outlying
    communities view air travel.
        Remotely piloted aircraft (RPA) have also been a focus of NASA
    research. In July 1999, the Environmental Research Aircraft and Sensor
    Technology (ERAST) project conducted a flight demonstration at Edwards
    Air Force Base involving the Altus vehicle, which is capable of
    performing science missions of greater than 4 hours above 55,000 feet
    in areas such as the polar regions. The first low-altitude flight of
    the Helios RPA was conducted in September 1999--the first step on the
    way to eventual flight at an altitude of 100,000 feet in fiscal year
    2001.
        Pillar Three, Access to Space.--I am very excited about our new
    Space Launch Initiative and I believe that no effort will be as
    important to the future of this Enterprise and this Agency as this one.
    In recent years, NASA has made significant progress in transitioning
    routine space operations to the private sector so that taxpayer
    resources can be concentrated on high-leverage science research and
    technology development functions. However, commercially competitive,
    privately-owned, low-cost, safe, Earth-to-orbit launch for human space
    flight remains the most critical, fundamental step this Agency can take
    to enable more aggressive civil space exploration and to stimulate new
    space commerce. If successful, the Space Launch Initiative will mark a
    dramatic maturing of our space program, with the potential to
    revolutionize NASA's and the industry's roles and responsibilities. The
    Initiative more than doubles fiscal year 2000 funding and supports our
    goal of conducting a competition in 2005 to meet NASA's human space
    flight needs through commercial launch service procurements by 2010 if
    industry is capable of delivering on its promises.. To achieve this
    goal, the Space Launch Initiative will pursue a three-pronged strategy:
    (1) technical risk reduction activities to support full-scale
    development decisions for at least two commercially competitive
    reusable launch vehicles prior to the 2005 competition, (2) hardware
    development to meet NASA-unique needs such as crew transport and cargo
    return on commercial launch vehicles that cannot economically meet
    these requirements alone, and (3) launch service procurements to
    provide alternative access for select Space Station needs in the near-
    term. In addition to these activities, the Space Launch Initiative also
    incorporates ongoing NASA space transportation Pathfinder programs.
        Among the most important of these ongoing programs are NASA's X-
    vehicle demonstrator programs. The X-33 program made considerable
    progress in fiscal year 1999 by beginning testing of the world's first
    aerospike engine at the Stennis Space Center. Engine testing is on
    track to be completed this summer. A significant challenge also arose,
    involving a structural failure of the X-33's unique, composite material
    liquid hydrogen fuel tank after successful completion of a rigorous
    testing sequence. We are dealing with cutting-edge technology with
    large composite designs, which have never been tested before. An
    independent investigation team will release a report on the X-33
    incident within the next month. In NASA's X-34 program, progress was
    evident throughout fiscal year 1999, with delivery of the first flight
    vehicle and captive carry tests by the companion L-1011 vehicle
    successfully carried out. Stennis Space Center also conducted hot fire
    testing of the X-34's innovative Fastrac engine. In addition, the wing
    was installed on the second X-34 test vehicle, for use during the X-
    34's first powered flights.
        Research involving highly innovative space transportation
    propulsion systems took a step forward with the ground testing of a
    pair of hydrogen-fueled Rocket Based Combined Cycle (RBCC) flowpath
    models. The transition from air-augmented rocket to ramjet operating
    mode was demonstrated in a unique new facility that allows continuous
    variation of the simulated mach number. Beyond this, NASA's Propulsive
    Small Expendable Deployer System (PROSEDs) experiment is exploring the
    potential role of electrodynamic tethers as a means of propulsion in
    space, without the use of propellants. A Critical Design Review of the
    project was carried out in early September 1999, and the experiment is
    scheduled for launch in August 2000. In addition to the Space Launch
    Initiative, NASA's fiscal year 2001 budget request includes $1.2
    billion over five years, an increase of approximately $200 million, for
    a base level of space transportation research that supports 2nd and 3rd
    generation RLV technologies.
                Commercial Technology Programs
        Since its inception in 1958, NASA has been charged with ensuring
    that the technology it develops is transferred to the U.S. industrial
    community, thereby improving the Nation's competitive position in the
    world market. The fiscal year 2001 budget request of $135 million
    continues this important aspect of our mission. The Agency's
    commercialization effort encompasses all technologies created at NASA
    centers by civil servants, as well as innovations produced by NASA
    contractors. The technology commercialization program involves the
    following components: conducting a continuous inventory of newly-
    developed NASA technologies, maintaining an internet-based database of
    this inventory, assessing the commercial value of each technology,
    establishing R&D partnerships with industry for dual use of the
    technology, disseminating knowledge of these NASA technology
    opportunities to the private sector, and supporting an efficient system
    for licensing NASA technologies to private companies. Included in the
    amount requested for NASA commercialization efforts is $100M to carry
    out the provisions of the Small Business Innovation Research (SBIR)
    Act, which requires that 2.5 percent of NASA's total extramural R&D
    spending be set aside for small business research grants. An additional
    set-aside, involving 0.15 percent of NASA's total extramural R&D
    spending, applies to the Small Business Technology Transfer (STTR)
    Program. The NASA SBIR program has clearly contributed to the U.S.
    economy, fostering the establishment and growth of over 1,100 small,
    high technology businesses.

                                   CONCLUSION
        Mr. Chairman, I am enthusiastic and pleased with the budget I am
    presenting to the Committee. It gives us the stability to: continue
    vital safety investments in our Space Shuttles, start a Space Launch
    Initiative that will revolutionize our approach to meeting human space
    flight launch needs, continue construction of the ISS, and to do the
    cutting-edge research in science and technology that will make the
    missions of tomorrow a reality. While there will continue to be
    challenges with our ISS partnership, we will push forward and complete
    the ISS. We are on the brink of having a state-of-the-art laboratory in
    space that will provide unprecedented opportunities for long-term space
    research and provide the foundation for opening the space frontier in
    low-Earth orbit and beyond.
        With a healthy launch industry, NASA would be able to focus its
    sights beyond Earth orbit. We will revolutionize our understanding of
    the universe and send rovers back to Mars while we look outward to
    Europa and try to uncover the mysteries locked beneath the icy surface
    of the Jovian moon that contains water and perhaps life. We will
    continue to develop the technology that will ultimately enable us to
    discover earth-size planets around other stars. We will continue to
    study our own planet Earth to try and understand the Earth system as a
    whole. We will push leap-frog technology which will not only make the
    missions we have not yet dreamed of a reality, but will also provide
    the technology push for continued economic prosperity and the exciting
    jobs of tomorrow.

                        NATIONAL AERONAUTICS AND SPACE ADMINISTRATION FISCAL YEAR 2001 ESTIMATES
                                            [In millions of real year dollar]
    ----------------------------------------------------------------------------------------------------------------
                                                                                      Fiscal years--
                                                                     -----------------------------------------------
                                                                      1999 OPLAN  12/   2000 OPLAN       2001 PRES
                                                                           23/99          REVISED         BUDGED
    ----------------------------------------------------------------------------------------------------------------
    INTERNATIONAL SPACE STATION.....................................         2,299.7         2,323.1         2,114.5
    SPACE FLIGHT OPERATIONS (SPACE SHUTTLE).........................         2,998.3         2,979.5         3,165.7
    PAYLOAD & UTILIZATION OPS.......................................           182.0           165.1  ..............
    PAYLOAD & ELV SUPPORT...........................................  ..............  ..............            90.2
    INVESTMENT & SUPPORT............................................  ..............  ..............           129.5
                                                                     -----------------------------------------------
          HUMAN SPACE FLIGHT........................................         5,480.0         5,467.7         5,499.9
                                                                     ===============================================
    SPACE SCIENCE...................................................         2,119.2         2,192.8         2,398.8
    LIFE & MICROGRAVITY SCIENCES & APPS.............................           263.5           274.7           302.4
    EARTH SCIENCE...................................................         1,413.8         1,443.4         1,405.8
    AERO-SPACE TECHNOLOGY...........................................         1,338.9         1,124.9         1,193.0
    MISSION COMMUNICATIONS SERVICES.................................           380.0           406.3  ..............
    SPACE OPERATIONS................................................  ..............  ..............           529.4
    ACADEMIC PROGRAMS...............................................           138.5           138.8           100.0
                                                                     -----------------------------------------------
          SCIENCE, AERONAUTICS & TECHNOLOGY.........................         5,653.9         5,580.9         5,929.4
                                                                     ===============================================
    SAFETY, MSN ASSURANCE, ENGRING & ADV. CON-  CEPTS...............            35.6            43.0            47.5
    SPACE COMMUNICATION SERVICES....................................           185.8            89.7  ..............
    RESEACH & PROGRAM MANAGEMENT....................................         2,109.6         2,217.6         2,290.6
    CONSTRUCTION OF FACILITIES......................................           168.5           181.9           245.9
                                                                     -----------------------------------------------
          MISSION SUPPORT...........................................         2,499.5         2,532.2         2,584.0
                                                                     ===============================================
    INSPECTOR GENERAL...............................................            19.6            20.0            22.0
                                                                     -----------------------------------------------
          TOTAL BUDGET AUTHORITY....................................        13,653.0        13,600.8        14,035.3
          TOTAL BUDGET OUTLAYS......................................        13,663.0        13,446.0        13,675.0
    ----------------------------------------------------------------------------------------------------------------
    Note: Fiscal year 2000 includes rescission and supplemental/transfer of $20.2M from HSF TO MS.

               ASSEMBLY OF THE INTERNATIONAL SPACE STATION VIDEO

        Senator Bond. Mr. Administrator, I think you have a show
    and tell here for us?
        Mr. Goldin. Our staff talked to your staff, and we
    committed to show this film, which shows, in four and a half
    minutes, the assembly of the International Space Station.
        Could we have the video?
        Senator Bond. That's without objection.
        Senator Mikulski. Whatever you say.
        Senator Bond. We'd like to see it.
        [Video shown.]

                              MULTIMEDIA PROJECTS

        Senator Bond. Thank you very much, Mr. Goldin, and I guess
    we are ready to turn to the questions.
        My first question is on the multimedia projects. I
    understand that NASA has been receiving proposals for the
    development of multimedia products and services with regard to
    the International Space Station. I am very concerned that these
    proposals be judged according to objective criteria, on an even
    playing field, and we have heard some concerns from the
    community.
        I understand there is not a formal RFP with a source
    evaluation board, so I'd like to know the status of this
    program, what criteria will be used in judging them, how the
    proposals will be selected, and if there is a procedure for
    handling disputes about the award of this contract, if one or
    some of the applicants are not happy with the result. How is
    this going to work?
        Mr. Goldin. First, Mr. Chairman, let me say we're in new
    territory. We are not dealing with standard government
    contracts, be they cost-type or fixed-price contracts. What we
    are attempting to do is engage the private sector in providing
    high definition TV services, multimedia services, so the
    taxpayers don't have to make an investment and, in fact, have
    the potential for gaining money back from the profits that
    might occur.
        Senator Bond. And I agree with that. I think that's a great
    approach. I'm excited about it.
        Mr. Goldin. And saying that, there's a great deal of
    anxiety because we have a different contractual approach. I am
    not a source selection official, so as a result I am not in
    that process and I won't be briefed until a decision is made.
    We're right in the middle of the process.
        I have talked to my people, and they have assured me that
    there are objective criteria for selection, there will be an
    opportunity for people to comment after the selection is made.
        Senator Bond. I mean has there been a formal RFP, and do
    the people making the proposals know what the criteria are?
        Mr. Goldin. There has been--Joe, could you come up, please?
    I would prefer that he do it because I have not been in the
    process.
        Mr. Rothenberg. Yes, sir. In fact, it's not a formal RFP,
    but we put out a request or an invitation for industry to
    submit proposals relative to forming a cooperative agreement
    with us.
        The RFP or the invitation is on the net, and visible on the
    web page, as is the evaluation criteria by which we will select
    the people to negotiate. It has all been on the web since the
    day we put it out.
        The process is a formal process. In fact, we actually
    validated it as part of our ISO-9000 certification last year.
    The whole solicitation, so to speak--it's not a solicitation in
    the traditional sense--is being run very formally. There is
    evaluation criteria, it is on the net, and there is a team to
    evaluate it.
        Senator Bond. How many proposals, how many different
    organizations are making proposals?
        Mr. Rothenberg. Twelve.
        Senator Bond. And what is your time frame for making the
    selection?
        Mr. Rothenberg. We hope to be able to do it over the next
    month. However, again, it's charting new territory, and there
    are policy issues and things to resolve to make sure we are on
    firm ground when we do.
        Senator Bond. Would you mind submitting to the committee a
    summary of the criteria? Is there something you can summarize.
        Mr. Rothenberg. Certainly.
        Senator Bond. We don't want a 500-page document, but----
        Mr. Rothenberg. It's pretty straightforward. Certainly we
    will.
        [The information follows:]

                                MCDONALD REPORT

                        ROTHENBERG SUMMARY OF TOP ISSUES
        Workforce erosion threatens continued Shuttle safety--Hiring will
    address this concern, however the number of in-flight anomalies today
    are significantly less in magnitude and significance then those when
    the shuttle workforce was at its peak.
        Shuttle is not an Operational Vehicle--its processing is highly
    dependent on touch labor and human actions. Touch labor and human
    actions are inherently weak links in the safety chain and should be
    reduced wherever possible--Safety and maintainability studies will
    attempt to identify and quantify upgrades which reduce opportunities
    for human error.
        Formal Aging Program covering all subsystems needs to be put in
    place--New Shuttle Development Office as well as AMES support will
    address.
        Risk management, maintainability and maintenance processes and
    tools need to be improved and take advantage of more modern tools
    including: a PRACA relational database front end; a more quantitative
    QRAS model; and processing support equipment such as non invasive
    wiring fault detection--Upgrade maintainability initiative, newly
    formed Shuttle Development Team and AMES Support will address.
        Shuttle design incorporates a level of risk which needs to be re-
    examined to see if they can be eliminated or reduced including:
    redundant wire routing; numbers of joints in engine and hydraulic
    plumbing; routing of redundant hydraulic lines and APU technology--
    These will be systematically reviewed by the Shuttle Program Office and
    as appropriate included in the upgrade program.
        Workforce stress--Broader survey by NASA at MSFC and by USA doesn't
    support all of the Human Factors findings.
        ASAP recommendations not always followed and the need for ASAP
    turnover--Team did not have the benefit of all NASA responses to ASAP
    but we have not responded by agreeing fully to the prescribed approach
    for every ASAP recommendation such as the 98 and 99 skill shortage
    concerns.

                             RUSSIAN SERVICE MODULE

        Senator Bond. Okay. All right. Thank you very much.
        Mr. Administrator, let me turn to the question that Senator
    Mikulski raised about Russia. You know, Russia's participation
    has been a significant roadblock to meeting the scheduled
    development of hardware and assembly as well as scheduled
    launches for the ISS assembly.
        In particular, the next scheduled element is the Russian-
    built service module, the element which was described here with
    living quarters and is part of the critical path. The element
    was scheduled for launch last year and has been rescheduled for
    launch by Russia later on I guess this year, on a Proton
    rocket, which also had problems.
        The GAO in its report recently questioned the safety
    requirements of the Russian-made service module, and since it's
    a critical component in providing crew quarters and control
    functions, it identified, the GAO said the service module falls
    short of NASA's safety requirements--inadequate shielding,
    inability to operate after losing cabin pressure, excessive
    noise, lack of verification of design.
        Can you tell us what the actual status of the service
    module is, and is the assembly complete in Russia? Has it been
    tested fully to ensure that it meets all requirements, both
    hardware and software.
        Mr. Goldin. The service module testing is complete and
    they're going back and doing what's called regression testing,
    because there's additional time available. But sometime, by
    late this month, all testing will be complete, even the
    regression testing, and it will be put in a container awaiting
    readiness for launch.
        The major problem we have had over the last year with the
    service module is not the module itself, but the failure of the
    Proton rocket. And I might say that America last year had
    trouble with its Delta and its Titan rockets, as did Europe
    with its Arian and Japan with it's H2 rockets. In that sense we
    are not concerned; and in fact our people have been over in
    Russia and have been briefed by the Russians on their fixes to
    the Proton rocket, and they believe they're on the right path.
    In fact, they commented that their testing was even more
    rigorous than the kind of testing we do.
        That right now is our issue. We told the Russians we wanted
    them to launch a minimum of four flights, two with the existing
    Proton rockets and then two with the modifications. Two
    launches have already occurred of the existing configuration
    successful. There will be another launch this month, and in May
    and June there are two launches with the modified Proton
    rocket.
        Presuming those launches are successful, we are on target
    for a launch between July 8 and July 14.
        Now to comment with regard to the GAO, we have communicated
    with the GAO, we have gone through each of those issues, we
    have taken specific steps in working with the Russians, and we
    do not believe that there is a safety problem. We thank the GAO
    for pointing out these issues, and we have worked them through.
        Senator Bond. Thank you very much, Mr. Administrator. Let
    me turn now to Senator Mikulski.

                        CHEMICAL AND BIOLOGICAL WARFARE

        Senator Mikulski. Thank you, Mr. Chairman. I would like to
    just follow up on the Russian issue to really get your
    response.
        Last year, allegations were raised that U.S. funds you
    designated for the space station were being diverted to a
    company called Biopreparat.
        This company was allegedly involved in chemical and
    biological warfare. This is a persistent rumor that continues
    to appear, and I would like for you to tell me, one have you
    investigated this rumor and two what have been the outcomes of
    that investigation?
        Mr. Goldin. Thank you, Senator Mikulski.
        We sent a team to Russia, the Russians were very, very open
    with us. That team included the Chief Financial Officer from
    the Johnson Space Center, the administrative contracting
    officer, we had a representative from the I.G.'s office, and we
    had a number of other people.
        I will submit for the record the formal report that they
    came back with and the protocol that they signed, but it says:
    ``The NASA team saw no indication that the funds were used for
    other than the intended purposes.''
        And it goes into the process that they used for the
    investigation and their findings. In addition to which, on our
    own cognizance, the I.G. is taking a further step by talking to
    the scientists that have been engaged in this program, and she
    will be coming out with a follow-up report in about a month.
        Senator Mikulski. The I.G. will be coming out with a
    report?
        Mr. Goldin. Yes.
        Ms. Gross. Not the scientists that were at Biopreparat, but
    scientists from America who attended Russian scientific
    presentations that we funded, and also those attended from U.S.
    presentations. We're also looking at the internal controls that
    were used to engage in this funding and how it interacted with
    the State Department.
        Senator Mikulski. Thank you. Well, that sounds like you've
    done a pretty rigorous evaluation of this, and that steps will
    be taken in terms of controls.
        Because we are very upset about this, and you know, we got
    the Russians involved in this space station so they wouldn't
    sell their technology to countries wanting to engage in weapons
    of mass destruction. They did go to Iran, their fingerprints
    are on other sales of technology. Part of that is the way the
    Russian government handled our money, and we won't go into that
    today, but biological and chemical warfare really is bone-
    chilling, so whatever we can do would be great.

                              EARTH SCIENCE BUDGET

        Let's move on, though, to one of the other issues. As I
    understand it, the earth science budget is cut by $100 million
    over the next 5 years. It does not appear that NASA also has a
    mission for earth science after EOSDIS.
        Tell me, why is earth science the only program that's being
    cut at NASA, and then also, what is the strategic plan for
    earth science beyond EOSDIS?
        Mr. Goldin. The Administration felt that given we have had
    incredible success in getting the phase one of the Earth
    Observation System underway, we needed to take a pause before
    we thought about the investments we will make in the next
    phase, which begins about 3 years from now, 4 years from now.
    So they asked us to prepare a plan, an earth science
    implementation plan----
        Senator Mikulski. This is OMB that asked you?
        Mr. Goldin. Yes. And to coordinate with all the other
    agencies of government--the National Science Foundation, the
    U.S. Geological Survey, the Department of Defense, and come
    back to them in the 2002 budget with a very detailed, agreed-to
    peer-reviewed earth science plan.
        The plan has come out, we've submitted it to the National
    Academy for review and our NASA oversight committees for
    review. We're engaging with the entire scientific community,
    and this plan will be part of the 2002 budget, and at that time
    I believe we will have a very significant outlook for the
    second phase of the Earth Observation System.
        Senator Mikulski. Well, Doctor, I really need to be kept
    apprised of this, and I will tell you why. I understand the
    logic OMB presented to you, and ``let's all take a pause.'' But
    you see, conveniently that comes out--and this is not about you
    in which you were directed to do--when we have a new
    administration, a new head of OMB--and quite frankly, I am
    afraid that earth science will get stiff-armed in the
    transition, because we take pauses and breathers and so on.
        So I can't have earth science literally fall between the
    transition cracks, and I would be very concerned about it. It
    would be my desire that even if the pause seems logical, that
    we know this year's appropriation what we are going to be
    talking about in 2002 so that we maintain the building blocks,
    and we're all aware that we do not want earth science to fall
    between the transition crack, or a new administration says
    ``Since we took a pause one year, why don't we take a pause
    next year? And how about the pause after that?''
        And I will tell you, from this Senator's perspective, it is
    not a pause that refreshes.
        Mr. Goldin. Senator, I don't know that I could add to what
    you just said.

                             PEER REVIEWED ANALYSIS

        Senator Mikulski. When do you think your peer--I see my
    time is up.
        Senator Bond. That's all right. Take another shot. You've
    got him on the ropes.
        Senator Mikulski. When do you think your peer reviewed
    analysis will be done?
        Mr. Goldin. I think it will be done in late summer of this
    year, in time for the 2002 budget submittal, but before the
    Congress goes out of session.
        Senator Mikulski. Do you think we could have this sooner
    rather than later, at least the preliminary picture so that we
    can have a sense of this as both the chairman and I work
    together, and we really are working with our House
    counterparts?
        Mr. Goldin. I would be pleased to submit for the record a
    consolidated version of what I believe the direction is going
    to be and ought to be in response to this hearing, if that
    would be----
        Senator Mikulski. Then we will accept it as NASA's view,
    been peer-reviewed, but at least it will give us a picture of
    the direction that NASA and its internal leadership, as well as
    yours, thinks it should go.
        Mr. Goldin. I would be pleased to do that, and I believe
    that this is one of the most significant things NASA is doing.
    We are just trying to understand how the earth is changing and
    what are the consequences for life on earth. I can't think of a
    more important program. So I will personally prepare this
    document and submit it to this committee for the record in
    response to your question at this hearing.
        Senator Mikulski. Thank you very much.
        [The information follows:]

     Exploring Our Home Planet NASA's Earth Science Enterprise in the New
                                     Decade

                               EXECUTIVE SUMMARY
        NASA's Earth Science Enterprise is charting the future course of
    its exploration of planet Earth from space. The roadmap of this
    exploration runs through the phases of characterizing, understanding
    and predicting changes and their effects in the Earth system. The Earth
    Observing System is providing that characterization, showing how the
    Earth's major components of land, atmosphere, oceans, ice and life
    interact on a range of time scales. The coming decade will see our
    understanding of the forces acting on the Earth system, how it
    responds, what will be the consequences for life on Earth. This new
    understanding will result in a growing national predictive capability
    for climate, weather and natural hazards.
        We know what are the science issues and questions that must be
    answered in the new decade. We have a maturing picture of what the
    observing and research architecture must be to answer these questions.
    We have identified the technology challenges that must be overcome to
    make this architecture both feasible and affordable. And we know that a
    variety of commercial, interagency and international partnerships will
    be required.
        As the Earth Science Enterprise deploys the Earth Observing System,
    it is in parallel defining its Research Strategy and resultant
    observational requirements for the next decade. The Enterprise's
    Research Strategy is being reviewed by the National Academy of Sciences
    this Summer. Candidate mission concepts arising from the requirements
    and criteria in the Research Strategy will be identified in the fiscal
    year 2002 budget request. Those already identified are the NPOESS
    Preparatory Project and the Landsat continuity mission (perhaps a data
    purchase or other partnership). Stability in the outyear budget for
    Earth Science will assure technology development and related
    formulation activities can occur for post-2002 mission concepts as we
    complete deployment of the first series of EOS, complete development of
    the EOS Data and Information System, and conduct science and
    applications research based on the resulting data.
    1. Earth Science is Science in the National Interest
        If we could extend practical weather forecasts to 7 to 10 days, the
    benefits to utility companies, to building contractors, to just about
    everyone, would be enormous. How will we get there? The same way the
    Nation achieved the current 3-5 day forecasts--by adding NASA's
    satellite technology to NOAA's operational weather forecasting
    capability.
        If we understood how and why climate is changing, we could take
    prudent steps--and avoid costly mis-steps--to lessen our impact on the
    climate system and our vulnerability to its changes. If we knew how
    much rainfall the Southeastern U.S. could expect to receive next
    season, farmers could make better decisions on planting drought
    resistant crops or more thirsty ones. How will we know? The same way we
    came to understand the extent and causes of ozone depletion, the
    mechanics of El Nino and La Nina, and the impacts of incoming solar
    energy on the Earth's atmosphere, oceans and land surface--by designing
    new space--based scientific instruments to measure key Earth system
    features, and by partnering with USDA, USGS, and other Federal agencies
    to get that information to those who need it at the state and local
    levels.
        If we understood the true shape of the Earth's surface, and how the
    motions of the Earth's interior affected it, we could begin to predict
    volcanic eruptions and the impacts of earthquakes and floods. How will
    we find out? The same way we have begun to measure land surface shifts
    in the Los Angeles Basin, and to collect the data needed to build a
    three-dimensional model of nearly the entire inhabited portion of the
    Earth--by combining new satellite remote sensing techniques with
    ground-based instruments to measure the Earth's gravity field and
    surface strain. And by partnering with USGS and FEMA to apply these
    data to their maps of geologic faults and flood plains.
    2. Scientific Challenges
        NASA's Earth Science Enterprise aims to obtain a scientific
    understanding of the entire Earth system on a global scale by
    describing how its component parts and their interactions have evolved,
    how they function, and how they may be expected to continue to evolve
    on all time scales. The challenge is to develop the capability to
    predict those changes that will occur in the next decade to century,
    both naturally and in response to human activity. The strategic
    objective of the Enterprise is to provide scientific answers to the
    overarching question: How is the Earth changing and what are the
    consequences for life on Earth?
        The view of Earth from space afforded by NASA's research satellites
    of the past four decades has led researchers to see the Earth as a
    complex and dynamic system. Its varied components of land, atmosphere,
    oceans, ice, and life are highly interactive. Incoming energy from the
    Sun and the motions of the Earth's interior drive these interactions.
    They constitute the natural forces acting on the Earth system.
    Especially in the last few millennia, and accelerating in recent
    centuries, human activities have constituted additional forces acting
    on the Earth system.
        These forces illicit a wide variety of responses in the Earth
    system. These include large-scale changes in ecosystems over time (as,
    for example, when `ice ages' expand and recede, or when forested lands
    are converted to agricultural or residential use), or even, perhaps,
    the frequency of severe storms. The Earth's own natural variability
    makes it difficult to isolate natural from human-induced impacts.
    Further, many Earth system responses feed back on the system to become
    forcing factors themselves.
        By examining the Earth as a system, as the view from space enables
    us to do, NASA aims to understand the forces, responses and feedbacks,
    and what they imply about natural and human-induced change. This
    conceptual approach applies in essence to all research areas of NASA's
    Earth science program, although it is particularly relevant to the
    problem of climate change, a major Earth science-related issue facing
    the countries of the world. The scientific strategy to address this
    immensely complex problem can be laid out in five steps or fundamental
    questions, each raising a wide range of cross-disciplinary science
    problems:
      --How is the global Earth system changing?
      --What are the primary causes of change in the Earth system?
      --How does the Earth system respond to these natural and human-
            induced changes?
      --What are the consequences of change in the Earth system for human
            civilization?
      --How well can we predict future changes in the Earth system?
        For each of these, a set of detailed, answerable questions have
    been posed, and what information is required to begin to answer them
    identified. Together with a set of decision How is the Earth changing
    and what are the consequences for life on Earth?
      --How is the global Earth system changing?
        --Is the global cycle of water through the atmosphere accelerating?
        --How is the global ocean circulation varying on climatic time
                scales?
        --How are global ecosystems changing?
        --How is stratospheric ozone changing, as the abundance of ozone-
                depleting chemicals decreases?
        --Are polar ice sheets losing mass as a result of climate change?
        --What are the motions of the Earth and the Earth's interior, and
                what information can be inferred about Earth's internal
                processes?
      --What are the primary forcings of the Earth system?
        --What trends in atmospheric constituents and solar radiation are
                driving global climate?
        --What are the changes in global land cover and land use, and what
                are their causes?
        --How is the Earth's surface being transformed and how can such
                information be used to predict future changes?
      --How does the Earth system respond to natural and human-induced
            changes?
        --What are the effects of clouds and surface hydrologic processes
                on climate change?
        --How do ecosystems respond to environmental change and affect the
                global carbon cycle?
        --Will climate variations induce major changes in the deep ocean?
        --How do stratospheric trace constituents respond to climate change
                and chemical agents?
        --Will changes in polar ice sheets cause a major change in global
                sea level?
        --What are the effects of regional pollution on the global
                atmosphere, and the effects of global chemical and climate
                changes on regional air quality?
      --What are the consequences of change in the Earth system for human
            civilization?
        --How are variations in local weather, precipitation and water
                resources related to global climate change?
        --What are the consequences of land cover and land use change?
        --To what extent are changes in coastal regions related to climate
                change and sea-level rise?
      --How well can we predict the changes to the Earth system that will
            take place in the future?
        --To what extent can weather forecasting be improved by new global
                observations and advances in satellite data assimilation?
        --To what extent can transient climate variations be understood and
                predicted?
        --To what extent can long-term climate trends be assessed or
                predicted?
        --To what extent can future atmospheric chemical impacts be
                assessed?
        --To what extent can future atmospheric concentrations of carbon
                dioxide and methane be predicted? criteria (below), these
                comprise a Research Strategy for the next decade. This
                Earth Science Enterprise Research Strategy is being
                reviewed by the National Academy of Sciences this Summer.
        The Earth system science issues outlined above are remarkable for
    the number and diversity of topics, the complexity of the interactions,
    the multiplicity of spatial and time scales involved. A great number of
    scientific questions have been posed by the nation through NRC reports.
    Establishing research priorities becomes a major challenge when
    priorities cross a number of different disciplines. The challenge
    facing the ESE is to balance competing demands in the face of limited
    resources and to chart a program that addresses the most important and
    tractable scientific questions and allows optimal use of NASA's unique
    capabilities. The criteria for setting priorities among science
    questions and implementation approaches are shown here.
    3. Progress Thus Far and Prospects for the Future
        The Nation's investment in Earth Science at NASA has yielded some
    remarkable returns. NASA's ability to make global and regional-scale
    observations, to engage in basic research, and model Earth system
    components gives it a unique ability to formulate and answer
    scientifically important and policy relevant questions. Examples of
    achievements thus far include:
      --Established the Earth's radiation budget (accounting for what
            happens to the solar energy that reaches the Earth) and its
            contribution to Earth's temperature and climate conditions;
      --Created a global database of land cover as a baseline to track
            future change due to natural and human-induced forces;
      --Made the first direct measurements of global ocean circulation and
            wind speed and direction at the ocean surface, and discovered
            their role in short-term weather events such as hurricanes and
            other storms, and seasonal variations in climate such as El
            Nino/La Nina;
      --Made the first measurements of the Earth's seasonal and annual
            biosphere fluctuations and their impact on food and fiber
            production;
      --Established the global carbon budget (accounting for circulation of
            carbon among the land, oceans and atmosphere), quantifying the
            uncertainties in our knowledge of it, to support sound
            environmental policy decisions; and
      --Monitored the seasonal and annual change in stratospheric ozone
            concentrations, and confirmed the sources and chemical
            processes of ozone destruction.
        The following two tables document progress thus far in
    understanding the forces and responses of the Earth system. The first
    identifies the key forces acting on the Earth's climate and estimating
    their relative contributions to climate change. The second identifies
    principal response areas and their relative impact on our lives. For
    each, an assessment is made of how well we understood them before the
    era of Earth-observing satellites, how well we understand them now, and
    where we think we can be in 2010.

        Together, these two tables summarize our anticipated movement
    beyond characterization of the Earth system to understanding the
    forces, responses and feedbacks at work in the system. Requisite for
    this progress is a balanced program of observations, research and
    modeling enabled by advanced technology development for the next
    decade. The Earth Science Enterprise has already begun laying out this
    architecture.
    4. Observing & Research Architecture
        NASA's Earth Observing System, now being deployed, will enable
    scientists to study all the key interactions among the major components
    of the Earth system--the land, atmosphere, oceans, ice and life. It
    will help us understand how the Earth works. The first EOS missions,
    Landsat 7, QuikSCAT, Terra, and ACRIMsat, are already in orbit and
    providing valuable science data, which is being distributed through the
    EOS Data and Information System (EOSDIS). Through 2003, another 20
    missions will round out the first phase of the Earth Observing System.
    Together, the EOS and related small satellites and Earth Probes such as
    QuikTOMS will allow researchers to observe these forcing and response
    factors in parallel to yield a synoptic view of the Earth system. Thus,
    EOS represents an historic increase in our ability to understand in
    unprecedented ways the planet on which we live.
        Recent gains in science and technology enable the design of an
    Earth observing and research architecture for the next decade. Moving
    from characterization to understanding requires an integrated program
    of observations, information management, research and analysis,
    modeling, and knowledge dissemination and application. This framework
    for understanding then provides the groundwork for reliable Earth
    system prediction.
    4.1 Observing Strategy
        EOS will lay the scientific foundation for the future climate
    monitoring system--the joint NOAA, DOD National Polar-orbiting
    Operational Environmental Satellite System--that will also be the
    future satellite system for both civilian and military weather
    forecasting. And EOS will provide the broader context of Earth science
    for future missions to explore Earth system processes about which
    little is known.
        These two additional contributions of EOS point to two of the three
    pillars of observing strategy for the next decade.
                Systematic Measurements
        The first pillar is continuity of selected long-term, or
    ``systematic'' measurements for which is believed that more than one
    decade of observation is required to understand natural variability and
    human influences on a key Earth system parameter. One example is
    atmospheric temperature and humidity, which is seen as a basic
    barometer of climate change. Another is land cover change, which both
    affects and is effected by regional climate change. Solar variability
    requires long term monitoring commensurate with its decadal variability
    so that internal and external forces on the Earth system can be
    quantified.
        For each systematic measurement to be sustained, a plan for its
    continuity must be established. Some can be assumed by the NPOESS
    satellites. The key issues for NASA then are: (a) providing the means
    to bridge the time span between EOS and NPOESS; (b) developing the
    technology that will enable NPOESS to acquire reliable, low cost
    instruments; (c) assuring the algorithms and calibration procedures
    exist to enable science-quality data to be derived from the operational
    instruments; and (d) securing long-term maintenance of these
    observations. For those systematic measurements not (or not yet)
    planned for assumption by NPOESS, NASA must seek other appropriate
    operational agencies (domestic or foreign) to continue the
    measurements. NASA, after all, is a research and technology
    organization not well suited to carry on operational, long term
    monitoring tasks--our role is to advance the state of the art in
    science and technology, facilitate its adoption by essential service
    providers like NOAA and USGS, then move on to the next challenge.
        In the 2003-2010 timeframe, some of the systematic measurement
    requirements will be met by the NPOESS Preparatory Project, a joint
    mission planned by NASA and the NPOESS Integrated Program Office for
    2005. NPP will continue essential measurements from Terra and Aqua
    (including cloud and vegetation cover and temperature and humidity
    profiles) as well as demonstrate instrument technology for NPOESS. NASA
    and USGS are partnering to formulate the plan for continuity of the
    Landsat data set, perhaps through domestic and/or international
    collaboration. Other systematic measurement needs are being assessed as
    part of the review of the Research Strategy, including those for ocean
    and ice altimetry, global precipitation, and stratospheric chemistry.
        The ideal observing system of the future will comprise multiple
    satellites operating in a coordinated fashion from multiple orbits (low
    Earth orbit, geostationary orbits, L1, L2). Small, smart satellite
    technologies and high rate on-board computing and communications will
    enable constellations of satellites that will provide high temporal
    resolution as well as robustness. Already, the Enterprise is taking its
    first steps in this constellation approach by ``formation flying'' its
    land imaging satellites Terra, Landsat and EO-1. We will do the same
    for the atmosphere with Aqua, Aura, PICASSO and Cloudsat. From its
    position at L1, Triana will view the full, Sun-lit disk of the Earth in
    some of the same channels as TOMS, adding the synoptic but frequent
    view as context for the local but infrequent one by TOMS. The next
    decade will provide new opportunities to advance the state of the art
    in multi-satellite science with such concepts as the Global
    Precipitation Mission, which will employ a main sciencecraft in tandem
    with existing and emerging operational weather satellites serving as
    drones to measure global precipitation distribution from pole to pole
    on a daily basis.
                Exploratory Measurements
        The second pillar is a set of exploratory missions that examine
    Earth system processes whose basic workings and impact on global change
    is largely unquantified. In some cases, they involve processes of known
    importance, but where the technology to measure them is only now
    becoming available at (an affordable cost). The Earth System Science
    Pathfinder (ESSP) missions now in development are in this category. The
    Gravity Recovery And Climate Experiment (GRACE-2001) will make the
    first precise measurements of the Earth's geoid. These measurements
    will serve to improve the precision of ocean altimetry as well as add
    to our understanding of the Earth's interior. PICASSO-CENA and Cloudsat
    (2003) will use space-borne lasers to provide vertical profile
    measurements of aerosols and clouds, respectively, to help determine
    how they moderate the impact of solar energy reaching the atmosphere or
    reflected from the surface.
        In the 2003-2010 timeframe, candidate exploratory missions include
    soil moisture measurement, ocean salinity, and land surface topography
    & deformation. Recent research has demonstrated that soil moisture is a
    key missing component in models of the global water cycle--and the
    availability of fresh water resources around the globe. Regionally,
    soil moisture influences evaporation, which in turn affects
    precipitation. Thus, accurate measurements of soil moisture on regional
    scales can improve forecasts of precipitation.
        Exploratory measurement requirements are also being addressed in
    the review of the ESE Research Strategy. The Earth Science Enterprise
    will avoid creating a ``queue'' of such missions. Rather, the tactic of
    mixing strategically focused and highly innovative scientific
    experiments within exploratory mission solicitations will be pursued to
    allow a combination of strategy and opportunity (along with assessments
    of technology readiness) to influence mission concept selection.
                Operational Pre-cursor and Technology Demonstrations
        A third pillar comprises demonstration missions that prepare the
    way for new and lower cost capabilities to support our national Earth
    remote sensing strategic objectives. Operational pre-cursor missions
    are those which primarily serve interests outside the research
    community. NOAA, for example, sees measurement of tropospheric winds as
    yielding the next great improvement in weather forecasting. NASA has
    invested extensively during the past decade in development of solid
    state laser technologies that enable measurements of tropospheric wind
    speed commensurate with NOAA's needs. NASA and NOAA are discussing
    possible approaches (including commercial partnerships) to generate
    these data. NASA will only pursue such missions where it has the
    expertise and required technologies, and where there is a partner who
    will use their products, and who will co-sponsor development and
    execution of the mission.
        We use technology demonstration missions to ``flight test'' new
    instrument and spacecraft technologies that enhance capabilities and/or
    lower the cost of measurements we need to make in the future. ESE will
    launch the New Millennium Program Earth Observer-1 (EO-1) mission to
    demonstrate a low cost means to meet the requirement for future
    Landsat-type data as well as to demonstrate the scientific and market
    value of hyperspectral imagery. ESE recently selected its next New
    Millennium mission to demonstrate the ability to make atmospheric
    sounding data from geostationary orbits that enable significant
    improvements (from 80 percent to 90 percent) in accuracy and extend the
    range of weather forecast from 3-5 days to 7-10 days.
    4.2. Data and Information System Services
        The Earth Observing System Data and Information System (EOSDIS) is
    functioning well and supporting the EOS missions launched to date. New
    EOSDIS releases are planned to support the balance of EOS missions to
    be launched through 2002. Over the past few years the National Academy
    of Sciences has been encouraging NASA to pursue an even more open and
    distributed architecture for data and information services. NASA is
    studying approaches to the data and information requirements of the
    future, with the goal of capitalizing on our investment in EOSDIS while
    embracing a broader range of modes of information product development
    and distribution. NASA will be presenting a concept for post-2002 data
    and information system services for review by the National Academy of
    Sciences later this year.
        This emerging new concept is intended to meet the challenges posed
    by higher data volumes, increasing demand and variety of data products
    required by diverse users, and continued rapid advancement of computing
    and communications technology. It will feature collaboration among
    participants on standards and protocols, competition in selection of
    new and innovative components, and rigorous processes to ensure
    transition of important data records to long-term archives (principally
    at other agencies). Components of this new Data and Information System
    Services (NewDISS) concept include: Backbone Data Centers evolving from
    the current Distributed Active Archive Centers (DAACs); Mission Data
    Systems to produce basic data products from new missions for broad use;
    and Science/Multi-Mission Data Centers to produce innovative
    information products, often by combining data from two or more
    missions. These are conceptual components; in reality, strategic
    alliances and competitive processes will likely result in cases where
    these functions are combined for some data product types. Such a
    concept will capitalize on an evolving EOSDIS infrastructure while
    adding new, flexible components to enable the ``understanding'' phase
    of Earth System Science. We envision that rapid developments in
    information system and telecommunications technologies will enable us
    to process and distribute geospatial information to users in near real-
    time.
    4.3. Research & Analysis
        The intellectual capital for both the planning and exploitation of
    Earth system observations is vested in a robust research and data
    analysis program. Research and analysis is the conceptual source of
    Earth system science questions, and of strategies to address them. The
    research program generates new scientific ideas and emerging research
    approaches, supports the early development of innovative observing
    techniques. In some cases, it generates new instruments and the linkage
    of instruments with platforms. This program develops processing
    algorithms, organizes field tests, and generally charts the path for
    scientific and engineering developments that enable future advances. It
    assures the linkage between global satellite observations, in situ
    process-oriented observations, and the computational models used to
    provide both a framework for interpretation of observations and a tool
    for prediction.
    4.4. Earth System Modeling
        Computer-based models are the principal means by which observations
    are translated into understanding in Earth science. Two key, related
    reasons account for this. First, as has been often described, the Earth
    is a dynamic system of interacting components. For example, it is the
    interaction of ocean temperatures and atmospheric winds and moisture
    that produce El Nino and La Nina. Atmosphere and land interactions,
    principally evaporation and precipitation, play a large role in
    regional weather. Models are the means by which these dynamic processes
    can be represented and studied. Second, because climate and other Earth
    system processes cannot be subjected to controlled experimentation,
    models are the only way in which predictions about changes in the
    future can be made. Weather forecasts are made based on models
    initialized with current weather conditions and mathematically-
    expressed climate system relationships. Questions about the affects of
    changing concentrations of trace gases on future climate can only be
    addressed via models.
        A variety of models exist for specific Earth system processes, such
    as formation of cloud particles in atmospheric convection, and ozone
    destruction and replenishment. Earth system component models, such as
    for the whole atmosphere, have been constructed and are being improved,
    employing in some cases the results of process models. Further,
    component models are being coupled to represent the key interactions in
    the Earth system, including ocean-atmosphere and land-atmosphere
    interactions, in order to improve our understanding of the global water
    cycle, the global carbon cycle, and the various forcings, responses and
    feedback in the Earth system.
        Accurate models are the key to the ``understanding'' phase of Earth
    system science. The modeling work now underway, and the observations
    from EOS and future satellites which drive them, should yield a
    quantitative understanding of Earth system change under present
    conditions and provide prediction of future changes. During the coming
    decade, the Enterprise will run fully interactive ecosystem-climate
    models to assess the impacts of climate change on land and marine
    productivity. We will assimilate wind data and precipitation data into
    climate and weather forecasting models to improve near-term and
    seasonal-to-interannual weather prediction.
        These modeling efforts depend on a successful program of
    observation in the next decade to acquire data on such parameters as
    winds in the troposphere, global precipitation, soil moisture, and land
    surface change. Some are measurements that must continue from the EOS
    era (e.g., ocean surface winds, land cover change), while others will
    be new space-based measurements (e.g., soil moisture, tropospheric
    winds, land surface deformation).
        We must also invest in development and utilization of
    supercomputers that support efficient execution of Earth system models
    that can predict future changes in the Earth on seasonal, annual, and
    inter-annual time scales.
    4.6 Partnerships
        The ESE research program is conducted within a larger national and
    international context. This implies both opportunities for task-sharing
    with partner agencies, and the responsibility to seek optimal
    coordination of mutually supportive programs of these national and
    international partners. Domestically, both commercial and inter-agency
    partnerships are essential to the long-term success of the Enterprise.
        The U.S. commercial remote sensing industry comprises both
    providers of satellite data and producers of value-added information
    products. Some companies are involved in both. The first wholly
    commercial remote sensing satellite was launched in 1999, and several
    more are planned over the next few years. Thus it is increasingly
    likely that some Enterprise science data needs will be met by
    commercial providers, and Enterprise mission solicitations will offer
    these opportunities. ``Value-added'' companies are being engaged in our
    applications demonstration partnerships with state and local
    governments and universities, with the intent that new, direct industry
    to user commercial relationships will result. While NASA has been
    instrumental in the birth and growth of the commercial remote sensing
    industry, it has evolved to the point where NASA has limited ability to
    influence their investment decisions. This is a good thing, but implies
    a change of relationship to a more equal partner status. Conversely,
    the growing industry has a limited ability to invest in high risk
    development; this will continue to be the area of NASA's contribution,
    along with scientific research.
        The Enterprise has been actively seeking the cooperation of
    operational agencies (principally NOAA and USGS) to ensure the long-
    term continuity of key environmental measurements in the long term. To
    achieve this goal, NASA will promote the convergence of the operational
    observation requirements of partner agencies with ESE research data
    needs for systematic observations, share the cost of new developments,
    and develop precursor instruments and spacecraft technologies for
    future operational application missions. NASA will also encourage the
    continuing involvement of scientific investigators in the calibration
    and validation of operational measurements, the development of more
    advanced information retrieval algorithms, and the analysis of
    operational data records. From this perspective, the potential for
    serving operational needs or commercial applications is a priority
    criterion for ESE programs, since such applications imply the potential
    for cooperation with relevant government agencies or data purchase from
    commercial sources.
        Internationally, partnerships will continue to be essential for
    global change research. In the EOS era, $4 billion worth of activity
    were invested by foreign governments directly in EOS missions, and $4.7
    billion more was leveraged by the Enterprise through data sharing
    arrangements. Both traditional partners Europe, Japan and Canada and
    newly emerging ones like Brazil and Argentina are being engaged in
    discussions of an integrated global observing strategy for the future.
    In addition to the cost savings resulting from such partnerships, it
    has become apparent that foreign governments are more willing to accept
    the findings of research when their researchers and space programs are
    engaged.
        The Earth Science Enterprise will pursue all three types of
    partners as we design the observing and research architecture for the
    next decade. The likelihood of success in leveraging resources invested
    by partners is greatly enhanced when the U.S. exhibits budget stability
    in the planning and implementation of satellite programs.
    4.7 Getting Scientific Results to Users
        Earth Science is science in the national interest. That is, it
    produces information with uses far beyond the scientific community--in
    weather forecasting, in agriculture and natural resource management, in
    urban and regional planning, and in environmental policy-making. Beyond
    research, then, the Enterprise must work with its partners to assure
    that timely, useable information products are available to a broad
    range of decision-makers. Several avenues exist and must be
    strengthened over the next decade to accomplish this.
        The first is NASA's partnerships with operational agencies--those
    agencies like NOAA, FEMA, USDA and USGS that provide services on a
    routine basis to the public. NASA already develops the weather
    satellites operated by NOAA for weather forecasting. In the next
    decade, NASA will help NOAA and the DOD to develop a new generation of
    weather satellites. A prototype satellite is planned for mid-decade
    that will meet NOAA's technology demonstration and risk mitigation
    needs as well as provide climate data to extend that begun by the first
    series of EOS. Joint research projects are underway with FEMA, USDA,
    and others to apply remote sensing data to their concerns (e.g., flood
    and drought preparedness). The next decade will see these agencies
    routinely applying remote sensing data to improve the services they
    provide to the public.
        The second are scientific assessments of environmental change. The
    nature of the scientific enterprise is that initial results will be
    reported through the peer-reviewed scientific literature and presented
    at scientific meetings. The sheer volume of scientific findings and, in
    many cases, the diversity of ideas, imply that a synthesis effort is
    needed to communicate the information usefully outside the scientific
    community. The assessment process, in which groups of scientists work
    to synthesize their knowledge in a particular area, is perhaps the best
    established means to make the connection between research results and
    the answers sought by the sponsors of research and by policy decision-
    makers. In such assessments, the scientific community comes together to
    answer not only questions such as ``What do we know?'' but also, and
    perhaps equally importantly, ``How well do we know what we think we
    know?'' These take place on both the national and international levels,
    through such organizations as the World Meteorological Organization and
    the US Global Change Research Program. Assessments in the next decade
    will include progress in the recovery of the stratospheric ozone layer,
    the health of the world's ecosystems supporting the global economy by
    providing goods and services, and impacts of climate change on various
    sectors of the economy. NASA is a provider of objective scientific
    information to these assessments.
        The third are partnerships with state and local governments to
    demonstrate new applications of geospatial data to regional concerns.
    These partnerships will often include commercial data product
    producers, who will independently generate these products once the
    viability of the techniques and market are demonstrated. The Enterprise
    currently has several mechanisms with which to form such partnership.
    The next decade will see this effort mature from an ad hoc set of
    actions to a coordinated program that is national in scope,
    characterized by competition, merit review, and ``demand-pull'' from
    state and local users.
        One key to achieving broad and efficient production and
    distribution of information products is computing and communications
    technology. The Enterprise is sponsoring a number of new research
    projects in this area. Of equal importance to more powerful computing
    hardware are the software tools and protocols to combine diverse data
    sets into readily useable forms. NASA, other agencies, and the private
    sector are pursing a ``Digital Earth'' concept for the next decade that
    will focus on means to combine diverse data types into a broadly
    accessible, intelligent architecture that can be queried by users with
    specific, unforeseeable interests.
    5.0 Anticipated Outcomes for the Nation: A Predictive Capability
        The observing and research architecture outlined in this section
    builds on the nation's investment in the Earth Observing System. It
    extends and improves upon selected EOS measurements for which longer
    term data records are required to answer key climate change questions.
    It adds some new measurements where recent research uncovers a need and
    technological advancement makes them feasible and affordable. And it
    focuses on the integration of observations, research and models made
    possible by EOS in order to reveal the forces, responses and feedbacks
    driving the directions of Earth system change--to provide answers to
    the science questions posed earlier. It is a flexible architecture that
    will allow for inclusion of advances in science and technology. It will
    yield a quantitative understanding of the Earth system, with such
    products as:
      --7-10 day weather forecasts;
      --Seasonal prediction of precipitation;
      --Quantification of the major forces and responses in the climate
            system, and seasonal climate forecasts; and
      --Quantified trends in terrestrial and marine ecosystem productivity,
            and impacts on production of goods and services.
        Beyond this, it lays the groundwork for a predictive capability.
    Visionary Earth scientists foresee the coming constellations of
    coordinated satellites evolving toward a ``sensorweb'' of intelligent
    satellites in a variety of orbits keeping watch over the Earth. This
    sensorweb will employ the understanding gained in the next decade and
    demonstrate for our service--providing partners the capability to
    produce:
      --10-14 day weather forecasts;
      --12 month rain rate estimates;
      --10 year climate forecasts;
      --10 day forecasts of pollution alerts;
      --5 day volcanic eruption prediction & routine forecast of ash cloud
            trajectories for civil aviation; and
      --15-20 month El Nino forecasts.
        Such forecasts will greatly enhance national and local efforts to
    protect the health and safety of both people and high-value physical
    assets. The nation's investment in Earth science over the next decade
    will continue to yield substantial, tangible returns in the years and
    decades to come.
    6. Implications for NASA Earth Science Enterprise Budget
        The ten and twenty year anticipated outcomes defined above are
    scientifically and technologically achievable. However, the nation is
    currently under-investing in Earth science if these are our goals.
    Essential elements requiring funding to implement this vision of Earth
    Science are:
        (1) Securing data continuity for important systematic measurements.
    As indicated above, the Enterprise is looking to NPOESS to assume
    responsibility to provide some key systematic measurements. In turn, a
    subset of these will be continued from EOS by the NPOESS Preparatory
    Project. But other important measurements (e.g., ocean and ice
    altimetry, stratospheric and tropospheric chemistry, land surface
    deformation) remain to be addressed.
        (2) Upfront investment in advanced technologies. Examples include:
      --the ability to migrate selected sensors from low Earth orbit to
            geostationary and higher orbits to achieve greater temporal
            coverage commensurate with the dynamic nature of atmospheric
            and surface processes;
      --nanosatellite technology to enable intelligent constellations of
            inexpensive sensorcraft to form a system that is both adaptive
            to new scientific understanding and robust enough to
            demonstrate the reliability required by operational users.
      --computing and communications advances that will allow near-real
            time processing, combination, and visualization of data sets,
            and modeling of weather and climate systems.
        (3) Demonstration of means to serve the broader, non-scientific
    community. Currently, the Enterprise is running a number of small pilot
    projects to demonstrate the applicability of remote sensing to
    practical problems. But in order to make the use of Earth science data
    and results ubiquitous in society--to see it make a substantial impact
    on economic growth and environmental quality--means must be developed
    to make geospatial data both accessible and meaningful to the broadest
    range of users.
        In the upcoming fiscal year 2002 budget process we will be
    considering the appropriate level of funding that is needed to conduct
    the research observations and technology development that will fulfill
    the goals of the ESE Research Strategy.

                                   CONCLUSION
        The next decade promises to be an exciting one for the nation in
    Earth Science. We will move beyond characterizing the Earth system to
    genuinely understanding how it works, so that we can begin to predict
    future change. New scientific knowledge and practical applications will
    be streaming from EOS and Earth probes missions. Advanced technology,
    lower cost missions will be developed to assure the continuity of
    essential science data. Small, innovative missions will discover facets
    of the Earth system that we can only guess at today. An information
    management system that will ensure affordable and timely delivery and
    access to data products by scientists, practitioners and policymakers.
    New ways of combining geospatial data into innovative, useful
    information products will engage a broader range of users to multiply
    the return on the national investment in Earth science. And the result
    will be a robust climate, weather, and natural hazard prediction
    capability for the nation.
        [Clerk's note: For further information about NASA's DRAFT Earth
    Science Enterprise Research Plan 2000-2010 visit there web site at
    http://www.earth.nasa.gov/visions/index.html]

                     RUSSIA'S OBLIGATIONS AS AN ISS PARTNER

        Senator Bond. Thank you, Senator Mikulski.
        Staying on the ISS questions, I remain tremendously
    concerned about Russia's ability or possible lack of commitment
    to meet its obligations as a partner in the ISS. I am concerned
    about the additional cost, and duplication that will hit us.
        What are the key pieces of hardware and software for which
    Russia is responsible and are essential to complete the
    assembly of the ISS? What is NASA's policy for addressing the
    risk of Russian failure to meet its obligations, what would our
    associated costs be, can we complete the ISS without Russia,
    what steps would NASA have to take under what timeline, are
    there any sanctions in the state-to-state agreement? I'd like
    to know, and really how much money we have had to spend, to
    backfill or meet existing Russian obligations.
        I know this is a broad question, but this is a major
    concern. So I'd like to have you address that whole question.
        Mr. Goldin. I will try and remember each element, but----
        Senator Bond. Well, let's start off from the back. How much
    have we spent to date on backfilling on Russian failure to meet
    obligations?
        Mr. Goldin. We have felt it was necessary to make the space
    station more robust, and early on we decided to build a crew
    return vehicle. Initially we were going to rely on the Soyuz as
    a crew return vehicle, but we did this for another reason: The
    Aerospace Safety Advisory Panel felt that they would like us to
    have a crew return vehicle so that all crew members could get
    into this vehicle at one time----
        Senator Bond. It was seven rather than three.
        Mr. Goldin. Than three. That program is on the order of
    about 800 to 900--no, no, it's on the order of $1 billion.
        We made a decision about a year or two ago that to make the
    station more robust in the event that the Russians could not
    meet their propulsive function, which is the most critical
    function they have to perform, that we would build a propulsion
    module. That propulsion module is presently estimated at over a
    half a billion dollars. I would say that that is a very
    specific step we took to make that station more robust.
        Senator Bond. What are the key pieces for which Russia is
    responsible in addition to those, and what are your back-up
    plans if Russia fails to meet its obligations?
        Mr. Goldin. The most critical element that we need is a
    service module on orbit. Once that service module is up there,
    we will have the very key link, and from that point on, we will
    be in a much better position.
        There are a number of other things, small elements the
    Russians have to deliver. The other critical element that the
    Russians have to deliver are Soyuz vehicles, two per year; and
    Progress vehicles, this year three, next year about three, and
    after that I think three to six per year. Those are the core
    things that we are expecting of the Russians and want them to
    take care of. Now in the event that they have a problem on
    launch with the service module, because we believe it is ready
    to go, we have built----
        Senator Bond. Have you all looked at the service module?
    You are convinced that that's okay, meets standards and----
        Mr. Goldin. Our people have been in the factory as it has
    been built, and right now we believe, as I indicated earlier,
    the key path element is the Proton vehicle. If we have two
    successful Proton launches with the modifications, we're ready
    to go.
        In the event that there's a problem on the launch with that
    Proton, we have built at the Naval Research Lab what's called
    an interim control module, which we could launch up to the
    space station in its present configuration and keep it up in
    the sky with a propulsive capability.
        If the Russians do not perform with the service module, we
    then could have a very significant delay to the program, but we
    have the backup in keeping it up there safely with the interim
    control module.

                           IRAN NONPROLIFERATION ACT

        Senator Bond. One related question, and this again was
    raised by Senator Mikulski. We are all familiar with the Iran
    Nonproliferation Act, which requires the President to certify
    Russia is not assisting Iran with ballistic missile technology
    or other weapons of mass destruction. But without the
    Presidential certification, NASA is prohibited from sending
    funding to Russia except under certain circumstances.
        What's the potential impact of the nonproliferation act on
    NASA and Russia's ability to work together, and if the
    President were not able to certify Russia was free of Iran
    Nonproliferation Act violations, what impact would that have on
    the space station, and what would NASA have to do?
        Mr. Goldin. First, let me start off by saying we are going
    to live with the letter of the law of the Iran Nonproliferation
    Act, and at the present time, under the auspices of the Act, we
    are in the process of seeking to buy $14 million worth of
    equipment that will enable us to hook up this interim control
    module and the propulsion module to the space station. We
    anticipate, under the Act we will be able to make this $14
    million purchase, and it was called out in the Act itself.
    There is $21 million more of purchases we would like to make
    which pertain to the safety of our astronauts and the safety of
    the space station, and we anticipate those purchases being made
    at some point later this year.
        Beyond that, if the Russians do what they say they're going
    to do, their president just said he is going to provide the
    proper finances for the space station--everything ought to
    flow. If the Russians do not perform, then we will be facing a
    decision, do we want to buy some further elements for the space
    station to keep it up there, until we bring all our other
    equipment from the United States? I am not yet ready to say we
    are going to spend a nickel beyond the $35 million I have just
    defined until we better understand the situation.
        Senator Bond. That's their performance. When would the
    Nonproliferation Act--would that potentially impact any of
    those purchases?
        Mr. Goldin. It could, beyond that $35 million I have just
    defined, and it may prevent us from buying some goods and
    equipment that could help keep the Russians going in the event
    they don't get the proper funding from their government. That
    would be smart for us to do because it would avoid spending
    billions of dollars on our side to make up for that deficiency.
    And at the present time we feel we're okay, but it could lead
    to a problem later this year.
        Senator Bond. Thank you.
        Senator Mikulski.

                               LIVING WITH A STAR

        Senator Mikulski. Well, I share the chairman's concerns and
    how we really need to stand sentry on this. I won't pursue an
    additional line of questioning, but I am going to be associated
    with his line of questioning about the space station.
        I would like to come back to space science again. In your
    budget presentation, you're talking about a new initiative
    called Living With A Star. And as I understand it, it would be
    a multimillion dollar project over 10 years.
        Could you, because this will be a new initiative and I
    think we are being very careful about new initiatives, could
    you tell me what is the goal of Living With A Star and what do
    you think will be the benefits of the program and why should we
    embark upon it?
        Mr. Goldin. It is a very important program. It will help us
    understand how and why does the sun vary, and how does the
    earth respond to these variations.
        I might give you a point of reference: A tenth percent
    change in the energy from the sun reaching the earth has a
    significant impact on our climate, and has had over the years.
    So these are very important small numbers we're looking at. We
    believe that this is going to impact us in four ways. And if
    you asked me this question 200 years ago, I would say ``Well,
    it could impact the climate, but we have no control, so we'll
    just keep on chugging along.'' But with high tech, it is the
    interaction of the radiation coming from the sun that could
    shut down our high tech.
        So the first area is the national economy. It could damage
    communication and weather satellites, and we've seen pagers
    shut down just a few years ago, and the whole country ground to
    a halt. It disrupts the electrical power grid. It could disrupt
    GPS navigation signals which are crucial to airline safety in
    almost everything we do. High frequency radio communications,
    and it could damage electronics and people flying at very high
    altitudes in planes.
        The second area we are concerned about and are working with
    the Department of Defense is national defense. Space weather
    could impact guidance and navigation of precision weapons,
    disrupt space operations, interrupt communications, affect long
    range radar, and impede navigation, all crucial to the national
    defense, and we don't have the kind of space weather
    forecasting that's necessary for that.
        The third area is understanding the variations in the sun
    and how it impacts global change here on earth. One of the key
    missions for NASA is to understand the forces on our climate.
    Some are natural like the variability from the sun, others are
    human-induced. Understanding what the sun does and
    understanding what people do and separating out the two allows
    us to have real mitigation strategies.
        And finally, for NASA, human exploration. One of the
    biggest challenges that we will have in sending astronauts to
    Mars is in protecting them from the dangers and rigors of space
    radiation and, in fact, this will be the subject of the
    announcement we'll be making with the National Cancer Institute
    later today.
        We only have a 1 hour warning on solar storms. In the
    limit, if we are successful in this program, we could get
    warnings of up to 2 weeks, and with a high tech economy, if you
    know what's coming, you could mitigate it and not have the
    devastating effect that it might have. So I would say of the
    things that NASA is doing, this touches every American, it
    touches every person on this planet, it touches our economy, it
    touches the national defense, it touches our climate, it
    touches everything and our vision for going to Mars.
        Senator Mikulski. So your basic position is Living With A
    Star will be a very important set of scientific activity that
    will then have great impact here.

                              TECHNOLOGY TRANSFER

        Well, as you know, one of the things I continually advocate
    is what I call tech-transfer, growth of knowledge. Today I know
    you will be signing again another bilateral agreement with NIH,
    and I recall when Dr. Bernadine Healy was head of NIH, in the
    Bush Administration, and you were the NASA administrator,
    encouraged you two to get together, that if we could have
    treaties around the world, that you two could have a bilateral
    agreement on the space science as well as the wonderful work at
    NIH.
        Could you tell us today what we are going to be signing,
    and could you describe any of the protocols that have come out
    of this agreement between NASA and NIH?
        Mr. Goldin. I might say that if we had a treaty, you were
    the chief negotiator, and that it has been unbelievably
    successful. We have signed 22 agreements with the National
    Institutes of Health in aging, in pulmonary disease, in heart
    disease, in balance problems, in cancer research. We now have
    transferred our bio-reactive technology to the National
    Institutes of Health to build tissues in three dimensions so
    they could do cancer research outside the body and have high
    quality tissue to work on.
        Today we are going to take the next step, with the National
    Cancer Institute, and using very advanced NASA technology, in
    nanotechnology, biotechnology and information technology. We're
    in the limit, we will build things an atom at a time and be
    able to perhaps even do self-replication. We hope to be able to
    work with the bio-informatics knowledge at the National Cancer
    Institute to be able to build what's called micromolecular
    sensors, where we can sense inside the body at the sub-cellular
    level, and search out disease before it really spreads.
        For example, a cell could mutate, and until it becomes an
    impact on your body could be 10, 20 years and you wouldn't even
    know it. So we're going to work on these micromolecular
    sensors, and we hope to build nano-explorers, nano-diagnostics,
    and nano-therapists to in the limit help our astronauts deal
    with the radiation that they'll have to come in contact with in
    going to Mars, and help on earth begin to get some real
    advanced sensing devices to help people understand when disease
    gets into their body much earlier.
        Senator Mikulski. I think that this is very, very exciting,
    and I don't want to prolong my questions, but as I understand
    it, and I know I'm going to sound like science fiction news
    here.
        But these biosensors are really very small nanosensors that
    truly an astronaut in space, and if we perfect it between NASA
    and NIH could then move into our own civilian clinical
    practice. But you truly could consume, through a pill, an
    inhalant, so on, a device that then breaks up and you'd have
    these mini-micro, nano----
        Mr. Goldin. It's a thousandth the size of a micro.
        Senator Mikulski. That can go through your body,
    essentially sensing--like literally an MRI, zipping through
    your body--and that down here at Planet Earth, we could then
    get a picture of what was happening with our astronaut. Am I
    correct in that?
        Mr. Goldin. It may even be better than that. These devices
    could have intelligence and communications capability, and in
    the limit communicate with an onboard computer and then provide
    real-time therapy without ever having to communicate back with
    earth. In the limit that's what we would like to be able to do.
        Senator Mikulski. Isn't that----
        Senator Bond. Awesome.
        Senator Mikulski. Yes. Yes.
        Well, Dr. Goldin, I know that Senator Shelby is here--I
    think that this nanotechnology, both through the Science
    Foundation, NASA and so on, could offer one of the most
    important breakthroughs that our nation could offer. And I hope
    to talk with the chairman about really how we can, in a very
    steady, progressive way, move forth in the development and
    exploration of nanotechnology. Because I truly think that this
    will--what miniaturization meant two or three decades ago, that
    this will be so leapfrogging us into the future and would like
    to discuss this with you.
        Mr. Chairman, that will conclude my questions. But again,
    Dr. Goldin, I'd like to thank you for all that you've done. We
    will be talking a lot over the next several months as we work
    on our appropriations.
        But again, both to you and to your team, I would like to
    express my thanks to your wife, because we've met on a number
    of occasions--but the same with FEMA and James Lee Witt and the
    people out there with spouses. Often we are in crisis
    management situations and so on, long hours, financial
    sacrifices.
        So I want to express my appreciation to her, and I really
    mean it for all in the room who--you know, behind every great
    person is a spouse that adds spice and support.
        Senator Bond. Either that or a surprise mother-in-law.
    Well, thank you, Senator Mikulski. I just hope we don't let any
    of the protest groups know about this potential breakthrough,
    because we don't want to have to fight them in the street as
    well.
        We now are delighted to welcome Senator Shelby, a valued
    member of the committee, and ask him to pose his questions.
        Senator Shelby. Thank you, Mr. Chairman.
        Mr. Chairman, to you and Dr. Goldin, I am sorry I missed
    some of the hearing, I had another commitment in another
    committee, like everybody, but this is a very important one.
        Dr. Goldin, I want to associate myself with the remarks of
    the Senator from Maryland. I have had the privilege of meeting
    your wife, and she is dynamic in her own way and that helps you
    in many ways, but so are you. You have brought a lot of
    leadership to NASA at a crucial time. You come from a technical
    background which is very, very important in the job that you
    do. And I think oftentimes it's nice for all of us to
    appreciate the obvious, and I think that's obvious.

                        ENABLING CUTTING-EDGE TECHNOLOGY

        Having said that, given the budget constraints which we've
    been through, and you've really been through on the front line,
    over the last 7 years do you think that NASA has been able to
    sufficiently invest in space propulsion research facilities an
    equivalent? In other words, to enable cutting-edge technology
    breakthroughs, because that's a big future, is propulsion.
    Where do we go, how do we save money, and so on? I've sat and
    talked with you about this before. I know we've had some money,
    but is it sufficient, really?
        Mr. Goldin. Up until this year's budget it has been very
    thin, and if you can indulge me for a moment, Senator----
        Senator Shelby. Absolutely.
        Mr. Goldin [continuing]. Shelby, I have a chart up here,
    and I'll ask the NASA comptroller to go to the chart. I believe
    you have a copy in front of you.
        Senator Shelby. I can see that, as long as it's way off.
        Mr. Goldin. This chart is testimony to the incredible work
    force at NASA and their belief in what the American people
    want. On that chart you will see four lines. The bottom line is
    labeled NASA, and we've normalized the budget to fiscal year
    1993.
        Relative to our budget in 1993, over these last 7 years the
    NASA budget has come down 5 percent. If you take a look at
    Defense, it has had its share of problems, but it has gone up 5
    percent. If you take a look at all the other discretionary
    agencies, they are up about 17 percent.
        This NASA team really wanted to do more with less, which is
    what the American people asked for. And this is the first time
    in 7 years that I am sitting before this committee saying we
    need more money. We have made a modest increase of about 3.2
    percent, which will get at the issue that you're talking about.
        We are being very frugal in what we do, and in fact we
    found we cut too hard, and I personally accepted the
    responsibility for pushing because I didn't know where the
    boundary was. But I felt it was essential to gain the
    confidence of the American people that we do the right thing.
    Having had some failures, we pushed too hard, and that is why
    in this year's budget we put a significant increase into
    propulsion; because without propulsion, you don't get to where
    you want to go in the solar system and universe.
        Senator Shelby. Propulsion is very important and central to
    the future of NASA, is it not?
        Mr. Goldin. Yes.

                    NEXT GENERATION REUSABLE LAUNCH VEHICLE

        Senator Shelby. Dr. Goldin, I also understand that the core
    activity, the Space Launch Initiative, includes competition in
    the private sector, to result in a decision around 2005 or
    something like that, about your next generation reusable launch
    vehicle.
        Who will be encouraged to compete, and how many competitors
    do you plan to fund?
        Mr. Goldin. Well, we intend to encourage not just the big
    companies, but the small companies. I personally had dinner
    with the CEOs of eight or nine of these small companies in
    anticipation of the budget. We even have a special competition
    set aside for alternate access to the space station, and we're
    looking for innovation approaches. Innovation could come from
    small companies or big companies.
        Senator Shelby. Oftentimes it does, doesn't it?
        Mr. Goldin. Yes. And we intend to down-select to perhaps,
    in the first round to four to six companies in this alternate
    access to the space station. So we want to be as inclusive as
    possible and go as far as our funds could take us, but it is
    essential to have competition.
        Senator Shelby. Are you building on what we have today? You
    know, NASA has already made progress in the current reusable
    launch vehicle programs, the X-33 and X-34. Will you be
    building on that, or will you be looking at everything?
        Mr. Goldin. We're going to be building on that, but we're
    hoping for other proposals. You know on the X-33, it is the
    first time in 25 years NASA has a radical new engine that's
    being tested in Stennis, Mississippi. We're hoping for
    innovation.
        In fact in yesterday's trade, the Aerospace Daily, it
    talked about the fact that we're working on a rocket-based
    combined cycle engine which breathes oxygen in addition to
    carrying its own fuel. So we're going to push the limits on
    everything.

                            SPACE LINER 100 PROGRAM

        Senator Shelby. Dr. Goldin, can you give me an update on
    the Space Liner 100? Last year we added $80 million for that.
    What's going on there?
        Mr. Goldin. First I'd like to thank you and Senator Lott
    and a number of the other members who helped work with us to
    get Space Liner 100 going. And in this year's budget, I believe
    we have what we call third generation reusable launch vehicles,
    which is in essence a continuation of Space Liner 100. I
    believe we have about $400 million in the budget, and when you
    include synergy with some of the aeronautics activities, it's
    even more money.
        So we are continuing, and this is really pushing the limit,
    like with a MagLev launcher--they built a 50 foot track down
    there in Huntsville, Alabama. We think you could save 25
    percent of the energy if you could accelerate the vehicle up to
    100 miles an hour using electricity on the ground so it makes a
    simpler, smaller vehicle. We are looking at building a test
    track as long as one mile.
        Senator Shelby. That's good.
        Mr. Chairman, thank you. And Dr. Goldin, thank you for your
    courtesy.

                             EXPORT CONTROL PROGRAM

        Senator Bond. Thank you very much, Senator Shelby.
        Following up on the question on Iran proliferation, the
    I.G. audit of March 23 raised some concerns about potential
    export violations by two or three NASA contractors, exporting
    NASA-funded control technology. This, from Goddard, Johnson,
    and the Marshall Space Flight Center, the responsible managing
    program personnel were unable to identify NASA-funded control
    technologies that contractors export.
        Without the proper knowledge and control, do we lack
    assurance that contractor export activities are in accordance
    with the applicable laws and regulations? What corrective
    action has NASA taken to ensure that these violations do not
    reoccur?
        Mr. Goldin. First let me say at the highest levels of the
    Agency I consider myself the chief security officer for this
    Agency, I don't delegate it to anyone else. I have gone to and
    asked for help from the director of the CIA and the director of
    the FBI. I did this some half year to a year ago because I did
    not want NASA to have any problems. And I said ``Send in your
    people, openly audit us, tell us where the problems are'' and
    we are getting ready for a briefing on that subject now.
        I have relied very heavily on John Schumacher who supports
    the security function for me, but I want you to understand I am
    in charge of security. We have done unbelievable things in
    training of our people doing the right things. Occasionally
    some people make some mistakes, and I thank the I.G. for doing
    her studies. We view the I.G. as a friend of the Agency because
    she looks for where problems are.
        Senator Bond. That's two unusual things.
        Mr. Goldin. I don't know the details of that problem----
        Senator Bond. Relying on the I.G. is not something we find
    often in this committee.
        Senator Shelby. That's unusual, Mr. Chairman.
        Senator Bond. Nor do we find somebody who takes
    responsibility when things--you stick out like a sore thumb,
    and we appreciate it.
        Mr. Goldin. We are dealing with public money and the public
    needs to have confidence in us. And the I.G. is independent. We
    don't always agree, but the fact of the matter is, I value the
    fact that she goes out and searches where problems are. I'd
    rather hear it from the NASA I.G. than read it in The
    Washington Post.
        Let me ask John Shumacher to address that specific
    question.
        Mr. Shumacher. Thank you, Mr. Goldin.
        Real quickly, on export control. First, NASA, since 1994
    has had a comprehensive export control program, that is for
    NASA and all our centers. We just had our annual export control
    conference where, as Mr. Goldin has said, we bring in other
    agencies to learn best practices and enforcement agencies like
    FBI and others to also tell us about threats and what they see,
    and that is to enhance the capability of NASA and NASA working
    with its contractors.
        Now with contractors in particular, they are directly
    responsible by law to adhere to the export control laws of the
    United States. We are glad to use our export control program as
    a resource to help them if they have questions and that type of
    thing, but there is direct accountability when a contractor is
    making exports pursuant to a contract that they are executing.
    If they are executing through NASA, a NASA agreement or such,
    then we have some work with them on that, but we try and make
    sure the lines are very clear about what is a contractor
    responsibility and what are NASA responsibilities.
        Also, as Mr. Goldin has indicated, the I.G. has looked at
    both NASA's export control program as well as contractor
    execution of their export control responsibilities, and their
    report recently came out. Any violation obviously we take very
    seriously and we want to understand what corrective actions are
    being taken by the contractor.

                          SPACE TRANSPORTATION VEHICLE

        Senator Bond. Let me ask one more. We've talked about the
    lifeboats and the Soyuz and the CRV that you are developing,
    the crew return vehicle, seven persons useful life of three
    years. I understand that NASA is looking to use the X-38 as a
    test vehicle and may spend $1 billion in its development.
        This CRV, at a cost of $1 billion, appears somewhat
    limited. Why not look to use this requirement to fund the
    development of the reusable launch vehicle or at least a more
    sophisticated space transportation vehicle that both could
    serve as an emergency vehicle and a supply vehicle?
        Mr. Goldin. Well, Mr. Chairman, we are looking at that as
    part of this integrated space launch initiative. Over the next
    few years, while we're testing the X-38, we're going to work
    with industry and see if it's possible to integrate a crew
    return function, which is only one activity, with a crew
    transport function, which is taking the crew up, and seeing if
    on the margin we could add to this billion dollars with a
    reasonable amount of money so that we could have alternate
    access a lot sooner. We are openly soliciting proposals from
    the industry to work with us, but we are going to continue to
    get this X-38 ready so that we could go build it should we have
    a need for it.
        Now the other reason is, the Aerospace Advisory Panel
    really wants us to move out. So in a certain sense, we're
    caught between a rock and a hard place, we've got to assure the
    safety of our astronauts. We have a 2 year window here in which
    to make a decision. If it looks like it could be done for a
    reasonable additional amount of money to get this crew
    transport function done----
        Senator Bond. It certainly would be a better----
        Mr. Goldin [continuing]. And in a reasonable amount of
    time, we will do it. But we will have to get this decision made
    in the next year or two. But you are absolutely on the right
    track, and our proposal and plan that you have submitted from
    the President covers just this very point.
        Senator Bond. Senator Mikulski?
        Senator Mikulski. Mr. Chairman, I've concluded my
    questions.
        Dr. Goldin, I'll see you at the NIH signing. I need to
    excuse myself for another hearing. And I also, in acknowledging
    your work and the members of your team, I would also like to
    acknowledge the work of the NASA I.G., Roberta Gross, and the
    job that she's done, and exactly what you said, where these
    have to be separate. But really, the fact that the NASA
    administrator takes the I.G. seriously, and the I.G. takes her
    role very seriously I think has helped us really get to the
    bottom of some of the issues we're facing.
        So I am going to thank you.
        Mr. Goldin. Thank you.
        Senator Mikulski. Thank you, Ms. Gross.
        Senator Bond. Senator Shelby.

                            PROLIFERATION--SECURITY

        Senator Shelby. Mr. Chairman, I just have a few
    observations in what you brought up, and that is proliferation,
    security and so forth. Dr. Goldin comes from the private sector
    and he understands how important research is, but also how
    important security is. So many things that you do in your
    research at NASA has many applications, oftentimes future
    military applications.
        Mr. Goldin. We're proud of that, and we transfer that
    technology to the Department of Defense.
        Senator Shelby. You do well there. But there is, and for
    good reason, added emphasis on security securing what we have
    as best we can, because people in the world want it, they don't
    want to pay for it, and oftentimes we don't want to sell it. So
    that is very important, what your aide is doing there, and also
    what the I.G. is doing.

                              BIOMEDICAL RESEARCH

        The other observation is what Senator Mikulski brought up
    just a minute ago, and that is the, I call it biomedical
    research, you know, and things, so many things that will come
    out of the basic research that you do, and working with the
    NIH, working with everybody else in the biomedical field.
        It's things like that we couldn't think of. I think she
    used the word miniaturization, but it's even sub that, isn't
    it, Dr. Goldin. We just keep reducing it and reducing it, and
    we get a lot out of it. I can see, as a layman, the potential
    good that the American people will get out of this. And
    considering our budget, although it's hard, to fight and get
    it--and the chairman knows better than I do because he's on the
    front line. I think NASA is a bargain for America. But we
    shouldn't take it for granted.
        Thank you, Mr. Chairman.

                          SHUTTLE SAFETY AND UPGRADES

        Senator Bond. Thank you very much, Senator Shelby.
        Mr. Administrator, we're getting near the end. The rest of
    it, I've just got a book or two full of follow-up questions for
    the record.
        Let me here raise a question about, the Aerospace Advisory
    Panel since 1998 has expressed concerns regarding future
    shuttle safety and the need for upgrades. And independent
    review of shuttle safety released last month identified nine
    key issues as well as 81 recommendations to improve shuttle
    safety.
        What steps are you taking to implement the recommendations
    and needed upgrades? What's the cost and how are you going to
    balance off the need for upgrades with the development of the
    reusable launch vehicle?
        Mr. Goldin. First let me say, I didn't appreciate how
    crucial the NASA Administrator's role is relative to the safety
    of the astronauts. I used to put payloads in the shuttle, and I
    wouldn't worry until my payload came out when it was on orbit.
        The first time I went down to a launch as NASA
    Administrator, the full importance of this job became very
    clear to me when I walked over and talked to the family members
    of the crew. You have to be there and see how they feel. I want
    to put some perspective on this for you. When I took over as
    NASA Administrator, the probability of a major problem
    occurring on the shuttle was about one part in about 70, 72.
    That was a very rudimentary calculation at the time. Today we
    believe it's about one part in 250. If you're a combat pilot,
    in combat, I'm told that the probability you'll have a major
    problem is one part in 20,000. If you get onto a commercial
    airliner, the probability of a major problem is one part in
    2,000,000. So what you have to rely upon is the genius and
    ingenuity of the people you have to deal with three million
    things that could go wrong, and fight the laws of probability,
    but you're never going to beat it by factors of 10.
        We tried to change the culture, and we have not put people
    who watch people who watch people, but we get quality people
    taking responsibility for what they're doing, and we
    transferred functions to the private sector. And we said we'd
    monitor as we went along, and the Aerospace Safety Advisory
    Panel was with us until 1998 then they began saying ``You know,
    we need to do some things.'' They made some suggestions, the
    people in Houston made some suggestions, people in Alabama made
    some suggestions, and Kennedy, and I took those suggestions to
    the President. And the Office of Management and Budget said,

        ``Yes, but you're developing a reusable launch vehicle.'' I
    said ``But it isn't going to fly at least until 2010, and I am
    personally responsible for the lives of the astronauts. This
    isn't politics, this is not economics, it is mandatory, the
    number one priority of NASA, number one priority is protecting
    the lives of the astronauts as best we can, but not
    guaranteeing it.''

        And I got the budget that I asked for. I asked for an
    additional billion five on shuttle safety upgrades, and we are
    going to do fundamental things that these reports had asked
    for.
        One, we use rotating machinery to provide auxiliary
    electrical power, it has toxic propellants. They thought it
    could be improved, that was their number one suggestion, the
    Aerospace Safety Advisory Panel, and the Shuttle Independent
    Assessment Team. We have money in the budget for that.
        We made a whole list of things, we have another outside
    panel reviewing all these upgrades. But what I'd like to ask
    you to think about is say that the shuttle and the astronauts
    deserve our attention and we can't let go of the bat for a
    better grip while we're developing a new system.
        I know it sounds strange, but we're going to have to spend
    what it takes to keep those astronauts safe. We're not going to
    spend money to make it cheaper to compete with other systems,
    but we will spend every nickel it takes to make it safe.
        I learned from the Mars experience. I pushed the system,
    and we're now at a limit, and we are backing off. We're adding
    over a thousand people to the human space flight account at
    NASA, in Huntsville, at Cape Kennedy, in Houston and in
    Stennis, Mississippi. And if we have to add more people, I feel
    comfortable coming back to this committee and I will not be
    concerned about those wanting to compete on an RLV. The shuttle
    must be as safe as we know how to make it, and we're shooting
    for a factor of two immediately, and we think there are some
    other possibilities.
        But I hope you understand the position I'm taking.

                         OVERSIGHT ON THE SPACE SHUTTLE

        Senator Bond. Yes. Following along that line, I'm concerned
    about oversight on the space shuttle. The L.A. Times and the
    Dow Jones News Service reported on March 16, it appears that
    two flawed engine seals that should have been thrown away were
    reused on the Space Shuttle Atlantis. Not a new problem,
    apparently Space Shuttle Discovery with Senator John Glenn
    aboard flew with two defective seal segments.
        As I said earlier, there are unknown dangers that may come
    up, but using something that should have been thrown away
    doesn't appear to be a very bright mistake. What happened
    there, and how did those things get in?
        Mr. Goldin. Let me give you the big picture, and then I'd
    like to ask Joe Rothenberg to give you the details. But it gets
    back to, it was a sub-tier supplier that, as I understand it,
    didn't classify parts they got in the system, and our people
    made the discovery that those parts were in the system and
    searched them out. And they wouldn't launch the shuttle because
    they felt there were defective parts, and in one case we
    stopped the launch and said ``there's a defective part in it''
    and pulled it back. So we don't believe we endangered the
    astronauts.
        Senator Bond. So you did not use them, you stopped them
    before they went?
        Mr. Goldin. When we learned about it, we did not launch. On
    one launch we weren't aware of it, and we did not have a
    problem. But when one of our people found out about it, they
    stopped the launch.
        The thing about the shuttle that I'm so proud of is, any
    one person could stop a launch if they have a concern, and that
    system really works. But I might point out that when we had a
    wiring problem on the Chandra, when we launched the Chandra
    telescope, there was some nicks in the wiring that caused a
    short that could have been a problem.
        We went back and we searched out and found nicks in the
    wires that existed from the day the shuttle was built. These
    are the issues we have to deal with, so when you find the
    problem you bore in. The key to it is when a problem is found,
    it is generally found by NASA and one of our employees, even at
    the lowest level. We stop, and we did stop when we found out
    about it. I'd like to ask Joe to go through the details of the
    issue in the L.A. times.
        Mr. Rothenberg. Yes, sir. These are called tip seals, and
    during the launch of, I believe it was 103, in the process we
    discovered there were 12 seals built from an improper material.
    And the way these seals are made, they're sliced off like
    slices of bologna and then used, so there was one assembly.
        We then went through a process, in that launch we knew
    during the flight readiness review that we had discovered that
    this happened. We found this back in the factory. We went
    through a process then of elimination to convince ourselves
    that there were none of those seals aboard 103, which was the
    Hubble repair mission in December, if I've got the dates right.
        We went through that process, and what happened is, we
    could count on the engines on that mission not having any of
    the seals. We could not account for where all the rest of the
    12 seals were. And what had happened is, when we came to the
    next launch, SRTM, we looked at it and at that point we were
    still not convinced that the seal, one of the residual 12 seals
    were not in one of those engines. So we actually delayed the
    launch to change out the engine, such that we could be positive
    that it wasn't on board.
        So it was the same problem in the safety process we had in
    place--to catch it, we couldn't convince ourselves we didn't
    have it, so we changed the engine out to be safe. So it was one
    problem and two actions to resolve it.

                    INDEPENDENT VALIDATION AND VERIFICATION

        Senator Bond. I mentioned earlier the concerns, you've
    taken responsibility for the failures on the Mars program,
    we've recognized that it's appropriate to push the envelope of
    human nature and take all reasonable steps to ensure that we
    don't have a failure which is a coding mistake or a conversion
    to metric mistake.
        Do you have any additional comments for us on how you're
    addressing these problems?
        Mr. Goldin. I view the problem we had as not so much that
    the error occurred, but the fact that the system wasn't
    resilient to the error. The system should have been able to be
    tolerant of the error.
        Let me back off a little bit and say, what is happening on
    the ground with the digital revolution is happening in space.
    Where in the past when we used analog systems and our engineers
    were comfortable with it with a relatively small software
    content, the digital content of our spacecraft is growing by
    leaps and bounds, the software is growing by leaps and bounds,
    and as a result, they're becoming much more complex.
        So the tools of just 5 years ago are not as good anymore
    today. One of the areas that we believe we need to do some
    major work is in an area called Independent Validation and
    Verification of the software.
        Senator Bond. That would be my question. With all of this
    new technology, this gives you much greater complexity, but it
    also gives you, does it not, give you the means to make a--to
    try out all these things and attempt to get a computerized
    judgment on whether the whole package works together?
        Mr. Goldin. Yes.
        Senator Bond. I am not technically competent, I am not at
    all proficient, but it seems to me that you ought to be able to
    develop a system to verify that all the widgets and gadgets and
    whozit's and whatzit's are fitting together properly. Is this
    possible.
        Mr. Goldin. You are absolutely on the right track, and in
    fact we just sent a team to Fairmont, West Virginia, which is
    our Center of Excellence for Independent Verification and
    Validation. We are strengthening that activity. And I might say
    that Senator Byrd worked with us about 5 years ago to get that
    going. And I believe he made a major, major contribution
    because now we are ready, we have the technology there, we're
    putting them under the cognizance of NASA Goddard, and we are
    going to be insisting that our programs have this independent
    validation and verification--not to have their own people do
    it, but people outside the system. So that is going to be a
    significant process improvement, not just for the Mars program,
    but for everything we do at NASA.

                               ADVANCED SOFTWARE

        There's another thing that you alluded to when you made the
    statement, and you said you didn't understand software. I think
    it's a very key statement you made.
        The software we use right now are called hard deterministic
    software where you write each line of code, then you have to
    verify that line of code and you have to check it, and it's
    very cumbersome and mistake-prone. NASA is developing, with
    some of our other partners, a new set of software which I'll
    call soft software, which has a capacity to learn.
        I want to give this one example because it's cognizant,
    it's very appropriate for this point. We took 10,000 lines of
    code--I think it was 10,000 to 20,000 lines of code in what's
    called a neural network or learning software, and we replaced a
    million lines of code in an F-15 that operated the ailerons and
    the flaps, and we trained that software on a simulator with a
    pilot to figure out how to turn the ailerons, how to move the
    flaps to get that plane to fly.
        After we had it trained, we put it in the plane and
    replaced the software. Then we trained it how to respond to
    failures, and we simulated the partial loss of a wing. And
    within 2 seconds it responded. We simulated loss of aerodynamic
    control surfaces.
        So when you have software that has a capacity for learning,
    you could then use that software to check out the other
    software that you have. So we're going to follow a parallel
    path and in this year's budget we have significant money in
    that so that we can work on advanced software. And we'll work
    on independent verification and validation, and with these
    tools, NASA is going to develop techniques that will be not
    only improving our own systems, but it will be available to the
    commercial sector. So you are absolutely right on with your
    question.

                         OVERSIGHT ON THE SPACE SHUTTLE

        Mr. Rothenberg. Mr. Chairman, I'd like to correct something
    I just said, in trying to remember numbers off the top of my
    head, I missed something in the chronology.
        The problem with the tip seal was discovered post-flight on
    the Hubble mission, which was 103 in December during a
    boroscope inspection. The tracedown of the problem with the 12
    seals, STS99, which was the SRTM to be launched in January, was
    the one where we went through and convinced ourselves it wasn't
    on board that vehicle. And 101, the rollout of 101, which was
    the next flight, was the one where we made the decision to
    change the engine to be safe.
        Senator Bond. Thank you.
        Senator Shelby, you had a question.

                             RELYING ON HUMAN LIFE

        Senator Shelby. Just an observation, may be a question.
        First observation, Dr. Goldin, I think you're absolutely
    right when you talk about human life--very important. No thing
    is perfect, we know that, and there's risk in space, there's
    risk in our military. We witnessed what happened this past
    weekend with the hybrid vehicle that--we don't know what
    happened, we'll find out.
        But quality control in the construction of a space vehicle
    or a military vehicle, I don't think you can do too much there.
    You are getting the tools, more tools, but there will never be
    a substitute for what the humans do--in building something.
    Because if it's put in there wrong, that is, a part, or if it's
    a defective part, or of it's not up to standard like it should
    be, and you've got a vehicle that's made up of thousands if not
    more of parts, you do have a problem. It's not insurmountable,
    but it's a big problem, isn't it?
        Mr. Goldin. It's very big.
        Senator Shelby. Not just in NASA, but in our military, in
    our marketplace, with everything.
        Mr. Goldin. We human beings are frail, and we make
    mistakes, and what we have to do is be tolerant of the human
    spirit and encourage people to do the right thing. And in this
    case, we believe it's the smart thing to add more people. We're
    not adding computers, we're saying we need to add more people
    to the shuttle and the space station and the Human Space Flight
    account to make sure we're doing the right thing. Maybe at some
    point way, way out there we'll have computers do even more, but
    right now we've got to rely on people. People make mistakes,
    and what we try and do is set up a system that's tolerant of
    mistakes. We don't punish people when they make a mistake,
    because then they won't tell you when they're making a mistake.
    But I have to say they will continue to make mistakes in the
    environment that this man is trying to set for that human space
    flight area is the right one----
        Senator Shelby. Well, he's to be commended for his work.
        Thank you, Mr. Chairman.

                     HIGH ENERGY SOLAR SPECTROSCOPIC IMAGER

        Senator Bond. Let me point out just one other thing, and
    ask for your comments on it. I understand this is also JPL, but
    I gather that a 75 million high energy solar spectroscopic
    imager was damaged during tests in March when the engineers
    mistakenly shook the spacecraft 10 times harder than intended
    during a preflight test.
        How much damage, what's the cost of the damage, and what
    kind of protocols can be put in place to lessen the likelihood
    of this kind of mistake?
        Mr. Goldin. As I understand it, and we don't have the full
    failure report, there was a problem with the actual hardware,
    the shake table if you will, that simulates the rocket launch.
    Initially, it stuck and then it broke loose and put a force in
    larger than it should have. In this case, I don't believe it
    was human error. We'll have to wait for that report to come
    back and understand it.
        Senator Bond. That was just something broke in the shake
    table, or----
        Mr. Goldin. There may have been something wrong with the
    shake table, but we need the report. However, there are some
    advanced techniques that we're developing that would be fault-
    tolerant and make the system capable of handling something like
    that, and we're looking at some of these new techniques as part
    of the advancement of making things less susceptible to
    problems that occur with the equipment that we have, using new
    computer techniques, using new advances in sensors.

                         ADDITIONAL COMMITTEE QUESTIONS

        Senator Bond. Well, thank you very much, Mr. Administrator.
    As I said, we have questions for the record, and I want you to
    be prepared for the announcement this afternoon. We thank you
    and your people for joining us today. We look forward to
    working with you and following up on the other questions and
    all of the exciting programs you have.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]

               QUESTIONS SUBMITTED BY SENATOR CHRISTOPHER S. BOND

                            CURRENT COSTS OF THE ISS
        Question. What is the current cost estimate for complete assembly,
    and what is NASA doing to control costs?
        Answer. The current estimate to complete the International Space
    Station (ISS), with a seven-crew capability, is between $24.1B and
    $26.4B.
        NASA's schedule assessment, consistent with the fiscal year 2001
    Congressional Budget submit, reflects assembly complete to be achieved
    in the range of May 2005 to November 2006. This assessment included a
    3-5 month projected delay to the Service Module (SM) launch schedule of
    March 2000, and approximately 13 months schedule margin for potential
    unknown delays that could affect the remainder of the assembly
    sequence. (The Service Module was successfully launched and docked to
    the ISS in July 2000.)
        From a budgeting perspective, NASA seeks to maintain reserves for
    the program for nominal cost growth and changes in requirements. This
    allows the program to prioritize requirements within a reasonable
    funding envelope, rather than seeking new funding every time a change
    is required or growth occurs.
        On the program side, all design, testing, and operational changes
    are subject to a series of control boards and management processes
    prior to approval and incorporation into the baseline program.
    Proposals are subject to technical, cost and schedule evaluations to
    determine the necessity of each change. Additionally, the program
    office monitors and assesses contracts costs, performance and schedules
    on an ongoing basis (see also response # 2).
        It is believed that earlier NASA and program decisions to minimize
    development deferrals by maintaining hardware delivery schedules have
    avoided significant cost growth. Estimates for total Vehicle
    development of the ISS have been relatively stable over the past two
    years. Increases in the total ISS cost estimate have been driven by new
    requirements in response to contingency planning activities, and the
    ``stretch-out'' of the assembly sequence. These delays in the launch
    schedules have generally been accommodated without significant increase
    to projected annual funding levels. The impact of extension of the
    schedule is generally reflected in estimated cost increases in the
    operations and research areas.

                           BOEING COST OVERRUNS, ISS
        Question. Please review your corrective actions to date that
    address these cost overruns.
        Answer. Approximately $1 billion in cost growth is derived from
    Prime contractor under-performance to the original contract estimate
    and schedules. Production and performance problems, qualification test
    and rework problems, and software delivery delays typical of most new
    technology programs, as well as labor rates increases, are contributing
    causes.
        The ISS is a large, unique, and complex vehicle, and NASA
    anticipated some cost growth as hardware elements and software packages
    are integrated and tested as complete launch packages for the first
    time. However, Boeing's cost growth is a deep concern. NASA has
    undertaken a variety of corrective actions since cost and schedule
    variances first began to appear to mitigate the cost and schedule
    implications. In addition to actions we have initiated, the program has
    also received recommendations from numerous external review groups and
    has been responsive to their recommendations as well. As the Program
    has transitioned from development to operations, NASA adjusted its
    approach, thereby maintaining effective contract management. This has
    been a complex and difficult undertaking, but NASA believes it has
    resulted in improved Prime planning, scheduling, and control processes
    on baseline ISS content. Some of the past actions taken include:
      --Stepped-up surveillance when potential risks have been identified,
            in order to apply appropriate funding and work force resources
            to trouble spots and to maintain station hardware and software
            delivery schedules.
      --Identification of non-production-related activities that might be
            curtailed or eliminated early to free resources needed by
            production and test teams.
      --Formally requesting the NASA Inspector General's office to review
            NASA's contract management processes as well as inviting other
            external advisory groups to provide advice and recommendations.
      --Establishing more frequent reporting requirements and adjusting
            reporting processes.
      --Working with the Prime contractor to achieve a monthly de-staffing
            plan which calls for a systematic reduction in staffing at the
            prime locations and the product groups.
      --Identification of areas of Program content under the Prime scope of
            work which could be pulled out and performed less expensively.
      --Working with the Prime's corporate management to ensure that
            required corporate assets are available to this critical
            Program and that the necessary levels of management experience
            and tools are applied.
      --Working with the Prime to develop and implement as rapidly as
            possible a workforce destaffing plan that aggressively removes
            Tier One and Two contractors from the work force as soon as
            hardware and software development efforts are completed.
      --Restricting change orders to the contract to only those that are
            absolutely essential to the successful operation of the
            Station.
      --Structuring contractor incentive and award fee criteria that
            clearly demonstrate NASA's overall concern with performance.
        As a result of Boeing's last cost increase in early 1999, NASA
    negotiated a restructure of the contract to better focus resources on
    the development work remaining. The restructure reorganized Boeing's
    work into four categories, with the development effort tied to previous
    delivery milestones. A new fee structure allows Boeing to gain some
    additional fee if its performance improves, and contractor staffing and
    production milestones are monitored very carefully by the Program
    Office and at Headquarters. Other development activity which is
    primarily integration and operations (I&O) in nature, was reassigned to
    a completion form effort tied to key launch package milestones. This
    allows Boeing and NASA to redirect resources to critical hardware and
    software production or integration areas as unforeseen problems arise.
    Prime spares production was segregated to allow the government more
    visibility into the delivery of high value replacement parts. All new
    development work, additions to contract scope, will be held separate
    from the core Prime effort, and will be under a different fee structure
    which gives the government increased leverage over Boeing's future
    performance. Boeing may earn up to 11 percent fee on the new work, or
    no fee at all if performance is unsatisfactory.

                             BOEING REORGANIZATION
        Question. What is the cost of Boeing's reorganization that NASA has
    or will pay for? How is the amount determined and how are savings
    measured?
        Answer. The costs and savings associated with Boeing's
    restructuring activities are included in Boeing's overhead accounts,
    which are distributed across all of Boeing's contracts, including those
    with both NASA and the Department of Defense. Government review of
    Boeing's restructuring activities is performed by the Defense Contract
    Management Agency (DCMA) which is assigned the responsibility to act
    for the entire Government to ensure that indirect expenses, including
    restructuring and reorganization expenses, meet the appropriate
    criteria required by Government regulation and that all Government
    contracts receive equitable treatment.
        The DOD Federal Acquisition Requirements (FAR) Supplement requires
    that a contractor achieve a 2-to-1 savings-to-cost ratio for external
    restructuring activities, which are non-recurring, and included events
    such as facility closings and consolidations. Other indirect costs
    associated with mergers and acquisitions that result from changes to
    accounting structures, management systems, and the establishment of
    common processes, are not subject to the FAR Supplement savings-to-cost
    requirement, but are subject to standard cost allowability criteria.
    The $82 million of cost for NASA identified by the NASA IG represented
    an early Boeing estimate of NASA's share of total indirect costs
    associated with the Boeing reorganization, and included both external
    restructuring costs and other indirect costs.
        An advanced agreement signed by Boeing and DCMA achieves over a 3-
    to-1 savings-to-cost ratio for external restructuring activities over a
    five-year period. NASA's share of the external restructure savings is
    calculated to be $63M against $20M in costs, and DCMA has quantified
    actual savings for NASA of $14.3M against $5.5M in costs through the
    end of fiscal year 1999. The other indirect costs resulting from the
    reorganization are under review by NASA and the DCMA. Accounting change
    cost impacts are reviewed prospectively by DCMA as part of the
    Government's Cost Accounting Standards administration processes, which
    protect the Government, as a whole, from paying unreasonable cost
    increases. However, because this type of impact is just one component
    of the company's overhead cost structure, it becomes difficult over
    time to isolate the costs and savings of these actions from other
    events and actions that affect indirect costs. Early indications are
    that these costs may offset a significant portion of the savings
    achieved with the external restructure activities, but the total impact
    is not yet known.

                    CRITICAL PATH ISS HARDWARE AND SOFTWARE
        Question. There remains huge concerns regarding Russia's inability
    or lack of commitment to meet its obligations as a partner in the ISS.
    I am very concerned about additional cost and duplication by the United
    States. What are the key pieces of hardware and software that Russia is
    responsible for and are essential to complete the assembly of the ISS?
        For purposes of this response, the term essential will be
    considered as a capability, without which ISS program schedules could
    be deferred by a period of one year or more, or in which Program cost
    could increase by over $1 billion beyond that currently budgeted. The
    essential contributions Russia is providing are best characterized by
    addressing ISS capabilities. A summary of these capabilities follows:
        Propulsion.--Russian partnership responsibilities have included
    propulsive guidance, navigation, and control since the inception of the
    International Space Station in 1994 (Service Module, Progress resupply,
    FGB operations). The two primary functions provided by Russian
    contributions in the propulsion area are reboosting the station to keep
    it at a safe altitude, and providing attitude control during reboost
    and for collision avoidance from orbital debris when necessary. NASA is
    mitigating this risk through use of Shuttle reboost and development of
    the Interim Control Module (ICM) that provides redundant capability for
    reboost, and development of a Propulsion Module (PM) which can provide
    both reboost and attitude control. At the current time, U.S.
    contingency plans do not provide a 100 percent redundant capability
    over the entire ISS life cycle.
        Command and Control.--The NASA Flight Director, located at Mission
    Control-Houston will always maintain the leadership role for
    commanding. However, the Russian control center will determine and
    issue commands to their respective on-orbit segment. While the ISS
    command and control system is designed to allow both Russian and U.S.
    mission control centers to transmit data and commands to the ISS and
    between their respective on-orbit segments. Russian ground equipment,
    Russian FGB and Service Module technical knowledge, and Russian vehicle
    operational skills remain essential to the success of the program.
        Crew Habitation.--The Russian-provided Service Module provides
    environmental control and life support systems (ECLSS) and living
    quarters for three crew throughout the life of the ISS. When launched,
    should Russia falter, the U.S. cannot maintain the SM without extensive
    technical insight and development of operational capabilities.
    Sustaining engineering and system spares development cannot be
    performed without extensive engineering knowledge of the vehicle.
    Absent this information, the SM would need to be decommissioned in some
    manner and the ISS crew capability would be reduced by three people.
    Logistical Capabilities
        Dry Cargo Transfer.--Partnership agreements call for the Russians
    to provide dry cargo via the Progress cargo ship. Depending on the
    extent of the shortfall, the loss of this important function could be
    offset by delivery of dry cargo by U.S. vehicles as intended by the
    Alternate Access element of the Space Launch Initiative, or by bringing
    up additional dry cargo on Shuttle flights, which could negatively
    impact the assembly schedule. In addition, the Japanese HII Transfer
    Vehicle (HTV) will deliver dry cargo to the station.
        Propellant Transfer.--The only vehicles capable of providing fuel
    to the SM and FGB are the Russian Progress cargo ship and the European
    Space Agency (ESA) Automated Transfer Vehicle (ATV).
        Question. What is NASA's policy for addressing the risk of Russia
    failing to meet its obligations and what are the associated costs?
        Answer. NASA's approach to contingency planning is to incrementally
    fund only those activities that permit the United States to continue to
    move forward should the planned contributions of our ISS partners not
    be delivered as scheduled, rather than to assume the responsibilities
    of other ISS partners. In fiscal year 1997, the budget line item
    entitled, U.S./Russian Cooperation and Program Assurance, was
    established. This budget line item had two parts, U.S./Russian
    Cooperation (Russian Space Agency contract support) and Russian Program
    Assurance (RPA). The first part, primarily support needed to accomplish
    Phase 1 of the ISS program (Shuttle/Mir), has been completed. The
    second part, Russian Program Assurance (RPA), was re-established within
    the Space Station budget line. The RPA budget was established to fund
    contingency activities and backup capabilities in response to concerns
    about the impact of the Russian Government's problems in meeting their
    ISS commitments.
        The RPA funding provides contingency activities to address ISS
    program requirements resulting from delays on the part of Russia in
    meeting its commitments to the ISS program, allowing the U.S. to move
    forward and build the ISS in spite of Russian shortfalls. These
    contingency activities are not intended to fully protect against the
    loss of Russian contributions. Depending on the degree of Russian
    shortfall, it could cause an extended delay to the program,
    necessitating additional crew return, life support, reboost, and
    guidance and control capabilities to replace planned Russian
    contributions, and result in a significantly less robust space station.
    In spring 1997, NASA embarked on the initial steps of a contingency
    plan that consisted primarily of the development of an Interim Control
    Module (ICM). During summer 1998, NASA initiated activities to build a
    U.S. propulsion capability, enhance Shuttle logistics capabilities,
    modify the Shuttle fleet for enhanced Shuttle reboost of ISS, and a
    limited procurement of needed Russian goods and services to support
    Russian schedules for the Service Module and early ISS Progress and
    Soyuz launches.
        NASA believes its approach of working with Russia to assure near-
    term critical capabilities while developing independent U.S.
    capabilities over the long-term provides the best approach to address
    the impacts from the Russian economic situation.
        The Russian Program Assurance (RPA) total funding is estimated at
    about $1.3 billion, of which about half was appropriated between fiscal
    year 1997-2000. The focus of these funds is developing redundant
    capabilities in the U.S. Only a fraction of this the funding is planned
    to purchase needed goods and services from Russia. ISS schedule delays
    have resulted in cost impacts and additional Shuttle flights, which are
    reflected in the ISS operations and research funding estimates and the
    Shuttle budget. While Russian delays have contributed to overall
    schedule delays, U.S. and other International Partner delays have also
    contributed.
        Question. Can we complete the ISS without Russia and what steps
    would NASA have to take under what timeline to complete the ISS?
        Answer. Elimination of Russia from the ISS Program would clearly
    result in a significant redesign and/or operational changes to enable
    ISS assembly without on-board crew. It would be less capable, much more
    costly, and significantly delayed. It would also likely result in a
    loss of international political support due to lengthy deferral in the
    assembly buildup.
        The delay to the assembly timeline would certainly be measured in
    years, but just how much would be dependent on what level of Russian
    cooperation would exist prior to their departure. Without their support
    ISS elements on orbit would be at risk. Without Russia, we would likely
    separate from the FGB, Service Module or any other Russian elements we
    could not sustain independently. We would place the Interim Control
    Module (ICM) in orbit, but not continue to build beyond a minimum
    station keeping capability until we had a clear confidence in the
    launch date of a permanent U.S. propulsion capability, with adequate
    ICM propellant reserves to proceed.
        Question. Are there any sanctions in the state-to-state agreements
    for failure to meet obligations, such as termination?
        Answer. Each Partner's ability to meet its obligations is
    predicated on availability of appropriated funds and best efforts to
    achieve technical milestones. While the Service Module has encountered
    delays, RSA has met its operational responsibilities to date. Should
    any partner fail to perform its operations responsibilities or to
    provide for its share of common system operations responsibilities, all
    partners would meet to jointly determine what action should be taken.
    Such action could result in an appropriate reduction of the failing
    partner's rights to its allocations.
        Question. How much money has NASA spent to date to backfill or meet
    existing Russian obligations?
        Answer. None. RSA has met its operational responsibilities to date.
        Question. Once the station is complete and in orbit, to what extent
    are we dependent on Russia where our astronauts would be at risk?
        Answer. Regardless of the makeup of the international crew, all
    partners are committed to crew safety. Rules and procedures are
    designed to preclude exposing the crew to unwarranted risk. Crew will
    not be launched or maintained in an unsafe environment, nor without
    certainty of safe return in the case of operational anomalies or health
    problems.
        The Russians are responsible for capabilities that contribute to
    the safe operation of the station and crew safety. They are committed
    to maintaining a Soyuz on-board the station for the duration of the
    operational period. This will be augmented by a crew return vehicle
    currently in the planning stage. Their responsibilities also include
    propulsion and logistics resupply contributions. Any operational
    failure or shortfall that puts the crew at risk would mandate the
    return of the on-orbit crew.
        NASA's overall knowledge of space flight and the difficulties of
    living and working in the harsh environment of space has been
    strengthened through our Russian partnership. Likewise, the station has
    a more robust on orbit infrastructure and transportation capability to
    respond to unforeseen events. Russian segment specifications and safety
    requirements are in place and their hardware goes through the same
    thorough safety review process as NASA and other internationally
    provided hardware. NASA has a rigorous safety review process developed
    over the past thirty-plus years of human space flight. We have made
    concerted efforts to understand and address compliance with
    requirements from a safety perspective between Russian Aviation and
    Space Agency (Rosaviakosmos) and NASA. Safety of flight, is, and will
    continue to be, our number one goal. This does not change with the
    involvement of the Russians or any of our other international partners.

                         COSTS OF OPERATION OF THE ISS
        Question. NASA has estimated that the cost to operate the ISS will
    average $1.3 billion, or $13 billion over a 10-year mission life from
    2005 to 2014. What activities are these costs associated with? For
    example, do these costs include the cost of spares? What are the
    responsibilities of other partners to maintain and operate the ISS?
        Answer. The cost estimates for ISS operations include all on-orbit
    mission operations, cargo resupply and return, crew operations and
    support, on-orbit maintenance, ground operations, launch processing
    (exclusive of Shuttle flight costs), sustaining engineering, spares and
    logistics. Also included are science utilization costs, and the
    operation of research capabilities and facilities supporting on-orbit
    science. Most spares for the ISS Program are being purchased up front,
    as many sources of supply will cease production after the station is
    assembled. The operations estimate includes the replacement of some
    spares where demand analyses have determined they will be necessary and
    where the industrial base will support reprocurements. It also includes
    costs for expendable supplies and consumables needed for core station
    operations. In addition to the ISS costs, approximately 5-6 Shuttle
    flights per year are anticipated for operations and research logistics
    and resupply, and crew transport.
        Not included in the $1.3 billion estimate are costs associated with
    any continued development or preplanned program improvement (P3I) for
    the core station or research capabilities. The current space station
    budget does not include funds for these activities, but they could be
    considered in future budgets.
        Per the intergovernmental agreements with each ISS Partner, common
    operating costs are shared among the U.S., Canada, ESA, and Japan.
    Russia is responsible for 100 percent of the cost of operating its on-
    orbit segment, and all partners support their own elements. The Russian
    provision of propulsion, logistics and crew transport for the total ISS
    operations offset their share of common operations costs. Of the $1.3
    billion estimated for average annual U.S. ISS operating costs, about
    $300M is expected to provide common cost operations. The U.S. is
    responsible for 77 percent of these costs, while Canada, ESA, and Japan
    will cover the remaining 23 percent. As station resource needs have
    matured, and partner capabilities to deliver cargo, especially
    propellant, have been factored in, NASA expects much of the ESA and
    Japanese responsibilities will be offset by contribution of common
    cargo delivery services. These contributions will not reduce the $1.3
    billion average annual U.S. funding for the ISS, but rather reduce the
    requirement for U.S. Shuttle flights.

                           MANAGEMENT OF ISS RESEARCH
        Question. NASA, in the past, has suggested the creation of a non-
    government organization (NGO) to manage the science research on the
    ISS. What is the status of this suggestion and how would this approach
    be better than NASA's current approach to selecting and managing
    science research? What would be NASA's relationship to this NGO be, and
    are there any additional costs that must be considered?
        Answer. NASA has initiated an internal study with representatives
    from Headquarters, the Johnson Space Center, Kennedy Space Center, and
    Marshall Space Flight Center that is scheduled for completion in Fall
    2000. The first task is to thoroughly and comprehensively define in
    detail the specific functions associated with ISS research and
    utilization, as well as the current performing organizations and
    budgets. The second task will be to develop one or more options for re-
    allocating the functions among the organizations, including a potential
    NGO. Finally, if one of these options appears to offer distinct
    advantages in terms of ISS research productivity over the life of the
    program, NASA will consult with the executive and legislative branches,
    as well as our international partners, before any final decision.
        The purpose of the internal study will be to determine if there is
    a better approach and if the principle of ``continuous improvement''
    can be applied effectively to the ISS research program. NASA has
    experienced success in the past through the use of non-government
    organizations, such as the Space Telescope Science Institute, National
    Space Biomedical Research Institute, and other non-government research
    institutes. This experience may have been instrumental in leading the
    National Research Council Task Group to their conclusion that, ``The
    strengths of the recommended [NGO] approach include its strong support
    for research, logical division of roles, well-focused responsibilities,
    and flexibility for evolution.'' (NRC Space Studies Board and
    Aeronautics and Space Engineering Board, Institutional Arrangements for
    Space Station Research, December 1999, p. 47.)
        If NASA proceeds, a direct contractual relationship, obtained
    through a competitive procurement process, appears to be the most
    effective approach. This is consistent with both our past experiences
    and the NRC's recommendation. In all cases, NASA would continue to
    maintain full fiduciary responsibility for all public funds
    appropriated.
        There may be additional costs associated with the start-up period,
    during the transition phase. This will be determined during the course
    of the internal study. It is premature to project costs without
    detailed definition of the scope of functionality.
        space flight operations contract phase ii cost benefit analysis
        Question. Mr. Goldin, I applaud your efforts to improve
    efficiencies throughout NASA through your ``Better Faster Cheaper''
    approach. However, I remain deeply concerned that contract oversight is
    insufficient and I am skeptical of some consolidation efforts. For
    example, a recent audit found that NASA had not performed a cost-
    benefit analysis prior to consolidation of Space Shuttle prime
    contracts into one prime contract with the United Space Alliance. This
    indicates to me that you are not relying on a complete analysis and
    documentation of estimated benefits for the consolidation. This lack of
    analysis also fails to provide you with a baseline by which you can
    later determine whether or not the consolidation was successful. I
    understand that you will ensure an appropriate cost-benefit analysis is
    conducted and applied to all phases of the operation. When will these
    corrective actions be complete and how will you ensure that these
    corrective actions are applied to consolidation efforts in the future?
        Answer. An effort is currently underway at the Johnson Space Center
    (JSC) to analyze the cost benefit of consolidating the External Tank,
    Solid Rocket Motor and Space Shuttle Main Engine projects under the
    Space Flight Operations Contract (SFOC) and is expected to be complete
    in the late CY00. This analysis will serve as a baseline and be one of
    a number of criteria to aid the Associate Administrator of Space Flight
    in determining the ``End-State'' of Space Shuttle Operations (see
    attached memorandum dated March 16, 2000).
        Should the Associate Administrator determine that further
    transition of Space Shuttle projects to the SFOC is in the best
    interest of the government, an additional cost benefit analysis will be
    conducted prior to the transition of each project.
        In conjunction with the fiscal year 20O2 budget formulation, the
    Space Shuttle program is also validating the cost benefit of the
    transition thus far. That information will be available with the
    release of the fiscal year 2002 budget.

                                      GP-B
        Question. Gravity Probe-B, a spacecraft designed to test Einstein's
    theory of relativity, is currently some $70 million in cost overruns
    with a potential slip in its launch schedule to 2002. When is enough
    and a project canceled?
        Answer. NASA's management procedures call for a termination review
    when projections show that a project will exceed its baseline cost,
    schedule, or technical performance requirements by ten percent or more.
    A project will be considered for termination when a thorough assessment
    concludes that there are no options for meeting the project's baseline
    requirements, coupled with a determination that the science objectives
    do not warrant making extraordinary sacrifices to proceed with the
    project. The goal of our termination review process is to maintain the
    delicate balance between achieving scientific objectives and living
    within our prescribed resources.
        The NASA Program Management Council recently reviewed the GP-B
    program in response to the technical and cost problems, and a new
    system of management controls has been established for the program. In
    particular, a series of Headquarters-controlled, near-term (April 2000-
    April 2001), critical milestones has been created. We are closely
    monitoring the progress made toward these milestones. Failure to meet
    this milestone schedule may result in a termination review by NASA's
    Program Management Council.
        Question. Also, what other missions are suffering from having to
    pick up the shortfalls on this project?
        Answer. Decisions on funding GP-B will be finalized within NASA's
    fiscal year 2001 initial operating plan. Details are not known at this
    time, and will depend, in part, on GP-B program performance against the
    critical milestones described above over the remainder of the current
    fiscal year.
        Question. Basically, what are the rules of the road for cost
    overruns? What kinds of reviews are required to justify the continued
    funding of a project that has slipped this badly?
        Answer. There is a hierarchy of reviews at NASA, beginning with
    regular reviews at the Program Manager level. Centers also conduct
    regular reviews via their Program Management Councils, which feed in to
    regular reviews at the NASA Enterprise level in Headquarters. Finally,
    the NASA Program Management Council, chaired by the NASA Deputy
    Administrator, also reviews major programs (such as GP-B) on a regular
    basis. The ``rules of the road'' on cost overruns are as described in
    the answer to Question 8 above.

                         LIVING WITH A STAR INITIATIVE
        Question. NASA is proposing a new program, Living With A Star, that
    would have initial funding of $20M in fiscal year 2001, with total
    costs of $511 million through fiscal year 2005. I support the mission
    of the program that will focus on understanding the origin of solar
    disturbances and how they affect human-made space and terrestrial
    technology. However, the total cost of the program through fiscal year
    2010 will be about $1.7 billion. This represents a huge outyear
    commitment, which must be measured against existing obligations. Where
    would you place this program in a priority list of the Space Science
    programs or does NASA intend to reduce funding for Earth Science
    missions to pay for these costs? What makes this program so valuable
    and why can't the goals of this program be achieved through the Sun-
    Earth Connections program?
        Answer. Living With a Star is important because it seeks to develop
    the scientific understanding necessary to effectively address those
    aspects of the connected Sun-Earth system that directly affect life and
    society. It is the study of the physics of solar variability and its
    effects. Why do we care? We have increased dependence on space-based
    systems, soon a permanent presence of humans in Earth orbit, and
    eventually human voyages beyond Earth. Solar variability can affect
    space systems, human space flight, electric power grids, GPS signals,
    high-frequency radio communications, long range radar, microelectronics
    and humans in high-altitude aircraft, and terrestrial climate. Prudence
    demands that we fully understand the space environment affecting these
    systems. In addition, given the massive economic impact of even small
    changes in climate, we should fully understand both natural and
    anthropogenic causes of global climate change.
        The new Living With a Star missions will provide unique
    capabilities not available from the on-going Solar Terrestrial Probes
    series of missions to be developed in the next decade. The Solar
    Sentinels will provide for the first time, the ability to observe the
    entire solar surface, including the side of the Sun facing away from
    Earth, and thereby observe ``solar weather'' globally. This will enable
    improved long range prediction of ``space weather'' and enable a more
    complete understanding of the life cycle of solar storm regions which
    are normally hidden from Earth's view for half their lifetimes when
    they rotate onto the solar farside. The farside Sentinel will also fill
    in a gap in solar seismology data used to probe the solar interior. The
    Solar Dynamics Observatory, a follow-on to the highly successful SOHO
    mission, will have high temporal and spatial resolutions to enable
    tracking of solar storm regions above and, for the first time, below
    the solar surface. This new capability, coupled with SDO's measurements
    of long term solar cycle dependent changes in the solar interior where
    the solar dynamo or ``solar weather engine'' resides, will enable major
    progress in understanding the physics of solar variability--why the Sun
    varies. The Geospace Mappers are specifically targeted at studying
    those aspects of geospace affecting human activities, unlike the Solar
    Terrestrial Probes geospace missions which have a pure science focus
    and therefore may or may not address physics problems related to human
    utilization of space.
        The LWS initiative was developed taking into consideration
    activities planned for the on-going SEC program, as well as the results
    and recommendations of the recent Space Science strategic planning
    process. The program also takes into account the multiple national
    interests discussed in interagency discussions and reports involving
    the National Space Weather Program and the Office of the National Space
    Security Architect, and scientific objectives given in reports of the
    National Research Council/National Academy of Sciences. The National
    Security Space Architect (NSSA) Space Weather Study and subsequent NSSA
    Space Weather Architecture Transition Plan states: ``Fundamental to the
    success of the Space Weather architecture is a robust, user-focused R&D
    program addressing the unsolved scientific problems that prevent
    current Space Weather products from meeting user requirements. The R&D
    program shall encompass basic research leading to the development of
    physics-based Space Weather models, development of Space Weather
    sensors, and generation of Space Weather products for users in all
    three domains, i.e., the solar and interplanetary medium, the
    magnetosphere, and the ionosphere/thermosphere.'' This is a primary
    goal of the LWS program. It is designed to meet critical scientific
    objectives articulated in the NSWP and NSSA reports. The NSSA Space
    Weather Study also points out that research and development sensors are
    a valuable data source and greatly benefit data-starved operations. The
    LWS missions will continue the NASA tradition of providing such data,
    as currently done with research missions such as ACE, Yohkoh, SOHO, and
    IMAGE.
        Addressing these multiple national interests properly in a timely
    fashion requires an expanded program studying solar variability and its
    effects. To meet this challenge NASA's budget request for fiscal year
    2001 includes a budget increase that averages out to a little more than
    1 percent in its yearly budget over the next decade. NASA does not
    intend to reduce funding in Earth Science missions to pay for the LWS
    program. LWS will provide important information about solar inputs that
    affect the Earth system and thereby complement Earth Science research
    into climatological, geological, biological, and anthropomorphic Earth
    system inputs. LWS is the highest priority new Space Science program.

                    THE INTEGRATED SPACE TECHNOLOGY PROGRAM
        Question. NASA is requesting some $730 million in the Integrated
    Space Transportation program, with a 5-year total of some $4.4 billion
    to develop a technology base for the replacement of the space shuttle.
    This program is designed to develop a second generation Reusable Launch
    Vehicle (RLV) program. The program is designed to attract the
    investment of the private sector in the development of new space
    transportation options, with the private sector taking the lead in
    development and funding after 2005. NASA plans to use this program to
    solicit new ideas and build on the X-33 program, the X-34 and the
    VentureStar as a technology base for the development of new
    technologies and vehicles. Nevertheless, it is not clear whether there
    is adequate private interest for the type of financial commitment that
    will be necessary to successfully finance and complete a shuttle
    replacement.
        We clearly need to find a cheaper way to access space to ensure
    commercial interest and growth. However, what makes $4.4 billion the
    right amount of funds to develop these new technologies and attract the
    private sector. I want a specific answer, not a general answer.
        Answer. Private sector interest in developing a new launch vehicle
    is predicated on two prerequisites: (1) reasonable technical certainty
    that a new vehicle can be built and competitively operated at projected
    costs, and (2) reasonable market certainty that a customer base large
    enough to use a new vehicle will exist.
        The $4.5 billion Space Launch Initiative directly addresses
    prerequisite #1 above and is a key component of NASA's overarching
    Integrated Space Transportation Plan, which coordinates investments in
    Space Shuttle safety, a Crew Return Vehicle for Space Station, base
    space transportation research, and the Initiative. The goal of the
    Space Launch Initiative is for NASA, by 2010, to meet its human space
    flight needs on commercial launch vehicles that will improve safety and
    reduce costs. NASA plans to undertake three major activities through
    the Initiative to meet this goal:
      --One, invest in technical risk reduction activities to enable
            competitive, full-scale development of privately owned and
            operated launch vehicles by 2005 (Risk Reduction and
            Competition, $2.4 billion);
      --Two, develop hardware that can be flown on these commercial launch
            vehicles to meet NASA's unique needs, such as crew transport
            (NASA-Unique Systems, $1.6 billion); and
      --Three, pursue procurements of existing and emergent vehicles for
            select Space Station needs as a means of providing near-term,
            assured access and demonstrating new, innovative approaches
            (Alternative Access, $300 million).
        In addition to these three major activities, the Space Launch
    Initiative also funds ongoing x-vehicle programs like X-34 and X-37 and
    critical systems engineering and requirements definition activities
    that will tie these elements together ($200 million).
        The fiscal year 2001 budget runout for the Space Launch Initiative
    reflects the Administration's current best estimate of what it takes to
    reduce the technical risks of developing a second-generation, Earth-to-
    orbit launch vehicles for at least two viable, competing designs prior
    to the 2005 competition (prerequisite # 1 above). The estimate, and the
    structure of the Space Launch Initiative, are based not only on the
    lessons learned in the Space Shuttle, X-33, and X-34 development
    programs, but also on the results of the industry-led Space
    Transportation Architecture Studies of 1998-99. Industry inputs from
    these studies fed directly into the planning estimates for the Space
    Launch Initiative.
        This process resulted in a prioritized list of technology
    investments based on investment options that NASA examined through an
    analytical hierarchy methodology. Each technology was subjected to a
    cost/benefit analysis and ranked based on potential payoff to cost,
    safety and technical risk. All analyses were based on architecture-
    level economic metrics.
        The results of the integration and analysis process served as the
    foundation for a series of roadmaps that illustrate the development
    required to advance the Technology Readiness Levels (TRL) of the key
    technologies to the point that they are mature enough for full-scale
    development. These key technologies include: crew escape and survival
    systems; operable, long-life propulsion systems; long-life, lightweight
    integrated airframes; advanced thermal protection systems; integrated
    vehicle health monitoring systems; and vehicle operability.
        It is important to note that NASA has more limited capability in
    directly addressing prerequisite # 2 above. If the Space Launch
    Initiative is successful in developing one or more commercially
    competitive, privately owned and operated launch vehicles that reduce
    cost and improve safety, NASA will transition its human space flight
    needs to the commercial market, thus enlarging and further stabilizing
    the overall launch market. However, NASA human space flight needs will
    still only comprise a fraction of the overall launch market.
    Developments in the non-NASA portions of the launch market could
    substantially alter industry investments in new launch vehicles. If the
    commercial launch market were to stay flat, the level of industry cost-
    sharing for full-scale development of a new launch vehicle would likely
    be smaller than if the market were to grow substantially. For this
    reason, NASA has taken a staged approach to the Space Launch
    Initiative, i.e. reducing technical risk and reassessing market
    conditions prior to the 2005 competition. It is also for this reason
    that NASA is pursuing investments outside the Space Launch Initiative
    through ISTP in areas like Space Shuttle safety.
     lack of strategic planning for the space transportation mission (s-34)
        Question. One of your ``faster, better, cheaper'' projects is the
    X-34 Technology Demonstrator. Recent reports that NASA has not
    adequately performed strategic planning for the Space Transportation
    mission lead me to believe that you should put more emphasis on the
    ``better'' portion of the equation. Requirements for the next-
    generation Reusable Launch Vehicle (RLV) technology must be clear, and
    management should be confident that the technologies resulting from the
    X-34 project support RLV needs.
        Please update us on NASA's strategic planning and management
    initiatives to improve the overall effectiveness of Space
    Transportation programs and projects.
        Answer. The intensive study, review, and planning that went into
    NASA's Integrated Space Transportation Plan, and especially the Space
    Launch Initiative, is the single, largest, recent improvement in NASA's
    space transportation programs. ISTP improves NASA's space
    transportation programs in two key respects:
        1. ISTP coordinates future decisions across all NASA space
    transportation investments. For example, Space Shuttle safety
    investments are now focused on improvements that will be fully in place
    by 2005 so that Shuttle can benefit from these safety investments
    before a potential replacement would be available through the Space
    Launch Initiative in 2010. In another example, prior to a full-scale
    development go-ahead decision on a Space Station Crew Return Vehicle,
    NASA will fully examine a range of designs for other, cost-effective
    options that meet both the crew return need and other needs, such as
    crew and cargo transport, on future launch vehicles developed under the
    Space Launch Initiative.
        2. ISTP, and especially the Space Launch Initiative, provide
    multiple, competing paths to future systems with back-up alternatives.
    For example, the Space Launch Initiative seeks to reduce technical risk
    for at least two competing Earth-to-orbit launch vehicle designs to
    enable full-scale development decisions in 2005 with operational
    vehicles by 2010. By pursuing at least two competing designs, NASA
    intends to spur industry innovation and have more than one development
    path if technical issues pose roadblocks to a particular design. If
    technical issues or market conditions delay development decisions in
    2005 or operability by 2010, ISTP is making concurrent investments in
    Space Shuttle safety to ensure continued U.S. human access to space. In
    the near-term, the Space Launch Initiative also seeks alternate means
    of access to Space Station for cargo on existing or emergent commercial
    launch vehicles to back-up the Space Shuttle.
        With respect to X-34 and other existing x-vehicle programs,
    decisions on expanding investments in those vehicles will be tied to
    industry proposals under the larger Space Launch Initiative to reduce
    technical risk and prepare viable, competing designs for the 2005
    competition. In this way, ISTP coordination and Space Launch Initiative
    goals provide an important context for decisions on specific space
    transportation investments.

                                 NASA'S MISSION
        Question. There has been very little discussion of what happens
    after the assembly of the ISS. There has been no public discussion of
    NASA's mission. Nevertheless, internally, and despite the current
    failures in the Mars programs, NASA seems to be focusing on Mars,
    possibly as a manned base. What is NASA's long term mission focus?
        Answer. While NASA's first priority is to complete the
    International Space Station to reap the benefits of long-duration
    research in space, we also continue to invest in research strategies
    and technologies to prepare for more challenging future missions. While
    we have not identified specific long-term missions or goals for the era
    after the International Space Station is fully operational, NASA is
    committed to taking steps now to prepare for challenging future goals
    and missions. We have initiated Agency-wide decadal planning studies
    designed to enable NASA to create a variety of blueprints for human and
    robotic space exploration scenarios, following ISS operations.
        One of the early outputs from these studies is the universal
    recognition that reliable and cost-effective space transportation
    remains the key enabler of a more robust civil space program. To meet
    this crucial need, NASA's new Space Launch Initiative makes the
    critical investments to assure more reliable access to space in the
    years ahead. In addition, we continue to invest in new science and
    technology initiatives in biotechnology, nanotechnology and information
    technology. These technologies will provide NASA with a new pathway to
    revolutionize our missions and the scientific and engineering systems
    that enable them, bringing down the cost, while enhancing safety. These
    strategic investments must be made in the near term if we are to expand
    our presence in the solar system in the long term, no matter what
    specific missions are ultimately pursued.

                                 STAFFING NEEDS
        Question. For fiscal year 2001, NASA is proposing to increase its
    FTEs by 328 people following several years of downsizing. This request
    reflects recent concerns that NASA has downsized to quickly. The recent
    1999 Annual report of the Aerospace Safety Advisory Board identified
    workforce staffing needs as its # 1 finding in that ``the continuing
    downsizing at the Office Of Space Flight Centers, coupled with the
    effects of the prior hiring freeze and unplanned departures, has
    produced critical skills deficits in some areas, growing workforce
    pressure and stress levels, and a serious shortfall of younger S&Es''.
    Staffing concerns have become so acute that the Administration has
    asked for $20 million in the fiscal year 2000 Supplemental bill for
    staffing increases.
        The report gave workforce needs an aura of an emergency. Did this
    problem sneak up on NASA and what are the most critical workforce
    needs?
        Answer. Due to concerns raised from within by internal reviews such
    as the Core Capability Study and by outside groups such as the
    Aerospace Safety Advisory Panel, senior NASA management became
    convinced that we had gone too far in our reductions at the Space
    Flight Centers. In the first quarter of fiscal year 2000, we decided to
    discontinue downsizing at these Centers and begin the revitalization of
    the workforce to correct skill shortages and imbalances. We decided
    that the staffing situation required more immediate action and an
    accelerated hiring plan was proposed. This plan included hiring 550 new
    personnel across the Space Flight Centers in fiscal year 2000 followed
    by 300 in fiscal year 2001 and one-for-one thereafter in order to reach
    a staffing levels that strengthen program management and ensure Shuttle
    safety. Since the fiscal year 2000 budget had already been passed when
    the decision to begin the revitalization in fiscal year 2000 was made,
    a supplemental bill was needed.
        These new critical staff hires are intended to support program
    requirements for Space Shuttle Operations and Upgrades, Space Station
    Development and Operations, Expendable Launch Vehicles, Advanced Space
    Transportation Technology and other Center mission related and
    administrative requirements. The hiring of these new employees is
    geared to alleviate stress impacts resulting from expanding workload
    pressures; eliminating critical skill shortages across our programs and
    Centers; and pursuing fresh-out hires to revitalize our Science and
    Engineering (S&E) knowledge base for future program and project
    management responsibilities. In addition, NASA is seeking to refocus
    our workforce composition towards a future oriented research and
    development base.

                                      MIR
        Question. Despite promises by the Russians to deorbit the Mir,
    Russia seems committed to maintain the Mir as an active space station.
    What impact will this have on Russia's commitment to the ISS and what
    steps is NASA taking to ensure that resources that should be going to
    the ISS are not being redirected to the Mir?
        Answer. NASA believes that it would be extremely difficult for
    Russia to support two space stations simultaneously, even if funding
    were obtained. As such NASA continues to press RSA on their specific
    plans for Mir. However, NASA believes that any decision concerning the
    future of Mir is the purview solely of the Russian Government. RSA has
    assured NASA that ISS remains its top priority and that Mir will remain
    on-orbit only if the resources can be found to maintain the two
    stations simultaneously and that the Mir lifetime can be accomplished
    with no impact to the ISS as long as both space stations do not
    concurrently experience off-nominal situations.

                                 REMOTE SENSING
        Question. While the LightSAR program was terminated in the VA/HUD
    fiscal year 2000 bill, this technology offers great potential for a
    number of practical applications, most particularly as an all-weather
    method for remote sensing of the earth's surface. The report to that
    appropriations bill required NASA to report on the actions NASA can
    take to support industry-led efforts to develop an operational
    synthetic aperture capability in the United States. What is the result
    of NASA's review?
        Answer. The Conference Report (House Report 106-379) accompanying
    H.R. 2684, the fiscal year 2000 VA-HUD and Independent Agencies
    appropriations bill, directed NASA to review the history of the
    LightSAR program, and to report to Congress on actions the Agency can
    undertake to support industry-led efforts to develop an operational
    synthetic aperture radar (SAR) capability in the United States, with
    particular focus on NASA as a data customer. The report was submitted
    to Congress on May 30, 2000. The report indicates:
        NASA has technology and scientific interests in Synthetic Aperture
    Radar (SAR) data, particularly L-band, for its studies of the Earth's
    surface and interior. We are currently weighing this interest among all
    others in the context of our Earth Science Enterprise Research
    Strategy. This plan was recently reviewed by the National Research
    Council (NRC) and NASA is currently preparing a response to the NRC
    recommendations.
        Commercial interest exists for X-band or C-band SAR data, but the
    market for such data is not sufficiently mature to justify a
    commercially-funded mission. NASA is mainly interested in
    interferometric L-band SAR data for its Solid Earth and Natural Hazards
    scientific programs. This was demonstrated by the latest and highly
    successful Shuttle Radar Topography Mission (SRTM). NASA is continuing
    its investment in SAR technology to reduce the cost of a possible
    future SAR satellite opportunity. Based on the outcome of the science
    planning and technology development activities, and our dialogue with
    stakeholders in government and industry, we will determine the
    appropriate course of action.
        Question. What is the status of NASA's transition to full cost
    accounting?
        Answer. NASA is actively pursuing the implementation of key full
    cost accounting and related practices. The basic implementation
    strategy is to phase key full cost practices into Center and Agency
    operations over the next few years. NASA Centers initiated full cost
    practices in fiscal year 2000. They are beginning to distribute direct
    labor costs to projects, and to standardize the structure and content
    of General and Administrative (G&A) costs and service pool costs across
    the agency. By the end of fiscal year 2000, NASA plans to decide on
    fiscal year 2001 full cost activities, depending on progress on fiscal
    year 2000 activities.
        NASA also plans to continue the transition to a ``full cost''
    budget during fiscal year 2002. As part of the transition to a ``full
    cost'' budget, the ``Mission Support'' account will be distributed to
    the appropriate activities in the remaining appropriations accounts:
    Human Space Flight and Science, Aeronautics, and Technology. All
    program and Agency support and operations will be distributed. The
    number of appropriations (excluding the Office of the Inspector General
    appropriation) will thus decrease from three to two.

                                  PROCUREMENT
        Question. NASA's procurement obligations accounted for over 87
    percent of NASA's total obligations in fiscal year 1998; and NASA
    procures some $12.5 billion in goods and services annually. In January
    1999, GAO identified NASA's contracting management as a high risk area.
    What is NASA doing to address this?
        Answer. NASA's Office of Procurement has taken corrective action on
    all recommendations issued by the GAO. The GAO has recognized that
    there are no open recommendations remaining related to NASA's contract
    management; nonetheless, GAO continued to include contract management
    on their High Risk list due to the delay in implementing IFMP. However,
    IFMP is now under review in order to determine how the project will
    continue. Future plans will be decided this summer, during the fiscal
    year 2002 budget formulation process.
        NASA has adopted a revised procurement measurement system effective
    November 19, 1998. One new measure--and a key one for tracking
    results--is that of customer satisfaction. Three electronic surveys
    were issued to three different groups of customers over the last year.
    The first survey (of about 4500 NASA procurement office customers) was
    completed in spring 1999. Approximately 37 percent of those polled
    responded. Survey results were provided to the NASA Procurement
    Officers for their review, which will help them improve their
    organizations' customer service. A follow up survey will be issued to
    those same customers in June 2000 to assess satisfaction levels in the
    areas of: effective communication, customer service, meeting mission
    goals, and procurement knowledge and skills.
        We have also collected data from two additional surveys: a survey
    of the Headquarters procurement office's procurement customers in the
    field (with a 49 percent response rate), and a survey of the
    Headquarters procurement office's other customers at Headquarters and
    Center management. Those survey results have been reviewed at
    Headquarters and any identified problems are being addressed. It is our
    intent to issue these surveys annually in the future. The results will
    be used to improve services to our customers.
        Regarding procurement self-assessments, GAO recommended that
    Headquarters provide the NASA centers with specific Agency-wide
    guidance regarding the self-assessment process. In a letter dated June
    17. 1997, the NASA Associate Administrator for Procurement forwarded to
    all Center Procurement Officers specific guidance entitled,
    ``Functional Management of Self-Assessments.'' This guidance is
    intended for the Center Procurement Officers' use in preparing and
    submitting annual functional self-assessments. These Center self-
    assessments are an integral part of the annual certification by the
    Associate Administrator for Procurement pursuant to Executive Order
    12352 to the NASA Administrator that NASA Procurement Systems are
    adequate. In addition, the Office of Procurement converted the existing
    Procurement Management Survey Guide, previously used by NASA survey
    teams which evaluate the quality, effectiveness and efficiency of
    procurement and grant programs at all NASA Centers, into a Self-
    Assessment Guide for use by the Centers in performing their own
    procurement self-assessments. The Self-Assessment Guide was updated in
    March, 2000. Also, the results of Center self assessments are one of
    the items reviewed by NASA survey teams in their on-site reviews.
        The NASA Office of Procurement has implemented a number of
    initiatives and innovations to relieve the affects of the Agency
    downsizing effort. They include the Consolidated Contracting Initiative
    (CCI), which emphasizes developing contracts, whenever appropriate,
    that can be used by other procurement offices within NASA and by other
    government agencies; and using existing contracts to the maximum extent
    to satisfy Agency requirements. The goals of this initiative are to
    reduce user time spent on acquisition-related tasks; shorten
    acquisition lead times, thereby meeting users' needs faster; minimize
    contract duplication; save money by consolidating requirements; reduce
    closeout backlogs; and improve cooperation across NASA and with other
    government agencies. Further, the Office of Procurement has initiated
    the NASA Contracting Intern Program (NCIP). This is a two-phase
    recruitment/employment effort. The program consists of a two to three
    year cooperative education program targeted to college sophomores and
    juniors followed by a two-year internship beginning at college
    graduation. It includes an orientation session, formal training
    courses, and a rotational assignment at a different NASA Center when
    the co-op graduates into a permanent Intern position. This program was
    initiated in order to ensure that there are adequate numbers of well-
    trained procurement professionals whose training and education meet the
    statutory requirements. This program will be used to fill approximately
    30 percent of the anticipated vacancies in NASA procurement Agency-
    wide.
        The NASA Office of Procurement has also initiated a number of
    contract management initiatives. These innovations include:
        Performance-Based Contracting (PBC) which entails structuring all
    aspects of an acquisition around the purpose of the work to be
    performed as opposed to how the work is to be performed or broad and
    imprecise statements of work. It emphasizes the use of quantifiable,
    measurable performance requirements, and performance quality standards
    in developing statements of work, selecting contractors determining
    contract type, structuring incentives, and performing contract
    administration, including surveillance. The Office of Procurement
    recently completed a reassessment on the agency-wide PBC implementation
    in order to ensure that Center procurement offices fully understand how
    PBC is to be structured for inclusion in NASA contracts. It was
    determined that the PBC implementation was successful and numerous NASA
    centers ``best practices'' were highlighted during the reassessment.
        Profit/Fee innovation.--NASA revised its structured approach for
    determining profit and fee objectives in order to ensure that profit
    and fee levels are competitive, appropriately motivate ``faster,
    better, cheaper'' contract performance, and use a methodology that
    adequately reflects the realities of today's business environment.
    NASA's revised structured profit/fee approach uses risk analysis to
    determine the Agency's objective instead of the former cost element
    approach.
        NASA has established Phase I of a Virtual Procurement Office (VPO).
    As a result of the explosion of WEB technology and the access to
    information, the efforts of the NASA Acquisition Internet Service
    (NAIS) Team in developing a range of tools for the contracting
    community, and the need to assimilate procurement activities with the
    Integrated Financial Management Program (IFMP), we have developed the
    VPO. The VPO assembles in one place on the Internet the myriad of
    references, tools, and sample documents available to contract
    specialists. The VPO is designed to organize the rules (FAR, NFS, and
    local instructions), samples and tools along the familiar lines of the
    NASA Form 98, ``Checklist for Contract Award File Content''. The VPO
    provides a convenient reminder of tasks that need to be accomplished
    and immediate access to the tools available to accomplish the tasks.
    Further, it highlights areas such as contract management and financial
    reporting that may be prime candidates for future development. The
    response to the VPO concept from all levels of procurement
    professionals has been very enthusiastic. The VPO has been
    substantially implemented at all NASA centers. NASA is now evaluating
    the steps to be accomplished in Phase II which will concentrate on
    Contract Management functions, procurement data warehouse, electronic
    filing, etc.
        NASA has submitted a proposed rule to the Federal Register that
    would change the NASA FAR Supplement (NFS) to emphasize considerations
    of Risk Management, including safety, security, health, export control,
    and damage to the environment, within the acquisition process. The
    proposed rule addresses risk management within the context of
    acquisition planning, selecting sources, choosing contract type,
    structuring award fee incentives, administering contracts, and
    conducting contractor surveillance. Additionally, the proposed rule
    would require offerors to structure their proposals to emphasize risk
    management, whenever the solicitation requires a technical proposal.
    Furthermore, the proposed rule would allow that contractors not be paid
    award fee for any evaluation period in which there is a major breach of
    safety or security.
        Award Term Contracting is a pilot program that will test a non-
    traditional method of motivating and rewarding contractor performance.
    The Award Term Contracting (ATC) evaluation and award process itself is
    directly analogous to the Award Fee process. However, instead of
    earning fee, a contractor receives periodic performance evaluations and
    scores, which can result in an extension of the term of the contract in
    return for excellent performance.
        Past Performance of contractors has traditionally been considered
    by NASA in its formal source selections and is now required by the FAR
    in competitive procurements over $1 million. A systematic collection of
    data on past performance for NASA contracts commenced during the third
    quarter of fiscal year 1998. NASA maintains contractor performance data
    for all contracts in excess of $100,000 in accordance with Federal
    Acquisition Regulation (FAR) 42.1502.

             COMPUTER HACKING AND TERRORISM: NASA IG, ROBERTA GROSS
        Question. The issue of computer terrorism and hacking have become
    significant security issues to the United States. I know that the NASA
    IG has made this a priority issue for her office and NASA. However,
    there remains a huge risk. There was a recent CNN website article that
    discussed the fact that both Brazil and NASA have been under a wave of
    online attacks with the result that Brazil's telecommunications
    regulatory agency was shut down for nearly 6 hours on March 15th. How
    big a risk to NASA is hacking and other forms of computer terrorism and
    what kind of risk? For example, could satellites be affected? How about
    the Space Shuttle or the ISS?
        Answer. Response provided by the Office of Inspector General
    directly to the Subcommittee.

                EXPANSION OF THE KECK OBSERVATORY ON MAUNA KEA
        Question. I understand the Office of Hawaiian Affairs is
    considering a lawsuit to block the expansion of the Keck Observatory on
    Mauna Kea. Hawaii, because of religious concerns. In this case, Native
    Hawaiians consider the summit of Mauna Kea a sacred religious site. How
    does NASA plan to deal with these very sensitive local concerns.
        Answer. The Keck Interferometer is a key element in NASA's Origins
    Program, a program to search for life in the universe. The Keck
    Interferometer is an important component of the program because it will
    provide data necessary for the design for the Terrestrial Planet Finder
    (TPF) mission, a key element of the Origins Program. The objective of
    TPF is to search for, and identify habitable planets, like our own
    Earth, orbiting nearby stars.
        The site at Mauna Kea is uniquely suited to demonstrating optical
    synthesis imaging necessary for the design and development of TPF for a
    number of reasons. First of all, the site already houses the two very
    powerful 10-meter Keck telescopes. Combined with the proposed four
    outrigger 1.8-meter telescopes, the configuration will yield an
    interferometric array with 15 different baselines that have lengths of
    up to 140 meters and angular resolution 10 times better than each of
    the Keck telescopes alone. This combined array will be used for both
    imaging of scientific objects and for advancing the development of
    synthesis imaging.
        Another very important facet is the fact that the atmosphere at
    Mauna Kea is extremely dry and stable. This provides for a very simple
    and straightforward atmospheric correction scheme for each outrigger
    telescope.
        While NASA has not done a formal study of alternate sites, it has
    given consideration to several possibilities. Unfortunately, none of
    them have the advantages that Mauna Kea does. Alternative locations
    would require building 6 telescopes instead of 4, and they would have
    to be outfitted with additional optical systems to compensate for the
    poorer atmosphere. This would add significant cost to the project and
    would also delay the return of scientific results.
        NASA officials, in coordination with staff of the W. M. Keck
    Observatory and the Institute for Astronomy, had a series of meetings
    this March with representatives of various Hawaiian entities. They met
    with several representatives of the State of Hawaii (including Dr. Don
    Hibbard of the Historic Preservation Division), interested Native
    Hawaiian community groups, and Senator Daniel Inouye's Hilo field
    representative, Mr. William Kickuchi. These consultations were part of
    an effort by NASA to understand the concerns of the Native Hawaiian
    groups and to determine if NASA might be of assistance in undertaking
    prudent mitigation measures that would address concerns related to
    NASA's proposed outrigger telescopes project. The information obtained
    from these meetings will be used to develop a draft mitigation plan.
    Upon completion of the draft mitigation plan, NASA will provide a copy
    to each of these entities in late June and be prepared to discuss its
    contents. They will have a 30-day review period. After we receive their
    comments, we anticipate having another consultation meeting to resolve
    any outstanding issues.

                              BOEING BUSINESS JET
        Question. NASA is looking to acquire a business jet that would
    provide international emergency medical facilities. This seems a
    Question.able acquisition for activities that can currently be
    performed by the US Military if necessary. I understand that this would
    be paid for by the Japanese as part of a swap which means that it is
    not really free and there would be additional operational costs. I need
    more information, but I would like a commitment if NASA goes forward
    that this plane would be used solely for medical emergency uses and not
    passenger use.
        Also, it has been suggested that NASA could contract for aircraft
    needs through private airline companies and time-share contracting. I
    understand that NASA has been looking at this issue and I would
    appreciate a summary of the pros and cons, including a cost analysis.
        Answer. The International Space Station (ISS) Program has a
    requirement to provide emergency medical response to safeguard the well
    being of astronauts in the event of an unplanned return to Earth of the
    ISS crew members. A worldwide rapid response capability is needed to
    achieve this. Additionally, the stabilization of long duration
    crewmembers after such an emergency return requires special medical
    equipment and medical personnel specially trained to this specific
    discipline. NASA is exploring numerous options to meet this need
    including the DOD and private sectors. NASA has been unable to identify
    any organization that could respond in a reasonable time-frame with the
    proper equipment or with personnel trained to deal with issues
    associated with long-duration space flight. The DOD Medevac mission has
    requirements, which are fundamentally different from NASA's. NASA's
    preferred solution at this time, is to obtain a specially outfitted,
    extended-range Boeing 737 aircraft. Should NASA pursue this option, the
    aircraft would not be used to carry passengers for administrative
    purposes. NASA is beginning to assess options for how to acquire such
    an aircraft, and one of the preliminary options under consideration is
    a potential barter arrangement with Japan.
        NASA is assessing options for contracting for aircraft needs
    through private airline companies and time-share contracting, and will
    provide a summary when the assessment is complete.

                                   LANDSAT 7
        Question. Landsat, as the world's first civil earth-observation
    satellite program, has provided us with a continuous stream of land-
    image data since 1972, and with Landsat 7, launched in April 1999, we
    have begun to collect and process seasonal global data sets of land
    image data. The management of Landsat 7 is currently the responsibility
    of the U.S. Geological Survey under a multi-agency memorandum of
    understanding. Does the USGS have financial responsibility for this
    program and to what extent? Can this be a model for future agreements
    between agencies?
        Answer. As a result of an interagency agreement between the USGS,
    NASA, and NOAA, signed in November, 1998, the USGS has been designated
    to be the operational agency for the Landsat Program. Financial
    responsibility for the Program in fiscal year 2000 is shared by NASA
    and the USGS.
        The USGS funds operation of the Landsat 7 ground data collection
    system (receiving, preprocessing, and permanently archiving Landsat 7
    images) from a combination of USGS appropriations and fees received for
    transmitting Landsat 7 data directly to international cooperator ground
    receiving facilities. The USGS also has funding responsibility for
    product generation and distribution, and supports this activity through
    income derived from product sales, with products distributed at cost of
    reproduction.
        NASA is funding fiscal year 2000 costs for operating the Landsat 7
    satellite and management of ground receiving stations in Alaska and
    Norway (shared facilities supporting other NASA missions). In fiscal
    year 2001, the responsibility for funding and managing Landsat 7
    satellite flight operations will transfer in its entirety to the USGS,
    pending final signature of the revised Presidential Decision Directive,
    and receipt of fiscal year 2001 support of Landsat 7 flight operations.
        This transition should serve as a model for such activities in the
    future. We believe this is an excellent model for transitioning a key
    capability from a research and development agency (NASA) to an
    operational agency (USGS) with the mandate for obtaining and preserving
    long term records of change.
        Question. Please identify all current projects with a projected
    total cost of the missions that exceed $50 million that are currently
    (or expected to be in fiscal year 2000) in excess of their annual or
    total budget by 15 percent. Please identify the status of the mission,
    the reasons for the cost overruns, the process in place for reviewing
    the cost overruns, and the status of each mission in the process, and
    the criteria that will be used to determine whether a mission will be
    continued or terminated.
        Answer. There are currently 4 projects over $50 million that exceed
    their total budget by 15 percent, three of which are within the Earth
    Science Enterprise and one in the Space Science Enterprise. These
    projects have experienced cost growth and schedule delays for a variety
    of reasons including technical problems, increased reviews and emphasis
    on risk reduction, and, in one case, Congressionally-driven changes in
    requirements. The NASA Procedures and Guidelines (NPG)--NPG7120.5A
    Program and Project Management Processes and Requirements set forth the
    internal Agency review process for reviewing program, technical, cost,
    and schedule performance.
        The NPG requires that a special purpose review be called to assess
    continuation of a project or mission that is projected to be unable to
    meet its commitments. A review is conducted by the appropriate Center
    Program Management Council when any project exceeds or is projected to
    exceed by more than 10 percent the total development run-out cost
    identified at Mission Confirmation Review (MCR) or its equivalent,
    exceeds or is projected to exceed the NASA mission cost cap identified
    at MCR or its equivalent, delays or is projected to delay launch
    readiness by 15 percent (based on time frame between MCR or its
    equivalent and Launch Readiness Date as defined at MCR or its
    equivalent), or fails to meet minimum success criteria as defined by
    Level I Requirements.
        In these reviews, NASA typically considers science benefit,
    availability of funding to address shortfalls, existing program risks,
    and all other relevant factors in determining whether to terminate or
    continue the mission under review. Findings are submitted to the
    Associate Administrator (AA) for review. The review recommends either
    continuation or termination of the mission. The AA then, in turn,
    submits termination or continuation recommendations to the
    Administrator.
        The following is the requested information about the specific
    projects and missions that exceeded the budget/cost thresholds
    referenced in the Question:
        (1) Earth Observing (EO-1).--EO-1 is a technology demonstration
    mission to validate in space new earth imaging technologies considered
    vital for future science and Land Remote Sensing. EO-1 experienced a
    failure in the power converter of the Wide Band Advanced Recorder-
    Processor (WARP) in early January 2000 which was caused by
    contamination of a wire bond in a hybrid reference diode. Because of
    its original intermittent nature, the failure was difficult to trace
    but it was eventually found to be caused by a random manufacturing
    defect. This issue can be resolved by replacing the power converter.
    ESE management tracked the cost and schedule impacts associated with
    this failure and other technical issues. When final cost projections
    showed cost growth sufficient to trigger a termination review,
    management discussions were held to decide whether to proceed with such
    a review. ESE decided not to press for a termination review based on
    the following factors:
      --The spacecraft appeared technically sound despite the random
            manufacturing defect problem and the fact this was a ``higher
            risk'' technology demonstration.
      --ESE management successfully tracked the evolution of the problem so
            there was little new information a termination review was
            likely to provide.
      --Since the agency had required a Red Team Review for all CY2000
            launch missions, ESE felt this would be a meaningful venue to
            assess the technical readiness of EO-1 for launch.
      --While the programmatic funding adjustments needed to cover the EO-1
            cost growth were difficult, they could be managed within the
            New Millennium Program.
        The value of the technology to NASA, as well as the increased
    management oversight, was the basis for continuing this technology
    development effort. Despite the technical problems and additional
    testing recommended by independent reviewers, corrective actions are
    underway and the satellite is on target for launch in October 2000.
        (2) Vegetation Canopy Lidar (VCL) Project.--VCL experienced
    development problems and schedule slips because of its Multi-Beam Laser
    Altimeter (MBLA) instrument. The instrument failed to achieve
    performance requirements. An independent review team recently
    identified ongoing technology issues and made recommendations to
    mitigate risk in areas such as laser performance, contamination
    control, and testing methodology. The independent review team developed
    recommendations relative to continuation of the mission. The Goddard
    Space Flight Center Program Management Council (PMC) conducted a
    Termination Review of VCL and generated a series of options for
    continuation. The NASA Headquarters Program Management Council also
    conducted a review of VCL on June 22 to weigh options for continuation
    or termination, resulting in an action to refine the options. A second
    meeting is scheduled for early August, after which a decision will be
    taken on the future of the mission.
        (3) Triana.--The Triana satellite mission presented a special case.
    The Conference Report (House Report 106-379) accompanying H.R. 2684,
    the fiscal year 2000 VA-HUD-Independent Agencies appropriations bill,
    included direction for NASA to suspend all work on the development of
    the Triana program until the National Academy of Sciences (NAS)
    completed an evaluation of the scientific goals of the program.
    Consequently, in October 1999, NASA suspended work on the Triana
    Project. This ``stand-down'' lasted five months. In March 2000, the NAS
    released its report that determined Triana's science was substantial
    and achievable. As a result of this review, NASA is implementing
    recommendations to increase instrument testing and calibration, as well
    as to increase the development and testing of data reduction
    algorithms. These additional requirements, as well as the required
    stand-down while the review took place and the final structure of a
    partnership with Italy, have resulted in cost growth and schedule
    slips. NASA did not subject Triana to a formal Termination Review
    because the delays and cost growth were largely externally driven.
    However, over the past several months, the Agency has conducted several
    reviews of the restart plan for Triana, and, in each case, the outcome
    was a recommendation to proceed with the program. In April, the GSFC
    Program Management Council (PMC) reviewed the Triana restart plan. In
    addition, the GSFC PMC chartered an independent review of Triana, which
    was conducted in May. Most recently, at the end of June, the GSFC
    reported its restart plan to complete Triana to the Headquarters PMC
    and received a recommendation to continue. Currently, spacecraft
    integration and testing is underway and instruments are ready for
    integration into the spacecraft.
        (4) Gravity Probe B.--Failed its science instrument functional
    tests last year, due primarily to thermal and gyroscope problems. As a
    result the science payload had to be disassembled and design
    modifications had to be made. The technical solutions are in work, and
    the project is currently on track for starting integrated payload
    testing in mid-September 2000, with a plan to initiate full space
    vehicle testing in September 2001, pointing toward a projected launch
    in May 2002. We are aware that new issues could surface as a result of
    the design modifications that are being made. A Headquarters-controlled
    near term (April 2000-April 2001) critical milestone schedule is in
    place for GP-B. We are closely monitoring the progress made toward
    these milestones. Failure to meet this milestone schedule may result in
    a termination review by NASA's Program Management Council (PMC).
                                     ______

                   QUESTIONS SUBMITTED BY SENATOR TED STEVENS

                 HUBBLE SPACE TELESCOPE SERVICING MISSION COSTS
        Question. The Conferees provided $23 million in order to address
    the critical shortfalls in the HST program due to the initial
    unavailability of the Columbia Orbiter for the third servicing mission
    and the subsequent decision to split this servicing mission into two
    parts. Following this action, we understand that the Shuttle Fleet was
    down for wiring inspections and SM3A slipped until December.
        What is the total cost of Shuttle impacts on HST in fiscal year
    20OO and the next five years?
        Answer. The additional $23 million provided by the Conferees was
    sufficient to cover the additional near-term costs from the split of
    SM3 into two parts, and related Shuttle impacts. The slip of SM3A from
    October into December 1999 was absorbed by reserves included in the
    $23M estimate.
        There is a $44 million additional out-year cost associated with the
    new HST servicing mission schedule. Sufficient time must be maintained
    between servicing missions to enable the workforce to complete
    necessary planning activities. In order to maintain a reasonable amount
    of time between SM3B and SM4, we delayed the planned launch of SM4 by
    about six months, until summer of 2003. The slip of SM4 means that we
    must maintain the Hubble servicing workforce for an additional 6
    months, increasing the HST budget requirement by $44 million in fiscal
    year 2003, with no changes necessary in other fiscal years.
        Question. How are these being addressed? Please provide a year by
    year summary of impacts, including impacts on Goddard and contractors.
        Answer. The $44 million impact in fiscal year 2003 was addressed
    during our out-year budget planning last summer by transferring funds
    from NGST in fiscal year 2003. There is a strong link between the HST
    and NGST programs, both scientifically and in their budgets. The two
    programs essentially ``share'' a given level of funding in the budget;
    thus increases in the requirements of one will force a reduction in
    funding for the other. Per this arrangement, as NGST progresses through
    the development phases in coming years, the ramp up in its budget will
    be largely offset by the significant ramping down in HST following SM4.
    The $44 million taken from NGST in fiscal year 2003 had no significant
    impact to the NGST program (either contractors or civil servants),
    since schedule slips driven by technology readiness and other issues
    have slowed the NGST ramp-up, making these funds available for HST.
        Despite this slip, NGST remains a very high priority within Space
    Science, in accordance with the new Decadal Survey report from the
    National Research Council. This report maps out the priority
    investments in astronomy research over the next decade, and gave the
    highest priority to NGST.
        Question. What is the status of the $40 million AO for ATD that was
    issued in 1999? How many proposals were submitted in response to this
    competitive solicitation and how many will be selected?
        Answer. Evaluation of the proposals to the $40M cross-cutting
    engineering technology development (CETD) AO (actually a NASA Research
    Announcement or NRA) was completed in late August. Thirty-nine panels
    composed of independent reviewers from NASA, other government agencies,
    and universities reviewed the 1,229 proposals submitted. Final
    selection is expected to occur in mid-September 2000. The average
    proposal is for $1.2 M over a three-year performance period, meaning
    that approximately 100 of the proposals will be selected within the
    $40M budget.
        Question. What plans does NASA have to continue this competitive
    process in the future? With fiscal year 2000 funds? With fiscal year
    2001 funds?
        Answer. It has always been NASA's policy to solicit the best ideas,
    and NASA plans to continue the competitive CETD NRA program. With few
    exceptions, proposals received are for a three-year performance period
    but will be reviewed for performance annually. New solicitations will
    occur as funds roll over from completed existing and future projects.
        Question. Would the Agency consider expansion of future AO's to
    include mid-level technology readiness levels (TRLs), as opposed to
    just early TRLs?
        Answer. NASA considers the proactive transition of promising low-
    TRL technologies to higher levels of application to be a critical
    aspect of technology development and has a number of strategic programs
    for that important purpose, such as the openly competed New Millennium
    Flight Experiment Program. NASA has long recognized the need to
    continue the development of promising low TRL technologies developed
    under its AO processes. It also recognizes the potentially huge
    benefits of adapting low TRL technologies developed elsewhere for use
    on NASA missions. Unfortunately, as technologies move up to higher
    maturity level, the amount of resources required to continue their
    development increases, a factor that limits the number of technologies
    that can be funded within a constrained budget. Developing new
    strategies for accomplishing the low-to-mid TRL transition process
    continuous within the Cross-Enterprise program is a part of on-going
    planning activities.
        Question. The Agency has changed its position over the last several
    years about its support for the Committee's directives in fiscal year
    1998, 1999 and 2000 to compete 75 percent of all ATD funds, both
    focused and core program elements. What is the Agency's current
    position on this directive and schedule for plans to implement it
    fully?
        Answer. NASA has two requirements from Congress: (1) compete 75
    percent of all ATD programs and (2) preserve center core competencies
    for technology development to support future missions. These
    requirements are not independent. NASA's technology core competencies
    are embodied in a group of technologists with in-depth knowledge and
    skills as to the possibilities, limits, and state of readiness of
    technology critical to NASA's missions. Examples are aerodynamics/
    aerothermodynamics, space power, microelectronics, advanced materials
    and structures, and robotic spacecraft. These technologists work
    closely with university and industry technologists and mission
    developers to provide system and mission level integration of disparate
    technologies. For example, a space-materials technologist understands
    the space-related value and problems of adapting a promising generic
    nanotechnology material developed by a competitively selected physical
    chemist who has no space background. The establishment of firm center
    core competency requirements is currently in progress under the
    direction of the Chief Technologist and involves about 35 technologies
    over the nine NASA centers and the Jet Propulsion Laboratory. An
    implementation strategy that integrates ATD core competencies with
    complementary competed ATD programs will follow. NASA believes that
    competed programs should not put the necessary NASA core competency
    personnel in conflict with potential government partners in
    universities and industry in the competitive proposal process. This
    belief is based on long experience in working with the external
    community to develop ideas to a useful state. It was underscored by the
    experience of the recent CETD NRA where competitive conflicts impeded
    the willingness of technology suppliers to communicate openly in
    matters not related to the NRA for fear of disclosing new technologies
    in discussions of applications other than the specific ones being
    proposed competitively. Beneficial information exchange that enables
    NASA to plan future technology dependent missions and to evaluate the
    benefits and risks of new technologies in combination with other
    mission factors and technologies, i.e. be a smart buyer, are
    compromised. An approach that enables NASA technologists to retain
    working relationships with all potential bidders in a full and open
    competition, without compromising internal cutting-edge knowledge and
    skills, is a crucial part of this strategy.
        Question. Please provide a detailed breakdown of the uses of all
    ``Core Program'' ATD funds (which totals roughly $800-900 million) for
    the last four years (fiscal year 1997-2000) by subprogram element,
    technology readiness level classification, project, contract and NASA
    center?
        Answer. The last four years total (fiscal year 1997-2000) for the
    Core Program is $843M. The subprogram elements that fall under Core
    Program consist of:

                            [In millions of dollars]

    Intelligent Systems...............................................    18
    Information Systems...............................................    90
    Advanced RTG......................................................     3
    R&A Instrument Development........................................    36
    Remote-Exploration & Experimentation (RE&E).......................    37
    Explorer Program Technology.......................................    13
    Planetary Flight Support..........................................    36
    Other OSS Core Technology.........................................    55
    Cross Enterprise Technology.......................................   555

        Technology readiness level (TRL) classification for the ``Core
    Program'' ranges from 1 through 9. Below is the breakout by each
    program element.

            Program Element                                              TRL
    Intelligent Systems...............................................   1-6
    Information Systems...............................................   5-8
    Advanced RTG......................................................   3-5
    R&A Instrument Development........................................   5-8
    Remote-Exploration & Experimentation (RE&E).......................   4-6
    Explorer Program Technology.......................................   4-7
    Planetary Flight Support..........................................   7-9
    Other OSS Core Technology.........................................   1-6
    Cross Enterprise Technology.......................................   1-4

        Please note that very little ATD work is being done within the
    Information Systems and Planetary Flight Support elements. Any ATD work
    that is being done within these two projects is technology upgrade and
    improvement.
        Within the Core Program NASA spends approximately 45 percent at the
    NASA centers (JPL is included) and 55 percent is contracted out via
    contracts, grants and inter-agency transfers.
        Question. How many civil servant and/or contract employees (e.g.
    JPL) are supported with these ``Core Program'' funds either through
    direct salary or program support? How many NASA Center-based technology
    labs are comparably supported with these?
        Answer. On an annual year basis the Core Program funds support
    approximately 500-550 civil servants and 700-750 contracted employees;
    JPL is considered as contracted employees.
        The ``Core Program'' funds support seven NASA centers (GSFC, GRC,
    LaRC, ARC, JSC, JPL, MSFC).
        Question. How are projects evaluated for funding with the Core
    Programs, including life cycle costs analysis? Who makes the decision
    to fund individual projects and tasks?
        Answer. For purposes of this response, we are interpreting ``Core
    Programs'' to mean those Space Science missions selected via the
    strategic planning process, rather than missions selected through the
    Discovery or Explorer process.
        The evaluation and funding of Space Science programs is done with a
    great deal of input from the outside science community. NASA involves
    groups like the National Academy of Sciences/Space Studies Board; the
    NASA Advisory Council; the Space Science Advisory Committee and its
    subcommittees; and representatives from academia, industry, and other
    government agencies in determining science priorities. These are laid
    out in the Space Science Strategic Plan, which is published every three
    years. Once these science priorities have been identified, detailed
    studies of mission concepts to carry out the science objectives are
    conducted. The results are presented back to the science community for
    prioritization. A number of factors are taken into consideration during
    this process. Among these are cost, technology readiness, launch
    vehicle availability, schedule, etc. So there is not one single factor
    that determines the fund/don't fund decision. With considerable input
    from the science community, selections are made by senior space science
    officials at NASA Headquarters.
        Question. Are there plans to change the management of the Core
    Programs line from Code S (space science) to Code R (aeronautics and
    space technology)? If so, can you explain the rationale for this and
    which funds identified in the budget justification on page SAT 1-49 are
    affected, and why this change was not included in the budget request
    for 2001? When will a reprogramming/reorganization notice be submitted
    to the, Committee to request permission to make this change?
        Answer. The movement of the oversight of a part of the Core
    Programs line from Code S to Code R in fiscal year 2001 is in progress
    as a part of integrating the Office of the Chief Technologist and the
    Office of Aerospace Technology. The rationale is to concentrate, under
    Code R, the early development of technologies that will eventually
    apply to many missions in multiple enterprises. The current program is
    being reviewed by Code R, and it is envisioned that programmatic
    changes may occur in addition to the recent management change. Final
    recommendations on specific changes will be identified after selection
    of the NRA winning proposals and evaluation of their contribution to
    the total needs for NASA technology. Any significant changes to the
    program will be communicated to the Committee via the Agency fiscal
    year 2001 Operating Plan following OMB approval.
        Question. Please provide the Committee with a detailed breakout by
    proposed flight or strategic initiative (including specific funding
    centers) by fiscal year for the period of fiscal year 1998--2005 of all
    ``Focused Program'' ATD funds, beyond the level of detail displayed on
    page SAT 1-55156. For example, Deep Space Systems for fiscal year 2001
    has $181 million request, yet only $112 million is identified in
    detail.
        Answer.

    ----------------------------------------------------------------------------------------------------------------
                                                                          Fiscal years--
                                             -----------------------------------------------------------------------
                                                1998     1999     2000     2001     2002     2003     2004     2005
    ----------------------------------------------------------------------------------------------------------------
    Origins (SIM, NGST, KECK, TPF)..........     77.1     92.2    131.2    133.2    186.9    295.3    482.5    449.8
                                             -----------------------------------------------------------------------
    SIM.....................................     34.2     31.2     40.9     48.0     95.0    136.3    182.6    142.8
    NGST....................................     20.1     32.2     46.6     61.5     55.4     66.6    209.5    223.5
    TPF.....................................      0.4      1.6      4.0     10.0     13.0     19.0     21.0     42.0
                                             =======================================================================
    KECK INTERFEROMETER.....................      9.5     16.4     13.7      6.4      6.4      7.5      7.8      8.5
                                             -----------------------------------------------------------------------
    ST-3/FLIGHT DEMO........................  .......      9.2      8.0     17.0     32.0     57.0     51.0     22.0
    FUTURE ORIGINS..........................     12.9      1.6     18.0     -9.7    -14.9      8.9     10.6     11.0
                                             =======================================================================
    Deep Space System (Europa & Pluto)......     51.5     97.1    162.2    181.8    227.1    218.1    212.7    267.1
                                             -----------------------------------------------------------------------
    EUROPA ORBITER..........................      2.9     15.4     57.3     93.0    101.2     56.7     31.6     31.4
    CISM....................................      8.5      4.9      8.7     10.9     13.1     13.9     14.5     14.8
    Advanced RTG............................      9.7      9.7      9.6      9.6      8.6      8.6      9.6      9.8
    PLUTO/KUIPER............................      1.0      0.7      7.0     19.6     61.2     72.4     65.2     34.1
    Deep Space-4 closeout...................  .......     11.4  .......  .......  .......  .......  .......  .......
    X-2000..................................     15.2     38.4     65.6     49.8     28.3     27.0     39.9     40.7
    Future Deep Space Missions..............     14.2     16.6     14.0     -1.1     14.7     39.5     51.9    136.3
                                             =======================================================================
    Search for Evolution & Universe (SEU)...     18.7     14.6     22.9     31.5     45.9    106.0    125.9    127.3
                                             -----------------------------------------------------------------------
    FIRST...................................      9.5      6.7     16.1     20.8     18.1     16.0      9.8      4.1
    GLAST...................................      3.3      4.8      4.9      8.7     22.5     84.3     93.5     44.3
    Future SEU Missions.....................      5.9      3.1      1.9      2.0      5.3      5.7     22.6     78.9
                                             =======================================================================
    Sun-Earth-Connections (SEC).............      7.9     20.2     26.6     78.0    160.8    240.9    310.7    448.3
                                             -----------------------------------------------------------------------
    Solar-B.................................      0.8      5.0      9.6     19.5     23.3     10.6      7.2     10.3
    Stereo..................................      3.4      7.0      8.3     23.6     54.0     73.7     64.6     22.8
    Solar Probe.............................      1.9      0.4      3.2      7.4     13.9     16.0     45.4     98.3
    Living With a Star......................  .......  .......  .......     20.0     64.0    117.0    133.0    177.0
    Future Solar-Terrestrial Probes.........      1.8      7.8      5.5      7.5      5.6     23.6     60.5    139.9
    ----------------------------------------------------------------------------------------------------------------

        The budget estimates as identified above represent total funding
    for the projects/program lifecycle (ATD, mission studies and pre-
    project planning, development, launch, and mission operations and data
    analysis) cost. The budget numbers as identified above are consistent
    with the fiscal year 2001 President's budget.
        Note that all unresolved shortfalls, currently carried in the
    ``Future Missions'' lines, will be resolved during the preparation of
    the fiscal year 2002 budget. This activity is currently underway, with
    each project's performance and progress during this year being used to
    revise future plans, schedules, and funding requirements. Resources
    will be reallocated to minimize the impact across the entire Space
    Science Enterprise, in accordance with the priorities established in
    the NASA and Space Science strategic plans.
        Question. For all flight projects or strategic initiatives
    (including funding centers) broken out in response to the previous
    question, please provide the full life cycle costs (including full
    multi-year projections) for ATD phase of these activities and the
    number of NASA employees (including JPL) working on each project or
    initiatives.
        Answer. Current life-cycle budget estimates for flight missions
    that are currently being funded within the ``Focused Program'' are as
    follow:

                            [In millions of dollars]

                                                             Life-cycle cost
            Selected Flight Mission                            (Real Year $)
    SIM............................................................... 1,030
    NGST.............................................................. 1,700
    TPF............................................................... 2,100
    ST-3..............................................................   220
    Europe Orbiter....................................................   450
    Pluto/Kuiper......................................................   350
    FIRST.............................................................   190
    GLAST.............................................................   330
    Solar-B...........................................................   160
    STEREO............................................................   320
    Solar Probe.......................................................   360

        Please note that the estimates identified above represent current
    assumptions, in many cases based on initial mission concepts that may
    vary considerably from the design that eventually flies many years from
    now. As a result, these numbers may change as the missions move from
    early formulation to the start of the implementation phase, where the
    mission design, technologies and development schedules are defined
    sufficiently to provide accurate estimates for full-scale development.
    It is at that point, just before the beginning of implementation, that
    NASA will carry out a detailed non-advocate review of these projects,
    and will establish a baseline cost estimate.
        The number of NASA employees (including JPL) working on each
    project or initiatives varies from year to year, and they are as
    follows:

            Project                                         # NASA employees
                                                              (JPL included)
    SIM...........................................................    85-110
    NGST..........................................................   110-150
    TPF...........................................................     3-150
    KECK INTERFEROMETER...........................................     10-20
    ST-3/FLIGHT DEMO..............................................     10-55
    EUROPA ORBITER................................................    46-142
    CISM..........................................................     19-34
    Advanced RTG..................................................         6
    PLUTO/KUIPER..................................................      4-13
    X-2000........................................................    73-155
    FIRST.........................................................      5-29
    GLAST.........................................................     12-30
    Solar-B.......................................................      4-11
    STEREO........................................................      5-15
    Solar Probe...................................................      1-17
    Living With a Star............................................     27-80

        Also note that the number of NASA employees as identified above
    will change as projects or initiatives move through the formulation and
    implementation phases.

                                      MARS
        Question. The five-year budget project estimates that almost $2
    billion (see Page SI-20) will be spent on the Mars program. Please
    breakout by activity, including advanced technology development and
    launch vehicle costs, how funds in the Mars Surveyor program have been
    spent to date (approximately $1.1 billion through fiscal year 2000).
        Answer. During the five-year (fiscal year 1995-fiscal year 2000)
    period, NASA has spent
      --$730M for the planning and development of the spacecraft and
            instruments for the Mars Global Surveyor (MGS), Mars 98 Orbiter
            & Lander, and Mars 01 mission.
      --$205M for launch vehicles for the MGS, Mars 98 Orbiter & Lander,
            and Mars 01 missions.
      --$70M for Mission Operations & Data Analysis.
      --$60M for advanced technology development.
        Question. Please indicate how funds spent on the Mars program in
    the future will be competed to permit greater outside support for it,
    including at academic labs and research universities?
        Answer. As with all of the past missions, the scientific research
    on each future Mars Surveyor mission will come from competitively
    selected payloads. The 2003 mission will fly the Athena rover package
    that was competitively selected to fly on the cancelled 2001 lander
    mission. All missions beyond 2003 will select science payloads on a
    competitive basis, with proposals solicited from all scientific
    sources. The selected proposals will be integrated into each mission.
        Moreover, during the ongoing Mars program re-planning process we
    are also considering the addition of a relatively large number of
    smaller science and technology missions. Payloads, technologies, and
    possibly entire spacecraft for these missions will also be selected
    utilizing a competitive process similar to that used in NASA's
    Discovery Program. In addition, the future Mars program is studying
    adoption of an outreach strategy with Industry, Academia, NASA centers
    and other Government facilities that have not traditionally played a
    major role in the program.
        Question. Prior to the latest mishaps, the Committee understands
    that the ``research and analysis'' portion of the Mars program was
    severely underfunded, to the tune of only a few percent of the
    program's total costs, compared with the community average of no less
    than 10 percent. How will future Mars activities correct this serious
    shortcoming?
        Answer. An analysis on the existing Mars Program indicates that
    NASA is spending about 10 percent per year on Mars research and
    analysis. Although comparable to other missions, NASA plans on a new
    philosophy for funding Mars research and analysis, in which each Mars
    mission will have sufficient science funding. Mission requirements will
    be the driver of the budget allocation rather than an arbitrary ``fit-
    in-the box'' allocation.
        Question. What role is the extramural planetary research community
    playing in shaping the future Mars program? Please provide the
    Committee with some examples.
        Answer. NASA's Space Science Enterprise is openly considering all
    facets of its Mars Exploration Program starting with the 2005
    opportunity and carrying through 10 to 20 years. In order to cast a
    wide net for capturing ideas and potential participants for missions,
    mission elements, and experiments that fit within the broadly defined
    scope of this program, NASA is sponsoring a two and half day workshop
    to be held at the Lunar and Planetary Institute (LPI). The workshop is
    specifically dedicated to the extramural community, i.e. open to
    scientists, engineers, and other colleagues from academia, Federal
    Laboratories and industry. The intent of the workshop is to provide an
    open forum for presentation, discussion, and consideration of various
    concepts, options, and innovations associated with a strategy for Mars
    exploration that calls for ``following the water'' strategy that is
    central to the ``quest for life'' on Mars.
        In addition to the workshop we are reaching out to the Industry for
    their ideas and concepts via a Request For Information (RFI).
        Other extramural planetary research communities that also play a
    role in shaping the future mars program include:
      --The National Academy of Sciences, Space Science Board, Subcommittee
            on Planetary Exploration (COMPLEX)
      --Space Science Advisory Committee (SSAC)
      --Solar System Exploration Subcommittee (SSES)
      --Mars Advisory Science Team (MAST)
      --Mars Exploration Program Advisory Group (MEPAG)
        Question. Last year Agency provided the Committee with a
    consolidated resource schedule for SOMO by account and program element
    with a total SOMO budget of $715 million. Please provide a comparable
    chart for the three year fiscal period (1999-2001) based on the 2000
    operating plan and the 2001 budget submission, breaking out each
    program element activity dollars by sub-program element, project,
    contract (e.g., CSOC, TMOD or other) and NASA field center.
        Answer. The table below represents the Consolidated SOMO Resources
    Schedule information available from the fiscal year 2001 NASA budget
    formulation.

        Question. The recent report on TMOD to the Congress identifies
    TMOD's budget as roughly $188 million per year. The budget
    justification, at page SAT 6-1 identifies JPL's allocation of fiscal
    year 2001 space operations budget as $131.1 million. Please provide a
    cost analysis of this difference by program element and project
    activity, identifying all fund sources in detail for the estimate
    provided in the $188 million figure.
        Answer. The table below is a cost breakdown that reconciles the
    $188 Million in the TMOD report to the $131 Million in the NASA Budget
    narrative.

    ------------------------------------------------------------------------
                                                               TMOD   SAT  6-
               Program Area                 Mgmt/funding      report     1
    ------------------------------------------------------------------------
    Cassini...........................  Space Science.......   $41.2  ......
    Galileo...........................  Space Science.......     3.6  ......
    SVLBI.............................  Space Science.......     3.3  ......
    Ulysses...........................  Space Science.......     4.3  ......
    Voyager...........................  Space Science.......     4.6  ......
    DSMS/AMMOS........................  Space Science.......    37.6  ......
    DSMS/DSN..........................  SOMO................    94.0   $94.0
    Ka-Band upgrade...................  SOMO................  ......    12.2
    Overseas sites....................  SOMO................  ......    24.9
                                                             ---------------
          Total.......................  ....................   188.6   131.1
    ------------------------------------------------------------------------

        The bases of estimate in the TMOD report falls into two categories,
    Flight Projects and Deep Space Mission System (DSMS). The flight
    project cost estimates reflect JPL's commitment to deliver science
    products to the projects. The TMOD report reflects two different
    sources of funding and content as shown that is different from the SAT
    report. The SAT report includes other content (Ka-Band Upgrade) that
    was not in place at the writing of the TMOD report.
        Question. The TMOD report also suggests that much of TMOD's works
    is R&D activity instead of true operations. Please indicate in detail
    (by program element, mission and project) what portions of the TMOD/JPL
    space operations budget finance ``operations'' and what portion
    finances ``R&D'', explaining the differentiation between the two.
        Answer.

                            [In millions of dollars]

    Operations (CSOC).................................................    56
    Operations (Non-CSOC).............................................    44
    Systems Development...............................................    73
    Research & Technology.............................................    71
                                                                      ______
          TMOD Report Total...........................................   188
          Total budget estimate for fiscal year 2001..................   244

        Programmatic responsibilities for TMOD include telecommunications,
    mission operations, ground-based radio astronomy, solar system radar,
    radio science observation, and management of assigned flight projects.
        Operations support is provided through the CSOC contractor,
    Lockheed-Martin, and other contractors.
        Research and Development tasks enable the conduct of on-going and
    new missions by the NASA strategic enterprises. The funds support the
    continuing advance and upgrade of the DSN and Advanced Multimission
    Operations System (AMMOS), including increased telecommunications
    performance and addition of new services and tools. Together, the DSN
    and AMMOS comprise the Deep Space Mission System (DSMS) that supports
    deep space missions. R&D funding also incorporates the science
    investigations for Voyager, Ulysses, Galileo, Cassini, Space VLBI, and
    the technology initiatives that benefit future communication
    requirements and reduce operational costs.
        Question. How many ``research and development'' projects or
    components were initiated, and over what time period, to create the
    Deep Space Mission System. Please identify each project, how much was
    spent per year, the JPL FTEs dedicated to each, the status of each
    project, and how each project's final cost compared to the estimate
    made at the start of each project.
        Answer. Deep Space Mission System (DSMS) is the name of the program
    within the TMOD responsible for the Deep Space Network (DSN) and the
    Advanced Multi-Mission Operations System (AMMOS). DSN systems
    implementation began in 1957, with the first antenna operational in
    1958. The DSN systems implementation is currently managed and funded by
    Office of Space Flight. The AMMOS concept began in the 1960's, and its
    evolution is managed and funded by the Office of Space Science.
        System evolution and upgrade projects to date for the DSN and AMMOS
    systems, collectively known as the DSMS, are numerous. Project
    historical records are not readily available at a detailed level due to
    the longevity of the program.
        The program content over the years was determined based on program
    priority and technical merit. Please refer to question number 21 for
    current upgrade initiatives.
        Question. Please identify each project, and amounts allocated by
    fiscal years 1999, 2000 and 2001, in the Deep Space Network mission and
    data services upgrades line. Page SAT 6-12 says that the Network
    Control Project was mostly completed in 1999. Please provide the
    original cost estimate for NCP and the cost at the project's
    completion. Please account for any changes.
        Answer. The matrix below is a list of current tasks.

    ------------------------------------------------------------------------
                                                             Fiscal years--
           Major DSN Upgrade Project Plans          Prior  -----------------
                                                    Years     2000     2001
    ------------------------------------------------------------------------
    Network Simplification Project (Includes         $16.4    $10.4     $5.4
     completion of the Network Control Project)..
    Cassini Radio Science Ground System..........      9.2      6.4      1.9
    Frequency and Timing Subsystem Monitor and         0.8      0.9      0.9
     Control.....................................
    Beam Wave Guide Ka-Band Upgrades.............      2.0      5.1      9.7
    70-Meter X-Band Uplink.......................     10.3      3.3      1.7
    Antenna Renewal..............................      3.1      1.0      5.3
    26-Meter Automation..........................      1.6      0.8  .......
    DSS-26 Electronics...........................      3.9      2.5      0.3
    Turbo Decoder................................      0.5      1.0      0.5
    Maser Replacement............................      1.0      0.5  .......
    Enhanced Reliable Network Service............  .......      1.3      0.4
                                                  --------------------------
          Total..................................     48.8     33.2     26.1
    ------------------------------------------------------------------------

        The objective of the Network Control Project (NCP) is to infuse
    industry developed monitor and control technology into the DSN
    infrastructure and to reduce operational costs. NCP represents an
    evolution and combination of several tasks over a number of years. With
    this history, it is difficult to precisely define an original cost.
    However, it is estimated that the final cost is about $50M including
    approximately $10M growth. The growth was primarily due to recovering
    from the use of Commercially available but not-yet-sufficiently-mature
    technology used for one component of NCP.
        Question. What is NASA's level of confidence in the NCP and its
    ability to deliver the capabilities originally promised at the
    project's beginning?
        Answer. NASA is very confident that the intended NSP capabilities
    will be delivered with the exception of a Network Planning and
    Preparation subsystem. This subsystem was eliminated in fiscal year
    1999 to obtain resources needed to ensure Y2K compliance. An
    equivalent, low cost approach to the NPP function was implemented by
    upgrading the subsystem which the NPP was intended to replace.
        The initial delivery of NCP was completed in late 1999. This
    delivery provided a basic implementation of all the remaining
    capabilities and is being operated in parallel with the legacy system
    at the DSN complexes for training and evaluation. Further deliveries of
    NCP are scheduled in 2000 to enhance the basic implementation and
    repair minor discrepancies identified in the original release.
        Question. Provide the original costs estimates, and the current
    cost data, by fiscal year, for the Network Simplification Project,
    including schedule and capability data.
        Answer. The table below is a cost comparison of the fiscal year
    1999 cost estimate contained in the Project Commitment Document (PCD)
    for NSP to the current fiscal year 2000 PCD cost estimate.

    ----------------------------------------------------------------------------------------------------------------
                                                                                 Fiscal years--
                                                             PY   -------------------------------------------  Total
                                                                    2000     2001     2002    2003     2004
    ----------------------------------------------------------------------------------------------------------------
    Cost estimate (1999 PCD).............................     4.8     9.7     8.8      4.1      2.5     0.8     30.7
    Cost estimate (2000 PCD).............................    16.4    10.4     5.4      3.7      4.5  .......    40.4
                                                          ----------------------------------------------------------
          Change \1\.....................................    11.6     0.7    (3.4)    (0.4)     2.0    (0.8)     9.7
    ----------------------------------------------------------------------------------------------------------------
    \1\ NSP cost growth is entirely due to adding the final costs of the NCP to the beginning of the NSP.

        Key Schedule Milestones are:
        Tracking and Navigation--July 2, 2002.
        Downlink Consolidation complete--August 3, 2002.
        Uplink Consolidation complete--August 3, 2002.
        Tracking and Navigation will include delivery of new telemetry
    hardware automation capabilities and diagnostic tools.
        Downlink Consolidation will deliver new DSN Telemetry and Tracking
    racks, each with full Block V Receiver telemetry and tracking
    equipment.
        Uplink Consolidation will include delivery of new/consolidated
    command, exciter and ranging hardware.
        These deliveries will allow removal of all obsolete, high
    maintenance equipment performing these functions today.
        Question. Please provide the current schedule for the transfer of
    MOPS contract work to CSOC.
        Answer. See response to question number 25.
        Question. There has been discussion that JPL wishes to reclassify
    ``Mission Operations'' as one of its ``core competencies'' and retain
    all related work in-house, requesting an additional 500 FTE's for this
    purpose. Please advise as to the accuracy of such a comment.
        Answer. Mission operations are largely contractor supported. There
    has been no reclassification of operations work to core competency.
        The Mars Program Independent Assessment Team report presented by
    Mr. Tom Young identified a need for more program management and project
    oversight at JPL and for increased staffing in individual projects. JPL
    did receive a ceiling increase from NASA of 500 work-years to meet this
    and possible other needs. Approximately 35 work-years of this increase
    will be used to maintain key JPL activities in planetary operations.
        The MOPS initiative was cancelled because the increase in the JPL
    workforce ceiling obviated the need for a contract partner in the area
    of planetary operations. A request for proposal (RFP) for the
    institutional computing services element that comprised the majority of
    effort in the MOPS procurement will be issued shortly, most likely to a
    small business.

                               MAJOR DEVELOPMENT
        Question. Please provide detailed breakouts for each major program
    element for earth science identified on page SAT 3-15, beyond the level
    of each particular project to include all relevant details that make up
    the individual projects identified in the new budget structure. For
    example, $110.3 million is requested this year for the Chemistry
    mission. Breakout the detailed costs in 2001 for each of the flight
    projects (Terra, Aqua, Chemistry, Special Spacecraft and Landsat 7)
    identified on SAT 3-15.
        Answer.

                                                                 Fiscal year
    TERRA: Spacecraft/S/C GFE.........................................   3.1
                            =================================================================
                            ________________________________________________
    AQUA:
        Project Support/Reserve.......................................  10.7
        Instruments...................................................   5.9
        Spacecraft/S/C GFE............................................  23.1
        Launch Vehicle................................................   3.2
                                                                      ______
          Fiscal year 2001 budget request.............................  42.9
                            =================================================================
                            ________________________________________________
    AURA (Chem):
        Instruments...................................................  40.4
        Spacecraft....................................................  29.2
        Project support/Reserve.......................................  15.6
        Launch vehicle................................................  23.5
        OMI accommodation.............................................   1.6
                                                                      ______
          Fiscal year 2001 budget request............................. 110.3
                            =================================================================
                            ________________________________________________
    IceSAT............................................................  46.3
    Solstice/SORCE....................................................  23.0
    Seawinds..........................................................    .4
    ACRIMSAT..........................................................    .5
    Meteor SAGE III...................................................    .2
    Scisat ELV........................................................   5.7
    Program Support...................................................  10.6
                                                                      ______
          Total Special...............................................  86.7
                            =================================================================
                            ________________________________________________
    Landsat-7:
        Spacecraft....................................................   1.2
        Instrument....................................................   0.2
                                                                      ______
          Fiscal year 2001 budget request.............................   1.4

                             ALGORITHM DEVELOPMENT
        Algorithm Development is addressed in response to question 27 and
    EOS Follow-on is addressed in response to question 28.
        Question. $82.1 million is requested for algorithm development (SAT
    3-15). Explain the principal activities, which will be undertaken with
    these funds. Please also breakout how these funds will be allocated by
    project and principal investigator. In addition, provide the total cost
    for algorithm development, project and/or principal investigator for
    the period fiscal year 1996-2000.
        Answer. Algorithm Development is the basic work to develop the
    initial set of at-launch algorithms (development through launch plus 1
    year), including geolocated and calibrated radiance data (Level 1),
    swath sampled fundamental science data products (Level 2), gridded/
    averaged data products (Level 3), and Level 4 data products
    incorporating Level 2 or 3 data from multiple algorithms and/or more
    significant model calculations. Algorithm development includes
    supporting experimental and theoretical (modeling) work. It also
    includes code development and testing, pre-launch algorithm validation
    with experimental data, and first-order validation of the data products
    in the early post-launch period including work to address issues of
    instrument calibration and artifacts.
        Algorithm development in the post-launch era includes long-term
    maintenance of the algorithms, such as implementation of improvements
    resulting from continuing validation work and user/application
    experience, and continued development of algorithms for research data
    products (planned Level 2 data products not available at launch).
        Instrument operations ensures the integrity of instrument
    operations with primary emphasis on Level 1 data products. This support
    continues through the life of the mission and includes updating of
    calibration information, treatment of changing on-orbit instrument
    characterization, and code modifications and reprocessing of the data
    products to reflect these developments.
        Also included under EOS algorithm development is support for the
    science team computing facilities (SCFs) that support data processing
    for algorithm development and maintenance, instrument operations and
    calibration studies, science data validation studies, and science data
    analysis. This involves a significant buildup prior to launch, and
    continuing post-launch maintenance and support.

                                    EOS ALGORITHMS FISCAL YEAR 1996-FISCAL YEAR 2001
                                                [In millions of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                          Fiscal years--
                                             -----------------------------------------------------------------------
                                               1996 NOA    1997 NOA    1998 NOA    1999 NOA    2000 NOA    2001 NOA
    ----------------------------------------------------------------------------------------------------------------
    Terra (formerly AM).....................      37.641      38.885      42.809      48.297      50.244      22.128
    EOSP....................................        .240        .260        .331        .375        .366  ..........
    Aqua (formerly PM)......................       6.926       7.671       9.878      12.988      12.748      15.960
    Ocean Data Assimilation.................        .090        .090        .090  ..........  ..........  ..........
    Aura (formerly Chemistry)...............       3.674       4.921       7.500      13.004      18.041      21.472
    Data Assimilation.......................  ..........        .090        .090        .090  ..........  ..........
    SAGE III................................       1.730       2.469       3.097       3.475       3.918       1.208
    Jason...................................  ..........        .835       1.277  ..........  ..........  ..........
    GLAS....................................       2.194       1.455       2.603       4.124       5.894       3.537
    TRMM (LIS & CERES)......................       3.956       3.995       5.007       5.326       4.840  ..........
    Landsat.................................       1.450       1.327       2.243       2.309       2.639  ..........
    ACRIM...................................        .250        .478        .303        .506        .425      86.000
    SeaWinds................................       3.146       1.712       5.210       6.129       4.231       4.051
    SORCE (formerly SOLSTICE)...............        .501        .542        .609        .443       1.596       1.103
    Program Management......................        .051        .120  ..........       3.466  ..........  ..........
    Computing...............................       4.602  ..........  ..........  ..........  ..........  ..........
    Data Assimilation Office................       6.849      11.050      11.253      13.061      16.758      12.555
                                             -----------------------------------------------------------------------
          Total.............................      73.300      75.900      92.300     116.800     121.700      82.100
    ----------------------------------------------------------------------------------------------------------------

                                 EOS FOLLOW-ON
        Question. Please breakout, in $500,000 or smaller increments, the
    uses of funds appropriated for this activity in fiscal year 1999 ($4.5
    million) and fiscal year 2000 ($24.7 million), including contracts
    funded, studies undertaken, conferences supported, etc. How much of
    this money was used to conduct meetings and travel? Have any specific
    mission studies (phase A or B) been undertaken with these funds?
        Answer.

                            [In millions of dollars]

    Advanced Technology Microwave Sounder (ATMS) instrument design
        stud-
        ies...........................................................    .3
    Project support for formulation activity..........................    .7
    CERES Flight model 5..............................................    .5
    CERES Aqua support................................................   1.4
    CERES Terra support...............................................   1.3
    CERES TRMM on orbit award fee.....................................    .3
                                                                      ______
      Fiscal year 1999 content........................................   4.5

        These are the smallest increments available.

                            [In millions of dollars]

    Fiscal year 2000 content:
        (SAT 3-15)....................................................  24.4
        Less operating plan adjustments...............................  -9.4
        CERES support.................................................  -1.4
                                                                      ______
          Remaining for NPP...........................................  13.6

        Please see smallest increment available detail breakout below.

    Preliminary Design Contracts $4M each to Aerojet and Ball
        Aerospace..................................................... 8,000
    Engineering support from QSS, MIT/Lincoln Labs, Swales............   487
                                                                      ______
          ATMS Instrument............................................. 8,487
                            =================================================================
                            ________________________________________________
    Rapid Spacecraft Studies: $150K each to Ball, TRW, Lockheed
        Martin, Orbital, Spectrum Astro...............................   750
    Initial RSDO awards ($50K to each catalog vendor).................   300
    Technology demonstrations: several in-house C&DH data bus
        technologies..................................................   235
    Engineering support from QSS, etc.................................   270
                                                                      ______
          Spacecraft.................................................. 1,555
                            =================================================================
                            ________________________________________________
    In-situ ground terminal: initiate in-house system design for
        future commercialization......................................   300
    FPGA development: in-house development for technology evaluation..   309
    Engineering support from Aerospace Corp. to develop Science Data
        Segment specifications........................................   750
                                                                      ______
          Ground Systems.............................................. 1,359
                            =================================================================
                            ________________________________________________
    IV&V support......................................................   450
    Contract engineering support: CSC.................................   430
    Contract engineering support: SSAI................................   160
    Misc. engineering support: IMDC charges, Swales...................    80
    Project control support (CM, scheduling, general business support)
        and
        Misc..........................................................   791
                                                                      ______
          Project Support............................................. 1,911
                            =================================================================
                            ________________________________________________
    Contingency.......................................................   308
                                                                      ______
          Total fiscal year 2000 NPP budget...........................13,620

        None of the funds above are used to conduct meetings and travel.
    The funds required to support these activities are in the Mission
    Support Appropriation.
        Question. Please explain why there is no current mission profile
    for the follow-on line given that planning for this activity has been
    underway for almost two years? Please explain how funds would be
    allocated in fiscal year 2001, including use of any carryover from
    prior years and allocations for specific missions.
        Answer. There is no mission profile in the fiscal year 2001
    President's request because there was no approved Research strategy in
    place to scientifically justify a particular type of measurement and
    mission required to obtain that measurement. Since the budget request,
    the Earth Science Enterprise has submitted a Research Strategy for
    2000-2010. This strategy has been reviewed by an interdisciplinary
    panel established by the National Academy of Sciences at NASA's
    request. NASA developed this plan with help from members of our Earth
    System Science and Applications Advisory Committee (ESSAAC) of the NASA
    Advisory Council (NAC), and from the Earth Observing System
    Investigators Working Group (EOS/IWG). In doing so, we have taken into
    account recommendations from a number of National Research Council
    (NRC) reports issued during the past two years. The Research Strategy
    provides an extended overview that sets the scientific, policy and
    programmatic context. This overview identifies the primary science
    objectives and the detailed questions that will guide our research and
    mission concept definition over the next decade. The draft reviewed by
    the Academy has been made publicly available on our ESE website
    (www.earth.nasa.gov).
        The ESE Research Strategy establishes the paradigm for NASA's
    approach to Earth System Science. It establishes the logical
    progression from characterizing Earth system variability through
    identification of forces of change, Earth System responses,
    consequences of change, and, finally, prediction of future change. For
    each step along this path, a prioritized set of science questions is
    defined. These, in turn, lead to observational requirements, which
    become the basis for mission definition.
        The plan will help to balance competing demands in the face of our
    limited resources and yet still chart a program that addresses the most
    important and tractable scientific questions and allows optimal use of
    NASA's unique capabilities for global observation, data acquisition and
    analysis, and basic research. To facilitate a sharper definition of
    primary mission requirements and clearer selection criteria, the plan
    also distinguishes among three types of space flight missions, each
    with a different purpose: systematic observation missions, exploratory
    missions, and operational precursor or technology demonstration
    missions. The identification of these different mission categories
    marks a significant departure from the original architecture of the
    Earth Observing System and should lead to a shorter development cycles
    and more cost-effective implementation.
        A set of prioritization criteria is defined for the purpose of
    turning science needs into a priority mission set. These criteria
    include such factors as technology readiness and partnership
    opportunities. Recognizing that the ESE research program is conducted
    within a larger national and international context, the plan envisions
    seeking out opportunities for task sharing between our programs and
    those of our national and international partners. For instance, under
    the plan, NASA will promote the convergence of the operational
    observation requirements of partner agencies with ESE research data
    needs for systematic observations, share the cost of new developments,
    and develop precursor instruments and spacecraft technologies for
    future operational application missions. By doing so, ESE assures some
    of its very long-term high quality observational needs are met through
    operational systems.
        ESE is establishing a list of priority systematic measurement
    missions as part of the fiscal year 2002 budget process based on our
    Research Strategy for the next decade. While preserving some
    flexibility in the order of these missions, their timing will be driven
    in part by the need for continuity with systematic measurements from
    the first series of EOS missions. As outlined in the Science
    Implementation Plan, NASA will actively support the development and
    implementation of an appropriate process to ``complete the cycle'' in
    which questions are formulated, scientific studies are carried out, and
    specific answers are developed to answer the questions. This is a
    dynamic process. For example, based on an earlier draft of the Science
    Implementation Plan, we are beginning formulation of what is called the
    NPOESS Preparatory Project (NPP) or ``bridge'' mission and the Landsat
    continuity mission.
        For the ``bridge'' mission, we expect to complete our formulation
    activities and proceed into the Implementation Phase (completion of the
    Mission Confirmation Review) in late calendar year 2001. For the
    Landsat continuity mission, we expect to release a solicitation
    instrument in August of 2001. As future priority missions are defined,
    we will proceed with them based on the availability of funds.
        In addition, for fiscal year 2001, NASA anticipates reprogramming
    many of these follow-on funds to accommodate launch delay impacts and
    mitigate risk on several of the EOS and Earth probe missions nearing
    development completion.

                                      NPP
        Question. The NPOESS Preparatory Project is listed as being in
    formulation studies. How much has been spent to date, by fiscal year,
    on NPP and from what lines in the earth science budget have these
    monies been allocated?
        Answer. The NPP funding is allocated within the EOS Follow-on line.

    ------------------------------------------------------------------------
                                                           Fiscal years--
                                                       ---------------------
                                                           1999       2000
    ------------------------------------------------------------------------
    NPP Funding to Date...............................        1.0       13.6
    ------------------------------------------------------------------------

                           GODDARD AND EARTH SCIENCE
        Question. Goddard's allocation of earth science dollars, both as an
    annual amount and as a percentage of the Earth Science Enterprise
    budget has dropped very sharply in the last five years. Please explain
    how you intend to reverse this problem, including identification of
    specific missions, in the near future, commencing, with the 2001
    operating plan.
        Answer.

                                                [In millions of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                                   Fiscal years--
                                                              ------------------------------------------------------
                                                                  1997       1998       1999       2000       2001
    ----------------------------------------------------------------------------------------------------------------
    Total Earth Science......................................      1,362      1,417      1,414      1,443      1,406
    GSFC Earth Science.......................................      1,024        930        882        895        812
    GSFC percent Earth Science...............................         75         66         62         62         58
    ----------------------------------------------------------------------------------------------------------------

        This reduction in Earth Science funds allocated to GSFC is due to
    the rampdown of the development for the first series EOS missions. ESE
    is establishing a list of priority future systematic measurement
    missions as part of the fiscal year 2002 budget process based on our
    Research Strategy for the next decade. GSFC's Earth Science future
    funding levels will be established as post-2002 missions are defined
    based on the new ESE Research Strategy, and as GSFC successfully
    compete for new research activities. We anticipate that GSFC will be a
    major contributor in the development of this future follow-on activity.
    For example, GSFC is beginning implementation of the NPOESS Preparatory
    Project (NPP) or ``bridge'' mission and involved in the formulation of
    the Landsat continuity mission.

                          ENTERPRISE AND CENTER TAXES
        Question. Please indicate, by program element and project, how
    headquarters, enterprise and center ``taxes'' are assessed against the
    earth science budget--by program element and project, including: SOMO
    charges, support contractors, inter-agency and international
    agreements, special initiatives--whether statutory or not, conferences
    & workshops, program evaluation, proposal review and proposing,
    administrative overhead and any other relevant charges assessed against
    the earth science budget by headquarters, Code Y management, or any
    individual center.
        Answer. NASA Headquarters (Office of the Comptroller) makes a flat
    rate assessment across the board of less than half a percent on the
    Earth Science budget. This assessment is not broken out by program,
    project, statutory, non-statutory requirements, etc. This assessment is
    taken off the top of the Earth Science appropriation. It is used to
    fund the following: (1) GSFC Center Director's Discretionary Fund
    (CDDF--the vast majority of the assessment goes to this), (2) Agency's
    Cost Estimating function and, (3) Earth Science closed accounts (old/
    late bills that come in that must be paid). When the agency receives
    Earth Science related reimbursable funds (domestic or international), a
    small assessment is withheld from the program/project, at NASA
    Headquarters and used for the financial and contract administration of
    reimbursable funds. The Office of Earth Science does not assess taxes
    on the Earth Science budget. GSFC Center assessments on Earth Science
    programs/projects are calculated based on a complex budget/cost
    algorithm that takes into account: project/program budgets, flight vs.
    non-flight projects, Full-Time Equivalents, level of institutional
    usage of facilities and services, and other Center unique costs and
    activities. The remaining activities (e.g. support contractors, SOMO)
    are directly funded within the project budgets.

                                     EOSDIS
        Question. Please breakout EOSDIS costs (for fiscal years fiscal
    year 1996-2001) by each of the six major components identified on SAT
    3-30, explaining the general activity of each component. Explain the
    relevant deltas for activity between fiscal year 1999, 2000 and 2001
    for each component.
        Answer.
    General Activity Descriptions:
        EOSDIS Core System (ECS).--Provides the Mission Operations segment
    for EOS spacecraft and the Science Data processing System (SDPS). The
    SDPS provides ingest, processing, archiving and distribution of EOS
    mission data.
        EOS Data and Operations System (EDOS).--Responsible for data
    capture from EOS spacecraft, interface up-link of command, processing
    and distribution of Level 0 data products and archival of Level 0 data.
        EOS Polar Ground Network (EPGN).--Provides X-band receiving
    capabilities for science data dumps and S-band telemetry, tracking and
    command capabilities for Landsat-7, and EOS spacecraft.
        Science Investigator-led Processing System (SIPS).--Responsible for
    producing standard data products and delivering them to the Distributed
    Active Archive Centers (DAACs). This instrument team processing of data
    is an alternative some investigators have chosen from providing the
    science software to the DAACs to allow data production generation at
    the DAACs.
        DAACs.--Eight geographically dispersed science data processing
    centers responsible for EOSDIS data management and user services within
    a particular science discipline. The DAACs also archive the data for
    future use.
        NASA Integrated Services Network (NISN).--EBNet is part of the
    larger NISN which provides the communications to support EOSDIS
    including: forward- and return-link communications for flight
    operations; high-capacity circuits for transport of science data from
    ground terminals to EDOS to the DAACs; inter-DAAC communications;
    communications with cooperating data centers and international
    partners.

                                      SIX MAJOR ELEMENTS OF EOSDIS FUNDING SUMMARY
                                                [In millions of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                                   Fiscal years--
                            Budget area                        -----------------------------------------------------
                                                                  1996     1997     1998     1999     2000     2001
    ----------------------------------------------------------------------------------------------------------------
    ECS.......................................................    121.5    100.7     83.0    118.6    104.8     73.8
    EDOS......................................................     34.5     24.4     22.1     22.1     10.4     10.8
    EPGN......................................................  .......      1.8      4.8      7.1      4.8      2.6
    SIPS......................................................  .......  .......  .......      3.3     10.3     17.6
    DAACS.....................................................     29.4     36.1     28.9     33.7     39.9     52.0
    NISN......................................................      6.0      7.4      7.4      7.4     19.2      8.1
    ----------------------------------------------------------------------------------------------------------------

    Relevant Deltas fiscal year 1999-fiscal year 2001:
        ECS.--The fluctuations in the ECS line reflect large equipment
    purchases in fiscal year 1999. In fiscal year 2000 and 2001 the costs
    are primarily labor driven and tied to releases of both science and
    mission operation systems primarily for Terra and Aqua.
        EDOS.--The significant decrease in the EDOS line from fiscal year
    2000 to 2001 is a result of the completion of the work and expiration
    of the EDOS contract in fiscal year 2001.
        EPGN.--The delta from fiscal year 1900 to 1901 in EPGN reflects a
    change in agency philosophy to have projects buy services through the
    Space Operations Management Office (SOMO) and no longer purchasing
    equipment and contracting directly for the requirements.
        SIPS.--The ramp up of costs in the SIPS area is a result of more
    missions and therefore more SIPS coming on line.
        DAACs.--The ramp up of costs in the DAAC area is a result of
    increased requirements to support the added missions in orbit.
        NISN.--The large increase from fiscal year 1999 to fiscal year 2000
    is primarily a result of Landsat-7 and Terra launches. The large
    decrease from fiscal year 2000 to fiscal year 2001 is based on the
    assumption that SOMO will pay for data transmission services beginning
    in fiscal year 2001.

                                     DAACS
        Question. Please breakout the full life cycle investment for each
    of NASA's DAACs since they were each created, including civil service/
    salary and expense costs for the relevant ``in-house DAACS (including
    JPL, facilities charges (including capital renovation or new
    construction) and instrumentation/equipment. Costs for algorithm
    development should be included where applicable.
        Answer. The end-to-end life cycle costs (fiscal year 1991-fiscal
    year 2005) for the NASA DAACs are shown below. The costs shown include
    operations, science support, and development and maintenance costs for
    the Version 0 and TRMM systems at the DAACs (including the JPL
    development costs for the ASF systems). The estimates of civil servant
    salaries have been included for EDC, GSFC, and LaRC. The operations
    costs for the ECS systems at the DAACs are estimated based on the ECS
    contract proposal. These costs do not include the development or
    maintenance costs for the ECS system nor the costs incurred by ESDIS
    and ECS for general DAAC operations support. The development and
    maintenance costs for the ECS system and the general operations costs
    are included in the data provided for Question 33.

                              Life Cycle DAAC Costs

                            [In millions of dollars]

    Fiscal year 1991-fiscal year 2005:
        ASF........................................................... 138.6
        EDC...........................................................  99.3
        GSFC.......................................................... 137.9
        JPL...........................................................  72.0
        LaRC.......................................................... 123.6
        MSFC \1\......................................................  12.1
        NSIDC.........................................................  46.2
        ORNL..........................................................  29.3
        SEDAC.........................................................  29.8

    \1\ MSFC DAAC was closed in 1998.
    ---------------------------------------------------------------------------

               SCIENCE INVESTIGATOR-LED PROCESSING SYSTEMS (SIPS)
        Question. Please provide detail for all awards in this component
    for fiscal years 1999, 2000 and anticipated for 2001, indicating all
    funding recipients. Please differentiate funds between regular SIPS
    activity and those identified as the 24 ESIPS (Earth Science
    Information Partners), the so-called EOSDIS Federation, providing
    funding allocations, by year, for all three years (99,00, 01) for each
    of the 24 ESIPS. For 2001 estimates, include any funds proposed for
    allocation to the ESIPS from the ESARP Applications budget identified
    on page SAT 3-65.
        Answer. The SIPS, or the DAACS as the case may be, are responsible
    for standard data and information whose production, publishing/
    distribution, and associated user services requires considerable
    emphasis on reliability and disciplined adherence to schedules.

                                                       SIPS BUDGET
                                                [In millions of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                                               Fiscal years--
               EOS Mission(s)               EOS Instrument(s)         Organization     -----------------------------
                                                                                          1999      2000      2001
    ----------------------------------------------------------------------------------------------------------------
    Terra (AM) & Aqua (PM).............  CERES.................  NASA LaRC............      .894     3.027     2.240
    Terra & Aqua.......................  MODIS.................  NASA GSFC............     1.415     4.469     8.100
    Terra..............................  MOPITT................  NCAR.................      .120      .240      .102
    Aqua...............................  AMSR-E................  NASA MSFC............      .396     1.104     1.017
    ICESat.............................  GLAS..................  NASA GSFC............      .336     1.064      .979
    Aura (CHEM)........................  HIRDLS................  NCAR.................  ........  ........      .468
    Aura (CHEM)........................  MLS...................  NASA JPL.............      .164      .361     1.505
    Aura (CHEM)........................  TES...................  NASA JPL.............  ........  ........     3.220
                                                                                       -----------------------------
          Total........................  ......................  .....................     3.325    10.265    17.631
    ----------------------------------------------------------------------------------------------------------------

        The Earth Science Information Partners (ESIPs) differ from the
    regular SIPS in that they do not produce standard products from NASA
    Earth Science missions, as do the SIPS.
        Type 2 ESIPs are responsible for data and information products and
    services in support of Earth System Science (other than those provided
    by the DAACs/SIPS) that are developmental or research in nature or
    where emphasis on flexibility and creativity is key to meeting the
    advancing research needs. They depend on data products provided by
    SIPS, but develop higher level geophysical data products in support of
    interdisciplinary science investigations.
        Type 3 ESIPs are those providing ESE-based data and information
    products and services to users beyond the Earth System Science research
    community who enter into joint endeavor agreements with NASA ESE in
    order to extend the benefits of ESE beyond the research community or to
    enhance EOSDIS capabilities.
        The ESIP Federation is an organization wherein the DAACs (aka ESIP
    1s), the ESIP 2s and the ESIP 3s can exchange scientific and technical
    information related to data and information system and service
    provision. Money set aside for the Federation provides the means to
    customize existing interfaces, tools, and data for a community of users
    to meet the needs of other user groups being served by the diverse
    ESIPs. Included, as requested, are the funding allocations, year by
    year, for the 24 ESIPs.

                                              FISCAL YEAR 2000 ESIP FUNDING
                                                [In millions of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                                                  Fiscal years--
               Contract Number                   ESIPs Type 2         Principle Investigator -----------------------
                                                                                               1999    2000    2001
    ----------------------------------------------------------------------------------------------------------------
    NCC5-300.............................  University of Maryland..  Dr. J. Townshend.......   1.250   1.200    .400
    NCC5-301.............................  Univ of California/LA...  Dr. R. Muntz...........   1.000   1.100    .375
    NCC5-302.............................  Univ of California/SB...  Dr. J. Frew............   1.000   1.100    .350
    NCC5-303.............................  Michigan State            Dr. D. Skole...........   1.000   1.000    .350
                                            University.
    NCC5-304.............................  Univ of New Hampshire...  Dr. B. Moore...........   1.000   1.000    .350
    NCC5-305.............................  IBM.....................  Dr. C. Li..............   1.000   1.000    .350
    NCC5-306.............................  George Mason Univ.......  Dr. M. Kafatos.........   1.050    .985    .215
    NCC5-307.............................  Univ of Rhode Island....  Dr. P. Cornillon.......    .950    .911    .240
    NCC5-308.............................  Univ of California/SD...  Dr. J. Simpson.........    .400    .425    .150
                                           MSFC....................  Dr. R. Spencer.........    .950    .900    .300
                                           JPL.....................  Dr. V. Zlotnicki.......    .800    .800    .200
                                           JPL.....................  Dr. T. Yunck...........    .850    .850    .300
                                                                                             -----------------------
          Total Type 2 ESIPs.............  ........................  .......................    11.3    11.3     3.6
                                                                                             =======================
    NCC5-309.............................  Univ of New Mexico......  Dr. S. Morain..........    .200    .200    .251
    NCC5-310.............................  Univ of North Dakota....  Dr. G. Seielstad.......    .500    .500    .500
    NCC5-311.............................  Rice University.........  Dr. P. Reiff...........    .450    .475    .400
    NCC5-312.............................  Planet Earth Science....  Dr. C. Gautier.........    .130    .150    .200
    NCC5-313.............................  Calif Resources Agency..  G. Darling.............    .470    .320    .338
    NCC5-314.............................  NBC Corp................  Dr. D. Jones...........    .400    .400    .350
    NCC5-315.............................  USRA....................  K. Kalpaakis...........    .320    .340    .230
    NCC5-316.............................  Univ of Minnesota.......  Dr. T. Burk............    .240    .260    .199
    NCC5-317.............................  Bay Area Shared Info....  D. Etter...............    .200    .200    .150
    NCC5-318.............................  Scientific Fisheries....  P. Simpson.............    .030    .034  ......
    NCC5-319.............................  MRJ Technologies........  D. Kliman..............    .038    .040    .010
    NCC5-320.............................  Reading Info tech.......  F. Sun/K. Meagher......    .067  ......  ......
                                                                                             -----------------------
          Total Type 3 ESIPs.............  ........................  .......................     3.0     2.9     2.6
          Total ESIP Funding.............  ........................  .......................    14.3    14.2     6.2
    ----------------------------------------------------------------------------------------------------------------

                                    NEW DISS
        Question. Please detail who has been involved in the New DISS
    activity (SAT 3-31), how much has been spent on this activity to date,
    what is projected in the future (2001 and beyond), and what contracts,
    if any, have been supported for this New DISS work. Also please explain
    what specific work has been done and what NASA's plans are for how the
    New DISS will build upon the EOSDIS investments made over the last
    decade.
        Answer. To date the New DISS activity has been in the stage of
    concept development. A team of experts from academia, Industry and
    Government was assembled in October of 1998, and met several times
    throughout fiscal year 1999 and fiscal year 2000 to prepare a New DISS
    concept document.
        The total cost of the New DISS activity so far has been to support
    meeting costs (4 meetings) for the non-civil service members of the New
    DISS expert team, approximately $80K.
        The Earth Science Technology Office at GSFC let a study (contractor
    was Aerojet) of the technologies that would be needed to implement the
    New DISS concept in fiscal year 1999. Cost of the study was $59K.
        NASA is presently organizing a transition team to look at how the
    New DISS concept can be implemented. As the question indicates, the New
    DISS concept is to build upon NASA's EOSDIS investments while evolving
    our data and information systems and services to incorporate
    information technology advances, which should make the system more
    flexible.
        Funding for this activity in fiscal year 2001 and beyond is under
    review at this time.
    New DISS Team Members
                Members
        Martha E. Maiden, NASA Headquarters, Chair; Vanessa Griffin, NASA
    Goddard Space Flight Center; Mathew Schwaller, NASA Goddard Space
    Flight Center; Candace Carlisle, NASA Goddard Space Flight Center;
    Ronald L.S. Weaver, University of Colorado; Roy Jenne, National Center
    for Atmospheric Research; Karen White, NASA Headquarters; Sara J.
    Graves, University of Alabama, Huntsville; David L. Skole, Michigan
    State University; Anngienetta R. Johnson, NASA Headquarters; Guenter R.
    Riegler, NASA Headquarters; Thomas A. Lasinski, Lawrence Livermore
    National Laboratory; and John R. G. Townshend, University of Maryland,
    College Park.
                Consultants
        Mark R. Abbott, Oregon State University; George David Emmitt,
    Simpson Weather Associates Incorporated; James Frew, University of
    California, Santa Barbara; David M. Glover, Woods Hole Oceanographic
    Institution; Anthony C. Janetos, World Resources Institute; Thomas
    Karl, NOAA National Climatic Data Center; Pamela A. Matson , University
    of California; Dorothy Perkins, NASA Goddard Space Flight Center; Moshe
    Pniel, Jet Propulsion Laboratory; Carl Reber, NASA Goddard Space Flight
    Center; Richard B. Rood, NASA Goddard Space Flight Center; and
    Christopher Scolese, NASA Goddard Space Flight Center.

                                  EARTH PROBES
        Question. Please provide the life cycle cost estimates for each of
    the earth probes listed on SAT 3-37, including the original cost
    estimate at the start of the project (Phase B and C/D), and the current
    estimate cost for each. Please explain.
        Answer.
    Background
        The Earth Probes listed on page SAT 3-37 of the NASA 2001 Budget
    Request to Congress (see URL http://ifmp.nasa.gov/codeb/budget2001/for
    more information) are:

                            [In millions of dollars]
    ------------------------------------------------------------------------
                                            Original Life     Current Life
             Earth Probe Mission           Cycle Estimate    Cycle Estimate
    ------------------------------------------------------------------------
    Total Ozone Mapping Spectrometer                 $34.3             $34.3
     (QuikTOMS).........................
    Earth System Science Pathfinders:
        VCL.............................              59.8         ( \1\ )
        GRACE...........................              86.0         ( \2\ )
        PICASSO-CENA (in formulation)...             112.2             112.2
        CloudSat (in formulation).......             115.8             115.8
        Volcam alternate mission study           \4\ 500           \4\ 500
         \3\............................
    Experiments of Opportunity..........         \5\ 250           \5\ 250
    Triana..............................              75               117
    University Class Earth System                 \6\ 15            \6\ 15
     Science............................
    ------------------------------------------------------------------------
    \1\ Under review.
    \2\ Replan in process.
    \3\ No Life Cycle estimate applicable as this is a funded study only.
    \4\ In thousands of dollars.
    \5\ Thousands of dollars each.
    \6\ Millions of dollars each.

    Explanations:
        General.--The Life Cycle Estimates above are for NASA only. Many of
    these missions involve partnerships with significant contributions from
    other US Government and/or International Space Agencies.
        Total Ozone Mapping Spectrometer (QuikTOMS).--The $34.3M figure
    shown is the funding from the Earth Probes line only. Additional
    funding comes from operations and science budget lines.
        VCL.--NASA confirmed the original life cycle cost estimate of
    $59.8M at the Mission Confirmation Review in March of 1998. More than
    one year later, NASA directed the VCL team to switch to Athena 1
    (former Clark launch vehicle), increasing the cost estimate to $67.3M.
    Recent difficulties with the delivery of the instrument, and concerns
    over the quality assurance of missions in this class based on the
    failure of the Mars missions, has led NASA to reassess VCL. This
    reassessment is on-going.
        GRACE.--NASA confirmed the original life cycle cost estimate of
    $86.0M at the Mission Confirmation Review in December of 1998. A replan
    is underway due to the contractor (German Company DSS) diverting
    workforce from GRACE to the CHAMP mission delay in addition to GRACE
    hardware and software problems.
        PICASSO-CENA.--Original cost of $112.2M. NASA will establish the
    baseline life cycle cost at the Mission Confirmation Review, based upon
    proposed cost, impact of risk reassessment, and the impacts of launch
    vehicle costs savings.
        CloudSat.--Original cost of $115.8M. NASA will establish the
    baseline life cycle cost at the Mission Confirmation Review, based upon
    proposed cost, impact of risk reassessment, and the impacts of launch
    vehicle costs savings. Additionally, NASA may provide CloudSat with
    additional funding based on the arrangement with the Canadian Space
    Agency for the RFES hardware.
        Volcam alternate mission.--Volcam is the alternate mission, should
    either PICASSO-CENA or CloudSat fail to demonstration that it can
    satisfy its level one requirements at the time of Mission Confirmation
    Review. The VOLCAM team is supported at a low, study effort level.
        Experiments of Opportunity.--The Experiments of Opportunity are a
    series of very low cost (approximately $250K each) payloads on free
    flying satellites, the space shuttle and International space missions.
    Examples include the Global Positioning Satellite (GPS) experiments on
    the already launched Orstead and Sunsat and the upcoming Champ and SAC-
    C missions.
        Triana.--House Report 106-379 directed ``NASA to suspend all work
    on the development of the Triana satellite using funds made available
    by this appropriation until the National Academy of Sciences (NAS) has
    completed an evaluation of the scientific goals of the Triana
    mission.'' The Academy released a favorable report in March 2000. The
    House Report recognized that ``there will be some additional cost
    resulting from the delay.'' The additional cost to the Triana program
    associated with the suspension of development and related activities is
    approximately $40 million. This brings the total cost of the Triana
    project from the original baseline of $77 million to $117 million. Of
    the $40 million cost growth, $16.5 million is associated with the stand
    down and recovery. This includes funding to address some technical
    problems in developing the sophisticated scientific instruments that
    were exacerbated by the stand down. NASA added $7.5 million to
    implement several NAS recommendations. Another $6.8 million is required
    to refurbish an alternate deployment platform that NASA is borrowing
    under an agreement with the Italian Space Agency to safely deploy
    Triana from the Shuttle bay. The decision to use this platform was
    taken in response to the Shuttle safety review process; this hardware
    has flown on a prior mission. And, $9.1 million has been added for risk
    reduction, including a moderate augmentation to program reserves.
    Triana's current launch readiness date is October 2001. Triana is
    manifested as a secondary payload on STS-112 (Research Mission), which
    is currently targeted for launch on April 18, 2002.
        University Class Earth System Science.--In fiscal year 2000 NASA
    competitively selected four University team concepts for mission study
    funding. In fiscal year 2001, NASA intends to select two of these
    concepts for final formulation and implementation. Each mission is
    capped at $15M.
        Question. Almost $18 million is budgeted in the 1999-2001 period
    for program support and future missions. Please explain what these
    funds have supported, including which contracts and kinds of program
    support. Why does the justification fail to describe anything about
    this activity, given that it is scheduled to grow by 163 percent (from
    $3.5 million to $9.2 million) between 2000 and 2001?
        Answer. We apologize for our oversight in failing to describe the
    Earth System Science Pathfinders (ESSP) Program Support and Future
    Missions in the budget justification.
        The Earth Probes program support allows NASA to take an integrated
    view of the Earth Probe missions for quality assurance and cross-
    project optimization. Program support provides for NASA technical
    insight through engineering support contracts for reviews, analysis,
    technical expertise, quality assurance, Space Operations Management
    Office (SOMO) related costs and independent validation and verification
    (IV&V). It also provides for the independent reviews and review teams
    for cost analysis, confirmation and Red Teams. In addition, the program
    support line includes institutional expenses and assessments.
        For future Earth Probe missions, the strategy of the Earth Science
    Enterprise is not commit in advance to a set program of experimental
    satellite missions for the next ten years. Instead, NASA will issue
    successive solicitations for comprehensive mission implementation
    proposals addressing specific science themes and their associated
    priorities subject to the peer review process. NASA will determine step
    by step the sequence of scientific disciplines addressed by the Earth
    Probe program, taking into consideration scientific priorities
    confirmed by scientific institutions and bodies, technical and funding
    capabilities, and opportunities for international cooperation. These
    exploratory missions, yielding new scientific breakthroughs, are a
    significant component of the Earth Science Enterprise's program, in
    conformity with the strategic mission of NASA to promote research and
    development. Each exploratory satellite project is expected to be a
    one-time mission that can deliver conclusive scientific results
    addressing a focused set of scientific questions/objectives. This is
    the epitome of faster, better, cheaper, enabling rapid response to
    emerging scientific priorities, maturing technical solutions, and
    creative partnership opportunities.

                         EARTH SCIENCE PROGRAM SCIENCE
        Question. Please identify all R&A solicitations released (and
    dollars used to fund proposals) in 1999 and 2000. Please provide a
    crosswalk for amounts provided for R&A in each year as identified on
    SAT 3-45 and explain any deltas.
        Answer.

                            [In millions of dollars]
    ------------------------------------------------------------------------
                                                                     Funding
                                        NRA #         Release Date     Per
                                                                       Year
    ------------------------------------------------------------------------
    Fiscal year 1999 Research
     NRA's:
        Solid Earth & Natural      NRA-98-OES-13..  12/24/1988.....      3.5
         Hazards.
        EO-1 Data Evaluation       NRA-99-OES-01..  04/02/1999.....      1.5
         Program.
        Earth Science Education    NRA-99-OES-02..  06/29/1999.....    \1\.8
         Program.
        Tropical Rainfall          NRA-99-OES-03..  07/21/1999.....      5.5
         Measurement Mission
         (TRMM).
        Modeling & Data Analysis   NRA-99-OES-04..  07/23/1999.....     22.0
         Research.
        Ozone Monitoring           NRA-99-OES-05..  09/29/1999.....      2.5
         Instrument (OMI).
        Land-Cover & Land-Use      NRA-99-OES-06..  07/29/1999.....      2.0
         Change.
                                                                    --------
          Sub-Total Fiscal Year    ...............  ...............     37.8
           1999 Research NRA's.
          Funding to support       ...............  ...............     98.2
           Grants awarded in
           fiscal year 1997 and
           fiscal year 1998.
          Total fiscal year 1999   ...............  ...............    136.0
           R&A--Science.
                                                                    ========
    Fiscal Year 2000 Research
     NRA's:
        SIMBIOS..................  NRA-99-OES-09..  12/02/1999.....      3.0
        RADARSAT-1/ADRA-2........  NRA-99-OES-10..  12/20/1999.....      2.0
        Trace P..................  NRA-00-OES-01..  01/28/2000.....      6.0
        Uninhabited Aerial         NRA-00-OES-02..  02/28/2000.....      4.0
         Vehicle (UAV).
        EOS Aqua.................  NRA-00-OES-03..  05/08/2000.....      2.0
        New Investigator Program.  NRA-00-OES-04..  04/27/2000.....      1.5
        Oceanography.............  NRA-00-OES-05..  05/26/2000.....      4.0
                                                                    --------
          Sub-Total Fiscal Year    ...............  ...............     22.5
           2000 Research NRA's To-
           Date.
          Funding to support       ...............  ...............    141.8
           grants awarded in
           fiscal year 1998 and
           fiscal year 1999 and
           grants yet to be
           awarded in fiscal year
           2000.
          Total Fiscal Year 2000   ...............  ...............  .......
           R&A--Science.
    ------------------------------------------------------------------------
    \1\ Jointly funded w/Codes F, E ($800K in Code Y portion).

    Notes: 1. The difference between SAT 3-45 budget for fiscal year 1999
      and 00 is due to 2nd and 3rd year renewals from previously selected
      solicitations; 2. Before 2nd and 3rd year renewals are funded, an in-
      depth annual review of the PI's progress is done; 3. There will be
      additional R&A solicitations released in fiscal year 2000.

                EOS SCIENCE AND MISSION SCIENCE TEAMS--RESEARCH
        Question. How are awards made for each of these sub-program
    elements listed on page SAT 3-45? Are they all award competitively
    through the peer review process (please explain in detail)? Detail all
    individual or institution-based awards for 1999 and 2000, by flight
    project or other relevant indicator, and explain, the use and proposed
    allocation (by subject and individual institution/investigator) of
    extra funds (+$44.2 million/+81 percent) requested for 2001 for Mission
    Science Teams--Research in 2001.
        Answer. The award process used for Research and Analysis--Science,
    EOS Science, Mission Science Teams--Research, and Uncrewed Aerial
    Vehicles (UAV) described below:
        NRA's are periodically developed by the EOS Project Science Office
    in cooperation with appropriate Earth Science Program Managers from
    NASA Headquarters, with input from the EOS instrument science teams via
    their publicly accessible and peer-reviewed Science Data Validation
    Plans, and from the external science community via open workshops. The
    NRA's are subject to the normal peer review and approval process and
    are advertised via Commerce Business Daily and through various mailing
    lists maintained by NASA Headquarters. Peer review is used extensively
    in NASA science, applications, education, technology (SAET) and
    appropriate flight mission acquisitions. It is essential for a high
    quality, relevant program. The use of external peer review enhances the
    quality of NASA's investigations and activities because it brings the
    best and most critical national and international experts to the
    evaluation process. External peer review ensures that fresh viewpoints,
    alternative perspectives and state-of-the-art understanding are
    included in the evaluation process. Each review includes a written
    record of the evaluation and evaluation records are maintained. The
    evaluation results are used to make a judgement about the merits of
    each proposal and ultimately are used as the basis to make a selection
    for an award. For more detailed information regarding our peer review
    and approval process please see our Office Work Instructions HOW17040-
    Y012 found on our web site http://HQISO9000.HQ.HASA.GOV/. Submitted
    proposals are subject to a rigorous peer review process including
    written mail reviews and a panel review by experts. Program Scientists
    from NASA Headquarters are actively involved in the NRA development and
    proposal review process to ensure appropriate integration with NASA's
    Research and Analysis Programs. The selecting official is Director,
    Research Division, Office of Earth Science, NASA Headquarters. Grants
    are implemented within 6 months prior to the planned launch of a
    platform to enable the required preparations to occur prior to the
    availability of the satellite data and, thereby, speed the validation
    process. The Airborne Science and Applications and Information Systems
    activities are not competitively awarded.

                            [In millions of dollars]
    ------------------------------------------------------------------------
                                                      Fiscal years--
                                            --------------------------------
                                                1999       2000       2001
    ------------------------------------------------------------------------
    TOMS Science Team......................        0.9        1.0        1.0
    TRMM Science Team......................       14.3       11.3       13.2
    Seastar Science Team...................        2.5        2.5        2.7
    RADARSAT Science Team..................        2.5        2.4        2.5
    UARS Science Team......................        4.9        4.7        3.0
    ERBE/SAGE Science Team.................        4.3        4.5        3.5
    Altimetry Science Team.................        2.3        1.4        1.5
    NIST Calibration.......................        0.1        0.1        0.1
    SBUV/2 Science Team....................        1.3        1.3        1.2
    Ocean Winds Science Team...............        4.4        3.1        3.7
    AVIRIS/AIR SAR/TIMS Science Team.......        1.6        1.7        1.7
    Pathfinder Data Sets...................        3.5        3.7        3.3
    SIMBIOS................................        5.5        2.0        4.2
    SLR Science............................  .........        8.7        6.7
    Land Cover Science Office..............  .........        1.7        1.5
    ESSP Science...........................  .........  .........        1.0
                                            --------------------------------
          Mission Science Teams............       48.1       55.8      100.0
                                            ================================
    Funding Shift from Algorithm
     Development to Mission Science Teams:
        TRMM Science (transfer \1\ from      .........  .........        4.5
         Algorithm Development)............
        Altimetry Science (transfer from     .........        3.9        4.0
         Algorithm Development)............
        Ocean Winds (transfer from           .........        1.8        1.8
         Algorithm Development)............
        Terra Science Team.................  .........  .........       18.9
        Aqua Science Team..................  .........  .........        7.3
        SAGE III Science...................  .........  .........        3.0
        IceSAT Science.....................  .........  .........        2.7
        Landsat-7 Science..................  .........  .........        2.6
        ACRIM Science......................  .........  .........        0.5
        SORCE Science......................  .........  .........        0.7
        Guest Investigator Program.........  .........  .........        3.2
                                            --------------------------------
          Total Transfer from Algorithm      .........        5.7      49.2
           Development to Mission Science
           Teams...........................
    ------------------------------------------------------------------------
    \1\ Recommend deletion of word ``augmentation & replace with word
      ``transfer''--statement is consistent with restructure

        Mission Science Teams.--Research consists of two primary
    activities:
      --Data Analysis which supports use of the satellite's (both existing
            and new ones) data to produce science results and the
            processing and re-processing of the data toward this end,
            including special requests and requirements for augmented
            science data processing and combination with other data and/or
            models.
      --Calibration and validation which includes activity that supports
            pre- and post-launch calibration and validation required by the
            instrument team to assess the validity, quality and
            applicability/limitations of the derived data products. This
            includes comparisons of data products to those produced by
            other instruments and platforms, vicarious calibration
            (calibration validation via correlative measurements) of Level
            1 data products, and use of analysis and correlative
            measurements to validate Level 2 data products where the latter
            may involve continuous, regular or episodic in-situ and/or
            remote ground-based and/or airborne measurements.
        Fiscal Year 2001 Mission Science Teams-Research $44.2M increase.--
    The Mission Science Teams-Research budget provides the opportunity for
    scientists from all institutions to participate in the analysis,
    verification, and utilization of data from NASA's currently operating
    space-based instruments. The budget increase in fiscal year 2001 is the
    result of funds that were in the past provided to the EOS instrument
    science teams for algorithm development being converted to mission
    analysis. This increase largely reflects the inclusion of the Terra and
    Aqua as members of NASA's currently operating space-based instruments.

                      APPLICATIONS--RESEARCH AND ANALYSIS
        Question. Please breakout allocations for this line on SAT 3-65 for
    1999, 2000, and 2001, including data for each of the four activities
    listed on 3-69 and 3-70 (RESACs, NASA-USDA cooperation, ESIPS, and the
    state and local government initiative).
        Answer. (a) The breakout allocations for SAT 3-65 (Research and
    Analysis--Applications) are as follows:

                                     FUNDING
                            [In millions of dollars]
    ------------------------------------------------------------------------
                                                          Fiscal years--
                  Applications Research              -----------------------
                                                       1999    2000    2001
    ------------------------------------------------------------------------
    Applications and Assessments....................     5.9     9.4     6.8
    Earth Science Extension Network.................     0.5     2.6     7.0
    Natural Hazards.................................     5.4     6.4     5.4
    Project Support.................................     2.4     3.5     2.0
    Applications Earmarks...........................    11.4    11.4  ......
                                                     -----------------------
          Total applications........................    25.6    33.3    21.2
    ------------------------------------------------------------------------

        (b) The breakouts for the four activities listed on SAT 3-69 and 3-
    70 are as follows:

                                     FUNDING
                            [In millions of dollars]
    ------------------------------------------------------------------------
                                                         Fiscal years--
                                                  --------------------------
                                                     1999     2000     2001
    ------------------------------------------------------------------------
    Regional Earth Science Applications Centers       13.7  .......  .......
     (RESACs) RESACs were fully funded in fiscal
     year 1999 for three years of performance
     ($M)........................................
    NASA--USDA Cooperative Projects ($M).........      2.6      2.4      2.3
    Type 3 Earth Science Information Partnerships      2.9      2.8      2.6
     (ESIPs) ($M) [ESIPs are funded by EOSDIS]...
    State and Local (not RESACs or ESIPs) ($M)...      7.3     23.4      8.6
        Applications (ESARP).....................      4.3      4.9      5.1
        State and Local Initiative...............  .......      0.6      3.5
        Congressional Interests:
            RACs.................................      3.0      0.3  .......
            Cayuga County........................  .......      9.2  .......
            Raytheon.............................  .......      6.3  .......
            Univ. of Missouri....................  .......      1.8  .......
            State Univ. of NY....................  .......      0.3  .......
    ------------------------------------------------------------------------

                       APPLICATIONS PARTNERSHIPS/PROJECTS
        Question. Please detail all major projects and/or partnerships
    supported by the Applications, Commercialization and Education whose
    total support over the fiscal year 1999-01 period will exceed $250,000,
    and amounts allocated to each, including such things as the 13 projects
    identified in the USDA partnership, the Type 3 ESIPs, and the 11
    cooperative agreements in state and local programs.
        Answer.

                                                                    [In thousands of dollars]
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                       FISCAL YEARS--
                     STATE                            PROJECT               PRINCIPAL INVESTIGATOR         PI AFFILIATION      -----------------------------
                                                                                                                                   1999       2000     2001
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                           USDA Partnerships--(Ag NRA)

    California \1\........................  Viticultural Integration of  Lee Johnson                  NASA/ARC and CSU........       200.0    200.0    200.0
                                             NASA Technologies for        (ljohnson@mail.arc.nasa.go
                                             Assessment of the            v).
                                             Grapevine Environment
                                             (VINTAGE).
    California \1\........................  Implementation of            Oliver Chadwick              UCSB....................       124.5    110.7    151.5
                                             Predictive Soil Modeling     (oac@geog.ucsb.edu).
                                             in the National
                                             Cooperative Soil Survey.
    California \1\........................  Using Remote Sensing to      Kenneth Tate                 UC-Davis................       199.5    188.3    155.7
                                             Monitor the Impacts of       (kwtate@ucdavis.edu).
                                             Flood-Irrigation of
                                             Meadows in the East Walker
                                             River Basin of California.
    Colorado \1\..........................  Prototyping Value-added EOS  Mark Weltz                   USDA-ARS................       199.9    199.1    199.0
                                             Data for Rangeland           (weltz@gpsr.colostate.edu).
                                             Management and Assessment.
    Kansas \1\............................  Remote Sensing-based         Mark Jakubauskas             Univ. of KS.............       198.9    200.0    180.0
                                             Geostatistical Modeling      (mjakub@eagle.cc.ukans.edu
                                             for Coniferous Forest        ).
                                             Inventory and
                                             Characterization.
    Maryland \1\..........................  Forest Characterization and  Ralph Dubayah                UMD.....................       199.6    198.0    199.5
                                             Inventory using Airborne     (rdubayah@geog.umd.edu).
                                             and Space-based Lidar.
    Maryland \1\..........................  Assessment of Global Crop    Paul Doraiswamy              USDA-ARS................       170.1    164.0    156.9
                                             Production from New          (pdoraisw@asrr.arsusda.gov
                                             Generation Remote Sensing    ).
                                             Technology.
    Michigan \1\..........................  Forest Structure from Multi- Craig Dobson                 Univ. of MI-Ann Arbor...       194.9    198.8    200.3
                                             spectral Fusion.             (dobson@umich.edu).
    Minnesota \1\.........................  Integrating Satellite        Marvin Bauer                 Univ. of MN.............       200.0    200.0    200.0
                                             Remote Sensing into Forest   (mbauer@tc.umn.edu).
                                             Inventory and Management.
    Minnesota \1\.........................  Mapping Consistent Within-   Damien Lepoutre              GEOSYS Inc..............       200.0    200.0    200.0
                                             Field Patterns of            (dlepoutre@geosys__intl.co
                                             Variability Using Multi-     m).
                                             temporal Satellite Images.
    Mississippi \1\.......................  Leaf Area and Volume         Scott Roberts                MSU.....................       182.1     96.8  .......
                                             Estimates in Loblolly Pine   (sroberts@cfr.msstate.edu).
                                             Forests Derived from
                                             Aerial Lidar.
    Montana \1\...........................  Developing Methods for       Robert Keane                 USDA Forest Service.....       199.2    198.7    199.3
                                             Mapping Fuel                 (rkeane@fs.fed.us).
                                             Characteristics for
                                             Predicting Fire Behavior
                                             Across the United States.
    South Dakota \1\......................  Regional Change Monitoring   Data Douglas Stow            SDSU....................       199.1    198.8    199.0
                                             of Habitat Reserve Systems   (stow@sdsu.edu).
                                             with Very High Resolution
                                             Remotely Sensed.
    South Dakota \1\......................  Application of Remote        Maribeth Price               SD School of Mines &           115.7     93.1     97.2
                                             Sensing to Forest Resource   (mprice@msmailgw.sdwt.edu).  Techn.
                                             Inventory and Habitat
                                             Modeling.

                                                Type 3 ESIPs ( \2\ ) and Coop Agreements ( \3\ )

    California \2\........................  ESE Education Series.......  Catherine Gautier            Planet Earth Science Inc       130.0    150.0    200.0
                                                                          (gautier@planearthsci.com).
    California \2\ \3\....................  California Land Science      Gary Darling                 CERES, California              470.0    320.0    338.0
                                             Information Partnership      (gary@ceres.ca.gov).         Resources Agency.
                                             (CaLSIP).
    California \2\ \3\....................  Integration and Application  David Etter                  Bay Area Shared Info.          200.0    200.0    150.0
                                             of MTPE Data and             (detter@basic.org).          Consortium.
                                             Information to the San
                                             Francisco Bay Area and
                                             Monterey Bay Region.
    District of Columbia \2\..............  NBC News and Information:    Dave Jones                   WRC-TV..................       400.0    400.0    350.0
                                             ESE Data to the World.       (dave.jones@nbc.com).
    Maryland \2\..........................  Integrating Environmental    Konstantinos Kalpakis        USRA/CESDIS.............       320.0    340.0    230.0
                                             and Legal Information        (kalpakis@csee.umbc.edu).
                                             Systems.
    Minnesota \2\ \3\.....................  TerraSIP: A Spatial          Thomas Burk                  Univ. of MN.............       240.0    260.0    199.0
                                             Information Partnership      (tburk@forestry.umn.edu).
                                             for Land Managers.
    New Mexico \2\ \3\....................  Performing a Regional        Stan Morain                  UNM.....................       200.0    200.0    251.0
                                             Assessment and Prototyping   (smorain@spock.unm.edu).
                                             Internet Accessible ESE
                                             Products for the Upper Rio
                                             Grande Basin.
    North Dakota \2\......................  A Public Access Resource     George Seielstad             Univ. of North Dakota...       500.0    500.0    500.0
                                             Center (PARC): Empowering    (gsteielst@aero.und.edu).
                                             the General Public to Use
                                             EOSDIS Phase III
                                             Operations.
    Texas \2\.............................  Creating Museum and School   Patricia Reiff               Rice Univ...............       450.0    475.0    400.0
                                             Learning Modules and         (reiff@rice.edu).
                                             Immersive Planetarium
                                             Shows.

                                                             Cooperative Agreements

    Arizona \4\...........................  NASA Southwest Earth         Roger Bales                  Univ. of AZ.............  \5\ 1,500.  .......  .......
                                             Science Applications         (roger@hwr.arizona.edu).                                       0
                                             Center.
    Arizona \4\...........................  Support of USGCRP Regional   Wil Orr....................  Prescott College........       430.0    430.0    430.0
                                             Workshops on Global
                                             Climate Change: Develop
                                             Model Linking Local
                                             Sustainability to Global
                                             Climate: Remote Sensing
                                             Applications Research for
                                             Local Governments.
    California \4\........................  California Water Resources   Norman Miller                LLL.....................  \5\ 1,500.  .......  .......
                                             Research and Applications    (nlmiller@lbl.gov).                                            0
                                             Center.
    California \4\........................  Southern California Center   Chris Lee                    CSU, Dominguez Hills....  \5\ 1,600.  .......  .......
                                             for Managing Fire Hazards    (ctlee@research.csudh.edu).                                    0
                                             at the Urban-Wildlands
                                             Interface.
    Connecticut \4\.......................  Better Land Use Planning     Chester Arnold               Univ. of CT.............  \5\ 1,100.  .......  .......
                                             for the Suburbanizing        (chester.arnold__jr@uconn.                                     0
                                             Northeast.                   edu).
    Maryland \4\..........................  Remote Sensing for Resource  Stephen Prince               UMD.....................  \5\ 1,730.  .......  .......
                                             Management: The Mid-         (sp43@umail.umd.edu).                                          0
                                             Atlantic RESAC Consortium.
    Minnesota \4\.........................  Upper Great Lakes Regional   Marvin Bauer                 Univ. of MN.............  \5\ 1,500.  .......  .......
                                             Earth Sciences Application   (mbauer@tc.umn.edu).                                           0
                                             Center.
    New York \4\..........................  Use of ESE Data for Cayuga   Bob Brower                   Cayuga County, NY.......     3,000.0  9,200.0
                                             County Planning.             (bbrower@co.cayuga.ny.us).

                                                                 Other Projects

    Alabama \6\...........................  Southeast Regional           J.F. Cruise                  UAH.....................       300.0    300.0    300.0
                                             Assessment.                  (cruise@uah.edu).
    Alabama \6\...........................  Economic Impact of Water     J.F. Cruise                  UAH.....................       150.0    100.0    150.0
                                             Allocation on Agriculture    (cruise@uah.edu).
                                             in the Lower
                                             Chattachoochee River Basin.
    Alabama \6\...........................  Flood Damage Prevention      J.F. Cruise                  UAH.....................       150.0    100.0    100.0
                                             using Remotely-sensed Data   (cruise@uah.edu).
                                             and a Mesoscale
                                             Atmospheric Model.
    Arizona \6\...........................  Agriculture Applications     Chuck Hutchinson             Univ. of AZ.............       200.0    140.0    200.0
                                             Research.                    (chuck@ag.arizona.edu).
    Arizona \6\...........................  Space/Land Grant Geospatial  Barron Orr                   Univ. of AZ.............       150.0    100.0    150.0
                                             Technology Extension.        (barron@ag.arizona.edu).
    California \6\........................  Pest Control in Precision    Nahum Gat (nahum@oksi.com).  OKSI....................       300.0    300.0  .......
                                             Farming using
                                             Hyperspectral Imaging.
    California \6\........................  Agriculture Industry-        James Tatoian                R&D Laboratories........       300.0    300.0    300.0
                                             Oriented EOCAP-SAR Study.    (tatoan@rdl.com).
    California \6\........................  Hyperspectral Detection of   Lee Johnson                  CSU Monterey Bay........       200.0    204.5  .......
                                             Nitrogen Stress in           (ljohnson@mail.arc.nasa.go
                                             Vegetable Crops: A Case      v).
                                             Study in the Salinas
                                             Valley of Monterey County,
                                             California.
    California \6\........................  Commercial Utilization of    Jan Svejkpovsky              Ocean Imaging...........       251.1    252.2    174.1
                                             SAR Data for High-           (jan@oceani.com).
                                             Frequency Coastal Zone
                                             Monitoring with Multi-user
                                             Application.
    California \6\........................  Improving Understanding      Jack Estes                   UCSB....................       500.0    390.0    390.0
                                             Role of ESE Data by Public   (estes@geog.ucsb.edu).
                                             and Private Applications
                                             Researchers, Potential
                                             Commercial Applications of
                                             ESE Data; Remote Sensing
                                             Curricula Development.
    California \6\........................  State and Local              Chris Lee                    CSU, Dominguez Hills....       100.0    150.0    150.0
                                             Applications Workforce       (ctlee@research.csudh.edu).
                                             Development.
    California \6\........................  Flood Plain Modeling Based   Van Zyl                      JPL.....................       100.0    100.0    100.0
                                             on Data Fusion of            (jakob.j.vanzyl@jpl.nasa.g
                                             Polarimetric SAR             ov).
                                             Interferometry and Laser
                                             Altimetry.
    California \6\........................  Thermal IR Remote Sensing    Sabins.....................  Bing Yen & Assoc........       100.0    100.0    100.0
                                             for Reducing Landslide
                                             Hazards in Southern
                                             California.
    California \6\........................  InSAR Measurements of        Mariana Eneva                Maxwell Technologies           100.0    100.0    100.0
                                             Crustal Deformation from     (meneva@maxwell.com).        Sys. Div.
                                             Large Rockbursts in Mines.
    California \6\........................  Development of a Fully       Donnellan..................  JPL.....................       190.0    190.0    190.0
                                             Three-Dimensional Model of
                                             Interacting Fault Systems
                                             for Interpretation of GPS
                                             and InSAR Observations.
    California \6\........................  CASSANDRA: A Storm Based     William Dietrich             UC Berkeley.............       110.0    110.0    110.0
                                             Model for Forecasting the    (bill@geomorph.berkeley.ed
                                             Initiation and Runout of     u).
                                             Debris Flows.
    Colorado \6\..........................  EOCAP-SAR: Land Cover        Russ Cowart                  I3-Information,                299.8    299.4    300.0
                                             Classification and DEM's     (rcowart@i3.com).            Integration & Imaging.
                                             for Telecommunication
                                             Tower Siting.
    Colorado \6\..........................  Application of Airborne      Phoebe Hauff (pusa@rmi.net)  Spectral International         275.0    300.0  .......
                                             Hyperspectral Data to                                     Inc.
                                             Characterization of Mined
                                             Lands and Analysis of
                                             Associated Watersheds and
                                             Impacts for Environmental
                                             Management.
    Colorado \6\..........................  SARMap GIS Information       David Cohen                  Vexcel Corp.............       299.3    299.8    297.8
                                             Package.                     (cohen@vexcel.com).
    District of Columbia \6\..............  Interagency Research         Nancy Maynard                NASA/GSFC...............       250.0  .......  .......
                                             Program in Environmental     (seawifs.gsfc.nasa.gov).
                                             Health.
    District of Columbia \6\..............  Landslide Modeling and       Bulmer                       Smithsonian Institu-            87.0     96.0     72.0
                                             Forecasting Utilizing        (mbulmer@ceps.nasm.edu).     tion.
                                             Remotely Sensed Data
                                             (LANDMOD).
    Indiana \6\...........................  Increasing Public Benefits   Bernie Engel                 Purdue University.......       100.0     60.0    100.0
                                             of Existing NASA Earth       (engelb@purdue.edu).
                                             Sciences Data:
                                             Multipurpose Applications
                                             in an Agricultural
                                             Watershed.
    Kansas \6\............................  Development of Agriculture,  Kevin Price (k-              Univ. of KS.............       150.0    150.0    150.0
                                             Land Use Mapping and         price@ukans.edu).
                                             Monitoring Protocol for
                                             the Great Plains.
    Kansas \6\............................  The Great Plains Regional    Edward Martinko (e-          Univ. of KS.............   \5\1,550.  .......  .......
                                             Earth Science Applications   martinko@ukans.edu).                                           0
                                             Center (GP-RESAC): A
                                             Consortium to Transfer
                                             Remotes Sensing Products
                                             and Technology to Support
                                             the Great Plains
                                             Agroecosystem.
    Maryland \6\..........................  AVHRR Support to Health      Compton J. Tucker            NASA/GSFC...............       300.0    200.0       na
                                             Researchers.                 (compton@kratmos.gsfc.nasa
                                                                          .gov).
    Maryland \6\..........................  Development of a Health      Steve Kempler                NASA/GSFC...............       320.0       na       na
                                             Archive at the Goddard       (kempler@daac.gsfc.nasa.go
                                             Global Change Data Center.   v).
    Maryland \6\..........................  Baltimore-Washington         Tim Foresman                 UMBC....................       200.0    130.0    130.0
                                             Corridor Change Detection    (foresman@hq.nasa.gov).
                                             & Development of
                                             Historical Agriculture,
                                             Forestry, LU/LC Study.
    Maryland \6\..........................  Direct State and Local       Bill Burgess                 NSGIC...................       100.0    100.0    100.0
                                             Government Participation     (wburgess@dnr.state.md.us).
                                             in NASA Outreach and
                                             Applications Activities.
    Michigan \6\..........................  Commercial Use of Orbital    Craig Dobson                 EnviSense Corp..........       299.8    300.0    300.0
                                             SAR for Renewable            (dobson@umich.edu).
                                             Resources--The Timber
                                             Industry: Product
                                             Development and Market
                                             Assessment.
    Michigan \6\..........................  Monitoring and Prediction    Darren Miller                ERIM Int'l..............       300.0    300.0    300.0
                                             of Coastal Oceanic           (dmiller@erim__int.com).
                                             Processes Utilizing High
                                             Resolution SAR Imagery.
    Montana \6\...........................  Validation of High-          Robert Crabtree              Yellowstone Ecosystem          300.0    300.0  .......
                                             Resolution Hyperspectral     (yes@yellowstone.org).       Studies.
                                             Data for Stream and
                                             Riparian Habitat Analysis.
    Nebraska \6\..........................  Application of               Paul Doraiswamy              USDA-ARS................       268.2    275.7  .......
                                             Hyperspectral Data for       (pdoraisw@asrr.arsusda.gov
                                             Site Specific Farm           ).
                                             Management.
    New York \6\..........................  Water Quality Monitoring     Rulon Simmons                Eastman Kodak...........       300.0    300.0  .......
                                             with Hyperspectral Imaging.  (rulon.simmons@kodak.com).
    New York \6\..........................  Kodak Earth Imaging: Demand- Elizabeth Frey               Eastman Kodak-Commercial       300.0    300.0    300.0
                                             Driven LightSAR Product      (svogler@kodak.com).         & Gov't Systems Div.
                                             Fulfillment.
    New York \6\..........................  Landslide Mechanisms and     Jeff Weissel                 Columbia Univ...........       167.0    148.0    145.0
                                             Hazard Assessment in         (jeffw@columbia.edu).
                                             Mountain Regions of the
                                             Pacific Rim using SRTM.
    North Carolina \6\....................  Exploitation of              Mark Karaska                 Applied Analysis Inc....       293.3    299.6  .......
                                             Hyperspectral Imagery        (mkaraska@discover__aai.co
                                             (AVIRIS) for Water Quality   m).
                                             Assessment and Monitoring.
    North Dakota \6\......................  Prototype EOSDIS Extension   George Seielstad             UMAC....................     1,000.0    650.0  1,000.0
                                             Project: Extend ESE Data     (gsteielst@aero.und.edu).
                                             into Agribusiness, K-12
                                             Education.
    North Dakota \6\......................  Northern Great Plains        George Seielstad             Univ. of North Dakota...  \5\ 1,720.  .......  .......
                                             Regional Earth Science       (gsteielst@aero.und.edu).                                      0
                                             Applications Center.
    Ohio \6\..............................  Applications of              James Riddell                MTL Systems Inc.........       299.6    299.8  .......
                                             Hyperspectral Data.          (jriddell@mtl.com).
    Texas \6\.............................  Commercial Development of    Doran Geise                  Earth Info. Sys. Corp...       292.6    318.9    278.7
                                             Enhanced Products from       (dgeise@eisyscorp.com).
                                             LightSAR Data for the
                                             Wireless and Oil/Gas
                                             Industries.
    Texas \6\.............................  Development of Surface       Ed Biegert                   Shell Exploration and          100.0    100.0    100.0
                                             Deformation Map Products     (EB723475@msxsepc.shell.co   Production Technology
                                             for Humid, Urban Areas       m).                          Company.
                                             using Radar Interferometry.
    Virginia \6\..........................  Development of Surface       Ann Carlson                  NASA/LaRC...............       125.0    125.0    120.0
                                             Solar Energy Data Sets for   (a.b.carlson@larc.nsa.gov).
                                             Commercial Applications
                                             for Placement of Solar
                                             Power Facilities.
    Washington \6\........................  Ocean Current Measurements   David Lai (dlai@nwra.com)..  NorthWest Res. Assoc.          172.7    237.3    297.2
                                             Using SAR.                                                Inc.
    Washington \6\........................  Remote Characterization of   Phil Cassady                 Boeing Info, Space &           300,0    300.0  .......
                                             Agricultural Crop Stress.    (philip.e.cassady@boeing.c   Defense Sys.
                                                                          om).
    Washington \6\........................  SAR-based Decision Support   Kenneth Cobleigh             Boeing Info, Space &           300.0    300.0    300.0
                                             of Forestry Operations.      (kenneth.a.cobleigh@boeing   Defense Sys.
                                                                          .com).
    Wisconsin \6\.........................  The Midwest Center for       George Diak                  Univ. of WI.............   \5\1,500.  .......  .......
                                             Natural Resource             (george.diak@ssec.wisc.edu                                     0
                                             Management.                  ).
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    \1\ AG NRA.
    \2\ ESIP (Earth Science Information Partnership).
    \3\ ESIP and Cooperative Agreements.
    \4\ Cooperative Agreements.
    \5\ RESAC--Funded in fiscal year 1999 for three years.
    \6\ Other.

                          ADVANCED TECHNOLOGY FUNDING
        Question. Please explain how the proposed ATD program, for which
    $110.7 million is requested in 2001, is used to support specific
    missions and activities anticipated to be funded in the EOS Follow-on
    and Earth Probes future missions.
        Answer. Three technology programs are involved: the Earth Science
    Technology Office (ESTO) Program, the New Millennium Program (NMP), and
    the High Performance Computing and Communications Program (HPCC).
    Overall program management is accomplished through Enterprise-level
    strategic technology planning procedures that include comprehensive
    requirements analysis and investment prioritization processes that
    fully engage the science and applications communities.
        The ESTO project areas are linked to the EOS follow-on missions as
    well as the Earth Probes by developing the technologies essential to
    enable the future measurements. ESTO requirements are linked to and
    approved by the Science and Applications Division Directors. Candidate
    missions are identified by scientific emphasis, e.g. Global
    Precipitation Mission or Soil Moisture. Specific examples of ESTO-
    funded technologies that are directly related to these missions follow:
      --Advanced Technology Initiatives.--Global Precipitation Mission
            (e.g. high data rate modulator/demodulators, cross-link
            components), Tropospheric Winds mission (e.g. convective
            cooling), NPP (e.g. components for reconfigurable computing).
            Platform technologies to support Ocean Winds (e.g. light
            weight, low power electronics, KA-band phased array).
      --Instrument Incubator.--Sea Surface Salinity and Soil Moisture (e.g.
            thinned array and mesh antenna); Tropospheric Chemistry (e.g.
            ozone DIAL, compact hyperspectral sensor), Ocean Topography
            (e.g. wide swath altimeter, delay Doppler radar)
      --Advanced Information Systems Program.--Global Precipitation Mission
            (e.g. high data rate downlinks--Ka-band or optical, inter-
            satellite cross-links, Internet like inter-satellite
            communications); Landsat Next (on-board processing), Soil
            Moisture (e.g. high data rate computational radiation-hard
            components, intelligent sensor control); Sea Surface Salinity
            (e.g. high data rate communications, on-board processing).
        The NMP is successfully implementing new procedures for identifying
    and selecting space flight validation missions for critical Earth
    Science measurement techniques and operational concepts. The EO-3 is
    intended to demonstrate EOS type measurements from geostationary orbit
    and it will be launched in 2005. Future NMP demonstrations will be
    essential as ESE moves to more sophisticated instruments, intelligent
    spacecraft, complex sensor constellations, and explore new vantage
    points for space-based Earth observations.
        The HPCC has as its program objective to develop supercomputers and
    associated software tools to increase the ability of scientists to
    model the Earth's climate and geophysical infrastructure and predict
    global environment trends. This is accomplished by using high capacity
    and speed among distributed modeling facilities and thus enables the
    integration and interoperability of multi-disciplinary models. A goal
    is to integrate improved model fidelity and interoperability into
    multi-disciplinary models and to validate results with outputs from
    satellite sensor data sets from all science missions. Advanced data
    visualization techniques are also developed through HPCC. Unraveling
    most of the more complex science questions and applying this knowledge
    to practical problems will rely on the capabilities enabled through the
    HPCC investments.

                                ATD COMPETITION
        Question. Please describe the ratio of intramural/extramural
    funding for all funds identified in the new ``Technology Infusion''
    earth science budget activity in 1999 and 2000, including allocations
    to all NASA Centers made without the benefit of competition. Please
    also provide the number of civil servants/JPL contract officials who
    are involved in earth science ATD activities.
        Answer. It should be noted that Technology Infusion is not new
    scope since it was moved to a new place in the budget structure. The
    Technology Infusion earth science budget activity includes three major
    program areas: the New Millennium Program, the High Performance
    Computing and Communications Program, and the set of project areas
    grouped under the Earth Science Technology office at GSFC. All three
    program areas rely heavily on the competitive process to solicit
    projects. Partnerships and cooperation among industry, academia, and
    government research labs, including those at NASA, is encouraged in all
    solicitations. Many of the fiscal year 1999 and 2000 awards included
    such partnerships. In fact, NASA Centers are often partners with others
    from outside the agency and significant portions of the funds for such
    projects go to the non-NASA partners. For definitional purposes
    `intramural' means that the funds are primarily obtained by a NASA
    Center through competition for expenditure. With this definition, the
    percentages of `intramural' as a ratio of total technology budget
    amounts to approximately 11 percent of the total budget for fiscal
    years 1999 and 2000. Even so, much of the work conducted at the Center
    through the `intramural' investment is done with previously competed
    contract support and agreements with universities. The remaining 89
    percent for FYs 1999 and 2000 is awarded to universities, industry and
    other federal labs, consistent with their technical expertise and
    technologies they have to offer to meet ESE's strategic objectives
    through open solicitation and peer review process. The FTEs including
    JPL staff involved in earth science ATD activities are about 150 and
    120, respectively, for fiscal years 1999 and 2000.

                                ATD COMPETITION
        Question. Does Code Y support the directive that 75 percent of all
    ATD funds should be competed? Please explain.
        Answer. As part of a larger effort the Agency is reviewing the
    methods by which it identifies and solicits advanced technologies
    especially those at very low Technology Readiness Levels (TRLs). With
    regard to its own funded technology programs, which tend to focus on
    higher TRLs to meet ESE's strategic objectives, the Office of Earth
    Science supports and is implementing the directive that 75 percent of
    all ATD funds should be competed.
        Specifically, under the designation of Technology Infusion, the
    Earth Science Enterprise conducts its New Millennium, Advanced
    Technology Initiatives, Instrument Incubator, Advanced Information
    Systems, and the High Performance Computing and Communications project
    activities through a higher level of competition than the 75 percent
    goal established in legislation. Following the first initial years of
    their existence, the Advanced Technology Initiatives and the Instrument
    Incubator will increase their level of competition to the fullest
    extent during fiscal year 2000, bringing the total level of competition
    for Earth Science advanced technology activities to about 90 percent.
        A description of the processes presently in place for conducting
    the technology infusion competitions is provided below. This broad
    level of competition helps to ensure that the most applicable
    competencies and capabilities have ample opportunity to participate in
    the program through the proposal review process. Utilizing this high
    level of broad announcements helps to ensure that there is a clear and
    wide distribution of information regarding the opportunities for
    participation and a clear communication of the expectations of the
    types of contributions that are needed to help achieve the objectives
    of the Enterprise's Strategic Plan. Therefore the applicable core
    competencies at the NASA Centers have clear information on the
    opportunities that exist along with ample opportunity to participate in
    the Earth Science technology infusion activities through the
    competitive process.
        The New Millennium Program (NMP) managed by JPL selects ESE flight
    projects using a two-step competition. The current EO-3 competition is
    using this process. The first step is a NRA calling for ``measurement
    concepts'' aligned with a technology focus identified by the Associate
    Administrator for Earth Science (AA). Of the submitted proposals a
    small number of measurement concepts are recommended by peer review for
    further study. The AA then selects those to be awarded study funding.
    For EO-3, four concepts were selected. During the study phase, the
    study teams are offered the opportunity to identify ``enabling
    technologies'' for their concepts. Another competition is conducted to
    select technology sources for these enabling technologies the winners
    of which are added to the study teams. At the end of the study phase
    (usually 6 months), Step 2 takes place when the Step 1 Study Reports
    are evaluated by Peer-review panels for management and programmatics,
    science and technology suitability, and cost realism. The AA selects
    one that then enters a mission development phase.
        The 5 percent of the funding that is ``assigned'' to a specific
    Center under the New Millennium program is sent to the Jet Propulsion
    Laboratory to cover the costs of JPL's management expertise for this
    program effort. It also supports studies that define the most useful
    technologies to be pursued by the Enterprise to meet its science
    objectives. Similar to employing JPL expertise in advanced technology
    for New Millennium, the Earth Science Technology Office (ESTO) at the
    Goddard Space Flight Center is responsible for the development of the
    Enterprise's technology strategy. Such expertise also provides
    management of the Advanced Technology Initiatives, Instrument
    Incubator, and Advanced Information Systems Technology activities,
    which are described in the following paragraphs.
        For fiscal year 1999 the Advanced Technology Initiatives (ATI)
    project area managed by the Earth Science Technology Office at GSFC
    directed the funding to LaRC to invest in ongoing component technology
    developments. Funding for ATI in fiscal year 1999 was a transition year
    for projects formerly in the Cross-Enterprise technology development
    program managed by OSS. Half of that program was competed and half was
    directed work at the NASA field Centers. The ATI project area for
    fiscal year 2000 has been competed at 100 percent. Contracts lasting up
    to three-year based on annual progress will be awarded for instrument
    component technologies. The plan for the ATI project area is to reissue
    competitive NRAs every other year in targeted sensors and sensor web
    technologies.
        The Instrument Incubator Program was competed as a NRA in fiscal
    year 1999, with up to three year contracts to industry, academia and
    government agencies. Project success will be based on annual progress
    reviews. The intention is to compete these instrument systems
    investments every other year.
        For fiscal year 1999 the Advanced Information Systems Technologies
    funds originated in the Prototype line in the EOSDIS Program. Prior to
    becoming part of the ESTO Program this prototype line was originally
    competed through requests for white papers then evaluated using peer
    review. This project area will be a major component of technology
    investment in the future. A formal NRA was released in early fiscal
    year 2000 resulting in 27 awards to teams from industry, academia, NASA
    Centers, and other government agencies. The Enterprise's approach for
    developing unique and critical aspects of a distributed systems
    architecture for information systems will be obtained through this
    competitive area.
        Beginning in fiscal year 2000 the High Performance Computing and
    Communications Program is using the NASA Cooperative Agreement Notice
    to select Grand Challenge Applications and Principal Investigators.
    This is a competitive process. Part of this program (about 25 percent)
    will be directed at extremely unique opportunities and to fund
    operation of the computing infrastructure.

                              SUBCOMMITTEE RECESS

        Senator Bond. So with that, the hearing is recessed.
        [Whereupon, at 11:22 a.m., Tuesday, April 13, the
    subcommittee was recessed, to reconvene subject to the call of
    the Chair.]

     DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT AND
            INDEPENDENT AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2001

                                  ----------

                             THURSDAY, MAY 4, 2000

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 9:34 a.m., in room SD-138, Dirksen
    Senate Office Building, Hon. Christopher S. Bond (chairman)
    presiding.
        Present: Senators Bond and Mikulski.

                          NATIONAL SCIENCE FOUNDATION

    STATEMENT OF DR. RITA COLWELL, DIRECTOR

                    OFFICE OF SCIENCE AND TECHNOLOGY POLICY

    STATEMENT OF NEAL LANE, DIRECTOR

                             NATIONAL SCIENCE BOARD

    STATEMENT OF DR. EAMON KELLY, CHAIRMAN

                OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

        Senator Bond. Good morning. The Subcommittee on VA, HUD and
    Independent Agencies will come to order. This is the last but
    not the least important budget hearing for the subcommittee.
    It's one which the Ranking Member and I have very great
    interest.
        We're here today to review the fiscal year 2001 budget
    request of the Office of Science and Technology Policy and the
    National Science Foundation. We welcome Dr. Neal Lane, who is
    the President's chief science adviser and Director of OSTP.
    Also we welcome Dr. Rita Colwell, Director of NSF and Dr. Eamon
    Kelly, Chairman of the National Science Board.
        You and your agencies have been critical to the success of
    Federal basic scientific research in this country, and we
    commend you for your vision, for your work, and we look forward
    to even bigger and better things from you in the future.
        As we convene this hearing, we celebrate the Foundation's
    50th anniversary this month. Both Senator Mikulski and I, along
    with other members of the subcommittee, have been strong
    supporters of the Federal commitment to basic science. It is
    clear that the Federal investment in research and development
    has been very positive, it's been critical for the economic and
    intellectual growth and well-being of our nation.
        Since its creation in 1950 with the support of a fellow
    Missourian, President Harry Truman, NSF has been responsible
    for numerous important scientific and technological advances
    that have benefited our society. NSF-funded research has helped
    us better understand the origins of the universe, developed
    what we call the Internet today, which NSF can legitimately
    claim the fatherhood of, and led to important medical advances
    such as the MRI.
        With this subcommittee's support, NSF has also pushed the
    boundaries of information technology and biotechnology, two of
    the fastest growing industries in this country. I am intrigued
    by the administration's new proposal to invest in
    nanotechnology. From what I've heard, even though I don't
    understand it, this new area may lead to innovations that only
    science fiction writers can imagine.
        As many of you know, I have a particular interest in the
    Federal investment in biotechnology, especially plant
    biotechnology. I strongly believe that biotechnology and mainly
    the plane genome research that we've worked on in this
    committee is imperative in maintaining the long-term
    sustainability and competitiveness of U.S. agriculture.
    Further, plant genome research has exciting possibilities for
    improving human health and nutrition, lessening the impact of
    damaging chemicals on the environment and meeting the truly
    human compelling needs of children and families in the less
    developed countries in the world.
        The sad reality, unfortunately, is that hysteria and fear
    instead of reason seem to be driving the debate surrounding
    biotechnology. The most recent example is a large potato
    processor in Idaho, forced no longer to use genetically
    modified potatoes. It was deeply troubling to me to read that
    the Idaho company decided to stop using genetically modified
    potatoes despite their belief that ``biotechnology is important
    for agriculture and providing affordable food.'' This looks
    like another case where decisions are being driven by
    misinformation in reaction to hysteria instead of facts.
        As I've said before and I'll continue to say over and over
    again, it's absolutely critical that we educate the public
    about biotechnology. Many in the public have legitimate
    questions about biotechnology, and we need to answer those
    clearly and in readily understandable terms. It is important
    that the public understands that genetically modified foods are
    the most heavily reviewed and tested of our food products, and
    are subjected to thorough scientific review.
        In the words of Dr. Jane Henney, Commissioner of Food and
    Drugs, ``FDA's scientific review continues to show that all
    bioengineered foods sold here in the United States are as safe
    as their non-bioengineered counterparts.'' Let me repeat: They
    are as safe as non-bioengineered counterparts, and that is a
    message that has been lost on the American public.
        Working together with other policymakers, media, academic
    leaders, and advocates for the needy, we need you, the three of
    you there and the people that work with you, to ensure that
    people have the information to separate fact from fiction. Dr.
    Lane, Dr. Colwell, Dr. Kelly, you and your colleagues within
    the administration must provide a unified voice on the science
    on which biotechnology is based. I ask your assurances that you
    will help us in reducing consumer confusion about
    biotechnology.
        We need people to understand that through biotechnology
    real world problems of sickness, hunger, and resource depletion
    are being solved. With your active involvement, I trust that
    reason and not hype will prevail in the debate.
        Now to the budget. NSF is requesting a $675 million or 17.3
    percent increase in its budget for fiscal year 2001. If enacted
    and if we can find the money, this would raise NSF's budget
    from $3.9 billion to almost $4.6 billion. And there's nothing
    I'd rather do. I appreciate the administration's support for
    the Foundation and congratulate NSF for receiving such a large
    budget increase.
        Personally I intend to work with my colleagues in the
    Senate to ensure that they understand the importance of NSF
    research and hopefully, we can convince them that NSF deserves
    a strong budget.
        That said, the reality is that this will be a very
    difficult year for the subcommittee. As the Ranking Member and
    I have suggested, where we stand right now is an impossible
    situation. We have major funding needs that are priorities and
    need to be balanced, ranging from medical care for veterans to
    housing for low-income Americans to emergency assistance for
    Americans affected by natural disasters, as well as providing
    vitally needed and important increases in the funding of basic
    science.
        We have a balanced budget for the second year in a row
    after many years of deficit spending. And any surplus must
    first be dedicated to the reform of Social Security. I think we
    all understand that. But we also have the situation where we
    have advised the chairman of the full committee, and I trust
    the ranking member of the full committee, that we do not have
    an allocation that will enable us to do what we must do; and we
    are going to continue to work over the coming weeks to make
    sure that we are able to get a budget that can be passed and we
    hope that it will include enough resources to provide the kind
    of increase that we personally feel is vastly needed and would
    be very well spent in NSF.
        Notwithstanding the budgetary issues, I have some questions
    about the Foundation's capacity to handle such a large budget
    increase, and a number of new complex program responsibilities.
        Auditors who have looked at your books have not identified
    any significant financial or management problems with NSF, but
    I'm concerned with NSF taking on more responsibilities when its
    staffing resources have remained flat over the past several
    years. In NSF's own budget justification, it notes that the
    level of funding requested for salaries and expenses
    ``essentially covers existing FTEs and operations and has not
    kept pace with the growth in program activities.'' That's a
    flashing light that we need to be discussing more with you.
        Count me as skeptical also about the efficacy and
    effectiveness of multi-agency initiatives. While I support the
    Information Technology Initiative, I remain concerned that the
    Foundation may be trying to take on more than it may be able to
    handle under current circumstances. Like the IT initiative, NSF
    would be the lead agency for the nanotechnology initiative. I
    need to hear how NSF is handling current multi-agency
    initiatives such as IT, and how IT would be able to handle the
    additional ones it has proposed in this year's budget.
        I also have questions about the large budget allocation for
    the nano initiative. NSF's budget for this research area would
    be increased by 123 percent over the fiscal year 2000 spending
    level. Given that the administration described nanotechnology
    and nanosciences as newly emerging fields, why did the
    administration request such a large funding increase? How was
    this increase determined, and the administration's long-term
    funding plan for this initiative. Especially compared to what
    we know are the compelling needs in the existing areas of
    research, which many people feel are not yet being met.
        It's also unclear to me how the administration plans to
    implement the nanotechnology initiative; how it would be
    managed, how it would be overseen, what performance measures
    will be used to judge its success, how will the duplication be
    avoided among the various agencies, and how will Federal
    nanoactivities be coordinated with similar private sector
    activities? Especially I would like to hear what role OSTP will
    play in the nanotechnology initiative and how it will resolve
    conflicts between agencies.
        Let me be clear on this: before I can support the nano
    initiative, I will need to be convinced that NSF has been able,
    effectively to manage the multi-agency initiatives it's
    currently involved in, especially the IT program; and the
    administration has a clear and cohesive implementation plan in
    place.
        The last point I raise is the Foundation's support for the
    institutions and groups that do not receive adequate financial
    assistance; namely, smaller research institutions.
        Let me be blunt: It was disappointing to me that the
    administration did not request funds for the Office of
    Innovation Partnerships, which is an important initiative not
    just to me but to this committee and to Congress, and it was
    included in last year's appropriations. It is also troubling
    that NSF's or OMB's decision was to flat-fund the Experimental
    Program to Stimulate Cooperative Research, or EPSCoR.
        Both of these programs are important in assisting those
    schools that do not have the same clout or private endowment
    support as the larger schools have. The Federal Government must
    be an active supporter to help level the playing field and
    ensure that these smaller schools and their students are not
    left behind.
        We're talking about capacity and capacity building. Where
    is the capacity? In some instances, it appears that the rich
    get richer, and the indirect costs build the capacity of those
    institutions that are clearly the ``have'' institutions. Is
    this a smart way to go? Should we continue to move certain
    schools far ahead of the pack? Should we be providing on a
    systematic basis capacity for other institutions which could
    attract the capable scientists and the engineers if they had
    the infrastructure in place to do so, so that we would broaden
    the opportunities for more and more areas, particularly more
    students to participate in and become the leaders we need in
    science, engineering, and technology for the future. This is
    something that we're going to have to talk about a good bit,
    and we need your guidance on this.
        Last, I applaud NSF's proposal to assist Tribal Colleges,
    but I am bothered by the level funding for other minority-
    serving programs. Frankly, given the budget that's submitted to
    us, I question the characterization of the president's budget
    for NSF as ``something for everyone.'' We look forward to
    working on this program and these problems, with your support,
    Dr. Colwell and Dr. Lane.
        Now having given you all the bad news, let me turn to my
    distinguished ranking member, Senator Mikulski, for her
    comments and questions.
        Senator Mikulski.

                    STATEMENT OF SENATOR BARBARA A. MIKULSKI

        Senator Mikulski. Thank you very much, Mr. Chairman, and I
    found your opening statement quite interesting. First of all,
    your passion for science. We're compatible in many ways; the
    suspicion of bigger bureaucracy and less results, kind of
    entropic situations come to government. But at the same time,
    you've been a really wonderful and passionate supporter of
    science and look forward to working with you in our
    appropriations.
        I really want to welcome Dr. Lane, Dr. Colwell, Dr. Kelly
    and welcome you with enormous warmth and respect for your
    contribution to the nation. I just wish our wallet could match
    our warmth, because I think we could have a quick hearing and
    move right into discovery and innovation.
        One of the I think aspects that I've enjoyed serving on
    this committee is that Presidents of the United States have not
    politicized their appointments of both their science advisor
    and the head of the Science Foundation, as well as the chairman
    of the board. That whether it was Ronald Reagan, but I worked
    particularly closely with George H. Bush and now with President
    Clinton to really know that science is about ideas and not
    about ideology, and therefore has chosen you to lead this. And
    I want to thank you for your service to the nation.
        Dr. Lane, I knew you as both the head of the National
    Science Foundation and now working with you in the President's
    capacity. Dr. Colwell, we go back. Senator Bond, I first met
    Dr. Colwell when we were working in marine biology in Maryland,
    and she talked to me about those little germs that could eat
    litter and clean up the Chesapeake Bay; and I wondered what
    happened to the germs after they ate that air; would I be
    having one in my gas tank.
        Dr. Colwell was my advisor to hold my very first hearing,
    on a topic called the Oceans and the Future, and she has been a
    colleague and an adviser ever since.
        Dr. Kelly, your stewardship as the president has been
    appreciated because if you get all of those scientists, 24
    scientists in a room, you're going to get 48 opinions, 96
    papers and 200 people who want to be the peer review people.
        So we really thank you for your leadership and your
    stewardship.
        I think we are so enthusiastic about the work of both the
    OSTP as well as the NSF, because the science of today will
    really be the economic engine of the future. Senator Bond has
    talked about the request that you've made, and also President
    Clinton's desire to increase $675 million over last year. This
    will be really I think significant and also fitting, as NSF
    celebrates its 50th anniversary.
        Fifty years ago Congress debated ``how should we have--
    should we have a national science foundation, and also what
    should it look like? Vannevar Bush outlined his idea, but he
    ran into a group in Congress who wanted more applied research.
    Dr. Bush wanted to make sure this was kind of a national
    endowment for scientific research.
        Congress, in the midst of the cold war and Sputnik, those
    apprehensions that we were facing, made it specific applied,
    almost Manhattan-like projects. The National Science Foundation
    was defeated 5 years in a row in the Congress because of the
    arbitrary arguments between basic and applied. That argument
    still continues. One recalls when I call for a strategy
    research that I was vilified in the scientific community
    because of my desire to have us have national goals.
        Again, I think those are artificial distinctions; and when
    one looks at science, I want the continuum. And we see now on
    the multi-agencies like nanotechnology, it will go to the basic
    of the basic, and then as well goes into the ideas, Dr. Lane,
    that you've talked about that in a sugar-cube like thing we
    could put the entire Library of Congress or a supercomputer the
    size of a teardrop, or the fact that we could have these
    biosensors in our body, particularly if you have high risk
    situations where you could go about your work and the doctor
    could go about monitoring you.
        This is really the fabulous potential. So we look forward
    to the National Science Foundation continuing its really robust
    and much-needed mission, and not having the continual
    discussions over basic and applied; but how can we achieve
    these national goals?
        When we began the last century we began with an industrial
    revolution, and it changed the face of America and it changed
    the face of the world with America leading the way. We ended
    this century with the information technology. And again,
    America has lead the way. So at the start of the 21st century,
    we need to again focus on what will be the technologies of the
    new century.
        I am particularly interested in the focused initiatives
    that the NSF has put forth, as well and really very focused on
    the nanotechnology. My colleague has raised very important
    issues related to coordination, making highest and best use of
    each agency and therefore highest and best use of both our
    intellectual talent and the taxpayer's dollars.
        Those issues must be addressed, but I do believe that at
    this point we need to not rest on our microchips, but really
    look ahead to the next century and what is the technology that
    will affect every one of our scientific areas. I believe that
    truly nanotechnology, it will be the basic tool, like infotec
    is now a kind of a, if I could, the spinal cord and nervous
    system for whether it's NIH, NASA, NOAA, whether we're studying
    inner space, outer space, the mind, the brain, or the heart and
    soul of what makes our planet and universe tick.
        So I'm very interested in advocating nanotechnology, with
    taking into and answering Senator Bond's concerns.
        NSF, though, is the backbone and we cannot--well, we look
    forward to new and dazzling initiatives, mesmerizing
    initiatives. We have to remember that NSF is the backbone of
    science, math, and engineering teaching. Now, we don't have a
    workforce shortage in this country; we have a skill shortage.
    And if it had not been the steadfast troubadoring of the
    Science Foundation on the need for science, math, engineering,
    we could not now even be filling the many jobs that science has
    created.
        We even want to note the fine role that NSF has played in
    teacher training, because it's not only in training the Ph.D.'s
    and the postdocs, but how we get into a classroom K through 12
    to make sure that we have the teachers that are trained and
    excite them about science.
        There are many issues that ride before us, and I prefer to
    explore them in the questions and answers, but again, Dr. Lane,
    or Dr. Gibbons or the excellent people that President Bush gave
    us, Dr. Colwell, you and your predecessors, Dr. Colwell. We
    really I think have had an excellent relationship, but what we
    want now is the relationship where we helped you get the
    resources, and you help us get the results. So with that I
    thank you and look forward to your testimony.
        Senator Bond. Thank you, Senator Mikulski, and now I will
    ask Dr. Colwell to begin.
        Dr. Colwell. Mr. Chairman and Senator Mikulski, I thank you
    very much for allowing me the opportunity to testify on the NSF
    budget for fiscal year 2001, and I'm just delighted with the
    commitment and the passion that both of you share for science,
    for the potential of technology, biotechnology, information
    technology, and especially nanotechnology.
        I really want to thank you and the subcommittee for your
    consistent bipartisan support for NSF science and engineering
    activities. Before I begin my testimony, let me first turn to
    Dr. Eamon Kelly, Chairman of the National Science Board, for
    his comments on the NSF Budget Request for fiscal year 2001.
        Dr. Kelly.

                            STATEMENT OF EAMON KELLY

        Dr. Kelly. I thank you, Dr. Colwell.
        Mr. Chairman, Ranking Member Mikulski, I wish to start off
    by simply expressing my strong support for the Foundation's
    request of $4.6 billion for fiscal year 2001. In prior
    testimony to the committee I have cautioned that the nation
    commits a fundamental error by underinvesting in fundamental
    research.
        The proposed budget for NSF is a significant step towards
    remedying this underinvestment. The 21st Century Research Fund
    reflects the Administration's continuing recognition that
    research is the keystone of our $8.8 trillion economy and the
    route to an enhanced quality of life for all of our citizens.
        The 17 percent requested increase in NSF is a wise
    investment in the lifeblood of science and engineering. It
    should be a priority in budget function 250, and indeed in the
    whole Federal budget.
        Knowledge and inventions emerging today are a tribute to
    research investment made in past years in a bipartisan spirit.
    Few predicted the magnitude of impact from the revolutions in
    genetics and telecommunications, but the ability of our nation
    to understand, harness and distribute the fruits of knowledge
    once again reminds us that science and engineering are long-
    term, high risk investments, with very high payoffs.
        As an economist, I must point out that even in the face of
    the demonstrably high returns on the basic research investment,
    conservatively 30 percent, U.S. public and private sectors are
    underinvesting in basic research. Universal acclaim for the
    benefits realized from federally-supported basic research has
    not yet generated commensurate public investment.
        In an $8.8 trillion knowledge-based economy, more than 2.8
    percent of the nation's GDP should be devoted to R&D. But more
    significantly, the Federal contribution as a proportion of the
    U.S. investment is shrinking. Today the Federal Government
    provides about a third of total R&D funding. A decade ago the
    Federal share was 46 percent. Three decades ago it was 60
    percent.
        As for basic research, the research with the highest
    payoff, the $20 billion proposed investment is less than one-
    quarter of total Federal R&D, a minuscule proportion of the
    total Federal budget. It's a nanoscale investment in basic
    research.
        Back then to the budget request for the National Science
    Foundation. It represents less than 4 percent of annual Federal
    spending on R&D and amounts to only 15 percent of the Federal
    basic research budget.
        Mr. Chairman, Director Colwell will highlight priorities in
    the NSF budget. I would observe that one-half of the budget
    request is for core support to grow the knowledge base. This
    takes time and resources competitively awarded across a
    spectrum of disciplines, problems and universities. The
    Foundation is determined to increase the average dollar amount
    and the duration of research grants. This will bring both
    greater efficiencies and needed continuity in investigator's
    research programs and support of students.
        The other half of the Foundation's request identifies
    specific priorities within a 20 percent increase within the
    Foundation's Research and Related Activities account. This is
    an appropriately bold increase in an investment budget. I note
    that Information Technology Research, Nanoscale Science and
    Engineering, and Biocomplexity in the Environment are
    Administration, multi-agency initiatives that NSF will lead.
        In particular, the Board's just-issued report,
    Environmental Science and Engineering for the 21st Century,
    calls for enhanced support for environmental research,
    education, assessment, and infrastructure.
        Mr. Chairman, I have tried to put the fiscal year 2001 R&D
    budget request into perspective. Investments in basic science
    and technology underlie the relationship between productivity
    and higher standards of living. This makes NSF a major partner
    in the nation's economic growth.
        The long-term high risk, high payoff strategy of the
    National Science Foundation must be preserved as a catalyst in
    the Federal R&D budget. The fiscal year 2001 investment budget
    proposal restores some essential balance to that investment
    portfolio.

                               PREPARED STATEMENT

        In closing, I wish to commend my colleague, NSF Director
    Rita Colwell, for her energetic and visionary leadership, and
    to thank the committee for its support of research and
    education, especially at the National Science Foundation. I
    would be pleased to answer any questions after Director Colwell
    talks.
        [The statement follows:]

                      PREPARED STATEMENT OF EAMON M. KELLY

        Mr. Chairman, Ranking Member Mikulski, and members of the
    Subcommittee, I appreciate the opportunity to testify before you. I am
    Eamon Kelly, Chairman of the National Science Board and President
    Emeritus and Professor in the Payson Center for International
    Development & Technology Transfer at Tulane University.
        Since the founding of NSF in 1950, the National Science Board has
    two roles--governing board of the National Science Foundation (NSF) and
    national policy body. The latter role operates within a framework of
    policy guidance established by the Congress and the Administration.
        As part of NSF's annual long-range planning and budget process, the
    Board conducts an intensive review. The Board's approval of the
    proposed budget seeks to assure the health of the human, disciplinary,
    and infrastructure base for science and technology; to support new
    opportunities for the advancement of knowledge; and to make the process
    of priority-setting responsive to such opportunities. Earlier this year
    the Board commented on and approved the Foundation's fiscal year 2000-
    2005 GPRA Strategic Plan.
        I appear today, on behalf of the National Science Board, to thank
    the Subcommittee for its commitment to long-term investments such as
    those epitomized by NSF's programs in research and education. Today, I
    would like to comment on how short-term prospects, as represented by
    the NSF budget request, are vital to our Nation's future.

                            A TRUE INVESTMENT BUDGET
        First, I want to express my support for the Foundation's request of
    $4.6 billion for fiscal year 2001. The last two years in testimony to
    the Committee I have cautioned--as an economist--that the Nation
    commits a fundamental error by underinvesting in fundamental research.
    The proposed budget for NSF is a significant step in remedying that
    underinvestment. The 21st Century Research Fund reflects the
    Administration's continuing recognition that research is the keystone
    of our $8.5 trillion economy and the route to an enhanced quality of
    life for all our citizens.
        A 17 percent increase in NSF is an investment in the lifeblood of
    science, engineering, and technology. It should be a priority in budget
    function 250, and indeed, in the whole Federal budget.
        Knowledge and inventions emerging today are a tribute to research
    investments made years or generations ago in a spirit of
    bipartisanship. As the President noted at the National Medal of Science
    award ceremony in March:

        ``We should all remember that, like the Internet, supercomputers
    and so many other scientific advances, our ability to read our genetic
    alphabet grew from decades of research that began with government
    funding. Every American . . . should be proud of their investment in
    this and other frontiers of science.''

        The magnitude of impacts from the revolutions in genetics and
    telecommunications has always been hard to measure. But the ability of
    our Nation--not just scientists and engineers--to understand, harness,
    and distribute the fruits of knowledge once again reminds us that
    science and engineering are long-term, high-risk investments, with high
    payoffs. It is with this same sense of anticipation that I would like
    to comment on the priorities in the NSF budget request.

                             NSF BUDGET PRIORITIES
        Fully one-half of the Foundation's budget request is for ``core
    support'' to grow the knowledge base. This takes time and requires a
    distribution of resources across a spectrum of disciplines,
    opportunities, and performing institutions. The Foundation continues to
    seek ways to increase the average dollar amount and duration of
    research grants. This would bring needed continuity to investigators'
    research programs and the support of graduate students.
        The other half of the request identifies specific priorities
    representing a 20 percent increase within the Foundation's research and
    related activities account and a 48 percent increase in major research
    equipment. These increases are appropriately bold for an ``investment''
    budget:
      --Information Technology Research will push the frontiers of high-end
            computing to expand our computer architecture, storage and
            retrieval, and network. The Terascale Computing System program
            will make supercomputing accessible to scientists and engineers
            across the Nation. And to better understand the social effects
            of those technologies, a research agenda on ethical, legal,
            education, and workforce issues will be supported across
            disciplines and cultures, including the use of technology in
            marketing goods and services in the global economy.
      --Like Information Technology Research, Nanoscale Science and
            Engineering is an Administration multi-agency initiative that
            NSF will lead. Nanometer scale--that is, one billionth of a
            meter to several hundred billionths--enables us to work at the
            atomic and molecular levels. Such manipulations create
            boundless possibilities for design of materials, manufacturing,
            electronics, computer simulations and processes in the
            environment are virtually boundless. The National
            Nanofabrication Users Network, university-based research hubs,
            and small business will all participate in the nanotechnology
            revolution.
      --Biocomplexity in the Environment is an ambitious program to
            integrate our understanding of dynamic systems ranging from
            simple organisms to whole ecosystems, from the transmission of
            waterborne contaminants to global climate change. Construction
            of a National Ecological Observatory Network, or NEON, will
            advance exploration of the biology of the planet pole-to-pole.
        I am proud to add that the Board recently issued a report on
    Environmental Science and Engineering for the 21st Century
     that calls for a significant increase in
    resources for environmental research, education, assessment, and
    infrastructure. The President's Committee of Advisors on Science and
    Technology and the National Science and Technology Council has endorsed
    the report. The intellectual maturity of environmental research makes
    the timing right to ramp up and sustain a programmatic thrust across
    agencies. In the Board's view, the environmental arena warrants a five-
    year growth plan that would more than double NSF's current portfolio.
    The fiscal year 2001 budget request begins this quest.
        NSF-supported Major Research Equipment not cited above includes
    facilities and instruments ranging from earthquake observational
    equipment, to the South Pole Station, the Large Hadron Collider and the
    Millimeter Array. These tools enable research and education to coalesce
    in networks and centers of excellence. They are the infrastructure for
    knowledge production and transfer, shared with NSF's partners across
    disciplines, sectors, and national boundaries.
        Finally, new ideas and revolutionary tools require educated and
    trained people. NSF's 21st Century Workforce initiative addresses the
    need for developing human resources at all levels of education--formal
    and informal, in schools, homes, and communities. The importance of
    teachers and teaching, rigorous content, the use of information
    technologies, and research on learning are all priorities in the NSF
    request.
        I am convinced that the Foundation understands the role of the
    Federal Government in K-12 mathematics and science education. The
    transitions between education milestones and preparation for entry into
    high-tech workplaces will determine the participation of all Americans
    in science and technology.
        There is no greater challenge than renewal of a skilled workforce.
    Citizens must be able to use knowledge of science and mathematics in
    their daily lives. Therefore, a more seamless approach to education K
    through 16, and especially the role of systemic reform, are continuing
    policy concerns for the Board. They are discussed in our 1999 report
    Preparing Our Children: Math and Science Education in the National
    Interest.

                            TRENDS AND OPPORTUNITIES
        Mr. Chairman, as we view the fiscal year 2001 R&D budget proposal,
    let's keep the requested increases in perspective. In an $8.8 trillion
    knowledge-based economy, one can argue that more than 2.8 percent of
    the Nation's GDP should be devoted to R&D. But the reality is that the
    Federal contribution as a proportion of the U.S. investment is
    shrinking.
        Universal acclaim for the benefits realized from federally
    supported research has not yet generated commensurate public
    investment. Even in the face of the demonstrably high return on basic
    research investment--conservatively 30 percent--the U.S. public and
    private sectors are underinvesting in research. The $20 billion
    proposed investment in Federal basic research represents less than one-
    quarter of the $85 billion total. This minuscule proportion of the
    total Federal budget devoted to research indicates a mismatch between
    our interpretation of the past and our commitment to the future.
        I am heartened, however, by recurring headlines in our newspapers
    linking productivity and the economy. As business investment builds on
    advances particularly in computing and information processing, the link
    between productivity and higher standards of living becomes more
    transparent. Behind the causal relationship lie investments in
    fundamental science and technology.
        As this Committee well recognizes, NSF is a major partner to
    national productivity and economic growth. Yet its budget represents
    less than 4 percent of annual Federal spending on R&D. According to the
    American Association for the Advancement of Science, the NSF request
    amounts to only 15 percent of the Federal basic research budget. Yet
    almost one-quarter of all Federal support for basic research conducted
    at academic institutions comes from NSF, as does one-half of nonmedical
    research funding.
        While more than two-thirds of the national R&D investment today is
    industry-funded, universities and colleges are the ``center of
    gravity'' in producing knowledge, innovation, and trained personnel for
    our workforce. Without hesitation, all of us here today would
    acknowledge that research universities have become not only incubators
    of innovation, but also partners in developing and commercializing
    products that generate income and hold value for other sectors of the
    Nation's economy.

                                   PROSPECTS
        Mr. Chairman, I cannot stress enough that the long-term, high-risk,
    high-payoff strategy of the National Science Foundation must be
    preserved as a catalyst in the Federal R&D portfolio. The fiscal year
    2001 budget proposal restores some balance to that portfolio. It is
    truly an ``investment'' budget. It is overdue--and needed--but just a
    start.
        I can also assure you that the National Science Board will continue
    to monitor the Foundation's investments and priority-setting in science
    and technology to ensure stewardship at its best--fairness, timeliness,
    and responsiveness to national needs. NSF's first GPRA performance
    report, Accountability Report fiscal year 1999, provides some important
    measures of outcome and progress toward goals. In addition, the Board's
    Science and Engineering Indicators--2000 report, to be released next
    month, will provide, among other insights, an analytical perspective on
    how R&D is propelling the productivity now observed in the Nation's
    economic and employment statistics.
        In closing, I wish to commend my colleague, NSF Director Rita
    Colwell, for her energetic and visionary leadership, and to thank the
    Committee for its support and oversight of excellence in research and
    education, especially at the National Science Foundation. I look
    forward to our future discussions.
                                     ______

                     Biographical Sketch of Eamon M. Kelly

        Eamon Michael Kelly was born in New York City and attended Columbia
    University from 1960 to 1965, where he earned the master and Ph.D.
    degrees in economics. Following graduation from Columbia, he joined the
    Penn State faculty at University Park, Pennsylvania.
        In 1968, Kelly was appointed to U.S. government service by the
    President, serving as Director of Policy Formulation with the Economic
    Development Administration of the U.S. Department of Commerce. He was
    later named Special Assistant to the Administrator of the Small
    Business Administration, where he participated in planning and
    initiating the federal government's first minority economic development
    program. Kelly joined the Ford Foundation in 1969 and served as
    Officer-in-Charge for the Office of Social Development, the
    Foundation's largest domestic and civil rights division.
        In 1977, Kelly served as a special consultant to the U.S. House of
    Representatives where he participated in drafting legislation that
    provided a $1.7 billion guarantee to prevent the insolvency of New York
    City. Later that year he was appointed Special Assistant to the
    Secretary of the U.S. Department of Labor. In that position, he
    successfully directed a government-wide investigation of the Teamster's
    $1.4 billion Central States Pension Fund and led negotiations resulting
    in the Fund being transferred to private management. After leaving the
    Labor Department, Kelly returned, at the request of the Secretary of
    Labor, to direct efforts that led to the end of a nationwide coal
    strike.
        In 1981, he was chosen to serve as the 13th president of Tulane
    University. In July 1998, Kelly retired as president of the university.
    Currently, Kelly, whose area of specialized interest is international
    urban and rural development, holds the rank of professor in the
    departments of Economics, Latin American Studies, and International
    Health and Development at Tulane. He is also a founding member of the
    Payson Center for International Development and Technology Transfer.
        Kelly is active on the boards of many professional, philanthropic,
    civic, and corporate organizations. In 1995, he was appointed by
    President Clinton to serve on the National Science Board (NSB), the
    governing body of the National Science Foundation, which sponsors
    scientific and engineering research, develops and supports educational
    programs, and helps guide national policy. In 1998, Kelly was elected
    chairman of the National Science Board. February 2000

                           STATEMENT OF RITA COLWELL

        Senator Bond. Thank you, Dr. Kelly, and we'll now restart
    the clock for Dr. Colwell.
        Dr. Colwell. Thank you, Mr. Chairman.
        The fiscal year 2001 Budget Request for the National
    Science Foundation, if it's enacted, will help set the stage
    for a new century of progress through learning and discovery.
    As you know, it is so important for the nation.
        For the coming fiscal year, the request for $4.57 billion
    represents a very much needed increase, 17.3 percent overall.
    And over $675 million above the current level. It's all about
    keeping the United States at the leading edge of learning and
    discovery. And the headliners in NSF's 2001 request are
    focused; they are multi-disciplinary initiatives. In fact,
    they're really national priorities. Information Technology
    Research, Biocomplexity, a 21st Century Skilled Force (instead
    of just ``work force'' ), and the emerging National Nanoscale
    Science and Engineering Initiative.

                       NSF'S FISCAL YEAR 2001 INITIATIVES

        Each of the initiatives integrate research across the
    disciplines of science, engineering and mathematics; and aim at
    solving many of the challenges facing our society. It is going
    to require more than individual discoveries. It's going to
    require integration of knowledge from all disciplines.
        Let's take biocomplexity. It seeks no less than a more
    complete understanding of our complex world and its
    interactions--physical, biological and social. In fact,
    describing those interactions, I am reminded of the words of a
    naturalist, John Muir, who wrote in the 1840s: ``When we try to
    pick out anything by itself, we find it hitched to everything
    else in the Universe.''
        One especially promising area in biocomplexity is the study
    of the earth's crust as a habitat for microorganisms. To
    illustrate this, I'd like to take us on a very, very brief
    journey by video to the depths of a sea floor. I am going to
    show some footage. It was taken with an IMAX camera from inside
    the submersible, the submarine Alvin.
        NSF has long supported Alvin, and we also helped support
    this filming, part of our public understanding and outreach.
    It's not yet been seen by the public. The footage was shot at
    about 30,000 meters in water at a deep sea vent called 9
    degrees North, beneath the Pacific Ocean south of Mexico.
        The footage will bring the astonishing life of the vents to
    millions of people who will never be able to descend in a
    submarine. We'll see features called black smokers, the
    mineralized chimneys that tower above the communities of life
    at hydrothermal vents.
        The mouths of the vents spew forth boiling water full of
    chemicals. These conditions are obviously toxic to humans and
    to most other life forms. We discovered these communities of
    living beings some two decades ago, but we're only just
    beginning to unlock their secrets. And the list of described
    species inhabiting the vents now is greater than 300, all
    living in the depths without photosynthesis.
        Instead of using the sun's energy, they employ
    chemosynthesis to oxidize the hydrogen sulfide emerging from
    the vents. From some of these microorganisms have come enzymes
    that are now used in the polymerase chain reaction, PCR, and
    this is a reaction that's used in criminology, it's used in
    public health, it's used in a variety of ways. These enzymes
    came from some of these microorganisms around these vents.
        Let's visit the vents very briefly.
        [A video was shown.]

                              THE BEGINNING OF NSF

        Dr. Colwell. To me, the black smokers we've just seen are
    not only metaphorical, but they're literal wellsprings of
    discovery. There are even suggestions now that these springs
    could have been the birthplace of all life on earth.
        But back on the surface, I'd like to move to another topic,
    the beginning of NSF. Fifty years ago this month, May 10, 1950
    in Pocatello, Idaho, a Missourian, Harry Truman, President
    Truman, signed Senate bill 247, the act that established the
    National Science Foundation.
        Our nation's commitment to science, engineering and
    education can be seen from the very beginning of the republic.
    The motto on America's first coin, for example, minted in 1792,
    read: Liberty, parent of science and industry.
        Now that motto has just as much meaning today in the 21st
    Century as it did in 1792 in an era before the advent of the
    steam engine. Individual scientists and engineers, supported by
    NSF and other Federal agencies, are using their talent and
    their freedom to create, discover and innovate; and now many of
    these scientists and engineers are moving from the universities
    into the private sector.
        This transfer to the private sector of people, researchers
    and students, first supported by NSF and universities, should
    be viewed as the ultimate success of technology transfer. These
    talented scientists and engineers are part of the new wave of
    entrepreneurs creating enormous wealth in areas like
    information technology, biotechnology, and now we will see in
    the future, in nanotechnology.

                                 BIOTECHNOLOGY

        In biotechnology, for example, the next generation of plant
    scientists are being educated at universities across the
    nation. This is made possible through NSF's significant
    investment in plant genome research. These young scientists,
    both graduate and undergraduate, are also working closely with
    industry, enabling U.S. world leadership in plant science. And
    for fiscal year 2001, our request for the plant genome research
    will total $102 million. This represents an increase of over
    $22 million, or 25 percent over fiscal year 2000.

                                 NANOTECHNOLOGY

        Nanotechnology, Mr. Chairman, is a newly emerging field
    where scientists and engineers are beginning to manipulate
    matter at the atomic level, literally moving atoms around. This
    Lilliputian technology has the potential to revolutionize
    nearly every facet of our economy and our lives.
        Just some of the things that researchers envision:
    molecular computers. Yes, Senator Mikulski, the size of a
    teardrop with the power of today's fastest supercomputers.
    Nanochips that simulate the electrical activity of a normal
    nerve synapse, holding great promise for developing better
    prosthetic devices for artificial limbs. In fact, we may even
    see a ``spinal bypass'' from the brain to below the spine where
    a lesion occurs, so that Christopher Reeve can walk again.
        We see micromachined needles with very sharp tips of less
    than a micrometer across. Such tiny needle tips can pierce the
    skin easily and without pain, another new method of drug
    delivery.
        Industry as well as other Federal agencies will be looking
    to our universities for the scientists and the engineers
    skilled in nanotechnology, and that's why I cannot overstate
    the importance of the NSF investment in the education of future
    nano-scale scientists and engineers.
        Now that trend has not gone unnoticed by industry. Leaders
    like Alfred Berkley, President of the NASDAQ stock exchange;
    CEOs like Norm Augustine of Lockheed, and 47 members of the
    Council on Competitiveness have all issued statements about the
    importance of the NSF investments in basic research. I've
    attached copies for the record.
        [The information follows:]

                   [From the Washington Post, April 30, 2000]

    Test Shows Students Can't Do The Math; 64 Percent Fail Final Exam After
                         Montgomery Standardizes Grades

                              (By Brigid Schulte)

        Almost two-thirds of all Montgomery County high school students
    flunked the final Algebra I exam in January, the first time the school
    system imposed a standard grading scale for the test.
        The failure rate is more than double last year's, when passing
    scores varied wildly from school to school and, some officials said,
    masked the real problems in the ``world class'' system that for years
    had allowed schools to set their own grading scales on the test.
        Based on a new uniform scale that set 60 as the minimum passing
    grade, a full 64 percent of all students taking the first semester
    Algebra I final exam in January flunked. The failure rates were higher
    for African American and Latino students: 80 percent of students in
    each group flunked the test, reflecting a ``pattern of
    underachievement,'' Superintendent Jerry D. Weast wrote in a memo to
    board members.
        Fifty percent of white students failed the test, as did 54 percent
    of Asian American students.
        Weast said the results, while disappointing, ``tell me exactly what
    I anticipated: They didn't do well. This is the truth.'' The
    explanations, he said, are that teachers don't have enough training,
    students aren't properly prepared in middle and elementary school and
    the math curriculum is a problem.
        Because Montgomery's Algebra I exam is modeled on the upcoming
    state high school graduation tests, the high failure rates raise
    questions about county students' prospects for passing the tough new
    state exams.
        ``I'm obviously alarmed and unhappy,'' said board member Reginald
    M. Felton (Northeastern County). ``Eighty percent failure rates say
    that we, as a system, are failing our students. That's unacceptable. We
    can't simply raise standards without investing to support these
    classrooms.''
        Last year, when the countywide Algebra I final exams were graded on
    a curve, as they had been for years, the cut-off score for a passing D
    grade varied among high schools--from a low of 33 at Kennedy High
    School to a high of 58 at Wootton. Only 29 percent of county students
    failed the final exam.
        This year, although 64 percent of the students failed the Algebra I
    final exam, 79 percent actually passed the course because the exam
    counts for only one-fourth of the total grade.
        ``This is really startling,'' said board member Mona M. Signer
    (Rockville-Potomac). ``I expected the failure rate to be higher with
    the new standard, but not this high. This really points to the need for
    remediation.''
        Last year, school board members were shocked to learn that for
    nearly 20 years, the school system had allowed individual schools to
    determine their own grading scales. As a result, an A at one school was
    a D at another.
        Concerned about rampant grade inflation, board members called for a
    uniform grading standard across the county for the exam. The variance
    in scores, many said, may have made the system look good, but it masked
    what was really going on. ``We were camouflaging our performance,''
    Felton said.
        To address the high failure rates, Weast had proposed spending
    almost $650,000 on teacher training, a three-week summer school program
    and six algebra master teachers to work with staff. But those programs
    were cut from Weast's budget proposal by County Executive Douglas M.
    Duncan (D).
        Weast and board members are lobbying the County Council to restore
    funding for these and about $16 million worth of other programs before
    the budget is finalized in May.
        ``This is a solveable issue,'' Weast said. ``I'm not blaming the
    principals, and I'm not blaming the schools. But clearly we've got to
    help the classroom teacher.''
        Weast did take issue with the so-called Algebra Initiative of a
    year ago that lowered class-size ratio to 1 to 20.
        ``You can't just give someone a lower class size, pat them on the
    head and say, `Go.' There was no training, there was no defined
    curriculum or defined testing.''
        To that end, board members have contracted with education
    consultants Phi Delta Kappa to audit the math curriculum. Out of
    frustration, Weast said, he moved money around to pay for the audit
    this year instead of next year.
        ``We couldn't wait for another year of failure as we get closer to
    2005, when kids have got to pass the Algebra I exam to graduate from
    high school,'' Weast said.
        Perhaps the most troubling test results come from Einstein High, a
    diverse Silver Spring school where 90 percent of the 256 students
    taking the final exam failed it. For Hispanic students, the failure
    rate was 99 percent, compared with 48 percent last year.
        ``This is outrageous,'' said Hector Lazo, who formed Latinos Unidos
    to fight for the uniform standards on the exam. ``It makes me feel like
    I've worked for nothing. If 90 percent of the students are failing, the
    teachers aren't doing their work.''
        Einstein Principal Richard L. Towers said he has hired bilingual
    aides to work with students who don't speak English well or who have
    had interrupted educations but added that teachers need more training
    and some students need extra help. The high failure rates show where
    the need is, he said.
        ``We need to know what the situation is, and not disguise it, by
    having everyone on a consistent grading scale,'' he said. ``Now we're
    at least better able to describe the problem.''

                               FAILURE RATE SOARS
        Montgomery County high school students' failure rate on the
    countywide Algebra I exams skyrocketed this year--the first time that
    the public schools imposed a standard grading scale for the tests.
    Under the new scale, students must get at least 60 percent of the
    questions correct to pass the exam. In previous years, individual
    schools set their own passing grades. Countywide, 80 percent of all
    black and Hispanic students, 50 percent of whites and 54 percent of
    Asian American students failed.

    ------------------------------------------------------------------------
                                                           Percentage
                                                  --------------------------
                                                     1999
                     High school                   Algebra    1999     2000
                                                      I     failure  failure
                                                   passing    rate     rate
                                                    scores
    ------------------------------------------------------------------------
    Bethesda-Chevy Chase.........................       56       40       65
    Montgomery Blair.............................       48       58       84
    James Hubert ``Eubie'' Blake.................       48       37       78
    Winston Churchill............................       57       11       24
    Damascus.....................................       58       30       41
    Albert Einstein..............................       35       43       90
    Gaithersburg.................................       49       22       69
    Walter Johnson...............................       49       19       61
    John F. Kennedy..............................       33       28       72
    Col. Zadok Magruder..........................       54       22       49
    Richard Montgomery...........................       50       94       62
    Northwest (ninth grade)......................       46       19       78
    Paint Branch.................................       50       23       40
    Poolesville..................................       47       29       55
    Quince Orchard...............................       46       26       58
    Rockville....................................       50       27       73
    Seneca Valley................................       50       47       85
    Sherwood.....................................       40       19       74
    Springbrook..................................       45       36       71
    Watkins Mill (ninth grade)...................       52       25       61
    Wheaton (ninth grade)........................       41       34       81
    Walt Whitman.................................       55       17       29
    Thomas S. Wootton............................       58       15       29

    ------------------------------------------------------------------------
    SOURCE: Montgomery County Public Schools.

                                     ______

    Prepared Statement of Alfred R. Berkeley, III, President, Nasdaq Stock
                                  Market, Inc.

        Increasing funding for the National Science Foundation is one of
    the most important components of the Administration's campaign to
    ensure America's continued economic growth. Historically, we have seen
    that discoveries made in the science and engineering arenas have
    propelled our economy forward by paving the way for breakthroughs in
    technology that in turn spawn entirely new industries.
        A relatively small government agency, the National Science
    Foundation played a key role in setting the stage for today's economic
    expansion that has created millions of jobs and improved the quality of
    life of many Americans. Research carried out 10, 20, even 30 years ago
    in the areas of biotechnology and telecommunications, to name a few,
    laid the foundation for the most vibrant sectors of the economy today-
    the same ones that have propelled the dramatic growth of The Nasdaq
    Stock Market.
        As much as history has demonstrated the important role science
    research plays in our continued economic success, the fact is, Federal
    support for such programs has declined precipitously in recent years.
    The Administration's new proposal seeks to reestablish such research as
    a national priority and the Foundation will put these new funds where
    they will be most beneficial to the public-at the frontiers of science
    and engineering research.
                                     ______

        Prepared Statement of Norman R. Augustine, Chairman, Executive
           Committee, Lockheed Martin Corporation Board of Directors

        The Administration's proposal to increase funding for the National
    Science Foundation comes not a moment too soon. Scientists and
    engineers in almost every field are close to new discoveries that could
    transform the way we live and work, and sustain our current prosperity
    well into the future. We should seize this opportunity to strengthen
    U.S. leadership in science and technology.
        There can be little doubt that advances in science and technology
    have fueled the current economic expansion. Over the years, the
    National Science Foundation's public investments in basic research--
    cross all disciplines in science, engineering and mathematics--have
    laid the foundation for the most dynamic and innovative science and
    technology enterprise in the world.
        Investing in people is just as important as investing in ideas. The
    National Science Foundation has supported generation after generation
    of the young scientists and engineers who train in our university and
    college research laboratories. Increased funding would boost this
    support and help build the highly skilled workforce required in the new
    knowledge-based economy.
        If the recent past is a guide, some of these young scientists and
    engineers will assure that America's established companies remain
    strong. Others will launch the start-up companies that will help fire
    economic progress well into the future. And some will be the Nobel
    laureates of the 21st Century. That's a winning proposition for the
    Nation--one we can be proud of and one that deserves our support.
                                     ______

      Council on Competitiveness Urges Congressional Leaders to Increase
          Federal Funding for Science & Technology in fiscal year 2001

        47 members of the Council on Competitiveness, including CEOs of
    some of America's largest corporations, presidents of major U.S.
    universities, and prominent labor leaders, signed a letter to
    Congressional leaders advocating long-term investments in America's
    science and technology enterprise that will strengthen U.S.
    competitiveness and assure future economic prosperity.
        The attached letter was delivered to Senate Majority Leader Trent
    Lott, Senate Minority Leader Thomas A. Daschle, Speaker of the House J.
    Dennis Hastert and House Minority Leader Richard A. Gephardt.

                   Letter From the Council on Competitiveness

                                                March 22, 2000.
    Hon. Trent Lott,
    U.S. Senate Majority Leader.
    Hon. J. Dennis Hastert,
    Speaker of the House of Representatives.
    Hon. Thomas A. Daschle,
    U.S. Senate Minority Leader.
    Hon. Richard A. Gephardt,
    U.S. House of Representatives.
        As you and your colleagues shape America's budget priorities for
    2001, the undersigned members of the Council on Competitiveness urge
    you to strengthen America's science and technology enterprise.
        Decades of bipartisan congressional investments have contributed
    decisively to the current U.S. economic boom. These investments created
    the advances in knowledge as well as the pool of technical talent that
    underpin America's competitive advantage in information technology,
    biotechnology, health science, new materials, and many other critical
    enablers.
        Nevertheless, public-sector investments in frontier research have
    declined sharply relative to the size of the economy. An additional
    $100 billion would have been invested if the Federal share of such
    research had been maintained at its 1980 level. Physical sciences,
    math, and engineering have been particularly affected. The recent ramp
    up of private sector investment in R&D, while vitally important, is no
    substitute for the Federal role in creating next generation knowledge
    and technology.
        We are also training fewer and fewer American scientists,
    engineers, and mathematicians despite soaring demand for these skills.
    Education and training of scientists and engineers are tied to
    federally sponsored research performed in the nation's laboratories and
    universities. When Federal R&D commitments shrink, so too does the pool
    of technically trained talent, forcing industry and academia to look
    abroad for skilled knowledge workers.
        In this time of prosperity, we ask that you use this year's budget
    resolution, authorization and appropriations process to start America
    down the path toward significantly higher long-term investments in our
    national science and technology enterprise. Your commitment to
    continued U.S. technological leadership will generate high-wage jobs,
    economic growth, and a better quality of life for all Americans for
    decades to come.
                Sincerely,
                                       Raymond V. Gilmartin,
                                               Chairman, Council on
                                                   Competitiveness,
                                                   Chairman, President &
                                                   CEO, Merck & Co., Inc.
                                       F. Duane Ackerman,
                                               Industry Vice Chairman,
                                                   Council on
                                                   Competitiveness,
                                                   Chairman & CEO,
                                                   BellSouth Corporation.
                                       Charles M. Vest,
                                               University Vice Chairman,
                                                   Council on
                                                   Competitiveness,
                                                   President, Massachusetts
                                                   Inst. of Technology.
                                       Jack Sheinkman,
                                               Labor Vice Chairman, Council
                                                   on Competitiveness, Vice
                                                   Chairman, Amalgamated
                                                   Bank of New York.
                                       John Young,
                                               Founder, Council on
                                                   Competitiveness.
                                       Roger Ackerman,
                                               Chairman and CEO, Corning
                                                   Incorporated.
                                       Paul A. Allaire,
                                               Chairman, Xerox Corporation.
                                       Richard C. Atkinson,
                                               President, University of
                                                   California.
                                       David Baltimore,
                                               President, California
                                                   Institute of Technology.
                                       Edward W. Barnholt,
                                               President and CEO, Agilent
                                                   Technologies, Inc.
                                       Craig R. Barrett,
                                               President and CEO, Intel
                                                   Corporation.
                                       Alfred R. Berkeley, III,
                                               President, The Nasdaq Stock
                                                   Market Inc.
                                       Molly Corbett Broad,
                                               President, University of
                                                   North Carolina.
                                       William R. Brody,
                                               President, Johns Hopkins
                                                   University.
                                       Richard H. Brown,
                                               Chairman and CEO, Electronic
                                                   Data Systems
                                                   Corporation.
                                       G. Wayne Clough,
                                               President, Georgia Institute
                                                   of Technology.
                                       Vance D. Coffman,
                                               Chairman and CEO, Lockheed
                                                   Martin Corporation.
                                       Jared Cohon,
                                               President, Carnegie Mellon
                                                   University.
                                       Philip M. Condit,
                                               Chairman and CEO, The Boeing
                                                   Company.
                                       L. D. DeSimone,
                                               Chairman of the Board & CEO,
                                                   3M Company.
                                       Gary T. DiCamillo,
                                               Chairman and CEO, Polaroid
                                                   Corporation.
                                       Sandra Feldman,
                                               President, American
                                                   Federation of Teachers,
                                                   AFL-CIO.
                                       Carleton S. Fiorina,
                                               President and CEO, Hewlett-
                                                   Packard Company.
                                       George M.C. Fisher,
                                               Chairman of the Board,
                                                   Eastman Kodak Company.
                                       Louis V. Gerstner, Jr.,
                                               Chairman and CEO, IBM
                                                   Corporation.
                                       Joseph T. Gorman,
                                               Chairman and CEO, TRW Inc.
                                       William R. Hambrecht,
                                               President, W.R. Hambrecht &
                                                   Co., LLC.
                                       Charles O. Holliday, Jr.,
                                               President & CEO, E.I. du
                                                   Pont de Nemours &
                                                   Company.
                                       Shirley Ann Jackson,
                                               President, Rensselaer
                                                   Polytechnic Institute.
                                       Irwin M. Jacobs,
                                               Chairman & CEO, QUALCOMM,
                                                   Inc.
                                       Durk I. Jager,
                                               Chairman, President & CEO,
                                                   The Procter & Gamble
                                                   Company.
                                       Jerry J. Jasinowski,
                                               President, National
                                                   Association of
                                                   Manufacturers.
                                       Peter Likins,
                                               President, University of
                                                   Arizona.
                                       Richard A. McGinn,
                                               Chairman and CEO, Lucent
                                                   Technologies, Inc.
                                       Patrick J. McGovern,
                                               Chairman of the Board,
                                                   International Data Group
                                                   Inc.
                                       Henry A. McKinnell,
                                               President and CEO, Pfizer
                                                   Inc.
                                       Mario Morino,
                                               Chairman and CEO, Morino
                                                   Group.
                                       Michael E. Porter,
                                               Professor, Harvard
                                                   University.
                                       Heinz C. Prechter,
                                               Chairman, ASC Incorporated.
                                       Eric Schmidt,
                                               Chairman and CEO, Novell.
                                       David E. Shaw,
                                               Chairman, D. E. Shaw & Co.,
                                                   LP.
                                       Frederick W. Smith,
                                               Chairman. President & CEO,
                                                   FDX Corporation.
                                       Michael T. Smith,
                                               Chairman and CEO, Hughes
                                                   Electronics Corporation.
                                       Ray Stata,
                                               Chairman of the Board,
                                                   Analog Devices, Inc.
                                       Gary L. Tooker,
                                               Vice Chairman of the Board,
                                                   Motorola Inc.
                                       G. Richard Wagoner, Jr.,
                                               President & CEO, General
                                                   Motors Corporation.
                                       Mark Wrighton,
                                               Chancellor, Washington
                                                   University.

        Dr. Colwell. Mr. Chairman, I've mentioned headliners. In
    NSF's 2001 request, there are four focused initiatives, but
    nearly half our requested increase, as pointed out by Chairman
    Kelly, $320 million will support what we call the core
    activities. It will help us with our biggest challenge;
    strengthen the core disciplines of science and engineering,
    while moving forward in the interdisciplinary focus priority
    areas.

                            NSF'S EDUCATIONAL FOCUS

        I mentioned earlier NSF's role in helping educate the
    future scientists and engineers. But that's just part of the
    story. If all of our efforts depend on work force, a skill
    force that is literate in science and technology, we must
    address science and mathematics education for all students at
    all levels, pre-K to graduate and beyond.
        And it's no secret that our schools are not preparing
    children adequately in science and math. No region of the
    nation is immune. I was dismayed to read in last Sunday's
    Washington Post that 64 percent of the high school students in
    Montgomery County failed the standard Algebra 1 exam. This
    cannot continue if the United States seeks to maintain world
    leadership in science and technology.
        If you are commonly driven by knowledge and ideas, how you
    prepare a work force, a skill force is paramount. NSF is
    committed to providing leadership in this critical area.

                         NSF'S INVESTMENT IN NEW TOOLS

        Mr. Chairman, let me just mention very briefly two new
    stocks in our investment in tools. In the Major Research
    Equipment account, we will add $45 million for two new starts,
    and to provide increases to ongoing projects. One is NEON, the
    National Ecological Observatory Network, and this is a pole to
    pole network, arctic to antarctic, with the state of the art
    infrastructure of platforms and equipment, to enable 21st
    Century science and engineering based ecology and biocomplexity
    research.
        Another new start is EarthScope, which is an array of
    instruments that will allow scientists to observe earthquake
    and other earth processes like volcanic eruptions, at a much
    higher resolution with greater predictability.

                  NSF'S ADMINISTRATION AND MANAGEMENT REQUEST

        Finally, we also mention our requested investment in
    excellent, high quality staff, and the cutting-edge technology
    that's needed to keep NSF's internal operation strong and
    responsive.
        Through our request for Administration and Management, we
    are confident that the Foundation can continue its commitment
    to scientific excellence and to the sound stewardship of the
    public's resources.

                         CLOSING REMARKS OF DR. COLWELL

        Mr. Chairman, since its founding 50 years ago, the National
    Science Foundation has been a very important and vital catalyst
    for discovery and innovation. Our 2001 budget request reflects
    the lessons of this history. It focuses on national priorities,
    as it should, but it also recognizes that one of our highest
    national priorities must always be to remain at the leading
    edge of science and engineering research and education across
    the board.

                               PREPARED STATEMENT

        So the requested increase of over 17 percent provides
    investment that is clearly in keeping with the wealth of
    opportunity that science and engineering provides society. In
    addition, it positions America to remain a world leader in the
    knowledge-based economy of the 21st Century. Thank you.
        [The statement follows:]

                       PREPARED STATEMENT OF RITA COLWELL

        Mr. Chairman, Senator Mikulski, members of the subcommittee, thank
    you for allowing me the opportunity to testify on NSF's budget request
    for fiscal year 2001. I want to begin by thanking you and the
    subcommittee for your consistent, bipartisan support for NSF's science
    and engineering activities.
        The fiscal year 2001 budget request for the National Science
    Foundation if enacted, would provide the largest dollar increase the
    Foundation has ever received. This investment will help set the stage
    for a new century of progress through learning and discovery.
        For the coming fiscal year, the NSF requests $4.57 billion dollars.
    This represents a much needed increase--17.3 percent overall--over $675
    million above the current level. This investment is part of the
    President's 21st Century Research Fund for America, and it is all about
    keeping the United States at the leading edge of learning and
    discovery.
        The headliners in NSF's 2001 request are four focused,
    multidisciplinary initiatives. In fact, they are really national
    priorities: Information Technology Research, Biocomplexity, 21st
    Century Workforce and the emergent National Nanoscale Science and
    Engineering Initiative.
        Each initiative integrates research across the disciplines of
    science, engineering and mathematics. Solving many of the challenges
    facing our society will require more than individual discoveries. It
    will require the integration of knowledge from all disciplines.
        Biocomplexity--for example--seeks no less than a more complete
    understanding of our complex world and its interactions--physical,
    biological and social.
        In describing these interactions, I am reminded of the words of the
    naturalist John Muir. He wrote: ``When we try to pick out anything by
    itself, we find it hitched to everything else in the universe.''
        Up to now, we have sought understanding by taking things apart into
    their components. Now, at last, we begin to map out the interplay
    between the parts of complex systems.
        One especially promising area in Biocomplexity is the study of the
    Earth's crust as a habitat for micro-organisms.
        To illustrate this I would like take us on a very brief journey by
    video to the depths of the sea floor.
        The footage we will see was taken with an IMAX camera from inside
    the submersible Alvin. NSF has long supported Alvin, and we also helped
    to support this filming.
        Not yet seen by the public, this footage is part of a proposed film
    about deep-sea hydrothermal vents being produced by Stephen Low
    Productions in collaboration with the Rutgers Institute of Marine and
    Coastal Sciences and Woods Hole Oceanographic Institution.
        It was shot at a deep-sea vent called ``9 Degrees North'' in the
    Pacific Ocean south of Mexico. The film will bring the astonishing life
    of the vents to millions of people who will never be able to descend in
    a submarine.
        We will see features called ``black smokers''--the mineralized
    chimneys that tower above the communities of life at hydrothermal
    vents.
        The mouths of the vents spew forth boiling water full of chemicals.
    Such conditions are obviously toxic to humans and to most other life-
    forms.
        We first discovered these communities some two decades ago but we
    are only beginning to unlock their secrets. The list of described
    species inhabiting vents now tops 300. All living in the depths without
    photosynthesis.
        Instead of using the sun's energy, they employ chemosynthesis to
    oxidize the hydrogen sulfide emerging from the vents. [black smoker
    footage]
        To me the black smokers we have just seen are not only metaphorical
    but literal wellsprings of discovery. There are even suggestions that
    these springs could have been the birthplace of all life on Earth.
        Back at the Earth's surface, I'd like to move to another origin,
    the beginning of NSF. Fifty years ago this month--May 10th, 1950 to be
    exact--President Truman signed S. 247--the act that established the
    NSF.
        Our nation's commitment to science, engineering and education did
    not begin in 1950. This commitment can be seen from the very beginning
    of the nation. The motto on America's first coin for example--minted in
    1792--read: Liberty: Parent of Science and Industry.
        That motto has just as much meaning today--in the 21st century--as
    it did in 1792, in an era before the advent of the steam engine.
    Individual scientists and engineers--supported by NSF and other federal
    agencies--are using their talent and their freedom to create, discover,
    and innovate.
        Increasingly these scientists and engineers, and perhaps even more
    important their students--are also making the jump to the private
    sector.
        This transfer to the private sector of people--first supported by
    NSF at universities--should be viewed as the ultimate success of
    technology transfer. These talented scientists and engineers are part
    of the new wave of entrepreneurs creating enormous wealth in areas like
    information technology, biotechnology, and now in nanotechnology.
        Nanotechnology--Mr. Chairman--is a new, emerging field where
    scientists and engineers are beginning to manipulate matter at the
    atomic level. Taking a cue from biology, researchers across disciplines
    are beginning to create nanostructures smaller than human cells.
        This ``Lilliputian'' technology has the potential to revolutionize
    nearly every facet of our economy and our lives. For example:
      --Researchers envision building electronic circuits from the bottom-
            up, starting at the molecular level. In the future researchers
            may be building molecular computers the size of a tear drop
            with the power of today's fastest supercomputers.
      --Combining microelectronics and neural research holds great promise
            for developing prosthetic devices for artificial limbs.
            Researchers are creating nanochips where nerve axons can regrow
            through the tiny grate in the center a silicon membrane. These
            chips then modify and distribute the nerve impulses, simulating
            the electrical activity of a normal nerve synapse.
      --Researchers are already developing micromachined needles with sharp
            tips of less than a micrometer across. Such tiny needle tips
            can pierce the skin easily and without pain--a novel new method
            of drug delivery.
        There are many more innovations--most occurring in the past year or
    so. We are also already seeing a substantial amount of industry-
    university partnerships in nanoscale science and engineering. Industry,
    as well as other federal agencies like NASA, DoE and DOD will be
    looking to our universities for the scientists and engineers skilled in
    nanotechnology. That is why I cannot overstate the importance of NSF's
    investment in the education of future nanoscale scientists and
    engineers.
        The transfer of scientists and engineers to the private sector can
    probably best be seen in the Information Technology sector. Everyday we
    read a news story touting the latest Internet whiz kid or biotechnology
    IPO. David Ignatius--in a recent column in the Washington Post--wrote
    about a 27-year old Stanford graduate student with a smart business
    plan and a hot Internet search engine with the strange name of Google.
        The offbeat name is actually a reference to the complex math--
    actually a series of mathematical algorithms--that makes the search
    engine work. It involves over half a billion variables in its complex
    calculations. The mathematical term googol represents 10 to the 100th
    power.
        Google the company is an excellent example of knowledge transfer
    from NSF investments in people. Both of the company's two founders were
    computer science grad students at Stanford who studied under an NSF-
    funded faculty member. One of the founders received an NSF Graduate
    Research Fellowship. Google's Vice President of Engineering is a
    computer science professor at the University of California at Santa
    Barbara and recipient of a prestigious NSF CAREER award.
        Google is a great example of how fundamental research in an area
    like mathematics acts as the lifeblood of the IT revolution. It also
    shows how the unparalleled innovation system in the U.S. can quickly
    exploit new ideas developed in university labs and bring them to
    market.
        This example is really just the latest in a string of NSF
    successes. The underlying technology for nearly all major search
    engines found on the web today--including Lycos, Excite, Infoseek,
    Inktomi and specialized search engines like Congress's own THOMAS--all
    were begun created through NSF-funded research at universities.
        This trend hasn't gone unnoticed by industry. Now leaders like
    Alfred Berkeley, the President of the NASDAQ Stock Market and CEO's
    like Norm Augustine of Lockheed talk about the importance of the NSF's
    investments in basic research. I've included as an attachment
    statements they made earlier this year on the importance of NSF's
    investments to industry. I've also attached the recent statement by the
    Council on Competitiveness, which was co-signed by CEO's and other
    industry executives.
        Mr. Chairman, NSF has recently developed a strategic plan that
    reflect our role in the innovation process. The investments proposed in
    our fiscal year 2001 budget were crafted to address three strategic
    goals for the Foundation. They are:
        Ideas.--This includes research at and across the frontier of
    science and engineering, and connections to its use in service of
    society.
        People.--We've always said that every NSF dollar is an investment
    in people. We cover kindergarten to career development to continuous
    learning.
        Tools--These are the databases, the platforms, and the facilities
    that keep us at the leading edge. There are some new starts in here
    that I will highlight in a moment.
        I've already mentioned the initiatives within the fiscal year 2001
    budget request. I would also like to note that nearly half our
    requested increase--$320 million--will support what we call the core
    activities. It will help us with our biggest challenge: to strengthen
    the core disciplines of science and engineering while moving forward in
    interdisciplinary areas.
        NSF's investments in cutting-edge mathematics and statistics are a
    perfect example of how investing in core disciplines will sustain new
    fundamental discoveries and make interdisciplinary activities run on
    all cylinders.
        The story of Google shows how mathematics has become increasingly
    important in ITR. We are also seeing impressive contributions to the
    new and emerging fields of bioinformatics and nano-scale manufacturing.
    The greatest insights into AIDS have come from mathematical models of
    disease.
        Mr. Chairman, within our core activities, NSF support for plant
    genome research will increase by $22.5 million to total $102 million in
    fiscal year 2001. This investment--long championed by you Mr. Chairman
    and this subcommittee--will help continue US world leadership in plant
    genomics.
        Our investment in the EPSCoR program will increase slightly to $73
    million in fiscal year 2001. This includes funding from both the EHR
    and RRA accounts. NSF has long sought to enable EPSCoR researchers to
    participate more fully in NSF research activities. Consequently, up to
    $25 million will be made available from the NSF research account for
    co-funding.
        Mr. Chairman, all of our advances in science and engineering depend
    upon a workforce that is literate in science and technology. When we
    talk about the equation for science and society, this is a critical
    part.
        Our request for programs specifically addressing NSF's strategic
    goal of investing in People--spanning both the EHR and Research
    Accounts--will increase by 10.8 percent over fiscal year 2000. Within
    this broader investment, our request for Education and Human Resources
    represents a 5.5 percent increase over the fiscal year 2000 level.
        Highlights include:
      --Funding for the Graduate Teaching Fellows in K-12 Education (GK-12)
            program more than double to $28 million. The GK-12 program
            supports graduate and advanced undergraduate students in
            science, math and engineering to be content resources for K-12
            teachers.
      --The request for the HBCU-Undergraduate Program (HBCU-UP) in fiscal
            year 2001 is $11 million, an increase of $1.60 million or 17
            percent. This reflects a contribution from NSF's research
            account of $3 million. The fiscal year 2001 request for HBCU-UP
            will provide continuing support for 14 existing projects and
            support for up to 4 new awards in fiscal year 2001.
      --The request for Advanced Technological Education Program (ATE)--
            NSF's flagship program for 2-year institutions and championed
            by the subcommittee--is $39 million, an increase of $10 million
            or over 33 percent. The ATE program seeks to strengthen the
            science and math preparation of students in technical fields.
            This will enable them to better compete in the high-performance
            workplace in areas such as Information Technology and
            Manufacturing.
        Our nation is in the midst of one of the greatest eras of
    technological change in human history. In an economy driven by
    knowledge and ideas, how we prepare our workforce is paramount. NSF is
    committed to providing leadership in this critical area.
        Finally, I mentioned earlier that we have two new starts in our
    investments in Tools.
        One is NEON--the National Ecological Observatory Network: a pole-
    to-pole network--Arctic to Antarctic--with a state-of-the-art
    infrastructure of platforms and equipment to enable 21st Century
    science and engineering-based ecological and biocomplexity research.
    The MRE request for NEON is $12 million in fiscal year 2001.
        The other new start is EarthScope, which is an array of instruments
    that will allow scientists to observe earthquake and other earth
    processes like volcanic eruptions at much higher resolution. $17
    million is requested for EarthScope in fiscal year 2001.
        Mr. Chairman, since its founding fifty years ago the National
    Science Foundation has been an important and vital catalyst for
    discovery and innovation. From the information technology revolution to
    the genomic revolution and everything in between--MRIs, lasers, the
    Internet, Doppler radar, and countless other innovations--NSF-supported
    fundamental research has advanced our society.
        NSF's fiscal year 2001 budget reflects the lessons of history. It
    focuses on national priorities, as it should. But it also recognizes
    that one of our highest national priorities must always be to stay at
    the leading-edge of science and engineering research and education
    across the board. Over half of the increased funding is just for that.
        The entire NSF investment portfolio sets the stage for a 21st
    Century research and education enterprise that is focused on national
    priorities. Guiding all of these activities is the Foundation's
    longstanding commitment to merit-based investments in learning and
    discovery that adhere to the highest standards of excellence.
        This request marks a significant step forward for U.S. science and
    engineering. The requested increase of over 17 percent provides a level
    of investment that is clearly in keeping with the wealth of opportunity
    that science and engineering provide society. It positions America to
    remain a world leader in the knowledge-based economy of the 21st
    Century.
        Thank you.

                             STATEMENT OF NEAL LANE

        Senator Bond. Thank you very much, Dr. Colwell. Dr. Lane.
        Dr. Lane. Chairman Bond, Senator Mikulski, I am very
    pleased to appear before you today. I ask that my written
    testimony, which describes OSTP's budget and the highlights of
    the administration's fiscal year 2001 R&D budget request be
    included for the record.
        The President and Vice-President have proposed an historic
    science and technology budget for fiscal year 2001, a budget
    that is balanced across all important fields of science,
    engineering and technology. And I cannot emphasize enough how
    dedicated the administration is to working with you to see this
    R&D budget enacted.
        Bipartisan support for this budget would put our R&D
    portfolio on an optimum investment trajectory, one that
    increases research in the core disciplines of science and
    engineering, technology, across the board, providing balance
    among the disciplines, and continued prosperity for the 21st
    Century.
        Mr. Chairman and Senator Mikulski, I very much appreciate
    your passion for science and technology and the strong support
    that you and others on your committee have given to the Federal
    R&D programs; and I know that you and I share a commitment to
    keeping America the world leader in science and technology.
        I hope you agree OSTP plays a vital role in leveraging the
    government science and technology investments for broad
    national goals.
        Within the balanced R&D portfolio, we're coordinating some
    very important interagency initiatives. In the area of energy,
    there's a new focus on biofuels, on developing clean, efficient
    energy technologies for burgeoning international markets, and
    on strong support for research to improve our domestic housing
    and clean cars. We have a targeted effort to understand
    solutions for environmental policy challenges such as hypoxia,
    harmful algal blooms and biodiversity loss. We are moving our
    robust global change research program into understanding carbon
    uptake and storage, and terrestrial systems, and to take stock
    of what a changing hydrological cycle might mean for the
    planet.
        We've continued our strong support for education research,
    and among our efforts to address 21st Century threats, we've
    proposed a new institute for information infrastructure
    protection, which is a new partnership with industry.
        And as you know, Mr. Chairman, we continue to coordinate
    efforts in the area of the planned genome, and food safety as
    well as many others.
        I want to highlight just two of our initiatives this
    morning. The information technology R&D initiative responds to
    last year's wake-up call from the congressionally-chartered
    President's Information Technology Advisory Committee, we call
    PITAC.
        OSTP was instrumental in getting the committee established.
    We also work closely with the committee to make sure that its
    work would be useful to the Federal agencies while still
    challenging those agencies to think outside the box about their
    responsibilities and possibilities in information technology
    research.
        Once we had the PITAC recommendations, OSTP pulled together
    the Federal agencies to develop a response. We ultimately
    concluded that information technology is so important that we
    proposed and you funded new Federal R&D investments. This year
    we build upon that effort by taking your advice, Mr. Chairman,
    and the recommendation of PITAC by presenting a single
    integrated information technology R&D portfolio, which includes
    the base high performance computing communication programs,
    including next generation Internet, the new activities
    established by last year's information technology for the 21st
    Century Initiative, and the Department of Energy's ASCI
    program, Accelerated Strategic Computer Initiative.
        This year the president has requested $2.315 billion for
    information technology R&D. That's 35 percent above and beyond
    our ongoing research programs. Out of this increase, Mr.
    Chairman, $279 million, nearly half of the initiative, comes
    through your subcommittee. I hope we can continue to count on
    your support.
        I would also like to highlight OSTP's work on the new
    initiative in nanotechnology research. OSTP, through the
    auspices of the National Science and Technology Council,
    convened an interagency working group to look into the
    feasibility of a nanotechnology initiative. After the working
    group finished its work, OSTP recommended that the president's
    advisory committee, PCAST, convene a panel to review the
    recommendations of the government body and to advise OSTP and
    others in the administration on how best to implement their
    findings.
        This effort culminated in the national nanotechnology
    initiative, which will provide an $225 million increase in the
    emerging fields of nanoscience and nanoengineering, to nearly
    double the current Federal investment. Once again, nearly half
    of this increase will come through this subcommittee. Roughly
    70 percent of the new funding proposed under the National
    Nanotechnology Initiative will go to university-based research.
    These investments will help meet the growing demand for workers
    with nanoscale science and engineering skills.
        The administration believes that nanotechnology will have a
    profound impact on our economy and society in the early 21st
    Century. Perhaps even comparable to that of information
    technology, or cellular genetic and molecular biology. And
    that's in part because nanotechnology advances will support all
    of these areas as well as many, many other areas of potential
    application.
        I ask today for your continued support for OSTP's role in
    coordinating science and technology policy for the Executive
    Branch, and for our nation at large. OSTP's budget request of
    $5.2 million and 40 FTEs for fiscal year 2001 represents no
    increase in FTE level and an increase in budget authority of
    less than two percent. These additional resources are essential
    to continue to provide the highest quality of work across the
    broad spectrum of responsibilities.
        Mr. Chairman, Senator Mikulski, Members of the Committee, I
    hope that this brief overview, combined with my written
    statement, convey to you the extent of this administration's
    commitment to advancing science and technology in the national
    interest, and the importance of OSTP's role in that enterprise.
        Regardless of party affiliation, in the end we can all
    agree that investments in science and technology are
    investments in the nation's future. I look forward to achieving
    bipartisan support for a national science and technology
    strategy that will combine the resources of industry, academia,
    nonprofit organizations and all levels of government to advance
    knowledge, promote education, strengthen institutions and
    develop a human potential. And to put our support for science
    and technology from all these sectors on the trajectory that we
    need to have for the future of the country.
        I ask not only your support for OSTP's fiscal year 2001
    budget request, but also want you to know how much I appreciate
    the long-standing bipartisan support of the committee for OSTP
    and for science and technology research as an enterprise.
        I enjoyed the video on the Alvin. I had the very great
    pleasure to go down in the Alvin with Congressman Jerry Lewis
    when he was chair of the VA, HUD subcommittee on the House
    side, and we were down for five hours looking at the wonders
    underneath the ocean. And if that's not bipartisan, it's an
    extraordinary experience--I highly recommend this experience.

                               PREPARED STATEMENT

        That concludes my statement. I'd be very happy to answer
    any questions you might have.
        [The statement follows:]

                        PREPARED STATEMENT OF NEAL LANE

        Mr. Chairman, Members of the Committee, I am pleased to appear
    before you today to discuss the Office of Science and Technology
    Policy's (OSTP) budget request for fiscal year 2001.
        I very much welcome, and am encouraged by the continued efforts in
    Congress in support of science and technology (S&T) funding. As you
    know, funding for S&T, like funding for education, is a high leverage
    investment in our continued quest for peace and prosperity. Support for
    such investments has traditionally been a matter of bipartisan
    agreement. It is imperative that we build common ground in support of a
    shared vision--a commitment to keep America the world's leader in S&T.
    I believe that the President's S&T budget, with your help, will
    generate the bipartisan momentum to put our R&D portfolio on an optimum
    investment trajectory that will continue to deliver strong returns on
    our investment, far into the future. This budget plots a bold course of
    strategic growth and prosperity through discovery. I look forward to
    working with Congress on a bipartisan basis to see it successfully
    enacted.
        Mr. Chairman, it has been a remarkable year for science. All of the
    millennial lists produced by the popular press listed advances in
    science and technology as some of the top achievements during the last
    century. Time magazine named Albert Einstein ``Man of the Century.''
    And this budget, which proposes a bold Science and Technology
    Initiative, could be one of the President's--and this Congress's--most
    important gifts to future generations.
        As we turn-the-corner on the new century, it seems appropriate to
    take stock of the Nation's S&T enterprise, and to look to the future--
    to the opportunities that lie ahead as well as the challenges that we
    face. The Information Age, driven by rapidly advancing S&T, is bringing
    changes to our society that are only beginning to unfold. Already, new
    communications technologies are transforming the way we work, where we
    work, and what we need to know to be successful in tomorrow's
    competitive environment. Six years ago, ``Internet'' was still a word
    known mostly to those in S&T. Today, this offspring of federal research
    activities is the backbone of a new industry and a window to a
    tremendous world of information for all segments of our society, from
    business executives to school children.
        The rapid economic growth of other nations means a future with
    greatly expanded markets for U.S. goods and services. Our ability to
    move our ideas, our goods, and ourselves swiftly to any place on the
    planet, with the help of new technologies, enhances our ability to
    share in the growth of global wealth. On the other hand, the increasing
    availability of these same capabilities throughout the world also means
    greater competition; it means increasing pressures on our shared
    environment, health, and natural resources; and it means more diverse
    dangers to our security from threats such as terrorism and the spread
    of nuclear and other weapons of mass destruction.

                     S&T--THE ENGINE OF OUR ECONOMIC GROWTH
        Sustaining U.S. leadership in science and technology has been a
    cornerstone of President Clinton's economic and national security
    strategy. Investments in science and technology--both public and
    private--have driven economic growth and improved the quality of life
    in America for the last 200 years. They have generated new knowledge
    and new industries, created new jobs, ensured economic and national
    security, reduced pollution and increased energy efficiency, provided
    better and safer transportation, improved medical care, and increased
    living standards for the American people. Science and technology have
    become the engine of our economic growth.
        Our economy has never been more driven by science and technology
    than it is today. Over the past three years, information technology
    (IT) alone has accounted for more than one-third of America's economic
    growth. More than 7.4 million American's work in IT today--and those
    jobs pay, on average, eighty percent higher than the average job. Alan
    Greenspan recently stated that rapid technological change has greatly
    contributed to nine years of record peacetime expansion, with
    information innovation lying at the root of productivity and economic
    growth, and is one of the forces producing what he called ``America's
    sparkling economic performance.''
        Investments in research and development are among the highest-
    payback investments a Nation can make. Over the past 50 years
    technological innovation has been responsible for as much as half of
    the nation's growth in productivity.
        We see the fruits of this innovation every day. Many of the
    products and services we have come to depend on for our way of life in
    America--lasers, computers, magnetic resonance imaging (MRI), teflon
    and other advanced materials and composites, communications satellites,
    jet aircraft, microwave ovens, solar-electric cells, modems,
    semiconductors, storm windows, human insulin, and others--are the
    product of U.S. science support and technology policies.
        These innovations also mean jobs and economic prosperity for
    America. They've built some of these key industries:
        Computers and Communications.--Federal support of computing and
    communications research, leveraged by industry and academia, has led to
    technical advances that are transforming the American economy.
    Commercialization and expanded use of the new information tools created
    through these innovative partnerships--which include everything from
    high speed supercomputing to the Internet--have unleashed spectacular
    economic growth and job creation. Over 800,000 new jobs were created in
    information technology sectors in the past year alone. These sectors
    are growing at double the rate of the overall economy and will soon
    account for 10 percent of the economy.
        Biotechnology.--Discoveries in biology, food science, agriculture,
    genetics, and drugs upon which the private sector has been able to
    build and expand a world-class industry today support $13.4 billion in
    annual sales and more than 150,000 American jobs.
        Commercial Space Activities.--The U.S. commercial launch rate has
    tripled since the first half of the 1990s. Revenues from U.S.
    commercial space launch activities have grown rapidly from $635 million
    in 1996, to over $1 billion in 1998.
        Aerospace.--Aerospace led all other industry sectors in 1999 with
    $41 billion in net exports. The latest figures show the total aerospace
    industry sales for 1999 to be $155 billion, employing over 837,000
    people. The U.S. Aircraft industry shipped over $54 billion worth of
    commercial aircraft, up 46 percent from 1997 levels.
        Environmental Technologies.--Almost unheard-of 10 years ago, more
    than 30,000 environmental technology and services businesses employ
    over 1.3 million Americans in high-growth, high-wage jobs. The
    environmental technology industry has annual sales over $186 billion, a
    number that is expected to grow to $214 billion by the year 2002. The
    environmental technology export market nearly doubled from $9.3 billion
    in 1993 to $18.9 billion in 1998, directly generating more than 130,000
    new jobs in the United States.
        Energy Efficiency.--Technology advances, developed in part through
    public-private partnerships, have cut refrigerator energy consumption
    from 1900 kWh/year in 1974 to an average today of less than 650 kWh/
    year, reducing consumer electricity costs by $100/year per
    refrigerator. A partnership with the glass industry led to the
    development of the oxygen-fueled glass furnace, which in just 8 years
    has captured 30 percent of U.S. glass production and provides annual
    net energy savings of $11 million. Geothermal heat pumps (GHP) reduce
    energy consumption by 63-72 percent compared to electric resistance
    heaters/standard air conditioners. Some 400,000 GHPs are now in use in
    the United States, with estimated annual savings of $120 million to
    $160 million.
        Every one of these industries has been built on federal investments
    in R&D, and they are not isolated occurrences. From satellites, to
    software, to superconductivity, the government has supported--and must
    continue to support--exploratory research, experimentation and
    innovation that would be difficult, if not impossible, for individual
    companies or even whole industries to afford.

                   RECENT ADVANCES IN SCIENCE AND TECHNOLOGY
        Over the past year there have been numerous scientific and
    technological advances, reminding us of how much there is yet to know,
    and of the potential of S&T to further enrich and improve our lives. It
    is important to note that federal funding was a key to virtually all of
    the scientific breakthroughs of 1999, which included:
      --Genomics speeds ahead.--The feverish pace of discovery in genomics
            begun in 1998 with the publication of the Caenorhabditis
            elegans nematode genome continued unabated this year. The big
            story was the first successful sequencing of a human
            chromosome, and the first two chromosomes of a flowering plant.
            In addition, researchers polished off the genomes of the fruit
            fly, Chlamydia pneumoniae (microbe which causes respiratory
            infections), Campylobacter jejuni (food-borne pathogen),
            Mycobacterium tuberculosis (a virulent strain of TB), and two
            chromosomes of Plasmodium falciparum (malaria parasite).
            Progress on sequencing has fueled similar efforts on new
            technologies to exploit the new information, including DNA
            chips, microarray gene analyzers, and advanced data processing.
      --Rice of life.--Genetically engineered crops have long held promise
            as a way to feed the world's 800 million people who are either
            hungry or undernourished. Last summer scientists unveiled
            strains of biotech rice that contain high levels of iron and
            beta-carotene, a vitamin A precursor. Vitamin A deficiency
            afflicts 400 million people worldwide, leaving them vulnerable
            to infections and blindness. Iron deficiency afflicts up to 3.7
            billion people, causing anemia and impaired mental function in
            children. The rice sequence data is being made freely available
            to the public.
      --We are not unique.--Once we wondered, but now we know: At least one
            solar system beyond our own revolves around a sun-like star.
            Earlier this year researchers discovered a system of at least
            three planets around the star Upsilon Andromedae, which is 44
            light-years away. The giant planets circle around their sun
            within the distance of our Mars' orbit--providing new clues
            about how solar systems may form.
      --Plentiful planets.--Following only four years after the discovery
            of the first planet found outside of our solar system,
            astronomers have raised the total to nearly 30 with a steady
            stream of new discoveries all year.
      --Making memories.--Using a new laser microscope technique,
            researchers have watched the complex, molecular processes that
            underlie memories in the brain. These studies have identified
            the function of key receptors in the synapses that modify the
            connections between neurons and thereby affect how they will
            behave in the future. Separate, supporting research showed that
            genetic modification of these receptors resulted in ``smart
            mice'' that were better able to learn mazes.
      --New light on photonics.--Several dramatic developments were made in
            the effort to make devices that manipulate light or photons the
            way semiconductor devices manipulate electrons. Based on custom
            made ``photonic'' crystals, researchers developed bandgap
            mirrors, high intensity light guides, and the first photonic
            crystal laser. The optical counterpart to conventional
            integrated circuits would result from combining the photonic
            waveguides and lasers in a single crystal, for possible use as
            telecommunications circuits and ultra-fast computers.
      --Tracking distant ancestors.--Geochemists extracted and identified
            chemical residues from ancient microbes in rocks 2.7 billion
            years old. These chemical remains from a primitive cell are
            nearly a billion years older than the oldest undisputed fossil
            remains.
      --Brain power.--Scientists had thought that human brain cells, unlike
            other biological cells, do not renew themselves as they die
            off. But researchers have discovered that brain cells do
            regenerate--and do so continuously throughout a person's life.
            The finding opens the possibility of treating disorders such as
            Parkinson's or Alzheimer's with cells taken from a patient's
            own brain.
      --Stem cells.--The late 1998 discovery that embryonic cells could be
            maintained as undifferentiated stem cells, with the potential
            to become virtually any type of cell in the body, was followed
            up this year by more than a dozen landmark papers describing
            their remarkable capabilities. This dramatic work has
            tremendous therapeutic potential for people suffering from
            Parkinson's, diabetes, and many other diseases. Stem cells
            could eventually be induced to grow everything from blood to
            organs. Doctors, for example, could grow tissue from stem cells
            and then transplant it into the same person to avoid rejection.
      --Tissue regeneration.--Scientists discovered a new type of stem cell
            when they isolated the mesenchymal cell in bone marrow. What's
            more, they were able to induce these cells to grow into
            specific types of connective tissue, such as cartilage, bone,
            or fat cells. Other potential applications include new muscles
            and tendons for sports injuries, and fat tissue for implants.

                PRESIDENT CLINTON'S FISCAL YEAR 2001 R&D BUDGET
        The President and the Vice President remain unwavering in their
    support for science and technology as crucial investments in our
    future. They maintain that such investments enable our nation to
    compete aggressively in the global marketplace, protect our environment
    and manage our natural resources in a sustainable manner, safeguard our
    national security from emerging threats, and spur the technological
    innovation that has contributed so much to our economic prosperity and
    quality of life. They have brought the budget into balance. They have
    increased the investment in science and technology. We all, but
    especially our children and our grandchildren, will reap the rewards.
        Fiscal year 2001 is the eighth year in a row that the President has
    proposed increased investments in civilian research and development.
    The civilian R&D request is $43.3 billion, an increase of 6 percent
    ($2.5 billion) over fiscal year 2000. The civilian R&D request now
    constitutes 51 percent of the overall R&D budget of $85.3 billion.
        The request boosts funding for basic research to $20.3 billion, an
    increase of 7 percent ($1.3 billion) over fiscal year 2000. The budget
    also strengthens university-based research, which increases by 8
    percent ($1.3 billion) over fiscal year 2000. Substantial increases for
    several agencies help to restore balance between biomedical research
    and other scientific disciplines. The budget provides increases for
    research in the core disciplines of science and technology across the
    board. As the President has said, ``We have to have a balanced research
    portfolio, because the research enterprise is increasingly
    interdependent.'' He got it exactly right, and his deeds match his
    words.

                        SCIENCE & TECHNOLOGY INITIATIVE
        The budget request includes a $2.9 billion Science and Technology
    Initiative directed towards national goals such as world leadership in
    science and technology and long-term economic growth and prosperity.
    This S&T Initiative is contained within the 21st Century Research Fund,
    which ensures effective integration of our science and technology
    investments. The Research Fund grows by 7 percent in fiscal year 2001,
    to a total of $42.9 billion.
        These investments will ensure that science and technology will
    continue to fuel economic growth and allow Americans to lead longer,
    healthier lives. These investments also will enable America to continue
    to lead in the 21st century by increasing support in all scientific and
    engineering disciplines, including biomedical research, nanotechnology,
    information technology, clean energy, and university-based research.
    Specifically, this infusion of funds will enable researchers to tackle
    important scientific and technological challenges, and will lead to:
      --American prosperity in the 21st Century.--With rapid growth,
            increased productivity and rising standards of living, the U.S.
            economy is thriving, in large part because of our technological
            leadership. Science and technology have become the engine of
            America's economic growth: information technology alone
            accounts for \1/3\ of U.S. economic growth, and is creating
            jobs that pay almost 80 percent more than the average private-
            sector wage. Many of the technologies (such as the Internet)
            that are fueling today's economy are the result of government
            investments in the 1960's and 1970's.
      --Longer, healthier lives for all Americans.--In the last 100 years,
            the life expectancy of the average American has increased by
            almost 30 years, as a result of breakthroughs such as
            antibiotics. Today, we are on the verge of even greater
            scientific advances, and continued investment in health-related
            research could lead to greater life expectancies and better
            quality of life.
      --Educating America's high-tech workforce.--The President's
            investment in university-based research will help spur
            innovations in new technologies and treatment, while preparing
            the next generation of leaders in science, engineering and
            technology.
      --Cleaner energy for a cleaner environment.-- Research can help
            America create cleaner sources of energy and energy-efficient
            technologies, such as fuel cells that emit only water, cars
            that get 80 miles per gallon, and bioenergy derived from new
            cash crops.
      --New insights into the world around us.--Increases in funding for
            science-based research can lead to amazing breakthroughs in our
            understanding of the world around us and beyond.

                          HIGHLIGHTS OF THE R&D BUDGET
        The proposed R&D investments will enable the S&T agencies to
    achieve the President's goals for science and technology: promoting
    long-term economic growth that creates high-wage jobs; sustain a
    healthy, educated citizenry; harnessing information technology;
    improving environmental quality; enhancing national security and global
    stability; and maintaining world leadership in science, engineering,
    and mathematics. For example:
      --National Institutes of Health (NIH).--The budget provides a $1
            billion increase (6 percent) in biomedical research at the NIH
            that will support research in areas such as diabetes, brain
            disorders, cancer, genetic medicine, disease prevention
            strategies, and development of an AIDS vaccine.
      --National Science Foundation (NSF).--The budget provides a $675
            million increase (17 percent) in the National Science
            Foundation--double the largest dollar increase in NSF's
            history. This increase will boost university-based research and
            ensure balanced support for all science and engineering
            disciplines. NSF funds half of all non-health related
            university-based research.
      --Department of Energy (DOE).--The budget provides $4.2 billion (a 15
            percent increase) for DOE's programs in the 21st Century
            Research Fund. The budget includes a 13 percent increase for
            basic science programs as well as continued support for
            construction and operation of large scientific user facilities,
            including the Spallation Neutron Source.
      --Department of Defense (DOD).--The budget provides $1.2 billion in
            basic research (a 4.3 percent increase), and $3.1 billion in
            applied research. Research on counter-terrorism and on
            improvements in the safety and security of the Nation's
            physical infrastructure and information and communications
            systems receive targeted increases.
      --National Aeronautics and Space Administration (NASA).--The budget
            provides $5.2 billion (a 6 percent increase) for NASA's
            programs in the 21st Century Research Fund, including $2.4
            billion for Space Science (a 9.4 percent increase), and $290
            million (a 48 percent increase) for a $4.5 billion five-year
            space launch initiative.
      --Department of Commerce (DOC).--The budget includes $862 million for
            DOC programs in the 21st Century Research Fund. It provides
            $176 million (a 23 percent increase) for NIST's Advanced
            Technology Program to promote competitive, cost-shared R&D
            partnerships, and $50 million to create an Institute for
            Information Infrastructure Protection.
      --Department of Agriculture (USDA).--The budget provides $894 million
            (an 8 percent increase) for the Agricultural Research Service.
            The budget also includes $469 million for research and
            education activities through the Cooperative State Research,
            Education and Extension Service, including $150 million (a 26
            percent increase) for the National Research Initiative (NRI).
            The NRI provides competitive grants in areas of national
            concern such as food safety, the environment, plant and animal
            research, and human nutrition.
      --Department of Transportation (DOT).--The budget provides $899
            million (a 39 percent increase) for DOT's programs in the 21st
            Century Research Fund. The budget includes $338 million for the
            Intelligent Transportation System initiative aimed at enhancing
            the safety and efficiency of the surface transportation
            infrastructure.
      --Department of the Interior (DOI).--The budget provides $895 million
            (a 10 percent increase) to USGS for science that supports
            natural resource and environmental decision-making. The budget
            also supports research and technical assistance on the
            scientific needs of land managers and local land use planners.
      --Environmental Protection Agency (EPA).--The budget provides $758
            million (a 14 percent increase) for EPA's programs in the 21st
            Century Research Fund. The EPA budget funds research that
            provides a sound scientific and technical foundation for
            environmental policy and regulatory decision-making.
      --Department of Education (DOEd).--The budget provides $379 million
            (a 19 percent increase) for Ed's programs in the 21st Century
            Research Fund. The budget provides $20 million to support a
            collaborative research effort with NSF and NICHD on large-
            scale, interdisciplinary research focused on understanding how
            promising practices and research on how children learn can be
            scaled up and applied in complex and diverse classroom
            settings.

                            INTERAGENCY INITIATIVES
        The budget increases funding for a number of priority research
    areas that require multi-agency efforts. High priority interagency
    programs identified by the National Science and Technology Council for
    special emphasis in fiscal year 2001 received the following increases:
      --National Nanotechnology Initiative.--This new $495 million
            initiative in nanotechnology--the ability to selectively move
            individual atoms and molecules--could revolutionize the 21st
            century in the same way that the transistor and the Internet
            led to the Information Age. Increased investments in
            nanotechnology could lead to breakthroughs such as molecular
            computers that can store the contents of the Library of
            Congress in a device the size of a sugar cube, and new
            materials ten times as strong as steel at a fraction of the
            weight.
      --Information Technology Research.--A nearly $600 million increase in
            information technology research (35 percent) could lead to
            advances such as high-speed wireless networks that can bring
            distance learning and telemedicine to isolated rural areas; and
            supercomputers that can more accurately predict tornadoes and
            hurricanes, and more rapidly develop life-saving drugs. This
            funding continues the funding for fundamental, long-term
            research, advanced applications, and research on the economic
            and social implications of information technology begun last
            year.
      --Climate Change Technology Initiative.--The budget provides a 30
            percent increase for this initiative, which includes $1.4
            billion in R&D on energy efficiency, renewable energy, carbon
            sequestration, and improvements in nuclear and fossil
            technologies. The initiative also provides $400 million in tax
            credits to stimulate adoption of energy efficient technologies.
      --U.S. Global Change Research Program.--The budget provides $1.74
            billion to observe, understand, predict, and assess the state
            of the Earth and how it changes in response to natural and
            human-induced forces.
      --Partnership for a New Generation of Vehicles (PNGV).--The budget
            provides $255 million (a 13 percent increase) for this cost-
            shared, industry partnership. PNGV aims to develop affordable
            cars that achieve up to three times the fuel economy of
            comparable vehicles and meet all applicable emission and safety
            standards.
      --Aviation Safety, Security, Efficiency, and Environmental
            Compatibility Initiative.--The budget provides over $1.3
            billion for FAA, NASA, and DOD to develop technology to help
            ensure that the nation's air transportation system will support
            the economic growth created by information technology and the
            E-commerce revolution and will
      --Countering 21st Century Threats.--The President's budget provides
            $590 million, a $56 million (10 percent) increase, for Weapons
            of Mass Destruction R&D to enhance our research and development
            efforts in preventing, detecting, and responding to the release
            of weapons of mass destruction, and to more effectively manage
            the health, environmental, and law enforcement consequences of
            such an incident should one ever occur. Furthermore, the budget
            includes $606 million, a $145 million (31 percent) increase,
            for Critical Infrastructure Protection R&D to improve the
            safety and security of our nation's critical infrastructures--
            the power, communications, information, transportation, and
            other systems on which our economy, national security, and
            quality of life depend. achieve the President's goal of
            reducing the aviation accident rate by 80 percent within 10
            years.
      --Interagency Education Research Initiative.--The budget provides $50
            million ($25 million at NSF, $20 million at ED, and $5 million
            at NICHD) to support large-scale, interdisciplinary research
            focused on understanding what educational strategies work and
            why in two key areas:early learning of foundational skills; and
            transitions to learning increasingly complex science and
            mathematics.
      --National Plant Genome Initiative.--The budget provides $87 million
            for the National Plant Genome Initiative (NSF, USDA, DOE, and
            NIH) to unravel the complex genomes of economically important
            plants.

                                THE OSTP MISSION
        In support of our Nation's science and technology priorities, OSTP
    has two primary responsibilities: advising the President on S&T; and
    providing leadership and coordination for our government's role in the
    national S&T enterprise.
        In the 1950's, in response to Soviet advances, highlighted by the
    launch of Sputnik, President Eisenhower saw the need for expert S&T
    counsel, and he invited James Killian, then president of MIT, to
    Washington to serve as the head of the first President's Science
    Advisory Committee, an OSTP predecessor. Since then our Nation's
    Presidents have drawn on the expertise of our office for S&T policy
    advice, and I see this as a contribution that will continue to grow in
    value as the challenges we face become increasingly complex.
        Within our agency, a small staff of professionals analyzes
    developments at the frontiers of scientific knowledge, and aids the
    President in shaping policy. OSTP also provides scientific and
    technical information and recommendations to the Vice President, the
    White House Offices, the Executive Branch Agencies, and to Congress.
        A second responsibility of OSTP is to provide leadership and
    coordination across the Administration. OSTP plays this role for a
    range of Administration priorities, including national security and
    global stability, environment, science, and technology. The National
    Science and Technology Council (NSTC) has been an invaluable partner
    with OSTP in developing interagency evaluations and forging consensus
    on many crucial S&T issues.

                              OSTP BUDGET REQUEST
        I ask today for your continued support of OSTP's role in
    coordinating S&T policy for the Executive Branch and for our Nation at
    large. OSTP's budget request of $5,201,000 for fiscal year 2001
    represents an increase in budget authority of less than 2 percent and
    no increase in the FTE level. This request will allow OSTP to fulfill
    its coordination and advisory responsibilities.
        The requested fiscal year 2001 budget will support the Director and
    up to four Associate Directors plus a staff of seasoned professionals
    with diverse training and experience. Our requested small increase is
    essential to continue to provide quality support to the President and
    information to the Congress. Since personnel costs constitute the
    largest portion of OSTP's budget, our fiscal year 2001 budget request
    reflects our commitment to operate more efficiently and cost-
    effectively without compromising the essential element of a top caliber
    science and technology agency--high quality personnel.

                   NATIONAL SCIENCE AND TECHNOLOGY COUNCIL
        To meet the Administration's priority S&T goals we must combine the
    efforts and the expertise of multiple agencies. OSTP personnel support
    the work of the NSTC, a Cabinet-level Council that sponsors interagency
    initiatives to advance key S&T objectives.
        Our distributed system of research funding also places a premium on
    coordination among complementary agency programs. The NSTC, now in its
    fifth year, is improving such coordination.
        NSTC membership includes Cabinet Secretaries, heads of science and
    technology agencies, and key White House officials with significant S&T
    responsibilities. In the process of generating specific budgetary and
    policy recommendations, NSTC routinely reaches beyond the federal
    government to seek input from a wide spectrum of stakeholders in the
    public and private sectors.
        An important objective of the NSTC is to guide individual agency
    budget priorities for R&D and to orient the S&T spending of each
    Federal mission agency toward achieving national goals. To meet this
    objective, the NSTC has established five goal-oriented committees, each
    of which is chaired jointly by a senior agency official and an OSTP
    Associate Director. These standing committees, along with ad hoc
    working groups within the NSTC, provide an effective forum to resolve
    cross-cutting issues such as determining the future role of the U.S.
    national laboratories, or providing a program guide to federally funded
    environment and natural resources (see Appendix A for a full list of
    NSTC generated reports from 1999.)

        THE PRESIDENT'S COMMITTEE OF ADVISORS ON SCIENCE AND TECHNOLOGY
        As Assistant to the President for Science and Technology, I co-
    chair the President's Committee of Advisors on Science and Technology
    (PCAST) with John Young, former President and CEO of Hewlett-Packard
    Co. The PCAST, which consists of distinguished individuals from
    industry, education, research institutions, and other non-governmental
    organizations, serves as the highest level private sector advisory
    group for the President and the NSTC. (see Appendix B for a full list
    of PCAST generated reports from 1999). President Clinton established
    the President's Committee of Advisors on Science and Technology (PCAST)
    at the same time that he established the NSTC to advise the President
    on matters involving S&T and to assist the NSTC in securing private
    sector involvement in its activities.
        Mr. Chairman and Members of the Committee, I hope that this brief
    overview has conveyed to you the extent of this Administration's
    commitment to advancing S&T in the national interest. We are delighted
    that the fiscal discipline exercised over the past seven years has put
    in reach the opportunity to place more emphasis on investments that can
    assure future economic progress, environmental protection, and other
    national priorities which depend so heavily on strong and sustained
    R&D.
        Regardless of party affiliation, in the end we can all agree that
    investments in S&T are investments in our Nation's future. I look
    forward to achieving bipartisan support for a national S&T strategy
    that will combine the resources of industry, academia, non-profit
    organizations, and all levels of government to advance knowledge,
    promote education, strengthen institutions, and develop human
    potential.
        I ask not only for your support for OSTP's fiscal year 2001 budget
    request, but also want you to know how much I appreciate the long-
    standing bipartisan support of the committee for OSTP and for the S&T
    research enterprise. I would be happy to answer any questions that you
    have.

                                   APPENDIX A

                     REPORTS--NSTC REPORTS AND PUBLICATIONS
        Bioinformatics in the 21st Century (January 1999)
        Research Involving Persons with Mental Disorders That May Affect
    Decisionmaking Capacity (March 1999)
        The Role of Monitoring Networks in the Management of the Nation's
    Air Quality (March 1999)
        Renewing the Federal Government-University Research Partnership for
    the 21st Century (April 1999)
        Transportation Strategic Research Plan (May 1999)
        Transportation Science and Technology Strategy (May 1999)
        National Transportation Science and Technology Strategy (May 1999)
        Program Guide to Federally Funded Environment and Natural Resources
    R&D (May 1999)
        Our Changing Planet (June 1999)
        Improving Federal Laboratories to Meet the Challenges of the 21st
    Century (July 1999)
        Federal Food Safety Research: Current Programs and Future
    Priorities (July 1999)
        Nanostructure Science and Technology, A Worldwide Study (August
    1999)
        Comparison of International Transportation R&D Expenditures and
    Priorities (September 1999)
        Accessibility for Aging and Transportation-Disadvantaged
    Populations (September 1999)
        Nanotechnology Research Directions: IWGN Workshop Report (September
    1999)
        Nanotechnology: Shaping the World Atom by Atom (September 1999)
        National R&D Plan for Aviation Safety, Security, Efficiency, and
    Environmental Compatibility (November 1999)
        These documents can be viewed at the NSTC Publications and
    Testimony Web page: http://www.whitehouse.gov/WH/EOP/OSTP/NSTC/html/
    nst__pubs.html
                                     ______

                                   APPENDIX B

      ACTIVITIES OF THE PRESIDENT'S COMMITTEE OF ADVISORS ON SCIENCE AND
                               TECHNOLOGY (PCAST)
        In 1999 PCAST provided the following report: Powerful Partnerships:
    The Federal Role in International Cooperation on Energy Innovation
    (June 1999). It is in our fundamental national interest to greatly
    strengthen international cooperation in energy innovation. The PCAST
    concluded that continuing our current energy trajectory would be
    ``problem plagued and potentially disastrous.'' Unless innovation to
    increase energy end-use efficiency and to improve energy supply
    technologies is both rapid and global, world energy demand is likely to
    soar in the next century to four times today's level, entailing higher
    consumer costs for energy, greater oil import dependence, worse local
    and regional air pollution, more pronounced climate disruption from
    greenhouse gases, and bigger nuclear energy risks than today. And if
    the U.S. abdicates leadership in international cooperation on energy
    technology while others forge ahead, it will cost U.S. firms dearly in
    their share of the multi-hundred-billion-dollar per-year global market
    in energy-supply technologies, most of which is and will remain
    overseas. As the world heads into the next millennium, however, there
    is a window of opportunity--open now, but closing fast--to move the
    world off this troublesome path. The choices the U.S. makes today will
    influence the evolution of the global energy system for many decades to
    come. The United States has strong stakes in the future economic,
    national security, and environmental course of world energy
    development.
        PCAST also advised the President on the following topics:
        Establishment of a Laboratory for National Information
    Infrastructure Protection. (December 1998)
        Review of Proposed National Nanotechnology Initiative (November
    1999)
        Review of the NSB Report on Environmental Science and Engineering
    for the 21st Century (December 1999)
        Letter to the President regarding fiscal year 2001 Budget
    Priorities (December 1999)
        Letter to the President to Endorse the Proposed National
    Nanotechnology Initiative (December 1999)

                              NEED FOR NSF VISION

        Senator Bond. Thank you very much, Dr. Lane. Let us begin
    now with questions.
        You state a broad proposition and ask for relatively brief
    responses, and this is something we want to work with you
    later.
        Dr. Colwell, I've been surprised to find, as I've talked
    with leaders in the scientific community in Missouri, including
    medical doctors, who ask me with a puzzled look on their face,
    ``Congress is committed to doubling the NIH budget, but NSF
    continues to fall farther and farther behind.'' And some,
    including Dr. Bill Danforth pointed out that so many of the
    medical advances, so many of the vitally important discoveries
    that have helped heal the many, many diseases come from work
    from the NSF. ``Why aren't you putting more into NSF, the kind
    of basic science research in physics and engineering and
    information that really support and enhance the work that is
    being done in the strictly medical field.''
        It's a good question, and I certainly have an enthusiasm
    for it, but my enthusiasm might get us two or three votes on
    the floor. That's not what we need. We need from you a vision.
    I'm enthusiastic about your publicly stated goal of doubling
    the budget in 5 years, but the rest of the Congress seems to be
    taking a ``show-me'' attitude. What are you going to get for
    it? What policy goals would the Foundation pursue? What
    specific areas of research and education?
        You've got to give us something that we can take to our
    colleagues who may not be focused on--we're all ready to sell;
    there's nobody better than my colleague from Maryland to go out
    and sell it. But what are you selling?
        Dr. Colwell. First of all, I think there's a need for an
    understanding that you have to have a parallel movement
    followed with progress. That is, the investment in NIH is
    terrific, but basic research and physics, math, engineering and
    chemistry really are the underpinning for the NIH discoveries.
        Let me just give you an example. Magnetic Resonance Imaging
    comes really from basic research in physics. Laser surgery for
    cataracts comes from discoveries made in physics and chemistry
    and computer science. That is not understood. So we really need
    to make it very clear that it's--I don't know how to put it,
    but maybe it's like parallel lines on a railroad track; you've
    got to move it along together because they are, in effect, both
    needed and necessary.
        The future moves with advances made in the basic sciences,
    along with biomedical applications. Now what do you get for the
    money? You get enormous contributions to the economy, and also
    the investments that we're making for the future include a new
    way of looking at learning and teaching.
        We're hoping to establish Centers for Learning and
    Teaching; in other words bring together the interdisciplinary
    knowledge from medical research with our understanding of how
    the brain functions and tying that to improve methods of
    teaching. And thereby bringing teachers together to be able to
    learn new ways of being more effective with their pupils, and
    linking this to the information technology revolution so that
    we can, in fact, tailor education to individual students.
        We also must pursue nanotechnology. It's interdisciplinary.
    And the future truly is interdisciplinary. When I arrived at
    the National Science Foundation, I said my biggest challenge
    will be to keep the strengths of the disciplines but at the
    same time pursue the opportunities of interdisciplinary
    research. And nanotechnology is a perfect example, because it's
    the interface of engineering, mathematics, chemistry, physics,
    and biology.
        It brings it together in a way that provides an entirely
    new, revolutionizing future in miniaturization. Coupling
    miniaturization to nanoscale, which is a billionth of a meter,
    sort of a magical scale, to tera-scale computing----
        Senator Bond. Before the time expires, let me just ask Dr.
    Lane and Dr. Kelly if they want to add anything briefly on
    this.
        We really would like to work with you to develop a plan,
    because I want to sell it. But I need to know what I'm selling;
    I need to be able to understand what I'm selling so I can I
    hope explain it to others. That's your toughest challenge.

                         NEED TO SUPPORT BASIC RESEARCH

        Dr. Lane. Mr. Chairman, there's no way I could say it
    better than Dr. Colwell just said, so let me just add: The
    funding for NIH, which is the body that funds biomedical
    research in this country, I think that trajectory is about
    right. That trajectory of funding pretty well tracks the GDP
    for this country. If we're going to fall below the GDP in
    investments in science and technology when we know that the
    returns are so substantial for our public, then we really need
    to understand why.
        Our problem is that all of the supporting sciences--
    physical sciences, engineering, that Dr. Colwell referred to,
    are being substantially underfunded, and Harold Varmus, former
    director of the National Institutes of Health said it many
    times; that unless you support the basic chemistry and physics,
    computer science, mathematics, various fields of engineering,
    then you're not going to have the tools necessary to do
    biomedical research or anything else, for that matter.
        So half of our economic growth in the past half century has
    come from innovation through investments in science and
    technology, most of that from the Federal Government. They
    didn't all come from biomedical research; in fact, it didn't
    primarily come from biomedical research; it came from
    investment in these other fields of study.
        So I agree with you, Mr. Chairman, we do need to do a
    better job to help you get the message across, and we'll work
    with you on that.

                           OUTCOMES OF BASIC RESEARCH

        Senator Bond. Dr. Kelly.
        Dr. Kelly. The message I would get across is on two levels;
    one, the economy, the other is the quality of life. Our entire
    economic growth during this decade has been based on
    information technology and other scientific developments that
    are founded in basic research.
        In terms of the quality of life, the health quality of
    life, environmental quality of life, what improvements we've
    seen educationally--all of the impacts in terms of the quality
    of life have also been based on basic research.
        In terms of the economic growth of this country and the
    derivative resources to improve the quality of life, as well as
    the scientific basis of it is all, every bit of it has been
    based in fundamental research.
        Senator Bond. Thank you very much.
        Senator Mikulski.

                            NSF'S ROLE IN EDUCATION

        Senator Mikulski. Thank you, Senator Bond.
        In the second phase of my questions I am going to come back
    to ``the vision'' thing. But you know, we can't do research
    unless we have the people who have been well educated; K
    through 12 and then throughout higher education programs.
        My questions will go to the role of NSF; and Dr. Lane, Dr.
    Kelly and your value-added comments. Because so many of our
    students that are well-educated at the undergraduate level come
    from other kinds of schools. And I was recently at the
    dedication of the new science building in Baltimore, of Notre
    Dame of Maryland College. It is the oldest Catholic women's
    college in the United States of America.
        I helped get them some money for the building, but they--I
    saw the equipment that NSF paid for in this new facility, of
    which two-thirds came from State and private sector funds.
    Actually, more than two-thirds.
        But then I talked to the young women, premed,
    bioengineering and a relationship between Notre Dame where they
    needed to spend the first 2 or 3 years in an all-women's
    environment, and then over at Hopkins. Bioengineering, biotech.
    But they were all going to start at this small college, of
    which NSF bought the scientific equipment.
        Here goes to my question. And also, everywhere I go, every
    college wants to be a university and every university tells me
    they want to be a Santa Maria and a flagship in research. But I
    worry about the Ninas and the Pintas. Or the Arks and the Dove,
    Dr. Colwell.
        So here is my question. In this budget that we're talking
    about, what do you see are the resources that are contained in
    your budget, and where we need to focus on are really what you
    think about in terms of not only our great land grant schools
    like the University of Maryland and the University of Michigan
    and so on.
        But in these other schools, they produce so many people
    that will either go on say premed or physics or other
    scientific careers; or be our science teachers. Some of the
    young women that I spoke to were going to go into the
    classroom.

                     GRADUATE FELLOWSHIPS IN K-12 EDUCATION

        Dr. Colwell. You touch on a very, very important point,
    because 40 percent, actually, of the undergraduates are
    enrolled in 2 year colleges. This is a major contribution to
    the work force.
        One of the things we have done in this past year is
    initiate what we call our GK12 fellowships; and that is to link
    the school system with graduate students. The students--we've
    now expanded it to undergraduate students as well as graduate
    students--receive tuition and fees and a stipend; they spend 20
    hours a week working with a teacher in an elementary, middle,
    or high school, working together, with the principal
    investigators being a basic scientist or engineer from the
    college or university and a teacher--not an administrator or
    principal, but a first class teacher.
        And the two co-principal investigators--and the students
    provide the excitement and information about the science----
        Senator Mikulski. Tell me the name of the program and how
    much--I think I understand the concept.
        Dr. Colwell. It's the GK12 program, and I believe it is
    about $28 million for----
        Senator Mikulski. And about how many stipends and teachers
    is this?
        Dr. Colwell. We started about half that, and we had about
    100 some graduate students who came to the NSF for a meeting of
    first year grantees and associated graduate students. They
    haven't quite completed their first year. I don't know the
    exact number, but it's several hundred, and I'll get that
    information to you.
        [The information follows:]

                  GRADUATE TEACHING FELLOWS IN K-12 EDUCATION

        The Graduate Teaching Fellows in K-12 Education (GK-12) program was
    initiated in fiscal year 1999. This program supports fellowships and
    associated training that will enable graduate students and advanced
    undergraduates in the sciences, mathematics, engineering, and
    technology to serve in K-12 schools as resources knowledgeable about
    both the content and applications of science, mathematics, engineering,
    and technology. Funding in fiscal year 1999 supported 31 projects,
    which collectively proposed to involve approximately 280 graduate
    students and approximately 120 undergraduates.

                   FACILITIES AND EQUIPMENT FOR SMALL SCHOOLS

        Senator Mikulski. Now, let's then go to the need for both
    facilities and equipment at these smaller schools. Where do we
    stand on that?
        Dr. Colwell. We of course do not build buildings, but we do
    provide equipment, and that is very important. And we have
    programs for the 4 year colleges for equipment.
        Senator Mikulski. And how much is that, and how much do you
    think you need related to the requests that you get?
        Dr. Colwell. Well, I'll give you the number, but I'll tell
    you we need twice as much.
        Senator Mikulski. Let's hear it.
        Dr. Colwell. Well, I will give--where's the executive----
        Senator Mikulski. You can turn to your very able staff;
    this is not a quiz, Dr. Colwell.
        Dr. Colwell. It's about $50 million for the facilities and
    equipment, and----

                               UNFUNDED PROPOSALS

        Senator Mikulski. And about how many requests do you think
    you get at NSF that your team rate as a satisfactory. In other
    words, that they would be very capable of using the funds?
        Dr. Colwell. Actually, we've just done a study of the
    rankings and we can fund most of the excellent, and some of the
    very good, but not all; and there's--underfunding of
    outstanding research.
        Dr. Pitts, would you like to comment on that?
        Senator Mikulski. I know my time is up.
        Could you come to the microphone so you could be part of
    the record as well?
        Senator Bond. And can I have your name, please?
        Dr. Pitts. Dr. Nathaniel Pitts. We have just finished our
    merit review report for 1999, and when we look at our data that
    talks about the rankings that peer reviewers give to proposals,
    and our ranking is a five scale ranking from poor to excellent,
    a very good being the second rating down, that many of our--
    actually about 7,200 of our proposals are in the very good
    range and are not paid.
        Senator Mikulski. But how many are they? In other words,
    are they ten or are they a hundred, or a thousand?
        Dr. Pitts. Well, I'm now talking about reviewers rankings,
    but NSF as you know funds about 10,000 proposals a year,
    declines about 20,000 proposals a year, and you're talking
    about a substantial number in this range.
        Senator Mikulski. And if the chairman would allow me for
    one question, the very goods and the excellents, are these big
    schools where the schools are what I call the Golden Rolodex
    meaning the prestigious schools? Hopkins would be cranky when I
    say that, but Hopkins really has a whole team to pursue grants
    and they win Nobel prizes. But again, I'm the St. Mary's
    College and the Notre Dames.
        Dr. Pitts. The particular data I'm talking about is not
    disaggregated like that; but in this range, these will be all
    types of institutions.
        Dr. Colwell. Let me add, Senator, NSF limits proposals to
    three per school for Major Research Instrumentation Program for
    the reason that you've enunciated. And that is to give a level
    playing field for the smaller colleges. So the bigger
    institutions can't flood us with large number of proposals.
        Senator Mikulski. As you know, I'm very interested in the
    smaller, liberal arts schools that produce people with basic
    science who either then go to science careers or into science
    education. And as we talk further, let's get a breakout of
    whether it's the big schools, or where we stand. And I'll come
    back to that.
        Dr. Colwell. Let me just add a point here; it has been
    shown that the 4 year liberal arts colleges produce more
    scientists and engineers, physicians and professionals than the
    other schools do.
        Senator Bond. Senator Mikulski, I appreciate your bravery.
    I've got to go back to a reunion later this month at one of
    those schools that's one of the ``haves''; so I hope there's
    nobody here----
        Senator Mikulski. I went to a small Catholic womens college
    that merged with a Jesuit college, so it continues to be a
    Jesuit college.
        But it is these small liberal arts schools. And Mr.
    Chairman, they've also been really an incubator for women,
    minorities--not that the big schools haven't; this isn't
    either/or, but it's to make sure one whole category is not left
    out.
        You went to a big school, is that right?
        Senator Bond. I think--I believe they probably do okay in
    the funding, but we won't mention that here.
        Dr. Colwell. I did teach at Georgetown University for 7
    years before going to the University of Maryland. So I've had
    the flavor of both.

                    PUBLIC MISUNDERSTANDING OF BIOTECHNOLOGY

        Senator Bond. All right, moving off of biographical
    sketches.
        Dr. Lane, I'm very much concerned, as you and I discussed
    yesterday about the fear and hysteria surrounding
    biotechnology. And I've asked the administration to mobilize to
    combat these fears and inject reason and facts in the public
    debate.
        Last year we directed OSTP to convene a working group of
    the agency, to come up with strategy and recommendations. The
    administration yesterday announced its plan; and in connection
    with the plan's release as I mentioned earlier, Dr. Henney of
    FDA stated that FDA's scientific review continues to show that
    all bioengineered food sold here in the United States today is
    as safe as the non-bioengineered counterparts.
        I'd like you to comment on that, and also, could you
    describe the recommendations, very briefly, of the working
    group's plan and how will this plan address the misinformation
    on biotechnology that's being spread through the media?
        Dr. Lane. Thank you, Mr. Chairman. This is a very serious
    matter which the administration is quite focused on and will
    comment on a plan that was rolled out very recently.
        But let me say at the outset, I think we all need to keep
    in mind, and we need to make sure the public understands the
    enormous promise that these technologies hold for the future;
    the future of our own people, the future of people around the
    world.
        And I know the National Science Foundation yesterday
    evening presented an award to Dr. Normal Borlog, who is a great
    champion and has done wonderful things in this area--and maybe
    Dr. Colwell could comment on that in a minute.
        Even the first generation products like pest-resistant
    plants that have come out of these technologies and allow in
    many cases farmers to use much, much less pesticide material--
    which we know is damaging. I mean, talk about killing
    caterpillars and butterflies, you do in fact do a lot of harm
    to otherwise good insects inadvertently through the methods
    that we have been using so far.
        We have an opportunity to get around that and to protect
    our environment at the same time, we deliver all the benefits
    of these technologies. Second generation products that will
    come out of biotechnology that provide enormous environmental
    benefits as well as direct benefits to consumers through
    improved nutrition. Foods that improve people's health
    generally. Foods that can be made allergy-free that prior to
    that so many people in our population couldn't touch at all.
    And in fact in some cases, endangered their lives. And many,
    many other examples.
        The United States' system for regulatory oversight for
    products of agricultural biotechnology is based on science, not
    on politics, not on superstition, not on hysteria. Therefore as
    the science advances we need to make sure that our regulatory
    agencies are continuing to ask the right questions. These
    technologies change very fast, so it's important that the
    agencies look closely at what the implications are. But we have
    to remember, we have 10 years of experience or more, in
    science-based regulatory oversight of these biotechnology
    products. We have the safest system of food in the world.
        Now we've seen in recent months the impacts of incomplete
    science on public opinion, and the Monarch butterfly research
    was a good example of that. The research that showed in a
    laboratory environment that the BT toxin that appeared on
    milkweed surrounding corn crops harms Monarch caterpillars. But
    if you feed a caterpillar a poison to the caterpillar, then the
    caterpillar at least gets sick, and dies.
        But if you look at realistic, much more complex
    environments in the real world, and that research is going on,
    what we find is that the effect is much, much less than had
    been suggested; it's even negligible.
        Could I quickly say what the parts of the President's
    announcement are?

                           AGRICULTURAL BIOTECHNOLOGY

        Senator Bond. And I just want to ask you one other thing.
    We discussed yesterday the NAS-USDA field test of Bt corn
    showing that the much lower rate of cancer-causing mycotoxin.
    If you could explain that and very briefly in layman's terms, I
    think we talked about it yesterday.
        Dr. Lane. Can I give that one to Dr. Colwell?
        Dr. Colwell. Two points. It's very important. One of the
    many reasons for the biocomplexity initiative is that we have
    over the last 30 years, 40 years invested heavily--as we should
    have done, as a nation, in molecular biology, biotechnology,
    genetic engineering. We now have these wonderful opportunities
    ahead of us.
        We did not, concomitantly, invest in understanding the
    environment. And it's the scientific and engineering
    underpinning of how complex systems of the environment work,
    i.e., biocomplexity. If we did understand that, we would then
    be in a position to be able to make predictions and sound
    scientific judgments; so we need to gather information on
    biocomplexity; that will allow us to utilize these
    opportunities.
        Let me also mention Dr. Borlog. An 83-year old gentleman
    who, by using classical techniques of plant selection and
    breeding, was able, single-handedly to save more lives, through
    good nutrition via the crops he produced, than any other living
    human being.
        Last night he gave an impassioned plea, which was much in
    the vein of your introductory statement, Senator, for the value
    and importance of the new agricultural biotechnology for the
    benefit of the world populations to provide nutrition and food.
        It was an extraordinary opportunity to hear this gentleman,
    a man who really knows what he's talking about.
        Third point I'd like to make--I'm sorry about that.
        Senator Bond. That's all right.
        Entirely appropriate shodding, one I accept most
    generously. Thank you.
        Dr. Colwell. Well, the point was that a man who has won
    many, many prizes for his research----
        Senator Bond. What you meant was, he knows what he's
    talking about. That's what you meant, you said it, and----.
        Dr. Colwell. The point that is really important here is
    that the classical techniques of breeding are imprecise. And
    what one does is actually move genes around with bits of extra
    DNA hanging on them. But with genetic engineering and
    ``enzymatic scissors'', very precisely we can make these kinds
    of transfers. So that we know what we're doing in a way that
    we've never been able to do before.
        This allows us, with great precision, to provide the
    benefits of improved crops and the benefits of biotechnology.
        With respect to comparison of the techniques of classical
    fertilized and chemically-treated crops, with the bioengineered
    crops there is no question that you have much less need both
    for fertilizer and for chemical treatment to reduce pests and
    other infestations. And also you will remove those organisms
    which do produce toxins when crops are harvested, such as
    peanuts for example, and a fungus that will grow in association
    with the peanuts, produces aflatoxin, which is one of the most
    powerful toxins. In fact, fortunately the FDA does regulate and
    test, require testing for aflatoxin in peanut butter, since
    this is one of the most important foods for our children in the
    United States.
        So if we are able to produce a crop that's aflatoxin-free,
    this then has an enormous advantage. And we can do this with
    biotechnology.

                       EXPLANATION OF GENETIC ENGINEERING

        Senator Bond. With the indulgence of my ranking member, may
    I check the scientific authenticity of the statement I used to
    explain to people like me who are not very scientifically
    knowledgeable, that the old-fashioned methods of hybridization
    and crossbreeding can let you cross a pit bull and a greyhound
    and get a dog that can't run and won't fight. But with genetic
    engineering, you can do a much better job of selecting those.
    Is that a reasonable scientific approximation?
        Dr. Colwell. It is florid, but fundamentally accurate.
        Senator Bond. Senator Mikulski.
        Senator Mikulski. I'm mesmerized by you, Senator. You know,
    I remember when you took the committee over in 1994 and now
    they come to this best hearing of the fiscal 2001, and you're
    talking about crossbreeding and hybridization and--I think
    someone ought to give me an honorary doctorate.
        Senator Bond. I've got a couple of those, and the only
    thing it does, they turn your name over to the development
    office and they ask you to contribute for alumni giving, so
    I've kind of turned them down after that.

                 COORDINATION OF THE NANOTECHNOLOGY INITIATIVE

        Senator Mikulski. I'd like to come back to the
    nanotechnology issue for kind of our wrap-up question, because
    we're heading off to the allocation meeting where we're going
    to put our flag on the ground jointly. So if we're going to
    meet America's compelling human needs today and the science
    needs to lay the groundwork for the future, we really need a
    greater allocation.
        So know that we would be working jointly to be able to do
    that.
        But coming back to the nanotechnology initiative, I'm going
    to start with you, Dr. Lane, even though ostensibly NSF is to
    be in charge. I share a very keen interest in this new
    initiative because of a cornucopia of opportunity. I also share
    Senator Bond's concern about multi-agency initiatives, because
    I believe that a multi-agency initiative is what this is all
    about; but it usually means multiple meetings, and those that
    got power are going to keep it, and I just really wonder: What
    do you see as the organizational mechanism. This is not to say
    NSF shouldn't do it or whatever. But as you know that within
    the science budget there are whales, there are dolphins, and
    there are even minnows.
        My question is, where would there be the kind of muscular
    way of coordinating this so everybody gets in in sync of really
    having those windows. Do you think it should be with NSF, do
    you think it should be with the President's science advisor
    with NSF playing the very key high profile role? You know what
    I'm saying. We have some excellent heads of our Federal
    agencies, but still, bureaucracy and turf often win out over
    science and advancement.
        Dr. Lane. Thank you, Senator. We want to be sure we have a
    science-based coordination process as opposed to a bureaucracy-
    laden one.
        I believe the National Science Technology Council is a very
    good mechanism, and I hope it will continue as a way to
    coordinate those activities involving the Federal agencies that
    need coordination; everything doesn't. But those that do, you
    need a mechanism to do that.
        We've said before that the nanotechnology initiative was
    originally developed by an interagency working group. The
    people with the most knowledge at NSF and other agencies coming
    together, and yes they did have some meetings, but they were
    substantive meetings. They talked about what's underneath
    science and engineering at the nanoscale and what the
    opportunities are; and then I talked about the way in which we
    reviewed their ideas, and put it all together.
        Right now we're working on an implementation plan for the
    coordination itself. We're talking about the possibility of a
    small coordination office, as we have in the case of global
    change research and as we have in the case of information
    technology----
        Senator Mikulski. Would that be under you?
        Dr. Lane. It would be an office funded through one or
    another of the agency's budgets, but it would be an office that
    essentially provides the staff support for coordinating this
    particular initiative.
        Senator Mikulski. Where would it be located and who would
    it report to?
        Dr. Lane. Physically it could be located in NSF, for
    example, as one of the coordination offices is now. It would
    report to whoever in government is chairing the committee of
    higher level government officials that oversee this activity.
    In the case of information technology, that's Dr. Ru----
        Senator Mikulski. But I'm talking specifically about nano.
        Dr. Lane. In the case of nanotechnology, we would expect a
    similar kind of an arrangement to be set up, and we're simply
    working with the agencies now to put together then the
    implementation strategy.
        So the staff in this office would report to the interagency
    committee. We would be involved in that committee, but it would
    be chaired by a member of the staff of either NSF, likely as
    the lead agency, or one of the other agencies.

                  NEED TO PUBLICIZE NANOTECHNOLOGY INITIATIVE

        Senator Mikulski. Well, I'd like to come back to something
    that Senator Bond said earlier about what we need to
    communicate to the Congress and to the American community.
        First of all, I want to acknowledge the excellent work that
    the interagency task force has already done. I also would like
    to compliment Dr. Roco at the NSF, because it is really those
    primary documents that I've read and pursued and took me on my
    own interest on this, in this field and in this topic.
        But right now I feel it's like our little secret, about
    what this is. And it's well known in the scientific community
    and so on, but our colleagues don't know about it yet, and my
    concern is that if we follow this mechanism, and maybe it is
    the right mechanism, but we're going to hide out right under
    the bushel, and then the initiative is going to be buried under
    other bushels.
        Also, even going to what Senator Bond is talking about with
    the plant genomes and also the whole biological revolution that
    has truly been part of, it's been a two-track revolution in our
    society, the biological and the infotec, that's moved
    everything forward, everything in our society and science.
        So what I'm looking for is for perhaps on this and then who
    knows--that really have high visibility. And I don't want a
    Manhattan Project motto where we're throwing money at it and so
    on, because this isn't about throwing money about it, it is
    about spotlighting one that our agencies do in addition to NIH,
    not in new Roth. And in fact, NIH will be one of the crucial
    beneficiaries of the biological work, the nanowork, the infotec
    initiatives.
        So would you please ponder that in talking with our
    colleagues, because I think we need visibility. Because I think
    from what I've read on the interagency, Dr. Kelly, is that the
    vision is there but it's not visible. And a vision that doesn't
    have visibility would be eclipsed by others who will meet to
    fund the crisis of the week or maybe a compelling disease
    that's emerged, et cetera. And yet you and I know that this is
    going to point to better diagnostics, better treatment. You
    talk about a spinal cord injury, just think about our little
    kids with cerebral palsy. We could go on and on.
        Hopkins is working on an electronic eye. An electronic eye.
    Can you imagine? I can't even imagine it. But those are the
    kinds of things so that we need the right mechanism to be sure
    it's not bureaucracy, but we don't want the vision to be
    invisible. And I think we need to think about how we elevate it
    to make highest and best use of your ideas, and then we can get
    our colleagues to embrace the basic nature of science.
        Senator Bond. Thank you very much, Senator Mikulski. If you
    want to start off and go plant the first flag, I want to ask
    just as couple of quick questions and then I will be over there
    as quickly as I can to join the battle.
        Senator Mikulski. Well, we'll let those of you from the
    Santa Maria come, but we've got our Ninas and Pintas over
    there. And I believe we landed first anyway. So thank you, and
    I look forward to an ongoing relationship.

                       NSF'S RESPONSE TO THE PITAC REPORT

        Senator Bond. Thank you, Senator.
        Last year, Dr. Colwell, we directed the NSF to support
    research projects in information technology research,
    recommended by the PITAC report, such as software, scalable
    information infrastructure, privacy, the impact of information
    technology advances on areas of societal, economical and
    ethical importance, and encourage the NSF to provide increased
    ratio of grants at higher funding levels for longer durations.
        Could you comment on how the Foundation has responded to
    it? Could you give us a flavor of the type of proposals being
    submitted, and are you seeing risky, innovative proposals that
    we contemplated, or are they just more of the same? If you
    could answer that.
        Dr. Colwell. Yes; I'll try to be very brief.
        With respect to the ITR program solicitation, we received
    something like 900 preproposals and about 130 were encouraged
    to write full proposals. And we got these proposals reviewed by
    making sure that we sent letters to every department in the
    relevant area. We received 290 very, very select, expert
    panelists from a database of 1,700 volunteers who were well-
    qualified.
        So we have been able to select proposals, through this
    panel approach, and we've encouraged innovation and Dr. Bajcsy,
    who is here, went to every single panel meeting, and she has
    made a point of reading the preproposals as well. So we've been
    able to select--really, we'll be selecting very innovative
    proposals. And the numbers have been huge and the quality has
    been extraordinary.
        So we feel very comfortable with the approach that we're
    taking.

                 NSF'S ABILITY TO FUND NUCLEAR-RELATED RESEARCH

        Senator Bond. Thank you.
        I call on Dr. Lane. It's my understanding that there's a
    statutory limitation or requirement on NSF's ability to fund
    nuclear-related research as it regards national security
    issues.
        Number one, is the statutory restriction, which I
    understand dates from the 1950's, an impediment to what you
    would regard as necessary research at NSF? I know also work is
    done in collaboration with the Department of Energy and we are
    concerned that that research may focus too heavily just on
    power generators.
        Are you able to and are we getting the kind of research in
    nuclear medicine and the many related fields of nuclear science
    that we should, or do you need to have that restriction lifted?
        Dr. Colwell. At the moment we're doing very well, because
    the NSF--one of the key roles is to support small groups of
    university researchers who use nuclear physics facilities in
    the United States and around the world. And also to educate the
    next generation of nuclear physicists.
        So we do the basic physics research on structure, atomic
    studies, energetic beams of protons, light ions that are used
    by medical and nuclear scientists. We do that kind of research,
    so we don't really have an impediment, and we do collaborate
    extremely well with the Department of Energy. But I'll ask Neal
    to comment further on that.
        Dr. Lane. I think it is true that a considerable amount of
    research in the area of nuclear energy goes on in the
    Department of Energy. And the Department of Energy supports
    activities all the way from the fundamental end where a good
    partnership with NSF assures that there's not an overlap of,
    not double funding of anything, to a much more applied
    activities in nuclear power. But also in issues of radiology
    and the impact of radiation exposure on humans.
        In fact, that's what got the Department of Energy into the
    human genome project, which that department actually initiated,
    was their interest in genetic effects of radiation.
        So it's a very broad program in the Department of Energy,
    and I think with the cooperation between the National Science
    Foundation and the Department of Energy, we can assure that
    there aren't any holes in the process.
        Dr. Colwell. Actually, CAT scans, NMR, PET scans, positron
    emission tomography; these are techniques that have come out of
    the basic NSF research. So the impediments are not there for
    basic research.

          FUNDING FOR EPSCOR AND THE OFFICE OF INNOVATION PARTNERSHIPS

        Senator Bond. Final quick question; the Office of
    Innovation Partnerships was created to build capacity at
    smaller research institutions, recognizing that the prestigious
    schools like Stanford, M.I.T., and Michigan are getting lots of
    dollars.
        It's disappointing to me that the 2001 budget doesn't
    request any additional funds for the office; flat-funds EPSCoR
    and flat-funds a number of other programs designed to assist
    minority-serving institutions. I was kind of scratching my
    head, why we're going up in the budget and the point I raised
    earlier about the ``haves'' having more and the ``nots''
    getting left out.
        Dr. Colwell. What we're doing is, the funding--co-funding,
    with the research directorates, in other words, we're
    leveraging money. So we will end up with total EPSCoR funding,
    including co-funding from the research accounts to be about $73
    million.
        We feel that we can help institutions by providing the
    EPSCoR funding, and then when projects come up that are
    fundable but the money isn't sufficient to fund in the research
    accounts, we can match them and, therefore, we can leverage the
    research accounts. This is also an important mechanism for
    bringing along those EPSCoR institutions that are beginning to
    do very, very well, even being competitive, because this is an
    experimental program. It's been running for a number of years,
    but it's a program to help leverage these institutions. This is
    one way to bring them up to their competition.
        So we are working very hard to leverage the money in a way
    that we can actually increase the effectiveness of EPSCoR.
        Senator Bond. Well, as I've said, I have many more
    questions; we'd like to continue this discussion; but if we're
    going to have any money at all to do these things we're talking
    about, I'd better go fight for the allocation.
        So thank you very much. We'll leave the record open for
    questions from other members of the committee. I've asked that
    you give us further detail on several questions; we'll continue
    to work with you.
        Dr. Lane.
        Dr. Lane. Senator Bond, we didn't have time for me to lay
    out the approach to biotechnology the administration used.
    Could I submit something for the record?
        Senator Bond. If you would, submit it. And I appreciated
    your briefing on it.
        [The information follows:]

        CLINTON ADMINISTRATION AGENCIES ANNOUNCE FOOD AND AGRICULTURAL
     BIOTECHNOLOGY INITIATIVES: STRENGTHENING SCIENCE-BASED REGULATION AND
                         CONSUMER ACCESS TO INFORMATION

        Agricultural biotechnology holds enormous promise for improving the
    productivity and environmental sustainability of food and fiber
    production. In order to secure that bright future, the Clinton
    Administration is taking steps today to further our long-standing goal
    of sound science regulation and improved access to information. These
    steps are intended to build consumer confidence, ensure that
    regulations keep pace with the latest scientific and market
    developments and ensure that voluntary product claims, such as labels,
    relating to biotechnology are truthful and not misleading.
        The Federal Government Has a Strong Regulatory System for
    Agricultural Biotechnology, a Sector That Holds Enormous Economic and
    Environmental Promise. The U.S. regulatory approach to agricultural
    biotechnology applies principles of sound science to ensure that there
    are no unacceptable human health and environmental risks associated
    with the use of these crops and that they are safe to enter into
    commerce. This system, encompassing the food safety and environmental
    regulations of the Department of Agriculture, Food and Drug
    Administration, and Environmental Protection Agency, has resulted in
    rigorous scientific review of products, while providing a predictable
    regulatory environment that fosters scientific advancement and product
    innovation.
        The Administration's Actions Today Will Strengthen our Science-
    Based Regulatory System and Facilitate Reliable, Voluntary Labeling
    Practices. The Administration's actions today will ensure that science
    remains the cornerstone of our nation's regulatory system--keeping up
    with recent advances in genetics, ecology, and health--and that Federal
    oversight of these products remains strong. In addition, they will
    facilitate voluntary efforts by producers to differentiate non-
    bioengineered commodities through the development of accurate and
    reliable testing and quality assurance procedures and through guidance
    for the content of product labels.
        The Clinton Administration announces steps to:
    Reinforce the Strength & Transparency of Science-Based Regulation
        The Council on Environmental Quality (CEQ) and the Office of
    Science and Technology Policy (OSTP) will conduct a 6 month interagency
    assessment of Federal environmental regulations pertaining to
    agricultural biotechnology and, if appropriate, make recommendations to
    improve them.
        The Food and Drug Administration (FDA) will take steps to ensure
    that it is informed at least 120 days before new agricultural
    biotechnology crops or products are introduced into the food supply and
    will propose that submitted information and the agency's conclusion be
    made available to the public.
        The U.S. Dept. of Agriculture (USDA), FDA, and the Environmental
    Protection Agency (EPA) will support an expanded program of
    competitively awarded, peer-reviewed research focusing on current &
    future safety issues.
    Enhance Information for Consumers and Farmers
        FDA will develop guidelines for voluntary efforts to label food
    products under their authority as containing or not containing
    bioengineered ingredients in a truthful and not misleading manner,
    consistent with the requirements of the Federal Food, Drug, and
    Cosmetic Act.
        USDA will work with farmers and industry to facilitate the creation
    of reliable testing procedures and quality assurance programs for
    differentiating non-bioengineered commodities to better meet the needs
    of the market.
        USDA, FDA, EPA, and the State Department will enhance domestic and
    foreign public education and outreach activities to improve
    understanding of the nature and strength of our regulatory process.
        USDA will provide farmers with reliable information on markets to
    inform their planting decisions and with best farming practices for new
    crop varieties.
        These Initiatives Reaffirm our Science-Based Regulatory Approach
    and Improve Public Access to Information. These initiatives reaffirm
    the Federal government's confidence in its independent, science-based
    regulatory approach to agricultural biotechnology. They also reflect
    that, as science and industry advance and consumer interest grows, it
    is appropriate to maintain the strength of our regulatory framework and
    ensure that information available to the public about the technology
    and to consumers about food products is balanced and accurate. In so
    doing, Americans will be in a better position to realize fully the
    enormous promise of this technology.

                     DETAILS OF ADMINISTRATION INITIATIVES
    Reinforcing the Strength of Science-Based Regulation
        The Council on Environmental Quality (CEQ) and the Office of
    Science and Technology Policy (OSTP) will conduct a 6 month interagency
    assessment of Federal environmental regulations pertaining to
    agricultural biotechnology and, where appropriate, make recommendations
    to improve them.
      --CEQ and OSTP will conduct an interagency assessment of
            environmental biotechnology regulations by preparing case
            studies to identify strengths and potential areas for
            improvement in the existing regulatory structure. The following
            agencies will participate in the assessment: Food and Drug
            Administration (FDA), Environmental Protection Agency (EPA),
            U.S. Department of Agriculture (USDA), and the Department of
            the Interior as well as other agencies as appropriate. The
            focus of this study will be in domestic environmental issues.
        The FDA will take steps to ensure that it is informed at least 120
    days before new agricultural biotechnology crops or products are
    introduced into the food supply.
      --The FDA will develop a proposed rule to require companies to notify
            FDA of their intent to market a new food derived from
            biotechnology. This new rule would replace the current
            voluntary, but widely adhered to, practice of consultations
            with the agency. After reviewing the company's submission, FDA
            will issue a letter to the firm describing its conclusion about
            the safety and regulatory status of the food or animal feed.
        The U.S. Department of Agriculture (USDA), FDA, and the
    Environmental Protection Agency (EPA) will support an expanded program
    of competitively awarded, peer-reviewed research focusing on current
    and future safety issues to expand the existing body of independent
    science on biotechnology derived foods.
      --These three agencies will coordinate their research programs
            related to risk assessment of agricultural biotechnology and
            expand these programs, consistent with available resources, in
            a way that maintains a strong science-based regulatory program.
            In particular, USDA's research, funded under the Initiative for
            Future Agriculture and Food Systems, should provide a strong
            core of competitively funded risk assessment research.
    Enhancing Information for Consumers and Farmers
        FDA will engage in a process to develop guidelines for voluntary
    efforts to label food products under their authority as containing or
    not containing bioengineered ingredients in a truthful and not
    misleading manner, consistent with the requirements of the Federal
    Food, Drug, and Cosmetic Act.
      --FDA will develop guidelines to help ensure product label claims
            concerning the biotechnology status of foods are truthful and
            not misleading. The guidelines will help manufacturers design
            labeling that is truthful and informative, rather than
            confusing. The agency will develop draft labeling guidelines
            with the use of focus groups, and will publish them for comment
            so as to receive maximum consumer input.
        USDA will work with farmers and industry to facilitate the creation
    of reliable testing procedures and quality assurance programs for
    differentiating non-bioengineered commodities to better meet the needs
    of the market.
      --USDA will develop an Advanced Notice of Proposed Rulemaking (ANPR)
            to seek input from consumers, industry, and scientists on how
            best to meet the needs of evolving markets. The ANPR will seek
            input on current market practice. In addition, it will seek
            input on the feasibility and desirability of quality assurance
            programs.
        USDA, FDA, EPA, and the State Department will enhance domestic and
    foreign public education and outreach activities to improve
    understanding of the nature and strength of our regulatory process.
      --Using a variety of outreach mechanisms at their disposal, agencies
            will proactively engage the public on how their foods are
            regulated and why these regulations protect the environment and
            human health. This is important both domestically and
            internationally where U.S. agricultural products are now facing
            increasing restrictions to some markets, in part due to the
            lack of shared understanding and information.
        USDA will work closely with the State Department to ensure
    collection of timely information on overseas markets, and will provide
    farmers with reliable information on markets to inform their planting
    decisions and with best farming practices for new crop varieties.
      --One of the most difficult choices a farmer faces each year is what
            to plant--what type of crops and what specific varieties.
            Farmers need better market data to better inform their choices.
            In some cases the current uncertainty in overseas markets
            concerning biotech crops has made their selections even more
            difficult. USDA will provide' farmers with better information
            on changes in market access.

                             CONCLUSION OF HEARINGS

        Senator Bond. Thank you very much, the hearing is recessed.
        [Whereupon, at 11:04 a.m., Thursday, May 4, the hearings
    were concluded, and the subcommittee was recessed, to reconvene
    subject to the call of the Chair.]

     DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT AND
            INDEPENDENT AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2001

                                  ----------

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

        MATERIAL SUBMITTED BY AGENCIES NOT APPEARING FOR FORMAL HEARINGS

        [Clerk's note.--The following agencies of the Subcommittee
    on VA, HUD, and Independent Agencies did not appear before the
    subcommittee this year. Chairman Bond requested these agencies
    to submit testimony in support of their fiscal year 2001 budget
    request. Those statements submitted by the chairman follow:]

                              INDEPENDENT AGENCIES

                    Department of Health and Human Services

                Agency for Toxic Substances and Disease Registry

         Prepared Statement of Dr. Henry Falk, Assistant Administrator

        Mr. Chairman and Committee Members, thank you for the opportunity
    to provide you with written testimony on the Agency for Toxic
    Substances and Disease Registry's (ATSDR) budget for fiscal year 2001.
        As you know, under the Superfund legislation, ATSDR was given the
    important mission of protecting the public's health related to exposure
    to toxic substances. Our mandate includes determining the nature and
    extent of health problems at Superfund sites, and advising the U.S.
    Environmental Protection Agency (EPA) and State environmental agencies
    on needed clean-up and other actions to protect the public's health. We
    are also charged with the critical task of determining the relationship
    between exposure to toxic substances and adverse health effects.
        To fulfill our mission, Congress appropriated $76 million to ATSDR
    in fiscal year 1999, and $70 million in fiscal year 2000. The
    President's budget for fiscal year 2001 calls for an appropriation of
    $64 million to fund ATSDR's activities.
        In this testimony we would like to focus on three areas which have
    major budgetary implications--for both current and future program
    activities.
      --We have a substantial and continuing Superfund workload of
            increasing complexity. ATSDR provides critical health
            information and services at these sites to community members,
            EPA and state decision-makers, and health care providers.
      --Health concerns continue long after clean up because health
            conditions often manifest only long after exposure.
      --New, significant health problems continue to emerge that need to be
            addressed. Current cases of lung cancer and other lung
            impairments at Libby, MT, are a striking example of this.
    Providing critical health information and services: Site Evaluations
        The volume of ATSDR's workload at sites continues to be
    substantial. In the last fiscal year alone, ATSDR and our partners
    produced 1,569 health consultations, 108 public health assessments, and
    32 exposure investigations. ATSDR has a staff of a little more than
    400. To meet the workload demands, we supplement our own staff by
    funding 28 state health departments to work with us.
        ATSDR's site health evaluation and consultation efforts are the
    starting point for all of the agency's site-specific health activities.
    Further site activities include epidemiologic health studies, health
    education and health promotion.
        The breadth of ATSDR's activities at sites is matched by the
    breadth of the kinds of sites we routinely work on. Early in our
    program the focus was primarily on EPA's National Priorities List (NPL)
    sites. With time, however, our workload has shifted to a wider array of
    Superfund-covered sites including emergency removals, petitioned sites,
    and federal facilities. Examples of the kinds of sites we have worked
    on recently include:
      --NPL Sites.--As mentioned, ATSDR is heavily involved at NPL sites.
            Among recent examples are Bunker Hill, Idaho; Keil Chemical
            Manufacturing, Indiana; Brick Township and Toms River, New
            Jersey; AMOCO Sugar Creek in Kansas City, Missouri; and the
            Monsanto/Solutia site in Anniston, Alabama.
      --Federal Facilities.--Current examples of ATSDR involvement at
            federal sites are the Hanford Nuclear Facility in Washington;
            the Kelly U.S. Air Force Base in Texas; Camp LeJeune military
            base in North Carolina; the Otis Air Force Base in
            Massachusetts; and the Valley Forge National Historic Park near
            Philadelphia, Pennsylvania. Our work at federal facilities is
            funded by the affected federal agencies.
      --Emergency Response/Immediate Removal Sites.--Examples of ATSDR
            emergency assistance is our responses to the Texarkana,
            Arkansas extensive mercury exposures; the Rhode Island concerns
            of PCB contamination in the Woonasquatucket River; and the
            Mississippi, Alabama, Louisiana, Tennessee, Arkansas, Texas,
            and Illinois methyl parathion exposures.
      --Petitioned Sites.--Environmental public health expertise also is
            frequently requested or ``petitioned'' by concerned citizens.
            Among the areas where ATSDR has responded to petitions are the
            U.S. Navy bombing range on Vieques Island, Puerto Rico; the
            Santa Susana Field Laboratory in Ventura County, California;
            and the Fresh Kills Landfill in New York.
      --Resource Conservation and Recovery Act (RCRA) regulated sites.--
            ATSDR is currently working with EPA to strengthen our support
            of their RCRA program. Some examples of RCRA sites at which
            ATSDR has been active include General Electric in Pittsfield,
            Massachusetts; Bovoni Landfill in St. Thomas, Virgin Islands;
            Iowa Beef Processing in South Dakota and Nebraska; Pacific Gas
            and Electric Company in Hinkley, California; and Trinity Foam
            Processing plant in Archdale, North Carolina.
      --Brownfields Re-development Sites.--ATSDR has funded public health
            activities at Brownfields sites in Baltimore, Maryland; Lowell,
            Massachusetts; Portland, Oregon; Chicago, Illinois; Rhode
            Island; and Seattle-King County, Washington.
        ATSDR's health consultations, public health assessments and
    exposure investigations at sites are critical in assisting EPA and
    state officials on clean-up decisions, addressing community health
    concerns, and in investigating possible increases in disease rates. The
    following are a few examples of ATSDR's public health activities around
    the country where our work has clearly made a difference:
      --Concerned about possible exposures, this past year EPA asked ATSDR
            to review data on the Hudson Oil Refinery site in Cushing,
            Oklahoma for its public health implications. Based on a site
            visit and review of the data, ATSDR determined that the site
            posed an urgent public health hazard and released a public
            health advisory to that effect on March 4, 1999. In April, EPA
            successfully used that public health advisory to help them list
            the site on the National Priorities List which gave them access
            to necessary funds to continue their removal actions without
            interruption.
      --In conjunction with our state cooperative agreement partner, ATSDR
            assessed the health concerns of the community living around an
            inactive metal-plating facility in Vincent, Alabama this past
            year. The health consultation indicated that there was an
            urgent health threat posed by deteriorating vats and buildings
            and chemical hazards on site; and a possible health threat from
            nearby potentially contaminated water. After Alabama and ATSDR
            advised the public and EPA of the hazards, EPA took immediate
            action to fence the site, post warning signs around the
            perimeter of the site, and sample on-site and off-site areas to
            better determine the extent of contamination.
          The public was extremely responsive as well. The community worked
            with Alabama's health department and ATSDR to educate residents
            about the hazards posed by the site through community meetings,
            a newsletter, and a door-to-door campaign to stop children from
            playing on or near the site. Preliminary evaluation of these
            efforts show that 90 percent of the residents correctly
            understood the hazards and risks associated with the site.
      --Planned incineration of dioxin and other hazardous wastes from
            Times Beach and other Eastern Missouri contaminated sites
            created community concerns about potential exposures to these
            substances. To address these concerns, ATSDR, working with the
            affected communities and EPA, designed a study to measure blood
            levels of dioxin and related compounds before, during and after
            incineration to test the effects of incineration. Results of
            the ATSDR investigation utilizing blood samples analyzed by the
            CDC's environmental health lab showed that levels of dioxin and
            other contaminants in study participants decreased
            significantly from pre-incineration to mid- and through post-
            incineration. Because of extensive citizen input and
            involvement throughout the study, there was wide acceptance of
            these findings and a very successful test of the efficacy of
            incineration as a clean-up methodology.
    Providing critical health information and services: Health Education
        ATSDR's health education and promotion programs focus on educating
    individuals, communities, and health-care providers about the health
    effects of hazardous substances in the environment. ATSDR works with
    affected communities to develop and promote public health strategies to
    mitigate the health impact of hazardous substances. To ensure effective
    health care services, our targeted continuing education programs and
    physician-related partnerships have enabled local physicians, nurses,
    and other health care providers to better diagnose and treat their
    patients exposed to toxic substances.
        As a result of site-specific lessons, ATSDR has become the leading
    resource within HHS for educating communities, the general public, and
    environmental health professionals about the medical and public health
    impact of toxic chemicals. ATSDR's toxicological profiles, case studies
    in environmental medicine, and medical management guidelines have
    become information source of choice for a wide range of audiences--from
    the lay public to the academician. Our website and toll-free
    information number provide user friendly access to this information
    literally hundreds of times per day.
        To expand the reach and application of health education and
    promotion activities, ATSDR has established many partnerships with
    national organizations of health professionals. ATSDR's partners
    include the American Academy of Pediatrics, American College of Medical
    Toxicologists, Association of State and Territorial Health Officials,
    National Alliance of Hispanic Health, the Migrant Clinicians Network,
    and the National Environmental Health Association. Partnerships with
    state and local health departments are particularly critical to
    accomplishing public health activities at the most local levels.
        Following are a few examples of health education and promotion
    activities that ATSDR has conducted directly and with partner
    organizations.
      --A significant effort to educate health care providers was initiated
            in the Agricultural Street Landfill (ASL) community in
            Louisiana. ASL is a 95 acre former municipal landfill that was
            developed, in part, for residential use. In order to address
            the residents health and wellness concerns, ATSDR distributed
            environmental health information to all 462 health care
            providers who serve that community. In addition, we provided a
            training seminar that 165 of these health care providers
            attended--a group who collectively serves more that 90 percent
            of the community.
      --The agency is working with the Association of Occupational and
            Environmental Clinics (AOEC). The AOEC 65-clinic network and
            300 individual members work with ATSDR to provide responses to
            health concerns associated with exposure to hazardous
            substances for local health care providers and community
            members. This relationship enabled ATSDR to better respond to
            the community in and around Alberton, Montana, the site of a
            railroad derailment-caused chlorine spill. ATSDR and an AOEC
            physician worked with community members to develop criteria for
            evaluation of a range of health concerns. Thirty-eight
            residents received health evaluations and several were further
            referred for pulmonary and neuropsychiatric testing as a result
            of their exposure.
      --The Tar Creek Superfund site is located in the northeastern corner
            of Oklahoma. Years of mining in the Tri-State Mining District
            (located at the juncture of Oklahoma, Kansas, and Missouri) has
            resulted in the accumulation of a large volume of tailings and
            other mine wastes. Children who live or play near mine tailing
            piles may ingest or inhale lead-contaminated dust. These piles
            have also been used by riders of off-road vehicles, and houses
            have been built on these tailings.
          ATSDR, along with the Ottawa County Health Department, has put
            together a health promotion campaign which includes health care
            provider and community education, as well as outreach and blood
            lead testing in nearby communities. Intervention through a
            mobile blood-testing unit has resulted in seven educational
            sessions reaching about 400 preschool/kindergarten children. In
            coordination with Women, Infant and Children's (WIC) services,
            the county health department has checked for childhood anemia
            in over 100 blood lead level tests and offered blood lead
            screening to all pregnant women. A database was created to
            track blood lead levels and interventions and to provide
            information to EPA for pathway analysis and cleanup, when
            necessary. Additionally, parents of children identified with
            elevated blood lead levels receive proper referrals, education
            and are entered in the database for follow-up. Plans are to
            expand the blood-lead screening to each Head Start and
            kindergarten throughout the county's seven school districts in
            the 2000 school year.
        The fiscal year 2001 budget, which is $6 million below the fiscal
    year 2000 budget, will support such efforts at selected sites, but some
    reductions will have to be made. (See Program Output Table for more
    detail.)

                           ATSDR PROGRAM OUTPUT TABLE
    ------------------------------------------------------------------------
                                                    $70 million  $64 million
                                       $76 million  fiscal year  fiscal year
                 Program               fiscal year      2000         2001
                                       1999 actual   estimated    projected
    ------------------------------------------------------------------------
    Cooperative Agreement States.....           28           28           21
    Sites Addressed..................          500          500          400
    Public Health Assessment                   108           78           60
     Documents.......................
    Health Consultations.............        1,569        1,900        1,400
    Exposure Investigations..........           32           45           30
    Site-Specific Environmental                  8           10            7
     Health Intervention.............
    Priority Health Conditions,                 35           30           25
     Epidemiologic, and Health
     Studies.........................
    Site-Specific Surveillance.......            3            3  ...........
    State-Based Surveillance.........            6            6            6
    Hazardous Substances Emergency              15           14           12
     Event Surveillance
     (participating states)..........
    Toxicological Profiles...........           20           14           10
    Pediatric Environmental Health               6           10            5
     Specialty Units.................
    ------------------------------------------------------------------------

    Public health problems persist even after clean-up
        There is an almost universally held perception that once a site is
    cleaned up no health problem exists. Unfortunately that is not the
    case. For many of the toxic substances found at Superfund sites, there
    is a long latency period before health conditions manifest themselves.
    For example, many cancers can take 20 or 30 years after exposure before
    diagnosis.
        This issue has recently been a point of discussion in consideration
    of the reauthorization of Superfund. In June 1999, Congressman John
    Dingell's office contacted ATSDR to request that the agency provide
    information on adverse health effects associated with the top 50
    substances on the Priority List with latency periods of six years or
    greater. In response, ATSDR reviewed and compiled the information
    available in our existing toxicological profiles. Our report noted that
    vinyl chloride, benzene, PCBs, trichloroethylene, hexavalent chromium,
    lead, arsenic, creosote, and benzidine are classified as ``known to
    cause cancer in humans'' or ``probable human carcinogens,'' and have a
    latency period of at least six years, usually 10 to 20 years or more.
    In addition, a number of other substances on the list are classified as
    ``reasonably anticipated to cause cancer in humans,'' based on limited
    evidence in humans, but sufficient evidence in animals. These
    substances include cadmium, chlordane, beryllium, carbon tetrachloride,
    and cobalt.
        The consultation also summarized the potential for developmental or
    neurologic effects with a latency of at least six years. Substances
    associated with these adverse health effects include organochlorine
    pesticides (e.g., DDT, aldrin, chlordane), some metals (mercury, lead,
    cadmium), arsenic, and trichloroethylene (TCE).
        ATSDR health studies and registry findings lend further evidence of
    the often lengthy time it takes before health effects are apparent in
    people exposed to toxic substances at Superfund sites. For example:
      --Two ATSDR studies found that people exposed to lead (a common
            contaminant found at one-third of sites) during the 1970s at
            the Bunker Hill NPL site in Idaho, continue to have long-term
            health effects. As a result of exposures as children and young
            adults more than 25 years ago, this population is at risk for
            manifesting health problems such as neurologic disease,
            infertility, high blood pressure, and early onset of menopause.
      --Analyses of self-reported data from the ATSDR Exposure Registry has
            indicated excesses of a number of health effects. Data from the
            registrants on the Dioxin Subregistry (which includes
            registrants from four Missouri NPL sites) and information from
            the nearly 10,000 people on ATSDR's subregistries on volatile
            organic compounds of TCE, TCA and benzene show an excess in
            reports of a variety of illnesses including anemia and
            respiratory problems.. Further studies are underway to validate
            these reported health effects.
      --A follow-up study of people living near the Caldwell Systems, Inc.,
            a former hazardous waste incinerator in North Carolina, found
            that residents initially found to have respiratory symptoms in
            an earlier study, continued to have a higher prevalence of
            respiratory symptoms two years later.
        In addition, all of the following specific health conditions have
    been associated with exposures to hazardous substances--defective
    reproductive outcomes, cancer, immune abnormalities, and
    neurobehavioral effects. Several ATSDR studies have found associations
    between living near hazardous waste sites or drinking contaminated
    drinking water and low birth weight in infants. Associations have also
    been found between exposures and various birth defects, including
    cardiac, neural tube and oral cleft defects.
        It is critical that ATSDR not only continue its study of the
    relationship between exposure to toxic substances and resulting
    disease--but also that we have funding to intervene with early
    diagnosis and referral wherever possible. Such interventions can and do
    save lives. A good example of this is the Drake Chemical Site in
    Pennsylvania:
      --In 1986, ATSDR successfully implemented a screening program for
            former workers exposed to a human bladder carcinogen at the
            Drake Chemical site in Pennsylvania. These former workers had
            been exposed to betanaphthylamine a known human carcinogen,
            specifically linked to bladder cancer. A total of 364 workers
            were initially eligible for screening; 82 percent of whom chose
            to participate. Compliance was high; participation rates ranged
            between 82 percent to 92 percent. Of the workers screened in
            the first phase, 50 were referred for the second phase which
            included a laboratory diagnostic work-up (a cystoscopy). As of
            1997, two workers have been diagnosed as having early stage
            cancer, another 13 were diagnosed with varying degrees of
            dysplasia, and 25 had some type of bladder abnormality
            diagnosed. This program has clearly been of benefit for
            detection and treatment of disease for these workers, and has
            been so successful that it now is continued by the State of
            Pennsylvania.
    Continually emerging health problems at Superfund sites
        The health screening activities begun at the Drake Chemical site
    more than a decade ago and continuing even today, underscore the need
    for long-term public health attention and intervention. Currently,
    ATSDR is involved in a number of sites where the long latency of
    diseases potentially associated with exposure to toxic substances have
    appeared. The situation in Libby, Montana, offers a dramatic example of
    past exposure resulting in serious disease.
        Commercial vermiculite mining and processing facilities operated
    for more than 60 years (until 1990) in and near the city of Libby,
    Montana. Recent reports have documented cases of non-occupational
    asbestosis-related pulmonary impairment among family members of former
    mine employees and others in the community with no connection to the
    mining operations. They are suffering (or dying) from asbestosis,
    mesothelioma, and lung cancers related to their asbestos exposure.
    Finding non-occupational asbestos-related pulmonary disease is
    extremely unusual and suggests that dangerous levels of asbestos
    exposure have occurred within the Libby community. Once these reports
    became known to EPA at the end of last year, they requested ATSDR's
    assistance in responding to the very real concerns of the community. In
    the course of the last couple of months ATSDR has designed a medical
    testing program to address the public health implications of past human
    exposure to tremolite asbestos in Libby.
      --The principal goal of the medical testing program is to identify
            asbestos-related health effects among people exposed to
            asbestos from the Libby vermiculite mine and refer them for
            additional evaluation and treatment.
      --Another important goal of the testing program is to assess the
            prevalence of asbestos-related conditions in the study area as
            a whole. This will be performed in order to: (a) identify the
            types of illnesses experienced by these exposed people and
            better educate local physicians; (b) provide the local medical
            community with an estimate of the additional medical care the
            community will need over the next 10-20 years, and; (c) provide
            the EPA with information needed to identify and eliminate
            current exposures to asbestos in the community.
        The first phase of the medical testing program involving both chest
    x-rays and pulmonary function tests will be directed at the 3,000-5,000
    people currently living in Libby who were potentially exposed. The cost
    of this first phase is approximately $4.5 million--an amount that could
    not be funded within ATSDR's fiscal year 2000 budget. Because EPA
    recognized the extreme importance of this medical testing program, they
    have allocated the $4.5 million to reimburse ATSDR to carry out this
    work.
        As this medical testing program progresses, it may well need to be
    expanded to former residents of Libby who now reside in other parts of
    the country. EPA also is investigating scores of other sites throughout
    the United States that have utilized vermiculite from Libby. As EPA
    investigates these sites, public health actions at other sites with
    significant exposure patterns--including replicating the medical
    testing program--may be necessary. Epidemiologic studies to investigate
    the linkage of different exposure patterns to the development of
    disease may also be needed.
        Another emerging health problem is the increase in brain cancer in
    children nationwide. In 1997, ATSDR initiated activities to investigate
    possible links between elevated rates of children's cancers in Toms
    River and exposures to hazardous substances. These actions include: a
    multi-site study examining the rates of brain cancer among residents, a
    multi-state case control study of childhood brain cancers, a review of
    available chemical data for the Dover Township area, and public health
    intervention activities including health care provider updates.
    Elevations in overall cancer incidence were confirmed for Dover
    Township and the Toms River section, particularly among female children
    under 5 years of age. Funding for this effort, and similar
    investigations at other sites, will be curtailed in fiscal year 2001.
        Finally, there is some suspicion that increased liver cancers in
    the Southwest and increased cases of multiple sclerosis may be linked
    to exposures to toxic chemicals. The cost of investigating these
    illnesses is not included in our budget.
        ATSDR has for more than 15 years applied the disciplines of
    environmental health science, epidemiology, toxicology, and health
    education to assess real and potential human health effects as related
    to hazardous substances. The agency has learned valuable information
    about the association of certain diseases and exposure to toxic
    substances and has used this information to help communities and
    environmental and health organizations to prevent and reduce
    potentially hazardous exposures. The agency has made a difference in
    the daily lives of many communities and in the body of knowledge in
    environmental health science. As the principal public health agency
    charged with determining the nature and extent of health problems at
    Superfund sites we will continue to strive to prevent exposures to
    hazardous substances and adverse human health effects.
        Mr. Chairman and Committee members we would be happy to respond to
    any questions you might have about our testimony or any of our program
    activities. Please direct your questions to ATSDR's Assistant
    Administrator, Dr. Henry Falk, by writing him at MS E-28, 1600 Clifton
    Road, Atlanta, GA 30333, or phoning (404) 639-0700.
                                     ______

                          Department of Defense--Civil

                             Department of the Army

                              Cemeterial Expenses

     Prepared Statement of Dr. Joseph W. Westphal, Assistant Secretary of
                            the Army for Civil Works

                                  INTRODUCTION
        I appreciate the opportunity to provide written testimony to the
    subcommittee in support of the fiscal year 2001 appropriation request
    for Cemeterial Expenses, Department of the Army. The Secretary of the
    Army, is responsible for the operation and maintenance of Arlington and
    Soldiers' and Airmen's Home National Cemeteries.
        Arlington National Cemetery is the Nation's premier military
    cemetery. It is an honor to represent the cemetery. This committee has
    historically been very supportive of the cemetery, and we appreciate
    your support.

                        FISCAL YEAR 2001 BUDGET OVERVIEW
        The request for fiscal year 2001 is $15,949,000, an increase of
    $3,476,000 over the fiscal year 2000 appropriation. This increase will
    permit Arlington National Cemetery to improve its infrastructure and
    work toward implementation of the cemetery's Master Plan. The funds
    requested are sufficient to support the work force, to assure adequate
    maintenance of the buildings, to acquire necessary supplies and
    equipment, and to provide maintenance standards expected at Arlington
    and Soldiers' and Airmen's Home National Cemeteries.
    Priority Investments
        I would like to summarize some of the Administration's priority
    investments we are proposing this year.
        First, the budget includes $717,000 to design the next increment of
    the Columbarium Complex.
        Second, $500,000 is included to design relocation of existing
    utilities along one of the major thoroughfare's traversing the
    cemetery, taking advantage of economies of scale and providing
    additional burial capacity.
        Third, $400,000 to continue preparation of a concept land
    utilization plan for lands contiguous to Arlington National Cemetery
    under the jurisdiction of the Department of Defense. This continues
    with the President's goal of ensuring that the cemetery remains open to
    initial burials through the end of the 21st century.
        Fourth, $800,000 is included to study the repairs required at the
    Kennedy gravesites and the reception building at the Memorial
    Amphitheater.
        Fifth, $100,000 is budgeted to continue developing a ten-year
    capital investment plan. We initiated this effort in accordance with
    guidance from the Office of Management and Budget (OMB) requiring a
    multi-year plan for financing construction projects.
        Sixth, $900,000 continues an initiative started in fiscal year 1996
    to expand contracts for enhancing the appearance of the cemetery, while
    reducing the overall number of government employees as part of
    government-wide streamlining.

                                 BUDGET DETAILS
        The funds requested are divided into three programs, Operation and
    Maintenance, Administration, and Construction. The principal items in
    each program are as follows:
    Operation and Maintenance
        The Operation and Maintenance Program, $11,535,000, will provide
    for the cost of daily operations necessary to support an average of 20
    interments and inurnments daily and for maintenance of approximately
    630 acres. This program supports 95 of the cemeteries' total 101 Full
    Time Equivalent Work-years (FTEW's).
        Contractual services as part of Operation and Maintenance total
    $5,389,000, including: $1.7 million for grounds maintenance; $900,000
    for information guide services; $1,590,000 for tree and shrub
    maintenance; and $130,000 custodial services. Custodial services
    previously cost about $210,000. However, competition resulted in a much
    lower bidder receiving this contract, leading to significant savings
    since fiscal year 1998. This contractor has now worked during the
    busiest season at Arlington, and performed adequately.
    Administrative Program
        The Administration Program, $967,000, provides for essential
    management and administrative functions, including staff supervision of
    Arlington and Soldiers' and Airmen's Home National Cemeteries. Budgeted
    funds will provide for personnel compensation, benefits, and the
    reimbursable administrative support costs of the cemeteries.
    Construction Program
        The Construction Program, $3,447,000, is for ongoing construction
    projects.
        Capital investment plan.--The 1997 proposed Master Plan for
    Arlington National Cemetery has identified projects to repair and
    replace aging facilities and utilities, preserve and protect historic
    resources, enhance visitor access and circulation, and provide
    sufficient capacity to ensure interment and inurnment of eligible
    veterans to the extent possible within the cemetery's boundaries. There
    is $100,000 included in the fiscal year 2001 budget to continue
    developing a multi-year plan for financing projects, consistent with
    the OMB guidance requiring full funding of capital investments in the
    most technically and financially efficient manner.
        Other construction projects include: $400,000 to continue
    preparation of concept utilization plans for developing contiguous
    lands; $717,000 to design the next increment of the Columbarium
    Complex; $500,000 to design the relocation of existing utilities;
    $500,000 to study the repairs required at the Kennedy gravesites;
    $300,000 to study the repairs required at the Memorial Amphitheater
    reception building; $200,000 to repair the roof at the visitors center;
    $200,000 to perform road repairs throughout the cemetery; $100,000 to
    inspect the existing sewer lines for needed repairs; $50,000 to remove
    an underground storage tank; $30,000 to study repairs required at the
    paid parking facility; and $350,000 to continue the graveliner program.

                                    FUNERALS
        In fiscal year 1999, there were 3,586 interments and 2,152
    inurnments. In fiscal year 2000, we estimate there will be 3,700
    interments and 2,200 inurnments, and in fiscal year 2001, we estimate
    there will be 3,700 interments and 2,300 inurnments.

                                   CEREMONIES
        Thousands of visitors, both foreign and American, visit Arlington
    to participate in events. During fiscal year 1999, about 2,700
    ceremonies were conducted and the President of the United States
    attended the ceremonies on Veterans Day and Memorial Day.
        During fiscal year 1999, Arlington National Cemetery accommodated
    approximately 4 million visitors, making Arlington one of the most
    visited historic sites in the National Capital Region. This budget
    includes $100,000 to continue a study, begun in fiscal year 1998, to
    develop an estimating procedure and reliable estimates providing more
    information on the demographics of visitors that Arlington National
    Cemetery serves. This increased orientation to our ``customers'' is
    consistent with the Government Performance and Results Act and the
    National Partnership for Reinventing Government.

                                   CONCLUSION
        The funds included in the fiscal year 2001 budget are necessary to
    permit the Department of the Army to continue the high standards of
    maintenance Arlington National Cemetery deserves. I urge the
    Subcommittee to accept this request.
                                     ______

                        General Services Administration

                      Federal Consumer Information Center

                  Prepared Statement of Teresa Nasif, Director

        Mr. Chairman and Members of the Subcommittee, thank you for the
    opportunity to be here today to present the fiscal year 2001 budget
    request of the Federal Consumer Information Center (FCIC). With me
    today is Beth Newburger, Associate Administrator of Communications for
    the U.S. General Services Administration and Debi Schilling, Director
    of Budget for the U.S. General Services Administration.
        Today, I appear before you for the first time as the Director of
    the newly formed Federal Consumer Information Center. In keeping with
    GSA's strategic goal to excel at customer service, GSA Administrator
    Dave Barram signed an order on January 28, 2000 transferring the
    Federal Information Center (FIC) to the Consumer Information Center
    (CIC).
        The merger brings together two very popular, highly visible
    consumer organizations. The CIC was established by Executive Order in
    1970 to work in partnership with Federal departments and agencies to
    inform the public about health and safety issues, developments in
    federal programs, and the impact and effects of federal research and
    regulatory actions. The FIC was established in 1966 and formalized by
    Public Law 95-491 in 1978 to provide the public with direct information
    about all aspects of Federal programs, regulations, and services. The
    FIC simplifies access to the Federal Government by serving as a single,
    initial point of contact. To accomplish this mission, FIC uses
    contractual services to respond to public inquiries via a nationwide
    toll-free telephone call center. The calls cover a myriad of topics
    such as Federal benefits, passports, Federal taxes, housing, and
    consumer issues.
        The merger will facilitate public use of Federal information by
    broadening both the variety of information available and the ways
    consumers can obtain it. The new Federal Consumer Information Center
    combines the nationwide toll-free telephone assistance program and
    databases of the FIC with the CIC web site and publication distribution
    programs. Bringing together these two organizations will streamline and
    enhance the delivery of information services to the American public.
    The FCIC will become a one-stop source for citizens to get answers to
    questions about government and consumer issues--the consumer's help
    desk for everyday life. FCIC will give the answer they can trust and in
    the way they want it: in print, on the web, or from a friendly voice on
    the phone.
        A cornerstone of the FCIC reference library, used by consumers and
    information professionals alike, is the Consumer's Resource Handbook.
    During fiscal year 1999, we updated both the print and the web version
    of the Handbook, recognized as one of the most helpful and popular
    Federal resources ever published, and work is underway to release the
    new 2000-2001 edition this summer. Earlier this year, we held a series
    of focus groups to obtain feedback on the design and to get suggestions
    for new content areas. Corporate, education, and government contacts,
    as well as consumers and congressional caseworkers, all lauded the
    Handbook and encouraged FCIC to continue widespread promotion and
    distribution. These discussions led to a decision to rename this
    document the Consumer Action Handbook to reflect how the book gives
    people the information they need to take action. FCIC's upcoming
    television public service advertising campaign will highlight the new
    Consumer Action Handbook and encourage consumers to call for a free
    copy or to use the electronic edition on the FCIC web site.
        Demand for consumer information continued to increase during fiscal
    year 1999. Since our web site went up in fiscal year 1995, FCIC has
    continuously expanded and improved its content and design, and page
    accesses have increased from one million in fiscal year 1995 to 9.5
    million in fiscal year 1999. Also in fiscal year 1999, the FIC program
    responded to over 2.7 million calls about Federal programs and
    services. In total, requests for printed publications, web site page
    accesses, and FIC calls are expected to exceed 20 million in fiscal
    year 2000.
        Not only has consumer demand increased, I'm pleased to report there
    is a high level of satisfaction with our services. During fiscal year
    1999, the National Partnership for Reinventing Government commissioned
    the first-ever comprehensive federal customer satisfaction survey.
    Customers of twenty-nine federal agencies were surveyed to determine
    how well they felt they were being served. CIC earned a score of 77 out
    of a possible 100, ranking well above the average federal agency score
    of 68.6 and the average private sector score of 72. With the addition
    of the FIC national call center, an expanded and enhanced web site, and
    the new edition of the Consumer Action Handbook, I'm confident that
    citizens will be increasingly satisfied with FCIC services in the years
    ahead. Whether it's explaining government benefit programs, sharing the
    results of federal research, or helping consumers solve their
    marketplace problems, FCIC will make it easier for citizens to find
    trustworthy answers to questions about everyday life.
        Mr. Chairman, again I thank you for the privilege of appearing on
    behalf of the Federal Consumer Information Center to present its budget
    request for fiscal year 2001. I hope that the Committee will agree that
    FCIC is a valuable Federal program and that it will look favorably upon
    our request.
                                     ______

                            Selective Service System

                Prepared Statement of the Gil Coronado, Director

                                  INTRODUCTION
        The Selective Service System (SSS) entered Year 2000 without any
    Y2K difficulty, continuing its long tradition of service to America,
    and with great enthusiasm about new endeavors on its horizon. The
    Agency's accomplishments for fiscal year 1999 reflect the
    professionalism of its full-time and part-time employees along with the
    dedication of its nearly 11,000 part-time civilian volunteers. I am
    proud to say that the Selective Service stands ever ready to fulfill
    its statutory missions should the President and the Congress authorize
    a return to a draft. But, even more exciting are the Agency's new
    initiatives, underway and planned, which will enable it to play an even
    greater role in direct support of Armed Forces recruiting and
    accessions processing. This means that Selective Service will provide
    not only America's time-proven defense manpower insurance for war, but
    will also contribute to embellish America's national defense needs each
    and every day.
        Although Selective Service is a small Agency with a modest annual
    budget, it does far more than its size and funding level suggest. For
    present and future generations of America's young men, it represents a
    very critical link between society-at-large and today's volunteer
    military. It also is a reminder that, as Americans, every young man is
    personally responsible for ``providing for the common defense,'' that
    he defend our Nation as his fathers, grandfathers, and great
    grandfathers have so gallantly done in the past. And it is through the
    SSS structure that every American community plays a positive role in
    providing for that common defense. Today, nearly 11,000 volunteer Board
    Members are appointed, trained, and standing by in America's counties,
    cities, and towns to respond to a national crisis that might mandate a
    return to a draft. To ensure fairness and equity, each Board is a
    melting pot of civic-minded men and women representing the racial,
    cultural and ethnic diversity of the young men in the communities they
    serve. And they form the unique bond between grass roots America and
    the U.S. Armed Forces.
        The President's budget request for fiscal year 2001 proposes
    funding the SSS at $24,480,000. This is a slight increase over the
    current fiscal year, but is considerably less than actual
    appropriations received from fiscal year 1983 through 2000. It has only
    been through adjusted fiscal priorities, reduction of full-time
    staffing, and the adoption of state-of-the-art information technologies
    over the years, that the SSS has been able to perform, enhance and
    accomplish its statutory responsibilities without interruption.
    Millennium Change Uneventful for Agency Computer Systems
        The SSS and its automated systems entered the new millennium
    without problems. The challenge faced by the Agency during the last
    year of the 20th Century was to ensure the continuous operations of its
    systems during the century rollover and plan for likely failure
    contingencies. Our computer systems were modified, tested and validated
    by an independent contractor to be Y2K compliant. A Business Continuity
    and Contingency Plan was also developed to provide direction and
    corrective action alternatives in the event of any system failure.
    Achieving High Registration Compliance Remains a Challenge
        As pointed out previously, ensuring that men who should be
    registered do indeed register remains difficult. Overall, our estimate
    of national registration compliance rates have eroded an additional
    percentage point since last year at this time. Estimated compliance now
    stands at 88 percent for 18- through 25-year-old males and 93 percent
    for 20- through 25-year-old males. This is frustrating for Selective
    Service because although greater numbers of men register each year,
    there is an ever increasing male population to reach. Other factors
    contributing to the decline include: increases in non-registered
    immigrants, and our inability to fund sustained public awareness
    activities and programs that promote the registration requirement.
    Additionally, the 88 percent statistic is troubling because the public
    may justifiably believe that any draft now with less than 90 percent
    registration compliance will not be completely fair or equitable.
    Expressed in school terms, this program needs to be graded ``A'' or
    ``A-minus'' when it comes to registration compliance; not ``B'' or ``B-
    plus.'' Today, an estimated 12 percent of the men who should be
    included in the pool of registrants are not there simply because they
    do not know about the requirement. This also means that the men who
    have complied with the law are that much more vulnerable to be called
    in a future draft.
        The Agency is countering this decline with an array of small-cost
    registration initiatives which embrace smart business practices, new
    technology, partnering with other governmental organizations, and
    tailored outreach. Several recent examples stand out. Beginning in June
    1999, the SSS implemented convenient telephonic registration.
    Additionally, operating hours for on-line registration through the
    Internet were expanded. Both services are available six days a week,
    including Federal holidays. Additionally, SSS now has volunteer High
    School Registrars in over 78 percent of the America's high schools, an
    increase from the 53 percent of schools with registrars just three
    years ago. The Agency also implemented an innovative policy change to
    permit 17-year-old men to submit registration information. Under this
    ``Early Submission'' program, SSS holds the data on file and processes
    it automatically as men reach age 18. Also, SSS has increased its
    special mailings program to young men, especially those in major low
    compliance areas of California, Texas, Florida, and New York. The
    Agency has also increased the number of uncompensated registrars
    serving in programs under the Joint Training Partnership Act/Workforce
    Investment Act and at Farmworkers Opportunity Program sites. We also
    are especially proud of our partnership agreement between SSS and the
    Immigration and Naturalization Service (INS) which resulted in the
    implementation of a new program just last month. Now, immigrant men
    completing an INS Form I-485 for residency status will automatically be
    registered with SSS if they are 18 through 25 years old. This new
    program, along with Website registration information and posters in
    Chinese, English, Korean, Spanish, and Vietnamese, should go a long way
    toward increasing registration compliance in our Nation's immigrant
    communities.
        Currently, 28 states and the Commonwealth of the Northern Mariana
    Islands link eligibility for state student financial assistance and
    state employment to a man's compliance with the SSS registration
    requirement. SSS continues to be responsive to requests for information
    relating to these state laws, as well as to inquiries from 51 cities
    and counties with parallel ordinances.
        Another area of emphasis to ameliorate the downward trend in
    registrations is the Agency's brand-new educational outreach
    initiative. The concept is simple and powerful. Through it, the
    Selective Service is partnering with key organizations that represent
    teachers, counselors, principals, curricula developers, and secondary
    and post secondary institutions nationally to ``institutionalize''
    registration within America's high schools. As part of this effort, the
    SSS plans a media event this spring, during which the Director of
    Selective Service, the Secretary of Education, and an array of
    educational groups will highlight the importance of registration
    compliance. Additionally, a new high school video and companion audio
    version for school public address systems have been developed as Public
    Service Announcements (PSAs) to showcase the Federal registration
    requirement. These TV PSAs, made with the participation of lieutenant
    governors of the States of California, Texas, and Florida, will help
    supplement our registration awareness kits, which include a hot link
    diskette to the Selective Service website. A different version of the
    video for the rest of the U.S., featuring the Secretary of Education,
    will be released this Spring. These materials will help facilitate on-
    line registration and are being distributed to all of the nation's high
    schools.
    Immediate Peacetime Relevance
        Aside from its mobilization role, today's SSS is proving its
    peacetime relevance through two new exciting and timely initiatives.
    The first of these is an approved program in which SSS will directly
    support military recruiting. The U.S. Armed Forces are currently
    experiencing challenges in recruiting qualified individuals for
    military service. In fact, during fiscal year 1999, the Army, Navy, and
    Air Force missed their recruiting goals. While the Marine Corps
    achieved its recruiting objective, it was not without extraordinary
    effort. Recognizing the extremely difficult military recruiting
    environment and anticipating that Selective Service can play a positive
    supporting role, the SSS and the Department of Defense (DOD) agreed to
    form a cooperative interagency partnership for the purpose of
    encouraging young men to register and volunteer to serve America
    through military enlistments.
        Today, both organizations are working together to provide high
    quality ``leads'' to military recruiters. Beginning this summer, the
    Selective Service System's acknowledgment mailings to all young men who
    have recently registered will be revised. The acknowledgment postcard
    currently in use, which provides each man with his proof of
    registration and official Selective Service number, is being replaced
    by a larger card enclosed in a mailing envelope that will include a
    promotional recruiting brochure produced by the DOD, and a mail-back
    postcard for new registrants to request more information about
    voluntary service opportunities in today's Armed Forces (Active Duty,
    National Guard, Reserve, and the Reserve Officers Training Corps).
        The DOD believes this initiative is so important that the higher
    costs of the expanded acknowledgment mailings will be reimbursed to the
    SSS by DOD. Currently, nearly two million men reach age 18 in America
    every year, so approximately 40,000 pieces of mail from the SSS will be
    mailed to young men each week. This should generate a continuous flow
    of new leads for follow-up by military recruiters.
        This new program provides distinct advantages over other or
    previous recruiting mailing programs using commercial lists. Because
    SSS mailings will be going directly to newly registered men, the
    address lists and birth dates are virtually 100 percent accurate.
    Additionally, the SSS envelope will not be confused with ``junk mail''
    because it contains an official document important to each man--his
    proof of registration needed to obtain student loans, Federal jobs and
    job training and the outside of the envelope will be marked
    accordingly, so recipients are certain to open and view its contents.
        This joint endeavor between the SSS and DOD fully supports the
    National Partnership for Reinventing Government's objective by
    capitalizing upon interagency resources to make government more
    efficient and economical to maximize service to the public.
    Longer Range Utilization of Agency Capabilities
        An even more ambitious partnership between the SSS and the DOD
    Office of Force Management Policy could result in a major realignment
    of several organizations involved in the Armed Forces accession
    process. Working together, the DOD and the SSS have developed a concept
    which, if implemented, will consolidate all military entrance
    processing under a single, new, umbrella agency. Some of the benefits
    include the elimination of redundant missions and functions, the option
    to re-engineer the follow-on structural organization, new opportunities
    for civilian employment locally at more than 65 locations across the
    country, and the potential for cost-savings and other efficiencies in
    the out-years.
        Bottom line, the concept recommends merging the resources and
    missions of the SSS, the Military Entrance Processing Command
    (USMEPCOM), and the DOD Medical Evaluation Review Board (DODMERB) into
    one new entity. This initiative is estimated to cover a three-year
    transitional period.
        In the concept, the proposed new agency is given the working title
    of ``Federal Entrance Processing Service,'' or FEPS. As proposed, FEPS
    would be an independent Federal agency with missions that include
    registering men as they reach age 18, conducting a draft in a crisis if
    authorized by the President and the Congress, processing and testing
    new recruits entering the Armed Forces in peace and war, and arranging
    physical examinations for Military Academy and Reserve Officer Training
    Corps cadets. As an independent agency, FEPS would be headed by a
    Director who reports to the President, but receives guidance, customer
    service standards, and performance criteria from the Secretary of
    Defense. Other alternatives are also being explored.
        The creation of FEPS also would require passage of authorizing
    legislation by the Congress and funding under the annual Defense
    Appropriation.
        The objectives driving development of this concept include:
    preserving peacetime SSS registration and the Agency's capability of
    conducting a fair and equitable national draft in a crisis; sustaining
    a more economical effectiveness of military entrance processing and
    support services, such as the Student Testing Program (ASVAB testing in
    the Nation's schools); civilianizing entrance processing so most of the
    military billets currently assigned to the three organizations will
    revert back to the Military Services for militarily-oriented
    reassignments; and consolidating all activities having the potential
    for overhead reduction to reduce duplication of efforts.
        This concept was developed by an interagency team comprised of
    representatives from DOD, USMEPCOM and the Selective Service System. It
    has been approved by the Director of Selective Service, the Assistant
    Secretary of Defense for Health Affairs, and the Assistant Secretary of
    Defense for Force Management Policy. It continues to be staffed within
    the DOD.
    Summary
        Today, Mr. Chairman, the Selective Service System stands prepared
    to perform its crucial, time-tested responsibilities. The missions of
    this small Agency are even more fundamental to our national military
    strategy as the United States deploys its Armed Forces in ever more
    scattered world trouble spots and as recruiting and retention for our
    All Volunteer Force continue to be challenging. The Selective Service
    System is also determined to contribute to America each and every day.
    And its value is two-fold: prepared to respond during a crisis while
    aiding the DOD to solve its military recruiting issues. The SSS fiscal
    year 2001 appropriation request of $24,480,000 will be invested very
    prudently in one of the Nation's greatest security assets. Its
    rationale for existence and its credentials are the same: a compact
    structure with the means to provide manpower to our Armed Forces as
    required in a national emergency, and to do it fairly, equitably, and
    in a timely manner.
        Your support of the President's Budget request will ensure that
    America maintains the SSS as a low-cost insurance policy against
    underestimating the nature and size of future threats our Armed Forces
    may face. With the ambitious programs and initiatives already underway,
    the Selective Service System is also paying important dividends today
    in better service to the Nation's youth, in direct support to the DOD
    and the All-Volunteer military, and to the American taxpayer.
        Thank you, Mr. Chairman.
                                     ______

                   U.S. Court of Appeals for Veterans Claims

              Prepared Statement of Frank Q. Nebeker, Chief Judge

        On behalf of the Court, I appreciate the opportunity to present for
    your consideration the fiscal year 2001 budget of $12,500,000 for the
    United States Court of Appeals for Veterans Claims.
        The Court's fiscal year 2001 budget request includes $895,000
    requested by the Veterans Consortium Pro Bono Program (Representation
    Program). The Representation Program has provided its own supporting
    statement for its budget request.
        The budget request of $12,500,000 reflects a $1,050,000, or 9
    percent, increase over the combined funding for Court and
    Representation Program operations initially appropriated for fiscal
    year 2000. Initial appropriations to the Court for fiscal year 2000
    were $11,450,000, but as a result of the final budget negotiations the
    Court incurred a $42,000 rescission.
        First, we have budgeted for an increase in personnel compensation
    and benefits. The amount budgeted is based on Economic Cost Indicator
    (ECI) pay raises and locality pay. The ECI uses as a base an fiscal
    year 2000 pay figure reflecting a pay raise of 4.8 percent for
    nonjudicial personnel, including the total locality-pay adjustment for
    Washington area government employees. The budgeted fiscal year 2001 pay
    raise for nonjudicial personnel is 3.7 percent. A pay raise has also
    been budgeted for judicial personnel, but no locality pay was included.
    During fiscal year 2000, we received funding for 8 full-time equivalent
    (FTE) positions, above the fiscal year 1999 authorized level of 80
    FTEs, for a total of 88 FTE positions. This funding permitted the Court
    to employ a third law clerk for each judge and an additional staff
    attorney in the Central Legal Staff (CLS). Seven of the additional FTE
    positions approved with the fiscal year 2000 budget are filled, and the
    Court anticipates that the eighth will be filled in May 2000.
        Late in fiscal year 1998, as a result of the growing backlog of
    cases in the Court's CLS and in chambers, the Court comprehensively
    reevaluated its personnel requirements and determined that the
    increasing caseload necessitated hiring these additional staff for each
    judge and the CLS. The Court expects these new personnel to permit the
    Court to keep its backlog at a reasonable level. The growth in backlog
    developed as a result of a sustained high level in the number of cases
    filed in the Court during the last three years--following a sharp
    increase during fiscal year 1997. The Court is monitoring its
    experience with the augmented staffing and will determine whether any
    adjustment is needed in the case-processing staff in the Court's public
    office. The budget estimate for fiscal year 2001 requests full funding
    for the eight personnel added during fiscal year 2000 to maintain the
    Court's backlog of cases at a reasonable level, in order to keep it
    from growing further and causing dramatic delay in the resolution of
    veterans' and survivors' claims. Last year, I summarized the Court's
    caseload history to provide background. This summary is brought up to
    date (through fiscal year 1999) by the following table, which also
    appears on page 4 of the Court's fiscal year 2001 Budget Estimate. In
    addition, the table provides the number of Board of Veterans' Appeals
    (BVA) total denials, and the percentage relationship of the Court's
    caseload to BVA total denials:

    ----------------------------------------------------------------------------------------------------------------
                                                                      Fiscal year--
                                    --------------------------------------------------------------------------------
                                       1991     1992     1993     1994     1995     1996     1997     1998     1999
    ----------------------------------------------------------------------------------------------------------------
    BVA TOTAL DENIALS..............   25,082   10,946    9,734    6,194    6,407   10,444   15,865   15,360   14,881
    APPEALS TO USCAVC..............    2,223    1,742    1,265    1,142    1,279    1,620    2,229    2,371    2,397
    APPEALS AS PERCENT OF DENIALS..      8.9     15.9     13.0     18.4     20.0     15.0     14.0     15.4     16.1
    ----------------------------------------------------------------------------------------------------------------

        Although the table reports BVA total denials, appeals to the Court
    come from the pool of cases in which the BVA has denied some of the
    benefits sought by claimants. Because the BVA does not report the
    number of its cases in which it denied some, but not all, benefits, the
    pool of BVA decisions from which appeals to the Court can arise is
    significantly larger than is reflected by the number of BVA total
    denials in the above table. Furthermore, since the 1992 enactment of
    legislation extending the Equal Access to Justice Act (EAJA) to the
    Court, there has been an ever-increasing number of EAJA applications
    (in fiscal year 1999, there were more than five times the number of
    EAJA applications than in fiscal year 1995). Recently, there has been a
    substantial increase in the number of cases where the Secretary is
    challenging the application, thus requiring substantially more Court
    and chambers effort to resolve EAJA applications.
        Another factor affecting the Court's workload is the continued
    effect of unrepresented appeals. Unrepresented appeals still pose a
    challenge, although the percentage of such appeals dropped in fiscal
    year 1999. The percentage of appeals filed by unrepresented appellants
    remained almost constant at 74 percent in fiscal year 1996 and 73
    percent in fiscal year 1997, down from its highest level--80 percent--
    in fiscal year 1995. In fiscal year 1998 the trend was upward, with 77
    percent of appeals filed by unrepresented appellants; however, in
    fiscal year 1999 that figure dropped to 65 percent. This rate remains
    much higher than the unrepresented civil appeal rate in U.S. courts of
    appeals. The rate is not surprising because nearly half of the
    claimants who were denied all benefits by the BVA were unrepresented
    there, or were represented by organizations that do not provide
    representation before the Court. In addition, by law, attorney fees may
    not be charged for representation until the BVA has rendered a final
    decision on a case. Although by the time of merits disposition the rate
    of unrepresented appeals in fiscal year 1999 was reduced to about 42
    percent, all unrepresented cases require extra processing attention as
    they progress through the development of the record on appeal and
    briefing stages.
        To move cases expeditiously and with integrity is, and must be, the
    Court's goal. I believe that the 88 FTE staffing level will permit us
    to reduce an unacceptably high backlog and maintain a reasonable
    pending caseload. The delays at the Board level and in the VA General
    Counsel's Group VII (the group within the VA General Counsel's staff
    that handles litigation before the Court) must not be allowed to occur
    at the Court's level of adjudication where the cost of remediation is
    relatively small, as compared to that for enhanced staffing at the BVA
    and in VA General Counsel Group VII. The requested 88 FTE positions are
    required to maintain timely and careful case processing and
    dispositions for benefits claimants seeking judicial review,
    particularly those who come to the Court unrepresented.
        In addition to personnel requirements, the Court's fiscal year 2001
    budget request reflects funding to continue revision and upgrade of the
    court's automated case-management system to accommodate changes in the
    Court's processes and to make docket sheets available to the public via
    the Court's Internet Website. The fiscal year 2001 budget request also
    includes funding to upgrade personal computers and file servers used by
    Court personnel to keep pace with the technical requirements of
    carrying out the Court's mission.
        Finally, over the past three years, I have urged that the
    Representation Program be authorized and funded outside the Court's
    appropriation. However, the Appropriations Committee's consideration of
    the Representation Program's request as separate from the Court's
    budget request and the removal of discretion from the Court over the
    Program's funding level has separated the Court, to the greatest extent
    possible under current legislation, from direct involvement in the
    Program. Accordingly, consistent with Congress' direction, the Court
    has forwarded to the Congress the Representation Program's own
    supporting statement for its fiscal year 2001 request for $895,000 as
    an appendix to the Court's submission and, also consistent with that
    direction, is including that amount, without Court evaluation or
    comment, in the Court's total fiscal year 2001 budget request.
        In conclusion, I appreciate this opportunity to submit this
    testimony on the Court's budget request for fiscal year 2001. On behalf
    of the judges and staff, I thank you for your past support and request
    your continued indulgence.
                                     ______

                       Executive Office of the President

                        Council on Environmental Quality

                Prepared Statement of George T. Frampton, Chair

        Mr. Chairman, Senator Mikulski, members of the Subcommittee: I am
    pleased to forward to you President Clinton's fiscal year 2001 budget
    request for the Council on Environmental Quality (CEQ) and the Office
    of Environmental Quality (OEQ) (hereinafter collectively referred to as
    CEQ). The President's request is the same as in fiscal year 2000--
    $3,020,000 and 26 Full Time Equivalent (FTE) staff positions, an
    increase of $204,000 over CEQ's enacted fiscal year 2000 budget. The
    increased budget request reflects the President's ongoing commitment to
    an invigorated CEQ that fully satisfies its statutory obligations under
    the National Environmental Policy Act (NEPA).
        Before outlining for you some of CEQ's major accomplishments this
    past year, and our objectives for the coming year, I would like briefly
    to describe our agency, the role it plays in the Federal family, and
    how we have defined our mission under the leadership of President
    Clinton.
        CEQ marked its 30th year on January 1, 2000. Congress established
    the CEQ in 1969 with strong bipartisan support amid growing concern
    about the state of our environment. In 1970, Congress passed the
    Environmental Quality Improvement Act, establishing the Office of
    Environmental Quality (OEQ) to provide professional and administrative
    support for the Council. NEPA, the statute that established CEQ and
    defined its goals and responsibilities, is truly a landmark law. It
    declares it to be the policy of the Federal government ``to use all
    practicable means and measures * * * to create and maintain the
    conditions under which man and nature coexist in productive harmony,
    and fulfill the social, economic, and other requirements of present and
    future generations of Americans.'' CEQ strives to serve those ends in a
    number of ways. The agency advises and assists the President in
    developing environmental policies and legislation; assesses and reports
    on trends in environmental quality and recommends appropriate response
    strategies; coordinates the environmental activities of all federal
    agencies and departments; fosters cooperation among federal, state and
    local governments, the private sector and the public; oversees agency
    implementation of the environmental impact assessment process; and
    mediates disputes regarding the adequacy of such assessments and the
    policy judgments inherent in them.
        This is an ambitious portfolio for a small agency, and one of
    utmost importance to our Nation. Thirty years after Congress so wisely
    sought fully to integrate environmental concerns into federal decision
    making, our challenges have grown only more daunting, and the need for
    innovative solutions all the more imperative. Our actions are guided by
    three core principles. First--and this is clear in the very words of
    our authorizing statute--our goal is not to balance the environment and
    the economy as if they are competing interests, but rather to
    demonstrate their fundamental interconnection. The choice between the
    economy and the environment is a false one. The economy and the
    environment can and must go hand in hand. Second, we must move beyond
    the chronic conflict that too often characterizes environmental
    decision making and forge collaborative approaches that meet our common
    needs. And third, we must devise innovative, common-sense solutions
    that achieve the greatest protection for our environment while
    minimizing the burden on taxpayers and the regulated community.
        I am pleased to report that CEQ has made great strides in advancing
    these principles, both as we carry out our day-to-day responsibilities
    and through focused efforts to reshape federal environmental programs.
        CEQ is working to reinvent the way government goes about protecting
    our environment. For instance, CEQ has helped forge public-private
    partnerships to protect water quality through incentives to landowners
    and to produce the cutting-edge technology that will triple the fuel
    efficiency of the American car. We are encouraging collaborative
    efforts to protect habitat before species become endangered and to
    avoid future flood damage by offering communities a range of options in
    preparing for and responding to floods. We are promoting job creation
    through support for the $180 billion-a-year environmental technology
    industry. We are working with federal agencies to streamline
    regulations and environmental reviews, saving precious time and
    taxpayer dollars. We played a critical role in formulating the
    Administration's climate change policy, which harnesses market forces
    to achieve cost-effective reductions in greenhouse gas emissions. We've
    expanded our response to the climate change problem by more fully
    integrating advanced coal and natural gas technologies into our climate
    change program as a climate related investment. The fiscal year 2001
    budget includes a total of $232 million (of which $56 million is part
    of Climate Change Technology Initiative) to support the Department of
    Energy's aggressive R&D effort to develop next generation technologies
    for the combustion and use of coal and natural gas. Part of this
    response is a request of $19.5 million for carbon sequestration
    research, significantly more than the $9.2 million appropriated in the
    fiscal year 2000 budget. The Administration's International Clean
    Energy Initiative (a $200 million multi-agency effort) will provide new
    incentives for clean energy technology innovation and export; advanced
    coal generation will help developing countries build a clean energy
    future while providing jobs here at home.
        CEQ is working to break gridlock and resolve longstanding disputes.
    For instance, CEQ has continued to oversee the Administration effort to
    resolve the impasse over dredging in the Port of New York and New
    Jersey as well as to work with other ports and concerned Members of
    Congress on infrastructure needs, permitting issues, and dredge
    material disposal.
        CEQ is working to formulate comprehensive policy and coordinate the
    environmental actions of all federal agencies. For instance, CEQ has
    led an inter-agency effort to complete a Supplemental Environmental
    Impact Statement to guide the transfer and development of the Homestead
    Air Base in a manner consistent with the Administration's commitment to
    the economic well-being of the community devastated by Hurricane Andrew
    and with the protection of Biscayne and Everglades National Parks. CEQ
    is working with federal agencies to promote and improve economic
    development and employment opportunities that can be created from
    environmental initiatives; and continues to work to improve and
    streamline the regulatory processes for interstate gas pipeline
    permitting.
        CEQ provides an institutional avenue to address special needs and
    concerns that cannot be addressed in a timely manner without with
    discipline and focus that CEQ can bring to the process. For example,
    the successful implementation of the Food Quality Protection Act (FQPA)
    requires federal agencies and other stakeholders to work together to
    ensure that sound decisions are made that protect public health while
    taking into consideration the needs of pesticide users. In order to
    help meet the early challenges of FQPA implementation, CEQ worked with
    USDA and EPA to help establish the Tolerance Reassessment Advisory
    Council (TRAC) to enhance stakeholder input on FQPA implementation.
    Through TRAC, agricultural, public health, and pesticide user
    communities were provided with an appropriate forum for increased
    involvement in the decision making process, and the process has
    benefited significantly as a result.
        Finally, CEQ is working to restore and preserve precious
    environmental values for future generations of Americans. Over the past
    year, we have continued to play a critical role in efforts to protect
    Yellowstone, the Everglades, and our oceans.
        In fiscal year 2000, CEQ has an approved level of 24 FTE positions.
    Our staffing level is nearly one-third below the total allowed by the
    fiscal year 1993 enacted level, which itself was less than half the
    historic peak for the agency. I believe the fiscal year 2001 budget
    request will permit CEQ to fulfill its statutory requirements and make
    continued progress toward the goal of common-sense, cost-effective
    environmental protection.
    Partnership Program
        In fiscal year 2000, CEQ began to initiate a major new effort to
    assist federal departments and agencies in responding to requests from
    states, metropolitan and local governments, and businesses for
    partnership opportunities. With additional funding in the fiscal year
    2001 budget, CEQ will be able to expand this program and continue
    responding to these requests: to promote smart growth, where local
    governments have already developed plans and are seeking federal
    partners; to protect open space including greenways in urban, suburban,
    and near-urban areas; to promote the retention of agricultural land
    near expanding residential areas in traditional agricultural use; to
    protect sensitive habitat in the context of metropolitan, regional, and
    ecosystem planning; and to promote, advise and assist in the clean up
    and restoration of bays, estuaries, and rivers.
        These programs pose new partnership opportunities, as well as
    additional potential challenges for CEQ.
        The President's budget proposals provide the resources that state
    and local governments and community leaders need to advance local and
    regional initiatives for environmental protection in partnership with
    the Federal government. Building more effective partnerships increases
    the need for the leadership and discipline CEQ can bring to issues that
    involve numerous agencies with very different missions. This is
    illustrated by our involvement in our ongoing major partnerships
    include the following: the Natural Communities Conservation Planning
    (NCCP) process in which Orange, San Diego, and Riverside Counties in
    southern California are doing comprehensive planning with cities, real
    estate developers, environmentalists, businesses and scientists and the
    federal government to avoid future Endangered Species Act and Clean
    Water Act mandates; Everglades Restoration; the use of Habitat
    Conservation Plans (HCPs) with timber companies in the Southeast and
    Northwest; restoration of the San Francisco Bay-Delta (CALFED; and the
    protection of Sterling Forest in New York and New Jersey.
        We believe that there are additional opportunities for more
    effective partnership. This new partnership approach could foster many
    additional opportunities. For example:
      --The Governors of California, Oregon, Washington and Alaska and
            several tribes have asked for federal funding to help states
            implement and develop coastal salmon restoration plans. They
            have also asked for federal coordination by the Acting Chair of
            CEQ to ensure that the federal agencies are working together in
            a partnership with the state on these important plans. The
            Executive of King County and the mayors of Seattle and other
            cities around Puget Sound have asked for a similar effort to
            assist their MetroSmart Growth Initiative in a way that also
            helps them and major businesses in the area recover salmon as
            well as preserve open space and plan urban and suburban
            densities.
      --In New England, CEQ has worked closely with the State of Maine, the
            Maine Congressional Delegation and other states to support
            state efforts to purchase easements protecting the working
            forests from development. This initiative would seek to
            preserve the quality of rivers and lakes, working forests, open
            spaces, promote sustainable economic development, and ensure
            public access to recreation for millions of Americans--not only
            those of the region but those within a days drive of these vast
            forests.
      --As issues of watershed degradation, loss of open space and
            agricultural land, and sprawl attract the attention of more
            Americans as a premiere ``quality of life'' issue, urban
            metropolitan and state governments which bear the principal
            responsibility for addressing these issues are seeking federal
            funding, federal technical assistance, and limited strategic
            use of federal mandates to make their jobs easier (or, in some
            cases, remove federal barriers to solutions).
        Only CEQ in many cases can provide the coordinated federal agency
    response that is helpful in forging these partnerships. No single
    individual at CEQ is tasked to respond to these initiatives. We have
    launched this important effort on a limited basis and continue to
    believe that with additional resources we can fulfill a bigger need
    which will pay countless dividends to state and local governments and
    their business and environmental partners.
    Accomplishments of the Council on Environmental Quality
        Over the past year we have endeavored to live up to the promise of
    NEPA--exercising fully our responsibility to coordinate policy and
    resolve disputes, advancing a new way of doing business, promoting
    consensus-based decisions, providing advice and guidance, responding to
    emergencies and resolving interagency disputes as early as possible,
    thus avoiding the need for more formal, time consuming processes. We
    also have worked very hard to respond to matters raised by the Congress
    last year. This portion of my testimony will report on some of our
    achievements during the past year and on those projects that we hope to
    accomplish in the coming year.
    Statutory Integration
        CEQ is identifying sites to pilot integration of compliance
    requirements under a range of statutory authorities and programs. The
    purpose of this effort is to develop local, on-the-ground models of
    comprehensive environmental planning that build on the objectives and
    principles explored by the Center for Strategic and International
    Studies (CSIS), the National Academy of Public Administration, the
    Keystone Center, and others (see The Environmental System in
    Transition: Final Report of the Enterprise for the Environment (CSIS
    1998)). Ideally, these models would provide more effective resource
    protection strategies while offering greater certainty and flexibility
    to the regulated community. In many cases, initial planning done under
    the Endangered Species Act, particularly for Habitat Conservation
    Plans, can be the building block or the model for more comprehensive
    approaches that pilot a ``no surprises'' approach incorporating a
    broader array of statutory requirements. The following examples suggest
    promising areas for this approach.
      --Pacific Northwest.--Successful coordination among Federal, state,
            and tribal resource agencies to respond to threatened and
            endangered salmon has established framework for regional
            coordination under the Endangered Species Act and the Clean
            Water Act. An integrated approach would expand this model to
            integrate remedial work under Superfund and the Natural
            Resource Damage programs and offer expedited resolution of
            compliance and restoration issues for responsible parties.
      --Southern California.--Constituents in the Santa Ana Watershed have
            asked for CEQ's assistance in integrating agricultural and
            clean water requirements in the area. Residents in Irvine and
            Newport, California, have asked for CEQ's assistance in
            expanding their Natural Communities Conservation Plans (HCPs in
            Orange County and San Diego County) under the Endangered
            Species Act (administered by the Department of the Interior and
            the National Oceanic and Atmospheric Administration) to
            incorporate a comprehensive wetlands management plan under the
            Clean Water Act (administered by the Army Corps of Engineers
            and EPA).
      --NEPA and the Magnuson-Stevens Act.--Successful coordination between
            the eight fisheries management councils established under the
            Magnuson-Stevens Act and the responsibilities of the National
            Marine Fisheries Service and the Secretary of Commerce to
            satisfy NEPA is essential to conserving and protecting our
            nation's fisheries and fishing industry. CEQ is leading the
            councils and NMFS toward a full and lawful implementation of
            NEPA's requirements through the council process that will help
            avoid shutdowns of fisheries and support sound decisionmaking.
    Dispute Resolution
        CEQ is a mediator between agencies and our efforts often prevent
    stalemates and litigation.
        The U.S. Institute for Environmental Dispute Resolution,
    established by Congress in 1998, opened for business in fiscal year
    1999. The Institute is authorized to resolve environmental disputes
    among federal agencies or between a federal agency and a non-federal
    party, as well as offer training and other services associated with
    alternative dispute resolution. Congress placed the Institute under the
    auspices of the Morris K. Udall Foundation, which was established in
    1992 as an independent agency of the Executive branch. The Institute is
    governed by the Foundation's Presidentially-appointed, Senate confirmed
    board. Because the Institute's role is linked to the NEPA and CEQ's
    role in interagency dispute resolution, Congress made CEQ a non-voting
    ex officio member of the Udall Foundation Board when it created the
    Institute. In that role, CEQ has been helping to advise the leadership
    of the Institute as it establishes its program. In addition, under the
    authorizing legislation, CEQ must concur in the use of the Institute by
    Federal agencies in Federal interagency matters.
        CEQ helped in mediating a conflict when the State of Hawaii and the
    Island of Maui sought to expand the existing Maui airport to allow an
    increase in the number of flights into Maui, and, more importantly,
    allow direct flights from outside the Hawaiian Islands to land in Maui
    without first stopping at the Honolulu Airport. The Maui airport
    expansion was very important to promote the tourist economy. When the
    Final EIS on the project was ready to be issued, the National Park
    Service voiced serious concerns about the Federal Aviation
    Administration's treatment of invasive alien species. To avoid a
    potential referral under NEPA, CEQ convened a high-level working group
    to review the problems surrounding invasive alien species and worked
    with the FAA and the NPS to develop a mitigation plan that would both
    allow the airport construction and protect Maui and its parks from
    invasions of alien plant and animal species. We continue to work with
    the State of Hawaii, the NPS and the FAA to assure that the mitigation
    is carried out in a manner that is faithful to the agreement.
        CEQ chairs an interagency working group that seeks to find a
    solution to a very polarized debate regarding brucellosis and bison in
    the greater Yellowstone ecosystem. This issue reached a crisis during
    the winter of 1997 when thousands of starving bison, suspected of
    carrying the brucellosis disease, left Yellowstone in search of food
    and scores were killed by the state. CEQ is working with the agencies,
    cattlemen conservationists, and the State of Montana in discussing ways
    to ensure that brucellosis is not spread to cattle and that bison
    remain a viable part of the Yellowstone ecosystem in order to produce a
    final environmental impact statement on bison management. CEQ worked to
    secure money from the Land and Water Conservation Fund to finalize the
    purchase of additional winter range for wildlife that can be used to
    prevent unnecessary slaughter of Yellowstone bison.
        CEQ has worked with the Department of Energy, the Department of the
    Interior, the Ute Indian Tribe and the State of Utah on the transfer of
    lands and minerals in the Naval Oil Shale Reserve Number 2, near Moab,
    Utah and the protection of the Green River. The agreement would
    transfer certain lands to the Tribe and others to the Department of the
    Interior and provide responsibility in the Department of Energy for the
    removal of uranium mill tailings.
        The CALFED Bay-Delta process is successfully keeping the
    stakeholders in the region working together to address the water
    supply, water quality, flood control and habitat restoration efforts in
    northern California. These issues can and should be resolved at the
    regional level; CEQ has worked to resolve interagency disputes when
    they arise. Bay-Delta stakeholders--agricultural, industrial and urban
    water users and environmental groups--are involved in problem solving
    and developing long term solutions to restore fish and wildlife
    habitat, to improve flood protection, to provide adequate water supply
    to all users, and to ensure clean water. The CALFED Bay-Delta Program
    will select a final ``preferred alternative'' to meet the goals of the
    program in the summer of 2000 and begin program implementation in 2001.
    Policy Coordination
        As mandated by the National Environmental Policy Act, CEQ's role is
    to advise the President on environmental policy matters and coordinate
    activities of the federal agencies and departments with regard to
    environmental matters that cross agency jurisdictional lines. In the
    past year, CEQ has played a role in the development and coordination of
    policies that have more effectively integrated environmental, economic,
    and social objectives into federal decision making. Outlined below are
    a few recent efforts undertaken by CEQ.
        The Army Corps of Engineers is developing through the NEPA process
    a preferred alternative to change the management of the Missouri River
    in a manner which provides greater environmental and recreational
    benefits along the river while protecting navigation interests. CEQ is
    involved in the development of a preferred alternative which balances
    the needs of the upstream and downstream states and helps resolve
    disagreements among the affected eight states and their constituencies.
        CEQ helped to resolve a highly visible and longstanding interagency
    conflict that had prevented construction of the Doppler Radar, a
    lifesaving weather radar installation for JFK and LaGuardia airports.
    The final solution allowed the construction of the radar while
    improving the surrounding urban national park.
        CEQ has been involved in the resolution of disputes among several
    federal agencies regarding a variety of Army Corps of Engineers
    projects along the Mississippi River, including the Yazoo Pumps
    project, the Big Sunflower maintenance project, the White River
    navigation project, and the St. Johns/New Madrid project. CEQ has
    reviewed NEPA documents associated with these projects and the
    consistency of the projects with wetlands protection goals of the
    Administration set forth in the Clean Water Action Plan. CEQ has also
    worked with other federal agencies on the development of programs aimed
    at providing economic relief to some of the areas affected by these
    projects.
        CEQ is working across federal agencies to promote and improve
    economic development and employment opportunities that can be created
    from environmental protection initiatives. For example, CEQ is working
    with the Forest Service, the Bureau of Land Management and the U.S.
    Fish & Wildlife Service to improve and expand the ``Jobs in the Woods''
    program. This program has had a successful beginning in the Pacific
    Northwest and can be applied to other regions of the country. It is our
    goal to see quality jobs created for local workers while doing needed
    restoration work on public lands. CEQ is also working with state,
    local, and tribal governments in various regions in the country to
    promote and assist in economic development and diversification for
    local economies which have been dependent upon the use of natural
    resources. Examples of this are Southeast Alaska, the Interior Columbia
    Basin, and the Northern Forest region in New England.
        In 1999 we made significant progress in furthering the 1996
    Administration Everglades Restoration Plan. On July 1, 1999, Vice
    President Gore presented to Congress the Army Corps of Engineers
    Comprehensive Restoration Plan, then known as the Restudy. CEQ will be
    leading the development of legislation to authorize the plan and the
    initial suite of restoration projects. In addition, CEQ coordinated the
    expenditure of the remainder of the $200 million provided to the
    Department of the Interior in the 1996 Farm Bill for the acquisition of
    land for restoration purposes, including the Talisman lands in the
    Everglades Agricultural Area. CEQ has also helped resolve disputes
    among federal agencies involving impacts of the management of water
    pending authorization of the Comprehensive Plan on various lands and
    interests and upon habitat and federally listed species, such as the
    Cape Sable seaside sparrow.
        In the period leading up the World Trade Organization (WTO)
    Ministerial meeting in December 1999 in Seattle, CEQ co-chaired with
    the National Economic Council an interagency staff committee on
    International Economic Policy and the Environment. Among the results of
    this policy development process was Executive Order 13141 under which
    the United States Trade Representative (USTR) will conduct a written
    review the environmental issues associated with certain major trade
    agreements, including multilateral trade rounds, bilateral or
    plurilateral free trade agreements, and certain additional trade
    liberalization measures. CEQ and USTR have joint oversight of
    implementation of the Executive Order and will co-chair a process to
    develop more specific operational guidelines under the order in
    consultation with the public and Congress. In addition, CEQ and USTR
    oversaw a written environmental analysis of the Accelerated Tariff
    Liberalization (ATL) measure in forest products which was forwarded to
    the WTO for further negotiation by the Asian Pacific Economic
    Cooperation (APEC). Technical work on this analysis was led by the U.S.
    Forest Service and the Environmental Protection Agency and agency staff
    conducted briefings for Congressional committees and the public during
    the process of developing this review.
    A New Way of Doing Business
        The Clinton Administration is committed to reinventing the way
    government operates so that it works better and costs less. CEQ
    continues to take the lead in reinventing federal environment policy by
    encouraging approaches that work to reduce burdens, break gridlock,
    provide incentives, and build partnerships with state and local
    government and the private sector. Below are some examples of how CEQ
    accomplishes this task.
        Since 1997, CEQ has worked actively to implement the National
    Environmental Technology Strategy and support the U.S. environmental
    technology industry. This industry represents a $200 billion sector of
    our economy responsible for more than 1.2 million jobs in 60,000 firms
    nationwide. CEQ oversees the Interagency Environmental Technology
    Office (IETO) that provides a one-stop-shop for businesses,
    universities, NGO's, and state and local government seeking information
    on federal environmental technology programs. Over the past year, the
    office has helped over 300 businesses connect with federal
    environmental technology programs. CEQ is presently developing a
    virtual roadmap of all federal environmental technology programs that
    will be available on the Web. We have started an initiative on
    electronic commerce that will link environmental businesses with
    municipal governments seeking innovative solutions to their
    environmental problems. On the international front, two events are
    planned (for fall 2000) that will bring together U.S. environmental
    technology firms with counterparts in Europe and Japan to explore joint
    ventures and partnerships across a wide range of technologies.
        A Federal advisory committee composed of state and local officials,
    business leaders, environmentalists, and others last year completed its
    work by issuing its final report and organizing a national conference
    known as the National Town Meeting. The May 1999 report, entitled
    Towards a Sustainable America, made a series of recommendations for
    action to be taken on climate change, environmental management,
    metropolitan and rural strategies, and international issues. The
    National Town Meeting, which capped six years of work by PCSD,
    demonstrated broad support from many sectors and strengthened
    bipartisan efforts to address sustainability issues. Over 3,500 people
    gathered in Detroit from May 2-5, 1999 to participate in the plenary
    sessions, 160 ``learning sessions,'' the extensive exhibit hall, and
    other special events. An estimated 120,000 people also participated
    through 121 concurrent events around the country, with 60,000 of these
    linking to Detroit via satellite. NTM events included top leaders from
    all sectors--business, NGO, civic, and government--as well as many
    elected officials from both parties. Michigan governor John Engler,
    Detroit Mayor Dennis Archer, Wayne County Executive Edward McNamara,
    General Motors Vice-Chairman Harry Pierce, and Reverend Joseph Barlow
    served on the Host Committee Representatives John Conyers, Joseph
    Knollenberg, John Dingell, and Carolyn Kilpatrick of Michigan's
    Congressional delegation also participated. Senator Christopher Bond
    and Governor Christine Todd Whitman of New Jersey addressed the
    conference through prepared videos.
        Following the National Ocean Conference in Monterey, California in
    June 1998, the federal agencies were charged with producing--within one
    year--a national policy for oceans issues. CEQ worked with the
    Departments of Commerce, Navy, the Interior, State, Defense, and EPA,
    the National Science Foundation and others to formulate this set of
    recommendations. Published as a formal report, ``Turning to the Sea''
    set forth background issues, concerns and recommendations in twenty-
    five different categories, ranging from freedom of navigation to marine
    protected areas. Based on the recommendations of the report, an Oceans
    Report Task Force was established to implement some of the
    recommendations, and this Task Force is co-chaired by CEQ and the
    National Security Council. Under the Task Force's guidance, agencies
    are now preparing action agendas to move the recommendations forward
    into concrete actions.
        The introduction and spread of invasive species in the United
    States is a major ecological and economic problem for diverse
    environments and economies in the United States. Invasive species are
    generally considered to be the second biggest threat to native wildlife
    (following habitat destruction). Approximately $5 billion per year are
    spent by ranchers and farmers in this country for noxious weed control,
    and indirect costs in losses to crop and rangeland productivity are
    estimated at about $7.4 billion per year. Utilities spent $3.1 billion
    over the last ten years to control invasive species. To address this
    difficult problem in a coordinated, systematic manner, the President
    issued Executive Order 13112 on invasive species in 1999. The Order
    establishes an interagency Invasive Species Council to coordinate
    federal efforts to address this problem, as well as an advisory
    committee to involve state, tribal and local governments, scientists,
    commercial interests, conservation organizations and academic
    institutions in developing and implementing solutions. In fiscal year
    2000, CEQ will be working with the Invasive Species Council to develop
    guidance on prevention and control of invasive species and restoration
    of native species in the context of the environmental analyses for
    projected actions.
    NEPA Reinvention
        One of the overarching goals of CEQ is to achieve higher levels of
    environmental protection with lower costs and less red tape. CEQ has
    made important strides in improving the way NEPA operates both in the
    day-to-day administration of NEPA and through the more fundamental
    implementation of NEPA itself. CEQ worked with several agencies
    throughout the year to provide advice and assistance in revising their
    NEPA regulations and procedures to make the environmental impact
    analysis process more efficient and effective. For example:
      --During fiscal year 1999 CEQ reviewed and approved a new NEPA
            handbook for the General Services Administration. The handbook
            is an excellent integration of NEPA law and policy as applied
            to GSA's many functions, and we believe it can serve as a model
            for other agencies.
      --During fiscal year 1999 and to date in fiscal year 2000, we have
            reviewed and approved changes to the National Park Service's
            NEPA procedures and to the Department of the Interior's NEPA
            manual.
      --Additionally, we have reviewed changes to NEPA procedures proposed
            by the Bureau of Reclamation, U.S. Army Corps of Engineers, and
            the U.S. Fish and Wildlife Service. We will shortly be
            reviewing proposed changes to the Department of the Navy's NEPA
            procedures. In the coming months we expect the Army to issue
            its draft revised regulations for public comment.
      --CEQ worked with the Department of Energy to follow up in their
            ongoing NEPA reinvention efforts. The 1998 symposium hosted by
            the National Association of Public Administrators (NAPA) and
            NAPA's final report reviewed those efforts and identified
            further opportunities. The final report and follow-up actions
            will be the basis of a ``efficient and effective NEPA
            practices/lessons learned'' forum for federal agency NEPA
            liaisons that will be held in the coming year.
      --CEQ issued a Memorandum to Heads of Agencies in the summer of 1999
            providing information to all federal agencies of their
            responsibility to determine whether appropriate state, local or
            tribal agencies are interested in being designated as
            ``cooperating agencies'' for purposes of preparing
            environmental impact statements. The Memorandum clarified the
            role of state, local and tribal governments as cooperating
            agencies and encourages Federal agencies to include state,
            local and tribal agencies as cooperators when they have either
            jurisdiction or expertise relevant to the environmental, social
            or economic impacts associated with a proposed federal action.
      --CEQ continues to work with the Federal Highway Administration,
            Federal Transit Authority, and transportation stakeholders to
            implement the mandates of the Transportation Efficiency Act
            (TEA-21 Act). In particular, we are committed to assisting
            federal and state agencies involved in transportation
            decisionmaking to better integrate the NEPA process with other
            environmental review processes and to identify and resolve
            potential problems on issues as early as possible. CEQ is
            working with the transportation agencies as they revise their
            planning procedures and NEPA procedures to better fit the
            requirements of TEA-21, and we expect those procedures to be
            published in draft for public review and comment soon. We also
            worked with the American Association of State Highway and
            Transportation officials to identify and recognize best
            practices in environmental partnerships throughout the country.
      --CEQ has been working with the National Oceanic and Atmospheric
            Administration to integrate the NEPA process into the National
            Marine Sanctuaries' management plan revisions. The majority of
            the nation's twelve National Marine Sanctuaries are beginning
            to revise their management plans. CEQ is working with the
            sanctuary managers and NOAA headquarters to establish a
            blueprint for moving forward with revisions in an organized,
            efficient and timely manner.
      --Along with other recommendations regarding the NEPA reinvention
            project, CEQ will work with the appropriate agencies to
            expedite review of natural gas pipeline projects. CEQ has
            supported the Federal Energy Regulatory Commission decision to
            modify ex parte requirements for purposes for the environmental
            impact assessment process.
        Mr. Chairman, Senator Mikulski and members of the Subcommittee, as
    the Acting Chair of CEQ, I am committed to continue the work that our
    agency was chartered to do 30 years ago. CEQ plays an important role in
    making sure that the federal family speaks with one voice on
    environmental issues. With the modest additional resources that we have
    requested, we can fulfill this role with an even greater effectiveness.
    I look forward to working with you in the coming year.
        Thank you for the opportunity to forward my statement to the
    Subcommittee.
                                     ______

                     Neighborhood Reinvestment Corporation

            Prepared Statement of George Knight, Executive Director

        Thank you, for the opportunity to submit written testimony to you,
    and for your long-time commitment to community revitalization
    demonstrated through your many years of support for the Neighborhood
    Reinvestment Corporation and its affiliated network of community-based
    nonprofit organizations--known as the NeighborWorks network.
    I am honored to share with this distinguished panel the exciting
    results of fiscal year 1999, update you on our progress to date in
    fiscal year 2000, and present the Corporation's fiscal year 2001 budget
    request of $90 million.

                          FISCAL YEAR 1999--HIGHLIGHTS
        Fiscal year 1999 represented a milestone year for the Neighborhood
    Reinvestment Corporation--once again reaffirming that local folks,
    given the resource of a flexible revolving loan fund, and the support
    of conventional lenders and insurers, can and will make large positive
    differences in their communities. The NeighborWorks system,
    now comprised of more than 200 community-based nonprofit organizations,
    relies on Neighborhood Reinvestment's ability to provide seed capital
    grants for locally managed revolving loan funds, practical technical
    assistance, hands-on how-to-do-it training, and an effective secondary
    market that can return your appropriations investment many fold in the
    form of leveraged private sector investment in our nation's distressed
    communities--whether they be rural, small town or densely urban.
        In fiscal year 1999 Neighborhood Reinvestment and the
    NeighborWorks network used the $90 million appropriation to:
      --Leverage more than $1 billion in direct total investment in
            distressed neighborhoods ($946 million of which came from
            private lenders along with resources provided by local
            governments, leveraged by $88 million in local revolving loan
            funds);
      --Assist 26,000 families to purchase or maintain their homes;
      --Manage over 20,000 affordable rental or mutual housing units
            (thousands of them formerly vacant and blighted properties);
      --Counsel nearly 61,000 potential homebuyers; and
      --Sponsor thousands of community revitalization efforts across the
            country, such as anti-crime organizing, youth training and
            employment, and economic development business loans.
        To support these outstanding accomplishments, the Neighborhood
    Reinvestment Corporation and Neighborhood Housing Services of America
    (NHSA):
      --Added 16 new organizations to the NeighborWorks network,
            for a total of 202 local partnership organizations serving more
            than 1,000 communities--48 percent of which are rural;
      --Purchased $46 million in loans through NHSA, replenishing local
            NeighborWorks organizations' revolving loan fund
            capital;
      --Conducted 180 detailed program risk management reviews of local
            NeighborWorks organizations;
      --Provided 162,000 training contact hours for practitioners and
            leaders in community development;
      --And, in further evidence of the maturation of the system and the
            quality of NeighborWorks lending, Standard & Poor's,
            for the first time ever, awarded a ``AA'' rating to a $75
            million security backed by non-conventional, affordable,
            nationally dispersed, residential mortgages in NHSA's
            portfolio.
              fiscal year 2000--goals and accomplishments to date
        Given the tremendous success of fiscal year 1999, and the powerful
    infrastructure that has been built and refined over many years, we
    continue to set high standards and goals for fiscal year 2000. Even at
    the reduced fiscal year 2000 funding level of $74.7 million, our goal
    is to:
      --Attract over $1.1 billion in investment to NeighborWorks
            communities;
      --Assist over 28,000 families to purchase or maintain their homes,
            and over 3,400 families to secure long-term mutual and
            multifamily rental housing;
      --Counsel 67,000 potential homebuyers; and
      --Add 12 organizations to the NeighborWorks network,
            expanding our reach to 1,100 communities.
        In 1998 the NeighborWorks Campaign for Home Ownership
    2002 was launched with a goal of putting 25,000 lower-income families
    into home ownership. In fiscal year 1999 additional funds were
    appropriated to expand that goal by 10,000. The Campaign raised the
    goal again in fiscal year 2000 by 5,000--bringing the goal to 40,000
    families over a five-year period.
        It's with great delight that I can report to you, the Homeownership
    Pilot you funded has clearly demonstrated enormous success--and should
    continue to be supported.
        To summarize the NeighborWorks Campaign for Home
    Ownership 2002 progress toward its five year goals:

            NEIGHBORWORKS CAMPAIGN FOR HOME OWNERSHIP 2002
    ------------------------------------------------------------------------
                                                21-MONTH RESULTS (35 percent
                 GOALS (1998-2002)                 of the way through the
                                                          Campaign)
    ------------------------------------------------------------------------
    Create 40,000 new homeowners..............  Created 13,800 homeowners--
                                                 35 percent of goal.
    Generate $2.9 billion in investment.......  Generated $1.2 billion in
                                                 investment--41 percent of
                                                 goal.
    Counsel 270,000 potential homebuyers......  Counseled 100,726
                                                 households--37 percent of
                                                 goal.
    Establish 50 HomeOwnership Centers........  Opened 23 HomeOwnership
                                                 Centers--46 percent of
                                                 goal.
    ------------------------------------------------------------------------

        The especially good news is who is being served. The profile of
    NeighborWorks homebuyers is markedly significant when
    compared to the profile of those served by government-backed loan
    programs or by the conventional mortgage market.

                                DEMOGRAPHIC PROFILE OF NEIGHBORWORKS HOMEBUYERS
                                                      [In percent]
    ----------------------------------------------------------------------------------------------------------------
                                                               NeighborWorks   Government-    Conventional
                  Characteristics of Homebuyers                         Loans            Backed Loans      Loans
    ----------------------------------------------------------------------------------------------------------------
    Minority.................................................               54                  31             15
    Female head-of-household.................................               41                  20             18
    Below 80 percent of MSA median...........................               67                  45             24
    Income of Borrower:
        Percent $15,000 or less..............................                6.7                 1.4            1.7
        Percent $15,001-$25,000..............................               31.5                11.8            7.9
        Percent $25,001-$35,000..............................               30.7                23.3           11.8
        Percent $35,001 or more..............................               31.1                63.5           78.6
    90-day loan delinquency (as of 9/30/99)..................                1.06                1.55           0.27
    ----------------------------------------------------------------------------------------------------------------

        Additionally it should be noted that 95 percent of the
    NeighborWorks clients are first-time buyers, many of them
    first generation buyers. And, that for 30 percent of the families,
    owning is less or only marginally more costly than renting. Home prices
    range from $25,000 in Buffalo, New York to $140,000 in Orange County,
    California.
        One of the keys to this outstanding success is the locally directed
    revolving loan funds operated by NeighborWorks organizations.
    One-third of new homeowners were assisted with NeighborWorks
    revolving loan funds--with the median loan being $4,300.
    Using Revolving Loan Funds to Create Homeowners in Rural Areas
        A challenge facing Neighborhood Reinvestment and the
    NeighborWorks network is how to best use scarce resources to
    reach large, sparsely populated rural areas desperately in need of
    assistance. In rural Montana a model is emerging that can do just that!
        The Neighborhood Housing Services of Great Falls, in partnership
    with local lenders, Realtors, the Montana Board of Housing,
    and especially the Resource Conservation and Development Areas (RC&D--a
    USDA program), is making home ownership a reality for hundreds of
    families in tiny towns and rural areas throughout Montana.
        In order to combat the many obstacles to working in rural areas--
    like how to provide homebuyer education and counseling to families
    scattered over thousands of square miles, find financing for
    nonconventional buyers (when even conventional financing is almost
    nonexistent), service/monitor the loans, etc.--we needed to be
    particularly creative.
        What did Neighborhood Reinvestment do? To start, we provided
    technical assistance to the Great Falls Neighborhood Housing Services
    as they thought through how to best serve families across the entire
    state. We helped facilitate meetings of their current and potential
    partners. We provided critically needed seed grant funds for their
    revolving loan fund. Through the Neighborhood Reinvestment Training
    Institutes, we conducted a specially designed course to teach the RC&D
    folks how to provide homebuyer counseling. And NHSA stands ready to
    purchase the non-conventional, revolving loans originated by Great
    Falls Neighborhood Housing Services, at par.
        How does it work? The RC&D folks structure local homebuyer
    education classes for prospective first-time homebuyers to provide the
    necessary financial literacy and pre-purchase counseling.
    Realtors assist in the home purchase. Local lenders package
    the first mortgage. The NHS of Great Falls provides, when necessary
    (about 70 percent of the time), a second mortgage from their revolving
    loan fund to fill the gaps of needed repairs or a portion of the
    closing costs. The second mortgage, made from the NHS of Great Falls'
    revolving loan fund, is often sold to NHSA, the NeighborWorks
    secondary market vehicle, allowing those funds to recycle so that they
    can be re-lent to others.
        The early results of this innovative partnership are astonishing!
    During 1999, the NHS of Great Falls assisted 2\1/2\ times the number of
    families to acquire or maintain their homes, compared to 1998 (from 134
    in 1998 to 339 in 1999). A great percentage of the families assisted
    earn between $15,000 and $18,000. To understand the potential of this
    approach it's important to realize that this partnership has allowed
    the NHS of Great Falls to expand its services from the City of Great
    Falls to, as of this date, 84 small towns and communities scattered
    throughout the vast State of Montana. This approach has been so
    successful that we believe it should be replicated, so that other rural
    states might also benefit. We are currently working with RC&D in
    several other Western states to replicate this effort. I look forward
    to reporting our progress on this exciting opportunity!
    Use of Technology in Rural Areas
        In a major technological breakthrough for rural community
    revitalization, four Vermont NeighborWorks organizations are
    operating their newly established NeighborWorks HomeOwnership
    Centers using a shared virtual office on the Web. These organizations
    are: Rutland West Neighborhood Housing Services, Burlington Community
    Land Trust, Gilman Housing Trust and Rockingham Area Community Land
    Trust. Despite the miles that separate them, having a common Web-based
    work area provides the NeighborWorks organizations with a
    vehicle for sharing solutions to difficult issues and trading
    information about which marketing methods work best in their
    HomeOwnership Centers.
        Several rural NeighborWorks organizations are considering
    expanding the use of virtual offices to facilitate interaction among
    rural NeighborWorks organizations nationwide.

                       LOOKING AHEAD TO FISCAL YEAR 2001
        The past year has seen interest rates rise by 1 percent. Will rates
    continue to rise? If so, what will be the impact on the distressed
    communities the NeighborWorks network serves? In many
    communities, aggressive lending tactics, referred to as ``predatory
    lending practices'', are taking their toll on individuals and
    neighborhoods. For NeighborWorks organizations, delinquency
    and foreclosure prevention is increasingly important if the
    reinvestment gains that have been made are to be held. The future will
    be most bright if we are best prepared for the downsides.
        Locally controlled revolving loan funds, coupled with Neighborhood
    Reinvestment's technical assistance, training and NHSA are a powerful
    combination. Working together we have attracted conventional capital
    and outstanding local leadership, and devised solutions to critical
    issues.
        Going forward, strategic financial and technical support for
    NeighborWorks revolving loan fund operations is the best
    method to capitalize on the strong capacity of the
    NeighborWorks network, as well as protect against the
    inevitable fluctuations in capital markets and the overall economy.
        To maximize the positive impact that the NeighborWorks
    system has had on the lives of thousands of lower-income Americans and
    to significantly increase the flow of private capital to distressed
    markets, the Corporation is seeking a $90 million appropriation for
    fiscal year 2001. Such an appropriation would permit the
    NeighborWorks network to keep up--and accelerate--the
    unprecedented pace that has been made possible by investments made in
    past years.

                                                        DEMONSTRATING A CONSISTENT INCREASE IN PRODUCTION
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                            Fiscal year--
                                                                        ------------------------------------------------------------------------------------
                                                                           1993 Actual      1995 Actual      1997 Actual      1999 Actual       2001 Goal
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Total Investment...................................................     $223,000,000     $358,000,000     $553,000,000   $1,000,000,000   $1,300,000,000
    Total Housing Units................................................            6,762            8,803           11,407           15,890           18,700
    Training Contact Hours.............................................           49,410           91,176          121,219          162,835          160,000
    Appropriation......................................................      $29,000,000      $39,000,000      $50,000,000      $88,000,000      $90,000,000
    --------------------------------------------------------------------------------------------------------------------------------------------------------

        In fiscal year 2001, Neighborhood Reinvestment will further enhance
    local revolving loan funds through capital grants. This will enable
    NeighborWorks organizations to continue to expand the
    opportunities for home ownership, as well as assist existing low-income
    homeowners who need assistance with rehabilitation.
        By replenishing revolving loan funds, local NeighborWorks
    boards of directors can continue to fashion and tailor strategies to
    meet rapidly evolving loan needs without ``approvals'' from Washington.
    In the distressed, lower-income communities served by
    NeighborWorks organizations, the revolving loan fund is often
    the only source of affordable, flexible and completely locally
    directable capital available. Unleashing local creativity bears
    enormous fruit. And, building on past success is crucial to creating a
    climate for broader reinvestment.
        Several NeighborWorks communities are currently involved
    in the use of Section 8 for home ownership, combined with conventional
    lending and use of their revolving loan fund. Based upon the strong
    interest and support generated by these initial ``demonstration''
    efforts, Neighborhood Reinvestment has begun to explore ways of
    expanding this promising strategy.
        Neighborhood Reinvestment will also, in fiscal year 2001, focus on
    ``not losing ground.'' Communities need to be prepared to respond to
    economic downturns that impact everyone, including individuals who may
    already be struggling.
        Despite the opportunities for increased first-time home purchases
    that have been afforded by the current interest-rate environment, in
    some cases overly aggressive (predatory) lending practices have left
    families (and neighborhoods) at risk of losing their homes. Among those
    who are likely to be most vulnerable are families with limited
    financial reserves who have purchased ``fixer-uppers'' that are in need
    of more substantial repairs than anticipated, and financially
    unsophisticated families who are tempted by unscrupulous offers of debt
    consolidation, equity withdrawal and over financing.
        Additionally families can fall behind when a job is lost, or if
    they experience divorce or medical judgements. In the face of such
    challenges, NeighborWorks organizations' staff provide,
    usually uncompensated by anyone, financial counseling to reduce
    delinquency and prevent foreclosure.
        Finally, the Corporation will continue to expand the capacity of
    those NeighborWorks organizations that now own and/or manage
    over 20,000 units of long-term affordable mutual and rental housing.
    Some of these organizations have formed a joint entity to expand their
    efforts to increase their ownership stock. The Corporation has the
    opportunity to strategically invest in this effort to raise asset
    management and resident service standards so that more families, who do
    not own their own home, can affordably and permanently rent in their
    communities with pride.

                       THE NEIGHBORWORKS SYSTEM
        In order to clarify how we plan to meet these ambitious goals, I
    want to provide some background on how the NeighborWorks
    system operates and what makes it successful.
    The NeighborWorks Network
        At the heart of this system is the NeighborWorks network
    which, as of December 30, 1999, consisted of 202 locally directed
    partnerships composed of community residents, the business and public
    sectors, serving more than 1,000 communities nationwide. Often known as
    Neighborhood Housing Services, each NeighborWorks
    organization's local board of directors establishes strategies for
    revitalization of their neighborhoods and community.
    NeighborWorks organizations share common characteristics:
      --Local residents, financial and business sector leaders, and public
            officials serve on each local organization's board of
            directors;
      --All NeighborWorks organizations are state-chartered, not-
            for-profit organizations with 501(c)(3) tax-exempt status;
      --They operate a flexible revolving loan fund;
      --They work with conventional lenders to develop flexible loan
            products;
      --They promote physical, economic and social revitalization of
            designated target areas;
      --They create and sustain affordable housing;
      --They must meet Neighborhood Reinvestment's stringent chartering and
            ongoing performance guidelines; and
      --They develop and support strong resident leaders who work to
            enhance the viability of their communities.
    Neighborhood Reinvestment Corporation
        Created by Congress in 1978 (Public Law 95-557), Neighborhood
    Reinvestment's mission is to encourage, support and facilitate these
    organizations' efforts to revitalize distressed communities through the
    local public/private partnerships. We do this through:
      --Technical assistance--delivered by specialized practitioner experts
            geographically placed around the country in nine district
            offices;
      --Flexible grants--to capitalize and operate revolving loan funds;
      --Training--``how-to,'' nuts-and-bolts coursework for community-based
            practitioners; and
      --Our secondary market, Neighborhood Housing Services of America
            (NHSA)--a special-purpose secondary market backed by national
            investors. This ensures the local liquidity of revolving loan
            funds.
        We also manage the risks inherent in the NeighborWorks
    system through a multifaceted risk management system. In essence the
    risk assessment/management system backs up strong local board
    leadership that monitors local financial controls, programmatic
    activities and program changes.
    Neighborhood Housing Services of America
        The NeighborWorks system's unique secondary market,
    Neighborhood Housing Services of America (NHSA), serves as a financial
    backstop to local NeighborWorks organizations' loan funds.
    Each NeighborWorks organization may sell loans to NHSA at
    whatever rate and term is locally affordable. This kind of secondary
    market outlet ensures a continuous source of capital through the local
    revolving loan fund, which, in turn, enables local organizations to
    utilize the plentiful private sources of capital that are available for
    conventional lending.
        Last year $88 million in revolving loan funds lending sparked an
    additional $946 million in coordinated private and public lending--
    resulting in over $1 billion in total direct investment. NHSA enables
    us to continuously meet the capital liquidity needs of the
    NeighborWorks network.
        Together, Neighborhood Reinvestment and NHSA assist in the growth
    and capacity development of local NeighborWorks organizations
    to meet the capital, technical and organizational needs of their
    communities.

                              REVOLVING LOAN FUNDS
        The engines that drive this system are the flexible local revolving
    loan funds managed by each local NeighborWorks organization.
    Neighborhood Reinvestment provides seed capital to attract additional
    capital that may come from local banks, insurance companies, local
    government, foundations and other investors. Each
    NeighborWorks organization sets its own underwriting terms
    and policies. The loans made from the revolving loan funds fill the
    gaps in an otherwise-fragmented set of resources available to lower-
    income borrowers. Local determination of best use and the flexibility
    of these funds are the critical resource for broader community
    revitalization. For example, the revolving loan funds are used for:
      --Gap financing--used in conjunction with conventional loans to
            assist families rehabilitate and purchase their homes;
      --Equity capital--to secure blighted properties for rehabilitation
            and sale, secure mutual or rental units as well as purchase
            property for rehabilitation or development;
      --Major rehabilitation, minor repair and emergency loans--used to
            help existing very low-income and frequently elderly homeowners
            maintain their homes and avoid the predatory lending scams that
            often target this population;
      --First and second mortgage loans--for those buyers who cannot fully
            qualify conventionally. These loans are tailored to the buyers'
            ability to repay;
      --Down-payment and closing cost assistance--for first-time
            homebuyers; and
      --Economic development--for small business start-up or expansions.
        The revolving loan funds serve both as a capital resource for the
    community and as a way of attracting and securing additional private
    investment in distressed communities. In fiscal year 1999, investment
    from NeighborWorks revolving loan funds hit an all-time high
    of $88 million--making possible $946 million in lending from other,
    principally private, sources.

                                   CONCLUSION
        The NeighborWorks system has proven to be an effective
    mechanism over time to revitalize distressed communities nationwide. It
    has improved its efficiency and effectiveness over its 20-year history
    in leveraging limited public funds with private capital. In 1994, total
    public- and private-sector investments totaled $268 million; in 1999,
    however, total investments in distressed communities amounted to more
    than $1 billion, leveraging nearly $12 for every dollar appropriated by
    Congress.
        In fiscal year 2001 and beyond, the NeighborWorks system
    will continue to support local distressed neighborhoods and communities
    in rural, small town, suburban and urban areas, and strive to
    continually demonstrate what a truly valuable public investment you
    have made!
        We are extremely grateful for the Committee's support and look
    forward to a successful year and continued opportunities in fiscal year
    2001.
                                     ______

                    U.S. Consumer Product Safety Commission

             Prepared Statement of Mary Sheila Gall, Vice Chairman

        I support the fiscal year 2001 Budget Request of $52.5 million,
    which reflects an increase of $3.7 million over our fiscal year 2000
    Appropriation.
        I have consistently supported funding levels that maintain the
    activities carried on in previous years along with reasonable and
    pragmatic funding increases to support new initiatives. Historically, a
    3 percent increase was needed merely to maintain services at the prior
    year appropriation level. But we have seen this fixed cost adjustment
    rise from 3 percent in fiscal year 1999 to 4 percent in fiscal year
    2000. In fiscal year 2001, an increase of 5.4 percent is needed to
    maintain services at the fiscal year 2000 level.
        This substantial adjustment is due largely to statutory pay and
    benefit increases ($2.8 million), a sizeable increase in our GSA space
    rent ($307,000), restoration of operating expenses cut in fiscal year
    2000 ($388,000) and non-compensation related cost increases ($196,000)
    due to inflation.
        The proposed fiscal year 2001 budget allows us to maintain
    operations at the fiscal year 2000 level, but does not allow for
    increases to fund critical investments necessary to implement
    improvements. Because we are a data driven agency, we depend on our
    data collection, analysis and laboratory testing. Each year we have had
    to scale back on our attempts to improve our laboratory equipment and
    keep our data information systems up to date. I hope that, with
    budgetary surpluses presently projected, that these deficiencies can be
    rectified in upcoming fiscal years.
                                     ______

              Prepared Statement of Thomas H. Moore, Commissioner

        Mr. Chairman, Ranking Member, and Members of the Subcommittee, I am
    very pleased to again have this opportunity to submit testimony in
    support of our appropriations request. The full details of our fiscal
    year 2001 appropriations request are set out in our budget document and
    I fully support our request as presented.
        For next year we are requesting $52.5 million, which is a modest
    $3.7 million increase over our actual fiscal year 2000 allocation. This
    request for 2001, if fully funded, would allow the U.S. Consumer
    Product Safety Commission (CPSC) to again sustain a proven safety
    program that has continuously helped to minimize the exposure of
    American families, particularly children, to unsafe and hazardous
    consumer products. However, our budget request does not incorporate
    important future investments in critical laboratory development, vital
    research initiatives, and much needed information technology. I feel
    that it is unfortunate that the full potential of this agency, once
    again, will not be realized because of the limitations placed upon it
    by its funding.
        By all measures, CPSC provides both tremendous service and
    tremendous value to the American people. Each year through reductions
    in deaths, injuries, and other costs associated with unsafe products,
    such as health care costs and property damage, CPSC saves the nation
    many times the agency's annual budget. Our agency is the major factor
    in the 30 percent decline in the rate of deaths and injuries related to
    consumer products since 1974. Yet, despite its proven effectiveness,
    CPSC must continue to forego additional product safety related
    initiatives that will enhance its ability to protect the American
    public. Our fiscal year 2001 request again will simply keep our
    successful safety programs operating at their current levels.
        Notwithstanding, in recent years, the U.S. Consumer Product Safety
    Commission has been very successful in addressing the unreasonable risk
    of harm posed by many, many consumer product. For example, our work has
    prevented about 40,000 injuries and reduced societal costs by over $800
    million each year by removing dangerous fireworks from the marketplace.
    There is a continuously growing public awareness and regard for the
    work that is performed at CPSC. Clearly, this growing regard for the
    results of our efforts is due to great leadership and, very definitely,
    to the hard work and skills of our professional staff, and to their
    intense dedication to our mission.
        In order to sustain that effort and successful funding of our
    appropriations request is needed. Therefore, I strongly urge the
    Subcommittee to appropriate the full $52.5 million requested.
                                     ______

    Prepared Statement of Ann Brown, Chairman, U.S. Consumer Product Safety
                                   Commission

        Mr. Chairman, and members of the Subcommittee, I am Ann Brown,
    Chairman of the U.S. Consumer Product Safety Commission (CPSC). With me
    today are Vice Chairman Mary Sheila Gall, Commissioner Thomas H. Moore
    and members of the Commission staff.
        I am pleased to have this opportunity to testify in support of our
    fiscal year 2001 appropriation request of $52.5 million. As you may
    know, last year I was confirmed by the Senate for a full seven-year
    term on the Commission. I look forward to directing our strategic plan
    for reducing deaths and injuries from consumer products to a successful
    conclusion, and to continuing my efforts to forge an ever more
    effective partnership among business, consumers and government so that
    all the consumer products we use in and around our homes will be safe
    for the children and families of America.

       UPDATE ON UPHOLSTERED FURNITURE, SLEEPWEAR AND DEATH CERTIFICATES
        Before I begin my testimony on our budget, I want to give you a
    brief update on the two tasks given us by the conferees on our fiscal
    year 1999 appropriations. As you recall, Section 423(a) of the fiscal
    year 1999 Conference Report directed us to contract with the National
    Academy of Sciences (NAS) within 90 days for a 12-month study of the
    potential toxicologic risks of all flame-retardant chemicals identified
    by the NAS and the Commission as likely candidates for use in
    residential upholstered furniture. These chemicals could be used to
    comply with our draft proposed regulation for flame resistance of this
    furniture. We entered into the contract with the NAS prior to the
    deadline on January 15, 1999.
        Accordingly, we expected the NAS study to be delivered to us in
    January, 2000. However, in early January, the NAS advised us that it
    would be unable to complete the study by the due date. The NAS staff
    informed us the study would not be submitted to us until April. I
    regret this delay and assure the Subcommittee the delay is not due in
    any way to CPSC, but is solely the responsibility of NAS. We will send
    the study to the Subcommittee promptly after we receive it.
        Section 429(a) of the Conference Report directed us to propose for
    comment within 90 days, a revocation of the amendments to the
    children's sleepwear standard issued on September 9, 1996. The proposed
    revocation was published in the Federal Register on January 19, 1999,
    prior to the deadline. Section 429(c) directed us to promulgate a final
    rule revoking, maintaining or modifying these sleepwear amendments by
    July 1, 1999. On June 28, 1999, the Commission voted 2-1 to reaffirm
    the 1996 amendments.

                            FISCAL YEAR 2001 BUDGET
        For fiscal year 2001, the Commission is requesting an appropriation
    of $52.5 million. This is an increase of $3.5 million over the amount
    Congress appropriated for fiscal year 2000. However, due to the 0.38
    across-the-board budget reduction mandated by the final Continuing
    Resolution of 1999, (Public Law 106-106), the Commission is requesting
    $3.7 million over the amount we will actually receive in fiscal year
    2000.
        This request will only allow us to maintain the agency's current
    safety effort at 2001 prices. The requested increase includes raises
    for staff salaries and benefits ($2.8 million), restoration of
    operating expenses cut in fiscal year 2000 ($388,000), and inflation
    only price increases for the non-salary costs of doing business, such
    as contract services ($196,000).
        Most of the $2.8 million increase for staff salary and benefits is
    the cost of the President's proposed pay raise in fiscal year 2001. In
    addition, small amounts are included to fund: the planned 480 staff
    level; increased retirement costs as our employment base shifts
    retirement systems; increased costs of health benefits; and the
    continuation of programs designed to recruit and retain our highly
    skilled scientific and technical staff.
        We were forced to cut operating expenses in fiscal year 2000 to
    reflect our reduced funding level, which is about $300,000 less than
    required for current services. We made additional cuts of about $88,000
    because other operating expenses increased more than we anticipated.
    For example, as a result of widespread publicity for many of the
    agency's recalls, more consumers are calling our Hotline, increasing
    our telecommunications and contract costs. The expenses that we seek to
    restore include: hiring expert assistance in complex compliance
    investigations; travel in support of voluntary standards development;
    collection of additional injury data; replacing aging laboratory
    equipment; keeping our injury information systems up-to-date; and
    scientific training for staff. The agency's operating expenses are not
    large (less than 20 percent of our budget) but they play a vital role
    in providing the staff with resources needed to complete their work.
        The space rent increase is a result of an across-the-board increase
    in rates charged by GSA for existing space. CPSC has not increased its
    space. In fact, the agency has taken substantial steps in recent years
    to lower our space requirement to today's level. Through the field
    telecommuting program, we have lowered our total rent cost by 25
    percent. We continue to use a converted 50-year old former military
    installation to house our laboratory facility in Gaithersburg,
    Maryland.
        The last increase necessary to maintain our current safety program
    is funding for price increases projected for the costs of doing
    business, excluding salary and space rent. These costs are those
    subject to annual inflation increases, such as travel, or specific
    contractual services that allow annual increases based on the Federal
    estimate of inflation.
        In sum, our 2001 budget request will simply keep our successful
    safety program functioning at its current level. We are foregoing any
    of the critical investments we want to make to improve our programs.
    Over the years, CPSC has improved efficiency, reduced staff, and cut
    costs, such as rent, as much as possible. There is no ``fat'' in our
    budget. All that remains is bone and muscle. Accordingly, we urge the
    Subcommittee to appropriate the full $52.5 million requested.

                            THREE NEW SAFETY EFFORTS
        I am pleased to announce that this year we are expanding our
    National Electronic Injury Surveillance System (NEISS) beyond consumer
    product-related injuries to include all injuries treated in hospital
    emergency rooms. This expansion was recommended in the 1998 Institute
    of Medicine study on injury in America. The Centers for Disease Control
    (CDC) was given $2 million in its appropriation for 2000 to fund the
    collection of this data at CPSC. The data will be available to all
    Federal agencies and will enable them to identify quickly emerging
    injury trends, and assist them in setting their priorities for future
    prevention and treatment programs. CDC's 2001 budget request includes
    another $2 million to keep this program going, and we expect that this
    funding will continue into the future. We believe our NEISS is the best
    in the Nation and are proud it was selected for this important public
    safety task.
        Last December, we launched Operation S-O-S--Safe Online Shopping.
    We have a highly trained team of 10 experts monitoring the Internet for
    unsafe and illegal consumer products.
        We have already found some violative products: flammable children's
    sleepwear; prescription drugs that can poison kids because they are not
    in child-resistant packaging; children's jackets with drawstrings that
    can catch and strangle a child; and novelty cigarette lighters that are
    designed to appeal to kids and are not child-resistant. Just this
    month, we recalled about 4,000 non-child-resistant lighters that the
    task force found advertised on the web.
        We have found unsafe toys on the web too. We found an unsafe toy
    for sale on both Amazon.com and E-Toys just before the holidays--it had
    small balls that a child under three could choke to death on, and we
    recalled them.
        The Internet is an increasing part of the information we receive
    about unsafe consumer products. In just one year, from 1998 to 1999,
    the number of Internet reports more than doubled.
        For the past six years I have made a special effort to protect the
    smallest and most vulnerable citizens, our children. As part of this
    effort, I have focused on the prevention of sudden infant death
    syndrome (SIDS). Last year CPSC, together with the American Academy of
    Pediatrics and the National Institute for Child Health and Human
    Development, issued a safety alert warning the public about the hazards
    to young babies of suffocation from soft bedding. Since then, our staff
    has worked with several major retailers of soft bedding for babies to
    develop a plan that would communicate this safety information to
    consumers when they shop. I am pleased to say that on March 15, I
    announced that seven major retailers, representing the majority of baby
    bedding sales, would cooperate with us in this effort. I commend IKEA,
    J.C. Penney, Kmart, Lands' End, Sears, Target and Babies ``R'' Us for
    ensuring that their crib displays, catalog spreads and advertising will
    show only safe bedding practices. This is another example of my strong
    belief that voluntary cooperation between business and government is
    the best way to improve consumer product safety.

                                   CONCLUSION
        Mr. Chairman and Members of the Subcommittee, despite all the
    progress the Commission has made, and is making, in reducing deaths and
    injuries related to consumer products, they remain a major, national
    problem. Every year there are about 22,000 deaths and 29.5 million
    injuries, resulting in total damage to the nation of over $500 billion.
    The CPSC is the only agency with the authority to prevent hazardous
    consumer products from killing and injuring our people, and where
    necessary, to enforce the laws against them. Your investment of $52.5
    million in the CPSC will be returned many times over in lives saved and
    injuries averted. We will use these funds efficiently and effectively
    to safeguard the health and safety of the American people.
                                     ______

                      American Battle Monuments Commission

        Prepared Statement of Gen. Fred Woerner, USA (Retired), Chairman

        Mr. Chairman and Members of the Committee: Thank you for the
    opportunity to testify on our fiscal year 2001 Appropriation Request.
    The special nature of the American Battle Monuments Commission places
    it in a unique and highly responsible position with the American
    people. The manner in which we care for our country's Honored War Dead
    is, and should remain, a reflection of the high regard in which we, as
    a nation, respect their service and sacrifice.
        As you know, the American Battle Monuments Commission is a small,
    one-of-a-kind organization, that is responsible for commemorating the
    services of American Armed Forces where they have served since April 6,
    1917 (the date of U.S. entry into World War I) through the
    establishment of suitable memorial shrines; and for designing,
    constructing, operating, and maintaining permanent American burial
    grounds in foreign countries. In performing these functions, the
    American Battle Monuments Commission administers, operates, and
    maintains twenty-four permanent memorial cemeteries and twenty-seven
    monuments, memorials, and markers in the United States and fifteen
    countries around the world.
        We have eight World War I and 14 World War II cemeteries located in
    Europe, the Mediterranean, North Africa and the Philippines. All of
    these cemeteries are closed to burials except for the remains of the
    War Dead who may occasionally be discovered in World War I or World War
    II battlefield areas. In addition, we are responsible for the American
    cemeteries in Mexico City, established after the Mexican War, and in
    Panama.
        Presently, 124,914 U.S. War Dead are interred in these cemeteries--
    30,921 of World War I, 93,243 of World War II and 750 of the Mexican
    War. Additionally 5,857 American veterans and others are interred in
    the Mexico City and Corozal (Panama) American Cemeteries. Commemorated
    individually by name on stone tablets at the World War I and II
    cemeteries and three memorials on U.S. soil are the 94,120 U.S.
    servicemen and women who were Missing in Action, or lost or buried at
    sea during the World Wars and the Korean and Vietnam Wars.
        We continue to provide services and information to the public,
    friends, and relatives of those interred in, or memorialized at ABMC
    cemeteries and memorials. This includes information about grave and
    memorialization sites as well as location, suggested routes, and modes
    of travel to the cemeteries or memorials. Immediate family members are
    provided letters authorizing fee-free passports for overseas travel to
    specifically visit a loved one's grave or memorial site. Annually, over
    10 million people visit our locations worldwide, half of which are
    American. Photographs of headstones and sections of the Tablets of the
    Missing on which the service person's name is engraved are also
    available. These photographs are mounted on large color lithographs of
    the cemeteries or memorials. In addition, we assist those who wish to
    purchase floral decorations for placement at a grave or memorial site
    in our cemeteries. A photograph of the in-place floral arrangement is
    provided to the donor.
        The care of these shrines to our War Dead requires a formidable
    annual program of maintenance and repair of facilities, equipment, and
    grounds. This care includes upkeep of 131,000 graves and headstones; 73
    memorial structures; 41 quarters, utilities, and maintenance
    facilities; 67 miles of roadways and walkways; 911 acres of flowering
    plants, fine lawns and meadows; nearly 3,000,000 square feet of shrubs
    and hedges and over 11,000 ornamental trees. Care and maintenance of
    these resources is exceptionally labor intensive, therefore, personnel
    costs account for nearly 61 percent of our budget for fiscal year 2001.
    Some of this maintenance is performed by casual labor, in peak seasons,
    since permanent cemetery staffs are not sized to provide all the
    required maintenance during the peak-growing season. The remaining 39
    percent of our budget is required to fund our engineering, maintenance,
    utilities, equipment, and administrative costs.
        As an organization responsible for permanent burial facilities, we
    do not have the option of closing or consolidating cemeteries. In light
    of this, we have increased our efforts to achieve greater efficiency
    and effectiveness, through automating and contracting, in the
    operational and financial management areas, where we do have
    alternatives. This Commission recognizes and fully supports the efforts
    of the President and the Congress to improve efficiency, focus on
    results, and streamline the government overall and in ABMC in
    particular.
        In coordination with OMB, we recently completed work on our second
    Strategic Plan (fiscal year 2000-2004) and Annual Performance Plan
    (fiscal year 2000) as required by the Government Performance and
    Results Act. We will forward copies to the various Committees of the
    Congress. We believe these plans provide our agency a comprehensive
    roadmap for the future.
        During fiscal years 1998 and 1999, as part of our Strategic Plan,
    and at the request of the Office of Management and Budget (OMB), we
    conducted the first comprehensive manpower study of our cemeteries
    since 1982. The results indicated a number of upgrades, downgrades, and
    new position descriptions were needed. Based on the survey results and
    with the concurrence of OMB, we implemented position downgrades and
    position upgrades in May 1999 for those positions requiring upgrade of
    one grade. Those positions requiring a second upgrade were accomplished
    in October 1999 (fiscal year 2000) and those requiring an additional
    upgrade will be accomplished in fiscal year 2001. Funding for the
    upgrades in fiscal year 2001 plus the adjusted personnel baseline is
    included in our fiscal year 2001 request.
        During fiscal year 2000 ABMC and OMB began a joint productivity
    study to determine if automation, technology, and outsourcing
    improvements could reduce the growing costs of foreign employment. We
    have completed the preliminary phases of this study and are encouraged
    by the findings. It appears that opportunities exist through
    outsourcing, leasing, and equipment modernization to reduce workhours
    associated with labor intensive operations and thereby can potentially
    defer or offset manpower growth. In addition, the study pointed to a
    long standing drainage/surface water problem which must be evaluated
    and resolved prior to fielding many of the other solutions and
    improvements. (We are continuing to evaluate the results and will be
    conducting further assessments.)
        During fiscal year 2001, we will begin an Infrastructure
    Modernization Program. Our cemeteries and their infrastructure range in
    age from 50 to 70 years old. With the help of Congress and the
    President over the last three years we have made progress in reducing
    our backlog of maintenance and engineering projects. We must now begin
    a concerted effort to examine the deep infrastructure of these aging
    facilities and execute a plan to modernize or replace worn out systems.
    The infrastructure Modernization Program will enable us to identify
    existing problems, avoid future problems and work in a more logical and
    efficient manner. The first phase of this program will establish a
    baseline by utilizing in-depth technical surveys of our installations.
    These surveys will be done by certified subject matter experts who will
    apply current standards, regulations, and technological advances to our
    facilities to determine what needs to be accomplished.
        In 1996, Congress specifically directed (Public Law 104-275) that
    ABMC prepare agency-wide financial statements annually beginning with
    fiscal year 1997, and that the financial statements be audited by the
    U.S. General Accounting Office (GAO) in accordance with accepted
    government auditing standards. Our first audit resulted in an
    unqualified opinion on our balance sheet, which is not normally earned
    on initial financial statement audits. We were one of the first
    agencies in the Executive Branch to ``early comply'' with the fiscal
    year 1998 accounting standards prescribed by the Office of Management
    and Budget in Bulletin No. 97-01, Form and Content of Agency Financial
    Statements. Our second audit also resulted in an unqualified opinion.
    We have recently completed the third audit and are awaiting the
    results.
        As I reported to you last year, we contracted with the Department
    of Treasury's Financial Management Services Center regarding the
    replacement of our accounting system. During fiscal year 1998, we
    selected a new system which we had planned to implement in March of
    1999. We proceeded with phased testing during the first two quarters of
    fiscal year 1999. Based on our experience, we discovered that the
    selected COTS system was in fact not capable of meeting the government
    approved Joint Financial Management Improvement Program (JFMIP)
    requirements. After numerous meetings with the contractor, Treasury
    Department, and the Commerce Department we terminated the delivery
    order. We are still intent on obtaining the efficiencies of a single,
    integrated accounting system for ABMC's worldwide operations. We are in
    the process of obtaining an independent assessment of our needs as
    compared to the COTS or other systems that may be available.
        With our initial success in auditing and the anticipated
    implementation of a new financial system, we expect ABMC to achieve an
    even higher level of management excellence in the next two to three
    years.
        In 1993, Congress directed the ABMC to establish a World War II
    Memorial in Washington, DC or its environs. It will be the first
    national memorial dedicated to the 16 million who served in uniform
    during World War II, the 406,000 who gave their lives, and the millions
    who supported the war effort from the home front. Congress provided
    legislative authority for siting the memorial in the prime area of the
    national capital, which includes the National Mall. The cost to design,
    build, and maintain the memorial is currently estimated to be
    approximately $100 million.
        The Commission of Fine Arts (CFA), the National Capital Planning
    Commission (NCPC) and the Department of Interior approved selection of
    the Rainbow Pool site, a 7.4-acre rectangular area at the east end of
    the Reflecting Pool between the Lincoln Memorial and the Washington
    Monument. This prominent location is commensurate with the historical
    importance and lasting significance of World War II to America and the
    world. The memorial site was dedicated by President Clinton on
    Veteran's Day, November 11, 1995.
        Friedrich St. Florian, an award winning architect based in
    Providence, RI, was selected to design the memorial through a two-
    stage, open competition through the General Services Administration's
    Design Excellence Program. President Clinton announced St. Florian's
    selection during a White House ceremony on January 17, 1997.
        On July 24, 1997, in a public hearing, the CFA approved many
    elements of the memorial design concept, but voiced concern over the
    mass and scale of the concept as presented. The CFA unanimously
    reaffirmed the Rainbow Pool site and requested that the design be given
    further study and resubmitted at a later date. On July 31, 1997, the
    NCPC reaffirmed its approval of the site and, like the CFA, requested
    design modifications and an analysis of various environmental
    considerations.
        On May 12, 1998, the National Park Service (NPS), on behalf of the
    ABMC, forwarded St. Florian's revised design concept to the CFA and the
    NCPC for their consideration and approval. On May 21, 1998, in a public
    hearing, the CFA ``unanimously and enthusiastically'' approved the
    location, site plan and revised design concept. On July 9, 1998, in a
    public hearing, the NCPC overwhelmingly approved the revised design
    concept. In May and June 1999, respectively, the CFA and the NCPC
    approved the memorial's preliminary design, successfully completing the
    second of a three phase design approval process.
        The public fund raising effectively began in March 1997, when the
    ABMC announced the selection of former Senator Bob Dole as the National
    Chairman of the World War II Memorial Campaign. Joining Senator Dole in
    this endeavor was National Co-Chairman Frederick W. Smith, founder of
    Federal Express and Chairman, President and CEO of FedEx Corporation.
    The Capital Campaign fund-raising efforts were extremely positive
    during the last months of fiscal year 1997 and all of fiscal year 1998
    and fiscal year 1999. As of January 31, 2000, $94.1 million had been
    raised from all sources, resulting in an account balance of $65.6
    million after costs. As national awareness of the effort grows, the
    response of the giving public has been more positive.
        In 1999 the World War II Memorial drive initiated a national public
    service ad campaign through the Ad Council that featured actor Tom
    Hanks. Cause-related marketing activities began with companies that
    expressed interest in bringing the Memorial to their consumer base.
    Films such as Saving Private Ryan substantially raised awareness of the
    sacrifices of the WWII generation and the planned recognition through
    the National World War II Memorial. Prominent corporate and public
    sector leaders have been enlisted to assist with the solicitation and
    advocacy process.
        The ABMC has established realistic and prudent estimates of the
    various giving constituencies. To date the campaign has been led by
    corporate and foundation giving, and we project continued positive
    response. Many corporations played an integral role in the World War II
    effort. Millions of interested and committed individuals are becoming
    involved in the respective campaigns of veterans groups. These groups
    are enthusiastically supporting the campaign.
        Civic organizations are beginning to step forward with fund-raising
    goals for their respective memberships. An initiative to have each
    state contribute $1 for every person from the state that served in
    uniform during the war has exceeded our expectations. To date, twenty-
    six states have either contributed or pledged their support. Twenty-
    three states have committed to introduce legislation in fiscal year
    2000. Individuals of affluence are being cultivated for major gifts and
    should accelerate the total level of support during calendar year 2000.
    Direct Mail has helped us educate the giving public and continues to
    provide a profitable return for each dollar invested. More than 355,000
    individuals have participated to date.
        During 1999, Congress approved several legislative items that
    support the World War II Memorial's fund-raising efforts. Public Law
    106-117, signed November 30, 1999, authorizes ABMC $65 million in
    borrowing authority to assure timely construction of the Memorial and
    to comply with the requirements of the Commemorative Works Act (CWA).
    This authority and World War II Memorial's cash holdings may be used as
    available funding for the construction costs plus the 10 percent
    maintenance factor as required by the CWA in obtaining the Secretary of
    Interior's approval for a construction permit. The legislation also:
    extended the authorization for initiation of Memorial construction to
    December 31, 2005; granted ABMC permanent authority to solicit and
    receive funds and preserves any such funds in ABMC controlled interest
    bearing Treasury Accounts, including any funds remaining after
    completion of the Memorial; and increased ABMC's authority to accept
    volunteer services and to use intellectual property interests. In
    addition, Public Law 106-58, signed September 29, 1999, makes the ABMC
    and the World War II Memorial Advisory Board (MAB) eligible to use
    nonprofit standard mail rates with respect to official mail sent in
    furtherance of soliciting funds and support for the creation of the
    National World War II Memorial.
        While our attention has been focused on management improvements and
    the design and construction of the World War II Memorial, we have not
    ignored our primary mission of operating and maintaining twenty-four
    memorial cemeteries and twenty-seven monuments, memorials, and markers.
        The Congress has been instrumental in our success in maintaining a
    high standard of excellence by providing the funds required to
    accomplish our objectives. The additional funding of $3 Million in
    fiscal year 1998 $2.5 Million in fiscal year 1999, and $2.0 Million in
    fiscal year 2000, for engineering and maintenance projects, allowed us
    to significantly reduce our backlog of essential projects. We are
    constantly reviewing our backlog list and have developed a revised list
    for fiscal year 2000 and beyond. We now have a total of 451 projects
    with a total estimated value of approximately $7.5 Million. We have
    grouped together certain types of projects, such as sprinkler systems,
    replacement of fuel tanks, and repair of roadways and walkways, in
    order to achieve economies of scale. Grouping these projects by region
    has and will allow contractors to consolidate bids and provides ABMC
    with the most cost-effective use of managing available resources.
        Our fiscal year 2001 request provides $2.2 Million for engineering
    and $1.0 Million for infrastructure modernization. During December 1999
    severe windstorms swept through Europe causing damage estimated at
    approximately $1.0 million. The cost of the cleanup will impact our
    planned engineering and maintenance projects.
        Our request also provides for cost of living increases for our U.S.
    and foreign national personnel, funding for the Infrastructure
    Modernization Program, Operational Efficiency Improvements and the
    Accounting System. We have focused our fiscal year 2001 program to
    ensure we accomplish these essential high priority projects.
        For the fourth year, in agreement with the Office of Management and
    Budget, we have repriced our budget to conform to the Fiscal year 2001
    foreign currency rates established by the Department of Defense.
        Since 1923, the American Battle Monuments Commission's memorials
    and cemeteries have been held to a high standard in order to reflect
    America's continuing commitment to its Honored War Dead, their
    families, and the U.S. national image. The Commission intends to
    continue to fulfill this sacred trust while ensuring the prudent
    expenditure of appropriated funds.
        The American Battle Monuments Commission appropriation request for
    fiscal year 2001 is $26,196,000.
        This concludes my prepared statement. I will be pleased to respond
    to your questions.
                                     ______

                           NONDEPARTMENTAL WITNESSES

        [Clerk's note.--The following testimonies were received by
    the Subcommittee on VA, HUD, and Independent Agencies for
    inclusion in the record. The submitted materials relate to the
    fiscal year 2001 budget request.
        The subcommittee requested that public witnesses provide
    written testimony because, given the Senate schedule and the
    number of subcommittee hearings with Department witnesses,
    there was not enough time to schedule hearings for
    nondepartmental witnesses.

                         DEPARTMENT OF VETERANS AFFAIRS

              Prepared Statement of the American Heart Association

                                STILL NUMBER ONE
        Heart attack, stroke and other cardiovascular diseases have been
    the leading cause of death since 1919. Nearly 60 million Americans--1
    in 5--suffer from one or more of these diseases. Hundreds of millions
    of Americans have major risk factors for cardiovascular diseases--about
    50 million have high blood pressure, 40 million have high blood
    cholesterol (240 mg/dL), 49 million smoke, 106 million adults are obese
    or overweight and 10 million have physician-diagnosed diabetes.
        Cardiovascular diseases cost Americans more than any other disease.
    This year, Americans will pay an estimated $327 billion for
    cardiovascular-related medical costs and lost productivity.
        Chances are heart attack or stroke will be the death or disabler of
    you or someone you love. Heart attack, stroke and other cardiovascular
    diseases are America's No. 1 killer and a main cause of disability.
    Cardiovascular diseases account for nearly 1 of every 2 American
    deaths.
        While heart disease and stroke occur at all ages, they are most
    common in Americans over age 65--an age group that is now about 13
    percent of the U.S. population and will be 16.5 percent by year 2020.
    By the year 2020, the percentage of veterans over 65 years of age will
    be about three times that of the general population. The VA's planning
    models recognize that its aging patient population demands more care.
    More than 4.49 million or 16.4 percent of the veteran population
    reported suffering from ``heart trouble'' in the 1993 National Survey
    of Veterans. More than 998,000 or 3.6 percent of the veteran population
    are stroke survivors. As the veteran population ages, the number of
    veterans afflicted by heart disease and stroke will increase
    substantially.

                         HOW YOU CAN MAKE A DIFFERENCE
        The American Heart Association, dedicated to reducing death and
    disability from heart attack, stroke and other cardiovascular diseases,
    commends this Committee's support of the Department of Veterans
    Affairs' Medical and Prosthetic Research program. But, we are alarmed
    that for the second year in a row the President's budget flat funds
    this vital program. Enactment of this budget would severely jeopardize
    ongoing studies and adversely impact planned innovative research. If a
    no-growth budget is enacted, VA would be negatively impacted by about
    $12 million in expected medical research inflation, which will erode
    out-year costs for previously approved research and new research
    opportunities.
        We recommend an fiscal year 2001 appropriation of at least $386
    million for the VA Medical and Prosthetic Research program. Our
    recommendation, consistent with that of the Friends of VA Medical Care
    and Health Research and the Independent Budget, will allow maintenance
    of fiscal year 2000 initiatives and implementation of new initiatives
    for fiscal year 2001. We challenge our government to significantly
    increase funds for heart and stroke research through the VA Medical and
    Prosthetic Research program. We strongly urge the VA to establish heart
    and stroke research centers to advance the battle against heart attack,
    stroke and other cardiovascular diseases--America's No. 1 killer and a
    leading cause of disability. Our government's response to this
    challenge will help define the health and well being of citizens in the
    next century.

         INSUFFICIENT VA RESOURCES DEVOTED TO HEART AND STROKE RESEARCH
        The VA Medical and Prosthetic Research program plays an important
    role in heart and stroke research and deserves the strong support of
    Congress. In fiscal year 1999, VA support for research on heart disease
    was $23.7 million (a 13 percent increase from fiscal year 1998),
    accounting for 7.4 percent of the fiscal year 1999 VA's Medical and
    Prosthetic Research budget. In fiscal year 1999, VA-supported stroke
    research represented $4.2 million or 1.3 percent of the VA's Medical
    and Prosthetic Research budget. We are concerned that insufficient
    money is being devoted to America's No. 1 killer--heart disease--and
    our No. 3 killer--stroke. Both are major causes of permanent
    disability. Besides its own program, VA investigators spent another
    $40.5 million on heart research and $7.8 million on stroke research
    from outside sources.

              VA HEART AND STROKE RESEARCH BENEFITS ALL AMERICIANS
        The mission of the VA Medical and Prosthetic Research program is to
    ``discover knowledge and create innovations to advance the health and
    care of veterans and the nation.'' While the primary purpose of the VA
    health care system is the provision of quality health care to eligible
    veterans, VA-supported research contributes to the quality of care by
    bringing talented and dedicated physicians into the VA system.
    Discoveries from VA-supported research benefit veterans, science and
    the world's health. VA cardiovascular research represents an integral
    part of the overall scientific effort in this field. VA researchers
    include many nationally recognized, distinguished scientists and
    several Nobel Laureates. The VA had supported Ferid Murad, M.D., 1998
    Nobel Prize winner for research demonstrating the role of nitric oxide
    in regulating blood pressure. Several VA investigators have been
    acknowledged for their work in cardiovascular research. For example,
    American Heart Association volunteer Gerald F. DiBona, M.D. was awarded
    the prestigious VA Middleton Award in 1995 for internationally
    recognized research on kidney and cardiovascular diseases.
        The Medical Research component of the VA Medical and Prosthetic
    Research program supports basic and clinical research, mainly
    investigator-initiated peer reviewed studies. It provides funds for
    support of VA-based faculty members (M.D.s or Ph.D.s) at various stages
    in their careers, multicenter cooperative studies--a large portion of
    which are cardiovascular studies--and research equipment. AIso, VA
    investigators provide core faculty support at major medical schools
    affiliated with VA institutions. The presence of a VA research program
    aids the VA. This small but internationally recognized, highly
    competitive research program in fiscal year 2000 supports 2,157
    investigators at 132 VA-supported facilities.
        VA cardiovascular research is largely clinical. The VA is a major
    contributor to clinical research, playing a unique role because of its
    ability to immediately translate research findings into practice.
        VA-supported research has produced landmark results and
    revolutionized treatment in the cardiovascular area. You and your
    family have benefited directly from VA heart and stroke research.
    Several cutting-edge examples follow.
      --Heart Attack Treatment.--VA's Quality Enhancement Initiative
            Ischemic Heart Disease Study found that VA medical facilities
            provide equivalent or superior treatment for heart attack
            patients when compared with the private sector. Quality
            measures for these veterans surpass those in the private sector
            in the use of aspirin, beta blockers, ACE inhibitors and in the
            evasion of calcium channel blockers. Similar findings were
            found for angioplasty patients.
      --Heart Bypass Surgery.--In 1997, an estimated 607,000 heart bypass
            surgery procedures were performed on 366,000 patients in this
            nation at an average cost of $44,820 per procedure in 1995.
            Generally, one year after surgery, 10 to 15 percent of the vein
            grafts used in these procedures become blocked. VA research has
            found that reducing the temperature of the solution used to
            harvest the vein grafts may stop heart arteries from becoming
            narrowed with atherosclerosis. The study also found that while
            a daily aspirin stops artery vein blockage for a year after
            surgery, long-term survival depends on the extent of underlying
            disease before the procedure and the length of time of the
            procedure. In a landmark study, VA researchers found that heart
            medication works just as effectively as heart artery bypass
            surgery for certain groups of patients with narrowed arteries.
      --Gene Therapy And Heart Failure.--About 4.6 million Americans suffer
            from congestive heart failure, a major cause of hospitalization
            for Americans age 65 and older. VA researchers have found in
            animal studies that inserting a gene in heart cells affected by
            heart failure started an active increase in the chemical that
            triggers the cells to beat more strongly. Additional research
            in this area could provide a new lease on life for millions of
            Americans. Also, VA scientists, using gene therapy in animals,
            increased the number of blood vessels that transport oxygen to
            the heart.
      --Stroke Risk Reduction.--About 9 percent of older Americans suffer
            from the most common type of an irregular heart beat, atrial
            fibrillation, a stroke risk factor. Research has shown that low
            doses of the blood thinner warfarin can lower stroke risk by
            about 80 percent in sufferers of atrial fibrillation.
      --Stroke Survivor Improvements.--Stroke is a leading cause of
            permanent disability in this country and the No. 3 killer. VA
            studies have produced therapies to enhance quality of life for
            survivors. VA researchers have created a software program to
            assess and treat the stroke-related speech disorder aphasia.
            Also, they have shown that strenuous exercise can benefit
            stroke survivors who are paralyzed on one side of their body,
            and have developed a rehabilitation procedure to restore arm
            movement. Researchers have identified seven pathways associated
            with motor recovery from stroke, allowing more precise
            predictions about functional recovery of stroke survivors.
      --Aspirin and Angina.--About 6.3 million Americans suffer from angina
            (chest pain) due to insufficient blood supply to the heart. In
            another landmark study, VA research found that aspirin cuts
            deaths and heart attacks by 50 percent in patients suffering
            from unstable angina.
      --Angioplasty Benefits.--In 1997, an estimated 447,000 angioplasty
            procedures were performed in this nation to restore blood flow
            to the heart by widening narrowed arteries. VA research was the
            first to evaluate angioplasty. Results showed that after
            undergoing angioplasty, patients suffered less pain and can
            exercise longer than those taking only medication. Another
            study found clot-busting drugs had similar results to
            angioplasty for heart attack survivors at savings of $3,000 per
            patient. Annually more than 150,000 people are candidates for
            clot-busting drugs, according to VA.
      --Heart Failure.--The growing number of sufferers from heart failure
            has earned this disease the title of ``the new epidemic.'' A
            major VA study, in conjunction with the National Heart, Lung,
            and Blood Institute and Intercardia Corporation, showed
            unexpectedly that the beta blocker bucindolol did not reduce
            death from heart failure. This finding will lead to further
            research to decide which patients are most likely to benefit
            from beta-blocker drugs and the need to examine gender, racial
            and ethnic differences in cardiovascular disease studies. This
            was the first study to include large numbers of African
            Americans and patients with advanced heart failure.
      --Heart Failure Drugs.--About 4.6 million Americans suffer from
            congestive heart failure, the often-disabling inability of the
            heart to pump sufficient blood throughout the body. A VA study
            showed that heart medications can enhance the heart's pumping
            ability and keep sufferers of congestive heart failure alive.
            These study results have revolutionized heart failure
            treatment.
      --High Blood Pressure.--An estimated 50 million Americans have high
            blood pressure, the leading stroke risk factor and a major
            cause of heart attack. VA research found that like private
            sector statistics, physicians increase anti-hypertensive
            medicine in only 25 percent of patients with higher blood
            pressure and that the patients who had their blood pressure
            monitored were poorly controlled. More aggressive management of
            these patients will reduce the number of heart attacks and
            strokes, America's No.1 and No. 3 killers, respectively. An
            inexpensive computerized reminder system helps doctors manage
            patients and cut costs by reducing use of calcium channel
            blockers.
      --Cholesterol.--About 40 million American adults have high blood
            cholesterol levels (240 mg/dL), a major heart attack and stroke
            risk factor. An estimated 11 million veterans are at increased
            risk of heart disease due to high cholesterol levels, according
            to the VA. A groundbreaking VA-supported clinical trial found
            that daily use of the drug gemfibrozil, raises HDL by 6
            percent, reduces coronary heart disease risk by 22 percent with
            reductions in heart attack, stroke, transient ischemic attack
            and carotid endarterectomy for heart disease sufferers with low
            levels of both ``good'' and ``bad'' cholesterol. Results could
            mean cost savings because gemfibrozil is cheaper than statin
            drugs. This is the first study to show significant reduction in
            risk of major cardiovascular diseases by raising HDL, the
            ``good'' cholesterol, lowering triglycerides and not changing
            LDL, the ``bad'' cholesterol. VA research showed the
            effectiveness of cholesterol screening, when broken down into
            HDL and LDL for adults-even those older than age 65. Another
            study found that the addition of soy protein to a low-fat diet
            substantially lowers cholesterol in those with moderately high
            cholesterol levels.
      --Irregular Heart Beat Treatment.--An estimated 1 million Americans
            suffer from atrial fibrillation, the most common irregular
            heartbeat, which causes more than 75,000 strokes a year. VA
            researchers found that the drug digoxin was not effective in
            controlling heart rate. But, they discovered when digoxin was
            combined with a beta-blocker, patients achieved almost perfect
            heart rate. These results will enhance treatment for atrial
            fibrillation and reduce stroke risk.
      --Wheelchair Aerobic Fitness Trainer.--This trainer is an alternative
            to drug-induced stress testing for cardiorespiratory fitness
            and coronary artery disease in people with lower limb
            disabilities.
      --Psychoeducational Program for Stroke Family Caregivers.--Most
            stroke survivors are helped in the recovery process by a family
            caregiver, usually the spouse. A pilot study testing a program
            to reduce physical and psychological demands on family
            caregivers found this intervention reduced depression and
            caregiver burden and better prepared them for their role.
            Preliminary results found that a telephone intervention may be
            as helpful as the in-home program. Execution of this program
            could have vital results for family caregivers of 4.4 million
            American stroke survivors.
      --Non-Q-Wave Heart Attack.--Of the estimated 1.1 million Americans
            who will suffer a heart attack this year, about 600,000 will
            experience non-Q-wave--EKG classification--version. VA research
            showed that noninvasive treatment of non-Q-wave heart attack
            patients saves money, an estimated $20 billion a year, and is
            just as effective or in some cases better than invasive
            procedures such as heart bypass surgery or angioplasty. Higher
            death rates were associated with invasive procedures. Results
            could change treatment for sufferers of this type of mild heart
            attack. An economic study is examining cost-effectiveness on
            initial stay and follow-up care and estimating impact of
            adoption of these recommendations on American health care costs
            and pioneer VA cost determination methods.
      --Heart Attack Treatment.--VA researchers found aspirin is as
            effective as aspirin and the blood thinner, Coumadin, for heart
            attack victims. Aspirin is cheaper and does not need dose
            regulation.

         HEART AND STROKE RESEARCH CHALLENGES AND OPPORUTNITIES FOR VA
        Research advances outlined above and other progress have been made
    possible by congressional support of the VA Medical and Prosthetic
    Research program. Thanks to research, heart attack or stroke no longer
    necessarily mean instant death. Now that more people are surviving,
    heart attack and stroke can mean permanent disability, costly medical
    care, and loss of productivity and quality of life. Challenges and
    research opportunities to advance the battle against heart disease and
    stroke abound. Examples of on going VA research are highlighted below.
      --Heart Failure Studies.--A VA study is comparing effects of three
            anti-clotting therapies (aspirin, warfarin or clopidogrel) in
            heart failure patients. Another study is creating a large DNA
            bank of sufferers to examine genetic basis of heart failure. A
            third study, the first large scale, international, randomized
            clinical trial, is evaluating effects of digitalis, a 200-year
            old treatment in preventing heart failure deaths, a major cause
            of hospitalization of Americans age 65 and older. Another study
            is determining if sleep apena oxygen treatment will improve
            survival and quality of life of veterans with heart failure and
            reduce hospitalizations. It will identify sleep apnea risk
            factors in those with stable heart failure. Heart failure
            represented more than 22,000 VA hospitalizations in 1990 at a
            cost of about $100 million. Results will improve treatment of
            heart failure that affects 4.6 million Americans.
      --Inflamed Arteries.--Many heart attacks and strokes are the end
            result of atherosclerosis, the disease process that causes
            obstructed blood vessels. VA-supported research has shown that
            inflammation may cause atherosclerosis or hardening of the
            arteries. Scientists have identified large numbers of a certain
            receptor on inflammatory cells in heart blood vessels. If
            researchers can create a way to block that receptor,
            progression of atherosclerosis might be prevented.
      --Heart Attack Research.--An estimated 1.1 million Americans suffer a
            heart attack each year. VA research is assessing cost-effective
            ways to diagnose and treat suspected heart attack without
            costly invasive procedures, including a computer analysis of
            the heart's electrical signals during exercise and a new
            scoring system in a treadmill test. Another study is examining
            long-term outcome and risk factors for heart attack sufferers,
            for those who have heart attack during surgery and for those
            who have heart bypass surgery. Findings could save money,
            improve health care and reduce surgical procedures.
      --Warfarin and Aspirin Study.--Heart attack is America's single
            largest killer. A VA-sponsored study is analyzing effects of
            the blood thinner warfarin plus aspirin versus aspirin alone in
            reducing deaths from heart attacks. If results confirm the
            hypothesis, VA estimates that 20,000 lives could be saved.
      --Angioplasty.--Heart disease affects about 20 million Americans.
            Heart disease is the No. 1 killer in the United States. In the
            first of its kind study, COURAGE, VA is comparing the
            effectiveness of angioplasty with medical therapy versus
            aggressive medical therapy alone in patients with heart
            disease. The results of this study could revolutionize
            treatment for heart disease. In 1997 an estimated 447,000
            angioplasty procedures were performed in the United States to
            restore blood flow to the heart by widening narrowed arteries.
            The average cost of angioplasty in 1995 was $20,370.
      --Atherosclerosis and Iron Research.--Atherosclerosis is a major
            heart attack and stroke risk factor. VA research is evaluating
            the concept that too much iron in the blood stream contributes
            to atherosclerosis. Research results could revolutionize the
            treatment of heart attack and stroke.
      --Stroke Research.--Stroke strikes about 600,000 Americans each year;
            many survivors are disabled. Researchers found restricting use
            of limbs unaffected by stroke can help patients recover use of
            limbs affected by stroke more quickly and fully. Progress in
            deciphering language of the brain's motor cortex, the section
            that helps control muscle movement, could lead to new
            technology that may reconnect damaged areas or communication
            pathways of the brain and may restore lost function after a
            stroke. Another study found the ``Western diet'' compared with
            the ``Asian diet'' may guard against dementia in Japanese-
            American stroke survivors. Now scientists are examining
            nutrients in the ``Western diet.'' Researchers are studying
            genetic susceptibility to carotid atherosclerosis, a major
            cause of stroke. Scientists are examining quality of care at VA
            hospitals, because of findings that blacks suffer more severe
            strokes than whites and that blacks are less likely to receive
            imaging tests or carotid endarterectomy, surgery to remove
            buildup of atherosclerotic plaque in the main artery to the
            brain, located in neck, to prevent stroke.
        The number of VA research applications has grown slightly over the
    last five years, but funding cuts and/or inflationary increases
    severely restrict support for approved applications. For the programs,
    which were reviewed for fiscal year 1999 funding, more than 30 percent
    of approved applications were funded. Ten years ago, 40 to 50 percent
    of the approved applications were funded.
        Through fiscal year 2000, total dollars appropriated for the
    Department of Veterans Affairs Medical and Prosthetic Research program
    have increased $128 million since 1985 at an approximate annual rate of
    about 3 percent. But, there has been a decrease in terms of constant
    ``1985 dollars'' of $14.7 million. The Medical Research programs
    highlighted below are of interest to the American Heart Association.
      --Investigator-Initiated Studies.--During fiscal year 2000 this
            program will constitute 71 percent of the Medical and
            Prosthetic Research appropriated budget. Under the President's
            2001 budget, this program would be straight-lined from the
            fiscal year 2000 appropriated level. These investigators
            comprise the core of all VA research and provide the
            preceptorship for career development awardees.
      --Cooperative Studies.--In fiscal year 2000 this program supports 38
            clinical trials. The VA offers a unique opportunity for
            cooperative studies due to close linkage among hospitals. These
            studies provide a mechanism by which research on the
            effectiveness of diagnostic or therapeutic techniques can
            achieve statistically significant results by pooling data on
            patients from a number of VA hospitals. The Cooperative Studies
            Evaluation Committee evaluates proposals developed by teams of
            VA clinicians and biostatisticians. The VA under this mechanism
            has supported many landmark clinical trials in the
            cardiovascular field (e.g., studies in high blood pressure
            treatment and coronary artery bypass surgery). Under the
            President's fiscal year 2001 budget, this program would be
            level funded.
      --Career Development Awards.--Applications for these awards are
            reviewed both locally and by the VA Central Office. This
            program experienced a decrease in the number of awards by 58
            percent from a high in 1991 of 212 awards to a low of 88 awards
            in fiscal year 1997. In response to the Research Realignment
            Advisory Committee's suggestion to rejuvenate this program, a
            renewed emphasis began in fiscal year 1997 for the VA's Medical
            Research Service, Health Services Research and Development
            Service and, for the first time, Rehabilitation Research and
            Development Service. This will result in an anticipated 176
            Career Development Awards in fiscal year 2000.

                                 ACTION NEEDED
        Today's investment in medical research will lead to future returns.
    Returns include continued decreases in death rates from heart attack,
    stroke and other cardiovascular diseases, reduced federal outlays for
    hospital and long-term care, a well-trained cadre of medical
    researchers and a healthier society.
        Consistent with the Friends of VA Medical Care and Health Research
    and the Independent Budget, we recommend an fiscal year 2001
    appropriation of at least $386 million for the VA Medical and
    Prosthetic Research program. This appropriation will allow maintenance
    of fiscal year 2000 initiatives and implementation of new initiatives,
    including continuation of research momentum in heart disease and stroke
    and maintenance of VA's vital role in this field. We urge VA to
    establish heart and stroke centers to fight cardiovascular diseases-
    America's No. 1 killer and a major cause of disability.
                                     ______

    Prepared Statement of the American Federation of Government Employees,
                                    AFL-CIO

        Mr. Chairman and Ranking Member my name Bobby L. Harnage, Sr. I am
    the National President of the American Federation of Government
    Employees (AFGE), which represents 600,000 federal workers across the
    nation. First, I want to thank you and your colleagues for increasing
    the DVA budget for fiscal year 2000 by $1.7 billion. This increase in
    veterans medical care for fiscal year 2000 is key to ensuring that this
    unique health care system is prepared to meet veterans' needs after
    four years of downsizing staff, eliminating beds, dwindling supplies,
    cuts in medical services, and increasing costs. Without the increase,
    veterans' health care would have been at risk.
        Our comments on fiscal year 2001 funding are based on two
    principles. DVA's budget will not be sound until it is linked to
    medical inflation and full staffing levels to both address inpatient
    and outpatient needs of veterans. Second, the DVA must be accountable
    for using its funds to provide veterans with the highest quality of
    care and benefits.
        For fiscal year 2001 the Administration is seeking a $1.4 billion
    increase over last year's pre-recission level. AFGE remains concerned
    that Administration's request is still insufficient in light of the
    years of budget cuts, increasing health care costs, and the mounting
    demand to provide veterans with specialized treatment and long-term
    care.
        The fiscal year 2001 Independent Budget, co-authored by four
    leading veterans service organizations (AMVETS, Disabled American
    Veterans, Paralyzed Veterans of America, and Veterans of Foreign Wars)
    and endorsed by AFGE's National Veterans Affairs Council, calls for a
    DVA medical care budget of $21.2 billion and additional staff. AFGE
    supports this request, which is a $1.9 million increase over the fiscal
    year 2000 funding level.
        But even this higher request does not allow the DVA to ensure that
    expenditures for veterans' health care keep pace medical inflation. For
    the general population age 65 and older health care expenditures are
    projected to increase by 4.4 percent each year from 1996 through 2005,
    according to HHS's Agency for Healthcare Research and Quality. The
    veteran population the DVA serves is sicker and more likely to suffer
    from mental illness and substance abuse than the general older
    population. Yet, from fiscal year 1995 to fiscal year 1996 DVA's budget
    increased by 2.49 percent, from fiscal year 1996 to fiscal year 1997
    the increase was 2.7 percent, from fiscal year 1997 to fiscal year 1998
    the increase was 4.7 percent but then dropped to a 0.53 percent
    increase for fiscal year 1999. Overall, the DVA budget has averaged 4.2
    percent increases since fiscal year 1996.
        We urge this subcommittee to recognize that it is unrealistic and
    unacceptable to expect the DVA to extract ``management efficiencies''
    to pay for an expected 20-22 percent increase over 1998 prescription
    drugs costs. How will the DVA ever be able to fill staffing holes that
    have been created through years of attrition and to ensure adequate
    prescriptions, medical supplies and equipment if the DVA budget is not
    linked to medical inflation?
        The Administration has proposed in its budget to send veterans to
    non-DVA health care providers who will not be held accountable for the
    same standards of care as the DVA. Currently, neither DVA's Medical
    Inspector nor DVA's Inspector General, Office of Healthcare
    Inspections, studies the medical errors that may be occurring at
    facilities in which DVA contracts for veterans medical care.
        Unlike the DVA's in-house operations, DVA's contractors are not
    required to inform veterans or their families of medical errors or
    adverse events that occur in a contractor facility. Nor are veterans
    entitled to additional compensation or disability benefits when they
    suffer medical malpractice or negligence at the hands of contractors
    with the DVA. Thus, when the DVA sends veteran to a non-DVA facility,
    that health care provider is held less accountable.
        Contractors are frequently paid on a per-patient basis, regardless
    of the costs for that patient. Under such arrangements, using fewer
    diagnostic tests, and providing less costly research-based treatments
    maximizes profits. DVA is accountable to Congress for providing
    veterans with care based upon their individual needs and the
    professional, independent assessment of DVA employees. Most contractors
    for DVA are accountable to their stockholders.
        In addition to the quality of care concerns raised by the use of
    contractors to provide veterans with care, there is also the issue of
    cost to the taxpayer. DVA rarely, if ever, performs an adequate cost
    comparison of whether it is more efficient to use contractors or DVA
    employees. Shouldn't Congress know the real cost of contract care for
    veterans?
        AFGE urges the Subcommittee to require DVA to conduct cost
    comparisons before contracting out current or new services as well as
    regular audits of the quality of care provided by contractors.
        AFGE supports DVA's budget proposal to increase patient safety
    initiatives. By rigorously identifying, analyzing and correcting
    systemic patient safety problems, DVA is more accountable to veterans
    and Congress.
        We believe it is unwise that DVA's budget proposal is silent on the
    most direct means of improving patient safety and health care
    outcomes--staff-to-patient ratios. Under DVA's proposed fiscal year
    2001 scenario, staff will be down by 29,652 from DVA's 1994 staffing
    levels, although DVA projects it will be treating more veterans and
    those veterans will be frailer and sicker.
        DVA needs to adopt regulations establishing minimum, specific, and
    numerical licensed nurse-to-patient ratios for all hospital units and
    Community Based Outpatient Clinics as presently exist for intensive
    care units and operating rooms. And then hold medical directors
    accountable for meeting these staffing levels. DVA also should prohibit
    DVA hospitals and contractors from requiring unlicensed, minimally
    trained personnel to perform nursing functions such as invasive
    procedures, patient assessment, patient education, or administration of
    medication.
        Adequate numbers of well-trained staff are essential to manage
    workloads, prevent potentially harmful delays in care, avert medical
    errors, and improve services. Inadequate staff-to-patient ratios can
    have serious consequences for patients. For example, research shows
    patients at hospitals with fewer nurses per patient have a greater
    incidence of urinary tract infections, pneumonia, blood clots,
    pulmonary congestion and other lung-related problems following major
    surgery.
        DVA's current analysis of reported medical errors does not call for
    an analysis of whether the staff-to-patient ratio was adequate, whether
    staff involved were on overtime, or whether staff involved were
    performing additional duties beyond their regular duties because of
    staffing shortages.
        Nearly 20 percent of the reported medical errors at DVA facilities
    involved a patient falling. AFGE believes that nursing staff-to-patient
    ratios may be a factor in these falls. One-third of the reported
    medical errors were a suicide or attempted suicide, yet DVA's protocols
    on investigating these events do not require an examination of how the
    extensive elimination of inpatient psychiatric beds and the concurrent
    reduction in staff affected those veterans in need of mental health
    services.
        AFGE urges this Subcommittee to hold DVA accountable for
    maintaining adequate staffing levels. We urge report language to direct
    DVA to study the relationships between adverse incidents (including
    ``close call'' medical errors) and the reductions in clinical and
    supporting staff levels, as well as elimination of inpatient beds for
    mental health services.
        The DVA requests $63.5 million to support pay raises for nurses
    under an alternative pay system for these federal employees. This
    request assumes that the nurses' pay increase in fiscal year 2001 will
    correspond to the same percentage increase for General Schedule (GS)
    employees. In the past, however, the DVA has denied nurses the full
    percentage pay increase provided to GS employees, despite the DVA's
    budgetary intentions. We urge this Subcommittee to hold the DVA
    accountable, and require that nurses receive--at minimum--the same
    percentage GS increase paid to other DVA employees.
        AFGE urges this Subcommittee to correct the deficiencies in the
    DVA's proposed fiscal year 2001 budget. The budget for veterans' health
    care must--at a minimum--support the existing staff levels, maintain
    appropriate patient-to-staff ratios by back-filling positions that have
    been lost by six years of staffing reductions. The DVA must be
    accountable for using its funds to provide veterans with the highest
    quality of care and benefits, and to fairly compensate its health care
    workers. When contractors provide veterans' health care they should not
    be held to lower standards or be monitored less rigorously than DVA.

                 DEPARTMENT OF HOUSING AND URBAN AFFAIRS (HUD)
        The proposed fiscal year 2001 budget for the Department of Housing
    and Urban Development is very ambitious. It seeks to increase funding
    over fiscal year 2000 by more than $6 billion dollars.
        AFGE believes that HUD must be held accountable for using its funds
    efficiently and effectively. We are troubled that HUD's budget request
    is inflated by its reliance on outside contractors to do core mission-
    related work. HUD cannot demonstrate that its proposed use of
    contractors instead of federal employees saves money.
        In its September 30, 1999, audit (99-PH-163-0002), the HUD
    Inspector General provided a follow-up review of HUD contracting.
    During the 20-month period reviewed, HUD obligated $1.3 billion. The IG
    found that: ``[e]ven though the reinvented HUD has placed greater
    reliance on outside contractors to conduct its business, it has not
    conducted an OMB Circular A-76 cost comparison in the past 11 years . .
    . to determine whether procurement decisions were cost-effective. In
    our opinion these multi-billion dollar spending decisions are exactly
    the type of decisions that were envisioned in OMB Circular A-76 and
    prudent management would encourage careful analysis of such matters.''
        Similar concerns about whether HUD appropriately considered the
    costs of contracting can be found in HUD IG Audit Report #97-PH-163-
    0001, and the National Academy of Public Administration report
    ``Renewing HUD, A Long-Term Agenda for Effective Performance.''
        In fiscal year 1999 this Subcommittee required HUD to explain its
    failure to conduct public-private competitions, as required under OMB
    Circular A-76. The Subcommittee found HUD's response troubling because
    HUD relied on form over substance to claim that it was following the
    guidance of OMB Circular A-76 even as it avoided conducting a single
    public-private cost study prior to contracting out.
        HUD cannot demonstrate that its proposed use of contractors instead
    of federal employees delivers better service.
        HUD procured management and marketing services for HUD owned single
    family properties (commonly referred to as the M&M Contracts). Federal
    employees had previously performed this work. This work involves the
    oversight of a significant a widely dispersed portfolio of HUD owned
    properties that must be sold. HUD was forced to terminate seven of the
    sixteen M&M Contracts awarded during the first year of the program. One
    contractor, Intown, held these seven contracts. Despite unprecedented
    support from HUD staff during the start-up period, Intown failed
    miserably and went into bankruptcy leaving subcontractors and HUD in
    the lurch. The contract failure also hurt the communities in which
    these HUD homes are located.
        The Intown debacle stemmed from HUD's push to contract out M&M
    without every conducting a public-private competition and without
    considering developing the internal capacity to bring the work back in-
    house work should the contractor fail to perform.
        In fiscal year 1999 this Subcommittee required HUD to explain its
    failure to conduct public-private competitions, as required under OMB
    Circular A-76. The Subcommittee found HUD's response troubling because
    HUD relied on form over substance to claim that it was following the
    guidance of OMB Circular A-76 even as it avoided conducting a single
    public-private cost study prior to contracting out.
        Because HUD cannot demonstrate that its current use of contractors
    instead of federal employees saves money and delivers better service we
    urge the Subcommittee to require that HUD demonstrate cost savings on
    current contracts before being allowed to expending millions more on
    additional contractor services. We urge the Subcommittee to require HUD
    to conduct a study to consider bring work back in-house where
    contractors fail to perform or have been implicated in waste, abuse or
    fraudulent contract charges or overcharges.
        Thank you for considering our views. This concludes my statement.
                                     ______

           Prepared Statement of the Air Force Sergeants Association

        Mr. Chairman and distinguished committee members, thank you for
    this opportunity to present what the Air Force Sergeants Association
    (AFSA) and those it represents believe should be among your fiscal year
    2001 budget priorities for the Department of Veterans Affairs (VA).
    This committee has always served in a singularly nonpartisan way to act
    as the conscience of this nation in ensuring that our veterans are
    viewed as a vital national resource rather than a financial burden. Our
    decisions in this regard as a nation should not be based on the bottom
    line, but on what is right. Building on the great successes you
    achieved last year, we ask you to continue the momentum in addressing
    the needs of those who serve.
        As each of you have often indicated, we owe our servicemen and
    women an immeasurable debt of gratitude. In order to preserve the day-
    to-day peace and prosperity of the citizens of this nation, those who
    serve in the military turn their mortal beings over to the dictates of
    their country--prepared to die, if need be. Their terms of service are
    always arduous, and the job they do for all of us is fantastic. We owe
    them--perhaps more than any other segment of our society. This
    committee among all components of our national leadership holds the key
    to protecting and honoring these warriors who are driven by no more
    than selflessly contributing to the preservation of freedom and
    liberty.
        Today, I wish to comment on some of the concerns we receive from
    our members through phone calls and during field visits. AFSA and its
    150,000 members represent those who are currently serving, those
    veterans who have reached retirement, and those who have simply
    separated.
        AFSA maintains that if this nation is indeed grateful for having
    been protected, it owes those who have served to safeguard it. After
    all, these men and women faced unlimited liability, forming a covenant
    with the nation to sacrifice their lives, if necessary, to protect its
    interests. We owe them a solid educational program to return them to
    the status of a productive citizen, we owe them short- and long-term
    health care to deal with any physical condition that resulted from the
    period during which they served their nation, we owe them other
    programs such as home loans to enhance their lives. For those veterans
    who reached military retirement, we must ensure that they too have the
    full range of veterans benefits.
        We ask that this committee, at a minimum, meet the Administration's
    fiscal year 2001 Budget proposals which include increases in funding
    for the Veterans' Health, Benefits, and Cemetery Administrations, and
    identical baseline funding for medical research. The president's
    request is a good starting point for this committee. We must all
    remember that the attention we extend toward those who have served will
    have a significant impact on those who are considering military
    service. As such, funding in all of these programs should be a national
    priority.
        This nation's response for service should be based on certain
    principles that this association urges these committees to use as a
    guide during your deliberations. These imperatives provide foundation
    upon which we feel the decisions of these committees should be based.

                               GUIDING PRINCIPLES
        1. Provide a Solid Transition Back into Society.--Clearly, a debt
    is owed those who serve. The United States of America owes its veterans
    dignified, transitional, recovery assistance . . . not based on rank or
    status, but simply because they served in the most lethal of
    professions. In effect, they signed their physical and spiritual beings
    over to this nation.
        2. Always Remember that Most Veterans are Enlisted.--Any decisions
    on veterans' benefits must factor in a realization that most veterans
    are enlisted veterans. These veterans served with lower pay, generally
    reentered the civilian populace with non-transferrable military skills,
    probably had relatively little civilian education, and served in skills
    that are less marketable. Certainly, ``a vet is a vet,'' but enlisted
    veterans bring a different economic equation to the table; we must
    factor in that situation as we make important decisions about veterans'
    futures.
        3. Decide Based on Right--Not Cost.--This nation's commitment
    cannot waver simply because of the large number of veterans. Congress
    and (in turn) the VA must never make determinations simply because
    ``the money is just not there'' or because there are now ``to many''
    veterans. Our national will and the correlative response should be
    based on doing what is right.
        4. Remember Reservists.--Our enlisted guardsmen and reservists are
    full-time players. They are part of the total force. Any differences
    between reserve component members and the full-time force, in terms of
    VA programs or availability of services, need to be systematically
    erased. Their commitment is no less real. Their subjection to unlimited
    liability is just as absolute. Their love of country is just as
    intense. We urge you to act to bring our guardsmen and reservists in as
    full beneficiaries.
        5. Honestly Commit to Treat the Maladies of War.--It is important
    that the commitment of our troops to combat or high-risk situations
    also involves an absolute commitment to care for any malady that may
    have resulted from that service. Many veterans call and write to this
    association about our government's denial, waffling, then reluctant
    recognition of illnesses caused by conditions during the Persian Gulf
    conflict. Many point out that our government agencies responsible to
    our veterans acted in the same manner following the Vietnam Conflict in
    reference to Agent Orange. We ask you to reinforce a commitment to
    unconditional care after service.
        This statement will focus on three general areas: education, health
    care, and general issues that we hope you will consider as you
    deliberate the budget and policies that should be a part of the program
    offered to our veterans for the upcoming fiscal year.

                                   EDUCATION
        As the Congressional Commission on Servicemembers and Veterans
    Transition Assistance (established by Public Law 104-275), also known
    as the ``Principi Commission,'' concluded in December 1998, education
    is the key to successful transition. While this incredibly
    comprehensive report summarized the changes needed to make the
    Montgomery G.I. Bill a viable tool for readjustment by providing a
    benefit that will pay for the cost of education, Congress and the
    Administration had done little to implement the historic findings of
    the commission. As such, action is overdue to show the members serving
    this nation that it cares for the incredible sacrifices they make.
        Make the Benefit a Legitimate, Valuable One.--If this nation is
    going to have a program that sincerely intends to satisfy the purpose
    of the program, it certainly should mirror civilian industry by
    providing a real educational program and not a token, non-sufficient
    one. At a minimum, the value of the Montgomery G.I. Bill must be
    increased to reflect the costs of education.
        Over the years, this fine program has lessened in value due to
    inflation. This benefit requires a member to pay $1,200 to buy into the
    program. In return, by current rates, the member receives 36 months of
    education at $536 per month. That comes to a total value of a little
    over $19,000 for the initial buy in cost. However, the national average
    for 36 months at an average four-year public college for a non-resident
    student for tuition, books, and fees is very close to $36,000. This
    average annual cost figure is derived from a non-partisan annual index
    reported by ``The College Board.'' This benchmark, updated annually, is
    $8774 for academic year 1999-2000. Stipends based on the proposed
    benchmark would have been $945 per month in 1998-1999, $975 for
    academic year 1999-00, and project to be about $1000 per month in 2000-
    2001. It is time that we realize that the educational benefit is an
    important transitional tool that should be tied to actual educational
    costs. It does have an impact on recruiting, retention and
    readjustment. It is time for the military institutions of this nation
    provide a fair, useful educational benefit for those who serve. As
    such, we strongly urge you to pass legislation to benchmark the value
    of the Montgomery G.I. Bill to the annual College Board report so that
    it will be, from now on, tied to a visible, legitimate cost of 36
    months of education. This would be fair to those who serve and, as a
    side note, make our annual efforts quite a bit easier.
        Provide an Open Window For All Into the Montgomery G.I. Bill.--
    Those who entered the service after December 31, 1976, and before July
    1, 1985, were offered the Veterans Educational Assistance Program
    (VEAP). Within that program, the military member contributes up to
    $2,700 which the government matches with up to $5,400. However, there
    are approximately 55,000 members who came into the service between 1977
    and 1985 who chose not to participate in VEAP because it was considered
    a relatively poor benefit in relation to the actual cost of classes.
    These G.I.s are now retiring (20-plus years of service) without any
    educational benefit.
        So too, since 1985, the Montgomery G.I. Bill has been offered to
    new airmen entering the Air Force. If an airman chooses to participate,
    this program requires a $1,200 payroll deduction, $100 during each of
    the member's first 12 months of service. For that $1,200, the member
    receives an educational benefit of $536 per month for 36 months--
    clearly a much more valuable benefit than VEAP. However, the airman's
    enrollment decision must be made at basic military training; it is a
    one-time, irrevocable decision. At that critical juncture, many choose
    not to participate because they can't afford to do so due to their
    already-relatively low pay. During the pressure of basic training (and
    at a time of lowest pay) is not the appropriate time that airmen, many
    of whom have families to support, should have to make such an important
    decision. We should let them elect to participate at any time during
    their careers.
        An open window to enroll in the MGIB at this time would correct a
    clear injustice that many of this nation's veterans continue to suffer.
    The 1997 VA Authorization Act created an open window for some VEAP
    participants to convert to the MGIB. However, 110,000 (DOD-wide) VEAP
    participants were excluded from converting to the MGIB because
    government counselors gave them faulty information. We have received
    dozens of phone calls and letters decrying the fact that these military
    members followed the rules; but were excluded because the government
    decided to change the rules at the last minute. Under VEAP, there is a
    2-for-1 matching. If you have money in your VEAP account, it is non-
    interest bearing. Accordingly, education counselors in all services
    advised VEAP participants not to put money into their VEAP accounts
    until they were ready to use the benefit. Unfortunately, when the 1997
    VEAP-MGIB window opened, the law allowed only those with money
    currently in their accounts to convert to MGIB. Tens of thousands of
    VEAP participants were excluded from the conversion because they
    followed the guidance of government counselors. In basic fairness,
    short of a universal open window, we need to reopen the opportunity for
    those who were illegitimately excluded from the earlier opportunity to
    convert to the MGIB.
        The veterans' educational benefit can be an excellent recruiting
    tool and a valuable transitional device. The Montgomery G.I. Bill has
    succumbed to educational inflation--it is simply no longer a strong
    educational incentive. It has been reported that this lack of value has
    led to where less than 50 percent of veterans enrolled in the MGIB even
    bother to use it. As such, we urge these committees to re-establish the
    educational benefit a legitimate, valuable program. Take the
    recommendations of the Principi Commission to heart to guide your
    decisions. Finally, we strongly urge an open window for all current
    non-MGIB enrolles an opportunity to get into the program.

                                  MEDICAL CARE
        Without question, the health care system administered by the
    veterans administration impacts, in one way or another, those who
    served. As we look at the VA medical system as it applies to our
    members, I wish to briefly touch on some issues that have been
    reflected in the many phone calls we have received from the field. Of
    course, we tend to hear most loudly and frequently from those who are
    not happy with the adjudication of their claims or the treatment they
    have received. I am not going to go into isolated problems, because
    anecdotal information is just that. Rather, I want to briefly touch,
    instead, on some specific health-related situations that need to be
    addressed.
        Provide a Full Continuum of Care.--There must be mandated access to
    VA health care for all veterans. All honorably discharged veterans must
    have the full continuum of care mandated by law. In minds of many, the
    VA health care system is there to serve only paupers. This image and
    the underlying reality must be upgraded. The VA system must act as a
    health care system for all veterans. In this sense, AFSA believes there
    needs to be a full national commitment toward expanded health care
    opportunities for veterans. Funding must be identified to provide this
    range of care.
        Support VA Subvention.--VA-Medicare subvention is very promising,
    and we offer full support for this effort. The VA has an infra-
    structural network to handle this, so we anticipate the effort will be
    successful. Under this plan, Medicare would reimburse the VA for care
    it provides to non-disabled Medicare-eligible veterans at VA medical
    facilities. Just as in the case of DOD Medicare subvention, this is an
    opportunity to ensure that those who served are not lumped in with all
    those who never chose to do so. Because of the Medicare reimbursement,
    cost to the government should be minimal.
        Wisely Support VA-DOD Sharing Arrangements.--The enlisted force is
    pleased with the possibility of VA-DOD sharing arrangements involving
    network inclusion in the DOD health care program, and especially, the
    practice of consolidating physicals at the time of separation. This
    decision represents a good, common sense approach that should eliminate
    problems of inconsistency, save time, and take care of our veterans in
    a more timely manner. In that sense, these initiatives may actually
    save funding dollars. Our only caveat would be that DOD beneficiary
    participation in VA facilities must never endanger the scope or
    availability of care for our traditional VA patients, nor should any
    VA-DOD sharing arrangement jeopardize access and/or treatment of DOD
    health services beneficiaries.
        Focus on the Welfare of the Veteran.--While the VA's drive to save
    money by reducing its expenses is commendable, we caution the VA that
    these reductions must not be the overriding target. The end goal must
    be full care and treatment of veterans. Participation in other avenues
    of revenue generation tends to cause focus on a bottom line. The only
    bottom line in this system should be the welfare of the veteran.
        Provide Long-Term Care.--The VA must be fully funded to provide for
    long-term care including nursing home care; care for chronically
    mentally ill veterans; and home care aid, support and services. While
    landmark legislation passed last year took us a great deal closer to
    this end, it will only come about if adequate, earmarked, consistent
    funding is identified.
        Care for Women Veterans.--Another dimension of this nation's
    veterans' demographics that has significantly increased in recent years
    is the number of women who serve. The VA must be funded to provide the
    resources and legal authority to care for women to include obstetric
    services and after-birth care for the mother and child. Funding needs
    to be earmarked to make this important health care a reality.

                                 GENERAL ISSUES
        A Written Guarantee.--Many veterans are frustrated and disappointed
    because promises that were made during their careers are simply not
    being kept. They feel that the covenant between the nation and the
    veteran was one-sided, with honor on the side of the veteran. We urge
    this committee to support a guarantee in writing of benefits to which
    veterans are legally entitled by virtue of their service. To refuse to
    do so is to say that this nation is not prepared to be honest with its
    servicemembers.
        Speedier Processing.--We applaud the Veterans Administration for
    progress made toward the reduction in the time required to process
    claims and adjudicate appeals. We urge you to do all that you can to
    push the VA to continue this progress and to fund initiatives that will
    make the system more provide- and user-friendly.
        Homeless Vets.--Because of the ravages of war, the unique nature of
    military service, and numerous other reasons, many veterans are
    homeless. We ask these committees to remember that many of these people
    paid a tremendous price in serving their nation. It is important that
    we expend an extra effort to assist this group of citizens; we must be
    concerned with their welfare.
        Legitimate, Sincere Veterans Preference.--Over the last few years
    you have made great strides toward making ``Veterans' Preference'' a
    reality. We urge these committees to continue to support and fund any
    improvement that will put ``teeth'' into such programs so that those
    who have served have a leg up when transitioning back into the civilian
    workforce.
        Eliminate Home Loan Fees.--The best way to attract new veterans to
    use this valuable benefit is to eliminate fees and make the program as
    attractive a possible. However, if other home loan programs are made
    available, liberal qualification criteria and the ``no down payment''
    feature should be maintained for all sources.
        Make the Reserve Home Loan Permanent.--For our reserve component
    members, the Selected Reserve Home Loan Program was extended once again
    last year. Congress should permanently extend this program. Those
    members who serve in the guard and reserve deserve full, year-round
    benefits. The concept of ``weekend warriors'' is certainly an unfair,
    inaccurate misnomer. Our nation owes them a great deal, the least of
    which is provision of a full benefits package for their service.
    Continuing to revisit this issue and approve it for limited time
    periods sends a very poor signal to these patriots. We ask this
    committee to endorse making the program permanent.
        Mr. Chairman, in conclusion, I thank you for this opportunity to
    present the views of the Air Force enlisted community. AFSA believes
    that the work of this committee is among the most important done on the
    Hill. Your job is not only to protect and reward those who served; it
    is to demonstrate to those currently serving and who someday will serve
    that this nation is committed to honor those who give a portion of
    their lives to their nation. After all, the nation's peace and current
    prosperity is in no small measure due to their noble efforts. On behalf
    of all AFSA members, we appreciate your efforts and, as always, are
    ready to support you in matters of mutual concern.
                                     ______

              Prepared Statement of the Fleet Reserve Association

                                  INTRODUCTION
        Mr. Chairman. The membership is pleased the Fleet Reserve
    Association (FRA) has been invited by this distinguished Subcommittee
    to present its request for funding the Department of Veterans Affairs
    (DVA) for fiscal year 2001. On behalf of nearly 153,000 shipmates, I
    extend gratitude for the concern and active interest generated by you,
    Mr. Chairman, and the Members of the Subcommittee in providing funds
    for the protection, improvement, and enhancement of programs available
    to our Nation's veterans.
        FRA is the oldest and largest professional military enlisted
    association exclusively serving and representing men and women of the
    three Sea Services. It continues to seek protection and equity for
    those who serve in or have retired from the Navy, Marine Corps, and
    Coast Guard, plus those veterans requesting assistance from FRA. The
    Association has been active over the past 75 years in pursuing
    Congressional and the respective Administration's support for enlisted
    quality of life and veterans' programs for Sea Services' personnel.

             DEPARTMENT OF VETERANS AFFAIRS FISCAL YEAR 2001 BUDGET
        FRA seeks adequate funding for the DVA. The budget requests
    approximately $48 billion or an increase of $1.7 billion over last
    year's funding. The Association is pleased to see the Administration
    take a positive step toward funding the DVA, but we believe there are
    some areas that need more attention. For example, FRA is very
    disappointed to learn the budget mentions nothing about needed
    improvements in the GI Bill. In addition, the Medical Care portion of
    the budget appears not to be sufficient to provide care for the
    Nation's veterans as outlined in the Department's mission.
        FRA is most appreciative of the Subcommittee's oversight of the
    Department's budget and its efforts to ensure adequate appropriations
    for veterans programs. We ask that you continue those efforts as you
    hear the concerns addressed in this statement. The Association believes
    its concern with the VA Medical Care budget is well founded and offers
    a comparison, as it did last year. This year, the Association has
    selected several agencies whose programs may be compared to Medical
    Care provided to the Nation's veterans. It is noted that for
    comparability, VA Medical Care has not received its fair share of the
    Federal budget over the years.
        A comparison of funding for VA Medical Care appropriations
    indicates DVA comes up woefully short from fiscal year 1996 through
    fiscal year 1999 when compared to PHS and NIH appropriations. Using VA
    Medical Care figures through fiscal year 2000 ($19,247), there has been
    an increase of 14.4 percent since fiscal year 1996, still 5 percent
    less than the nearest Federal agency based on the previous fiscal year.
        In its belief that more needs to be done, FRA lists the following
    programs that should be properly funded or expanded in the DVA for
    fiscal year 2001. The Association urges the adoption of its
    recommendations and their eventual funding to assure America's veterans
    they will be fully recognized and, if applicable, compensated for the
    sacrifices made in service to the Nation and its citizens.

                          FRA RECOMMENDATIONS IN BRIEF
        FRA's membership has an average age of 68 years, all veterans of as
    many as three wars, mostly retired and from the Sea Services. On their
    behalf, the following recommendations are submitted for consideration:
      --Appropriate funds to expand health care for all veterans.
      --Provide funds for the construction and leasing of additional
            nursing and long-term care facilities.
      --Provide additional funding to improve educational programs and
            provide voluntary open enrollment in GI Bill for all current
            and past VEAP participants.
      --Support the repeal of the statute requiring the repayment of
            separation pay if the service member re-enlists in the Reserve
            component, subsequently is entitled to retired pay, or becomes
            entitled to VA compensation.
      --Provide support for the adoption of concurrent receipt of military
            retired pay and veterans' compensation without loss to either.
      --Deny funding to DVA for the enforcement of Civil Court orders
            directing the division of veterans' service-connected
            disability compensation and military retired pay. Also,
            encourage the adoption of laws that will repeal this practice.
      --Appropriate sufficient funds for the expansion of cemetery
            facilities (including Arlington National Cemetery) to provide
            adequate burial spaces.

                         VETERANS HEALTH ADMINISTRATION
    Expand access to veterans health care
        FRA seeks adequate funds for the Veterans Health Administration
    (VHA). Eligibility Reform and the Uniform Benefits Package are an
    appealing concept, offering our veterans a comprehensive health care
    plan that provides the care they need. What is bothersome, however, is
    the annual enrollment requirement and not knowing what priority levels
    will be enrolled each year. FRA believes that VHA medical treatment and
    care centers should be open to all veterans' regardless of their
    ability to pay. The Association agrees there must be a system granting
    priority access for certain veterans; i.e.--service-connected disabled
    at 30 percent or more; however, all veterans rated 20 percent or less,
    or non-rated, should be granted access on an equal basis--first come,
    first served. The latter group would include non-disabled military
    retired veterans who were promised free medical care for life and
    received that care previously, but do not now have access to military
    treatment facilities (MTFs). These military retirees are forced to seek
    treatment from other than MTF sources.
        Through the Base Closure and Realignment Acts (BRAC), Congress
    voted to close MTFs, many of which were located in areas where retirees
    resided for the purpose of obtaining the benefits promised to them and
    their families. It is only fair that Congress should now allow them
    higher priority access to VA health care and direct the Department of
    Defense to reimburse the VA for care tendered. Frankly, FRA further
    believes that extending equal access to veterans as suggested above
    will improve quality and the administration of care in veterans' health
    care programs. Lastly, until the military initiates or provides
    sufficient access to some type of health care program for ``displaced''
    (Base Closure) military retirees, VA treatment facilities should be
    open for their use at no cost to the retiree. Therefore, FRA does not
    advocate the adoption of TRICARE in VA medical facilities for military
    retirees.

                              MEDICARE SUBVENTION
        FRA recommends that a demonstration project be authorized with
    funds appropriated for the VA to test the feasibility of establishing
    Medicare Subvention programs within its health care facilities.
        FRA is concerned with dwindling access to health care. In its
    statement on the proposed VA Medicare Subvention Demonstration Program
    in July of last year, FRA stated this concern: ``its membership, with
    an average age of 68 years, will be compelled to seek health care in
    non-military treatment facilities, even though the vast majority are
    military retirees.'' When these retirees made their decision to retire
    in a certain area of our country, they did so with the thought of being
    close to a military installation or MTF. As stated earlier, many of
    those installations have closed and MTFs are no longer available.
        FRA believes it would be cost-effective for the VHA and the Health
    Care Financing Administration (HCFA) to allow Medicare-eligible
    veterans to voluntarily utilize VHA facilities for their health care.
    Medicare Subvention is integral to fulfilling the promise of caring for
    veterans who served the Nation in war and peace.
        HCFA would reimburse the VA for care provided Medicare-eligible
    veterans and at the same time collect from third party insurers
    providing veterans Medigap or other commercial healthcare policies.
    Instead of Medicare dollars going to a commercial entity, authorizing
    Medicare Subvention for the VA would then become one of the major
    building blocks to encourage DVA to continue and expand modernization
    of its health care program.
    Medical Care Collections Fund (MCCF)
        The MCCF program has achieved mixed results. Past performance
    suggests the program failed to reach its collection estimates while the
    costs to conduct the program continue to increase. Recent trends
    indicate that VA's collections have decreased over the past few years.
    VA collected $523 million in 1995, $495 million in 1996, $450 million
    in 1997, and $442 million in 1998. The MCCF balance as of September 30,
    1999 was approximately $396 million, sustaining this trend.
        FRA firmly believes the MCCF program was never intended as a
    substitute for adequate appropriations, but rather as a program to
    compliment or supplement appropriations. The Association recommends
    that to aid in providing additional funding for the VHA health care
    system, VA should continue to collect reimbursements through the MCCF
    program. However, VHA should be authorized to retain receipts from this
    program and these should not be included in the VA budget.

                           TOBACCO-RELATED ILLNESSES
        FRA recommends that DVA be authorized and funds appropriated for
    the pursuit of monetary reprisal from the tobacco industry for the
    purpose of establishing care and treatment for tobacco-related
    illnesses attributed to smoking while veterans were active members of
    the Nation's Uniformed Services.
        In 1998, Congress changed the law prohibiting service-connection
    for disabilities related to smoking. Arguments have been made that
    smoking is a matter of personal choice and veterans should not be
    compensated for an illness that resulted from their choice. Counter
    arguments have been made that military life created an environment and
    culture that encouraged smoking.
        Many veterans began using tobacco during their military service, it
    was a way of life. Information detailing the health risks associated
    with tobacco use and nicotine addiction was nonexistent. There are some
    who believe the Armed Services facilitated smoking by including
    cigarettes in meal rations and provided cigarettes at discounted prices
    in military exchanges. FRA recommends Congress revisit and repeal its
    1998 decision.

         NURSING HOMES, LONG TERM CARE, AND OTHER HEALTH CARE PROGRAMS
        World War II and Korean veterans are in their 60s and above, as are
    some Viet Nam veterans, and require a greater level of long-term care.
    This year, the number of veterans 65 or older will peak at 9.3 million,
    and by 2010 approximately 8.5 million veterans will be 65 or older--
    which equates to 42 percent of the entire veteran population. No one
    can argue against the fact that as our veterans are aging, more and
    more of them will become dependent upon the VA to provide the necessary
    care in nursing homes, domiciles, state home facilities, and its
    underused hospital beds. The Nation can ill afford to wait for out-year
    funds before it expands nursing or long-term care.
        FRA is grateful to Congress for the passing of Public Law 106-117,
    the Millennium Health Care Act. This statute makes great strides to
    achieve the long-term care our veterans deserve. One concern of the
    Association, however, is the proposed method by which VA plans to fully
    fund the Millennium Health Care Act.
        After reviewing the DVA budget request, FRA disagrees with the
    methodology used in collecting $350 million for the Millennium Act and
    then transferring that money over to the Treasury. VA's rationale for
    this is, in doing so, it will allow more room for discretionary VA
    spending under the current caps set in the Balanced Budget Law. The
    Association views this as a slight of hand rather than a business
    practice and firmly believes any money collected from veterans for
    veterans health care should stay with VHA.
        FRA is opposed to consolidating the newly created Health Services
    Improvement Fund and the Extended Care Revolving Fund with the Medical
    Care Collections Fund (MCCF). The new funds were created as part of the
    Millennium Health Care Act with the intent of improving various health
    services to veterans. The Association believes there was never any
    intent on the part of Congress to allow the commingling of these funds
    and asks that you keep them separate. This will allow for better
    tracking of collections, but more importantly, it will ensure money
    collected for veterans long-term care will be spent for future veteran
    long-term care--just what Congress intended.

                        MEDICAL AND PROSTHETIC RESEARCH
        Dollar for dollar, VA is widely recognized for its effective
    research program. FRA continues to support adequate funding for medical
    research and for the needs of the disabled veteran. The value of both
    programs within the veterans' community cannot be overstated. The need
    is there.

                        VETERANS BENEFITS ADMINISTRATION
    Education
                Montgomery GI Bill (GI Bill)
        As in the past, the GI Bill is one of the major enticements for
    enlisting in the United States Armed Forces. FRA believes that
    improvements to the GI Bill are necessary in order to continue to
    attract new recruits per congressionally mandated recruitment levels
    each year, and to retain those who are currently serving but not
    enrolled in the program
        The Association believes those veterans who participated in the
    Veterans Education Assistance Program (VEAP) and were not able to
    convert to the current GI Bill should be provided the opportunity to
    enroll. Whether they withdrew voluntarily because VEAP failed to offer
    satisfactory benefits, or as a result of misinformation from senior
    officials, now is the time to right this wrong.
        Presently, the GI Bill provides a monthly stipend of $536 for nine
    months out of the year or $19,296 over a four year period. According to
    VA calculations, the current average annual cost of college tuition,
    fees, and board is $981 monthly or $8,829 for the typical nine month
    academic year. Over a four year period the current allowance pays just
    over half the average cost for tuition, fees, and board. Estimates for
    the 2000-2001 academic year amount to $1000 a month or $36,000 over
    four years.
        FRA believes Congress should increase the GI Bill allowance to an
    amount at least equal to the average cost of pursuing a four year
    college education and open the enrollment door for those former VEAP
    participants. The Association continues to subscribe to the belief once
    offered by the Treasury Department that veterans who take advantage of
    their GI bill will eventually return more money to the U.S. Treasury
    for every dollar spent by the Federal government for their education.

             TERMINATION OF THE $1,200 CONTRIBUTION TO THE GI BILL
        FRA opposes the termination of the $1,200 contribution (payroll
    deduction) to the GI Bill. The Association believes the contribution
    adds an incentive for the service member to further his or her
    educational pursuits because of this investment. However, in lieu of
    $100 per month for 12 months, the Association recommends $50 monthly
    deductions over a 24 month period. At the end of the two year period,
    he or she would be eligible to begin receipt of GI Bill benefits. Also
    recommended is the reimbursement of contributions with interest if, at
    the end of the enlistment or period of honorable service, the member
    chooses not to participate in the GI Bill. Further, if the member fails
    to complete the term of enlistment or service, or is in receipt of less
    than an honorable separation, no refund of contributions would be
    authorized.

             TRANSFER OF EDUCATION BENEFITS TO SPOUSES AND CHILDREN
        FRA opposes the transfer of education benefits to spouses and
    children of those who have served less than a 20 year career in the
    Armed Forces. The Association believes if this were allowed, the cost
    of providing education benefits to veterans' family members will soar
    to new heights. It's difficult to forget the years 1975 and 1976 when
    the high cost of funding the Vietnam GI Bill caused the major veterans'
    organizations and the incumbent Administration to call for its demise.
    Many Vietnam veterans subsequently lost out on education benefits.

                  EDUCATION BENEFITS FOR ACTIVE DUTY PERSONNEL
        FRA again suggests an amendment to provide stipends to active duty
    personnel pursuing education under the GI Bill. If the service member
    has two or more years of honorable active service and the inclination
    to enroll in a course of education after regular duty hours, he or she
    should be authorized a partial stipend depending on the number of hours
    completed each month. Today, many service members must seek employment
    after hours in order to provide every-day comforts for the family. If
    the member receives a stipend for enhancing his or her level of
    education instead of ``moonlighting,'' then we create a win-win
    situation where veterans can obtain the best education for which they
    quality. FRA recommends appropriations to fund such a program.

                              PAY AND COMPENSATION
    Separation pays
        To ease service member's transition, Congress agreed to provide
    certain separation payments for those with six or more years of active
    service, but less than 20. On departure from their uniformed service,
    they were encouraged to join the Reserve or National Guard. However,
    few knew or were aware that if they eventually retired and received
    retirement pay, their separation pay, special separation benefit (SSB),
    or voluntary separation incentive (VSI) payment would have to be repaid
    to the Federal government. The same applies to those who are later
    awarded service-connected disability payments from the VA.
        FRA is totally opposed to the requirement of repayment. Under
    current law the service member who is released from active duty and
    does not qualify for veterans disability payments, or is not accepted
    by the National Guard or Reserve, never has to repay any portion of
    separation pay. If, however, qualified for either, it's time for pay-
    back. FRA has difficulty understanding why the individual willing to
    further serve the Nation in uniform or is awarded service-connected
    disability compensation should have to repay the Federal government for
    that privilege. The Association recommends the repeal or the necessary
    technical language to amend the applicable provisions in Chapters 51
    and 53, 38 USC, to terminate the requirement to repay the subject
    benefits. (Also requires an amendment to 1704(h)(2), 10 USC.)

                               CONCURRENT RECEIPT
        FRA continues its advocacy of concurrent receipt of military
    retired pay and veterans' service-connected disability payments without
    loss to either.
        Late in the nineteenth century, Congress was looking at military
    retired pay and disability pensions and found the administration of the
    programs in shambles. There were instances of persons receiving
    military disability pensions while still on active duty. In an effort
    to correct the problem, Congress inserted language in the fiscal year
    1892 appropriations legislation prohibiting an individual from
    receiving both military retired pay and a disability pension.
    Currently, the prohibition is described in 38 USC 5304(a)(1) and reads
    as follows:
      --Sec. 5304(a)(1) Except to the extent that retirement pay is waived
            under other provisions of law, not more than one award of
            pension, compensation, emergency officers', regular, or reserve
            retirement pay, or initial award of naval pension granted after
            July 13, 1943, shall be made concurrently to any person based
            on such person's own service or concurrently to any person
            based on the service of any other person.
        Most retired military veterans abhor the knowledge their Federal
    civilian counterparts can receive their government pension concurrently
    with veterans' compensation for service-connected disabilities. It is
    difficult to comprehend the fact that retired military personnel,
    unauthorized to draw military retired pay concurrently with veterans'
    compensation, may gain employment in the Federal establishment, switch
    his or her military retired pay to a Federal employee pension, and be
    eligible for concurrent receipt of both the Federal pension and
    veterans' compensation.
        The argument of ``same period of service to the Nation cannot be
    compensated twice'' follows. If this were true, why is a Federal
    employee, a member of the National Guard or Reserve, paid by the
    military for the annual 14 day training period and, at the same time,
    in receipt of payment for his or her Federal employment, plus a credit
    for both civilian and military retirement purposes? This is, without a
    doubt, dual payment for the same period of service. (Note: This is in
    no way to be construed as advocating a change to the procedure of
    rewarding Guard and Reserve personnel who also are Federal employees.)
    FRA has long believed the statutory dollar-for-dollar offset in
    military retired pay for any amount of VA disability compensation is an
    unfair penalty, particularly for severely disabled retirees whose
    disabilities have precluded any post-service working career. The
    Association is grateful for the passing of Special Compensation for
    Severely Disabled Retirees last October and views this as a good first
    step. We have recently learned there are many in Congress who believe
    that inclusion of section 658 of the National Defense Authorization Act
    for Fiscal year 2000, now Public Law 106-65, fixed the concurrent
    receipt issue. That is far from the truth--they are two separate issues
    and concurrent receipt remains high on the Association's agenda.
        FRA remains committed to enactment of full concurrent receipt for
    all disabled retirees. Retired and disability pays are totally
    different. Retired pay is a force management tool designed to attract
    and retain large numbers of high quality service members to pursue a
    military career. It is offered in recognition that members are forced
    to start a new civilian career in their forties and face a substantial
    income loss when leaving the military. Disability pay, on the other
    hand, helps to compensate members for injuries or disease incurred in
    the line of duty. The monetary benefits compensate for pain, suffering,
    or injury, plus the member's reduced earning potential.
        FRA recommends the distinguished members of this Subcommittee
    actively support and encourage the repeal of 38 USC 5304(a)(1).

         COURT-ORDERED DIVISION OF VETERANS COMPENSATION/RETIRED PAY
        The intent of service-connected disability payments is to
    financially assist a veteran whose disability may restrict his or her
    physical or mental capacity to earn a greater income from employment.
    FRA believes this payment is exclusively that of the veteran and should
    not be a concern in the States' Civil Courts. If a Civil Court finds
    the veteran must contribute financially to the support of his or her
    family, let the court set the amount allowing the veteran to choose the
    method of contribution. If the veteran chooses to make payments from
    the VA compensation award, then so be it. The Federal government should
    not play a collector's role.
        FRA urges this Subcommittee's support for considering the
    inequitable treatment in Federal law, not only of veterans described
    immediately above, but of veterans earning military retired pay for
    long and faithful service to the Nation in the uniformed services. The
    Association recommends the adoption of stronger language offsetting the
    provisions in 42 USC, now permitting Federal enforcement of State
    court-ordered divisions of veterans' compensation payments.

                        COMPENSATION AND PENSION PROGRAM
    Disability compensation claims processing
        FRA believes the processing time for a disability compensation
    claim continues to be excessive. Veterans Benefits Administration (VBA)
    reports the average processing time for initial claims is 160 days. If
    that claim is appealed to the Board of Veterans Appeals (BVA), as many
    are, the average time for a decision is 700 plus days. Speed is an
    issue. More important is accuracy, a component of processing ignored
    for years and the cause of many delays in finalizing a claim. The
    Association is grateful for recent budget and personnel increases,
    however, more employees and money are not the answer if they are not
    properly trained. VBA's own Statistical Accuracy Report program (STAR)
    shows an error rate of thirty to forty percent in their Regional
    Office's (RO's). Manager's of those RO's attribute inadequate staffing
    and lack of training as the primary reason for the high error rate.

                        NATIONAL CEMETERY ADMINISTRATION
    Cemetery systems
        In 1862, President Lincoln signed into law legislation authorizing
    establishment of national cemeteries ``--for the soldiers who shall die
    in the service of the country.'' Fourteen cemeteries were established
    in that year making the beginning of what has become the National
    Cemetery Administration (NCA). The NCA has undergone many changes since
    its inception. Currently, the administration maintains over 13,000
    acres of developed and undeveloped land containing over 2.2 million
    grave sites. That equates to 117 cemeteries throughout 41 states, the
    District of Columbia, and Puerto Rico. The NCA anticipates the opening
    of two new cemeteries in spring of 2000.
        One quarter of the nation's 26 million veterans alive today are
    over the age of 65. A rapidly aging veteran population coupled with the
    death rate of World War II veterans creates resource challenges within
    the NCA. Current estimates suggest about 572,000 veterans will die in
    2000 which is a rate of approximately 1,567 per day. Future estimates
    suggest that number will increase to 620,000 annually by 2008, or an
    average of 1,700 per day. The NCA estimates its annual interment rate
    for fiscal year 2000 is expected to reach over 80,000.
        The NCA has been doing much to meet resource challenges and the
    demand for burial spaces for aging veterans. It could do more, but
    without the necessary funds, the system will never meet the demand. FRA
    urges increased funding, fenced so the NCA has exclusive use for the
    purchase of land, preparation, construction and operation of new
    cemeteries, the maintenance of existing cemeteries, and the expansion
    of grants to States to construct and operate their own cemeteries. FRA
    strongly supports the NCA's appropriation request of $110 million and
    an increase of 47 FTE for fiscal year 2001.

                    OTHER RECOMMENDATIONS FOR CONSIDERATION
        FRA submits the following comments for the Subcommittee's
    consideration. They come from recommendations related to the goals of
    the Association as resolved by the FRA membership in convention in
    August 1999.

                                TRICARE AND DOD
        FRA does not support HMO-style health care for military personnel.
    The current dissatisfaction with DOD's TRICARE system is adequate
    reason to oppose any recommendation to expand the program within the VA
    Medical Services.

                          ARLINGTON NATIONAL CEMETERY
        FRA endorses the Bill, H.R. 70, that will establish new eligibility
    requirements for burial in the Arlington National Cemetery. The House
    passed this Bill on a 428-2 vote March 23, 1999 and it was placed on
    the Senate Calendar June 28, 1999. If this goes to conference, FRA
    recommends the Senate defer to the House proposal.
        Additionally, FRA supports the appropriation of funds for the
    expansion of the cemetery to include portions of the property now
    housing the Arlington Navy Annex and any available property adjacent to
    the cemetery grounds.

                         TRANSITION ASSISTANCE PROGRAM
        FRA welcomes any recommendation to improve and adequately fund the
    Military's Transition Assistance Program. The Association has in the
    past few years opposed the Department of Defense's attempts to reduce
    this critical program that assists service members in returning to
    civilian life when their periods of active service in the Armed Forces
    are concluding.

           UNIFORMED SERVICES FORMER SPOUSES PROTECTION ACT (USFSPA)
        In 1998, Chairman Stump held hearings on the USFSPA. It was clear
    the original law made its way through Congress under suspicious
    circumstances and has become a one-way weapon used by many former
    spouses, and their attorneys, to financially bleed their military
    spouses of outrageous sums.
        Late last year, FRA sponsored a voluntary survey and received 327
    responses from both male and female members of the Armed Forces, mostly
    active duty and retired enlisted personnel in pay grades E5 through E9.
    The Association sent a letter, along with a summary of survey
    responses, to most members of Congress requesting their support for
    having a bad law revisited. The current statute is offensive. It is not
    equitable to all it serves, and it is discriminating to many.
        FRA strongly endorses Messrs. Stump and Norwood's proposal, H.R.
    72, and urges all members of this Subcommittee to support its proposed
    amendments to the USFSPA. The Association believes USFSPA should be as
    fair to the military retiree veteran as it is for his or her spouse.

                                   CONCLUSION
        Mr. Chairman, allow me to again express the sincere appreciation of
    the Association's membership for all the Subcommittee has done for our
    Nation's veterans over these many years. FRA is grateful for the
    opportunity to address the distinguished members of this panel on the
    issues so important to its membership. Granted, not all veterans'
    issues are cited in this statement, however, the Subcommittee does have
    the Association's support for the improvement or enhancement of any
    veterans programs not addressed herein.
                                     ______

                   Prepared Statement of The American Legion

        Mr. Chairman and Members of the Subcommittee: The American Legion
    appreciates the opportunity to comment on the Administration's fiscal
    year 2001 budget proposal for the Department of Veterans Affairs (VA).
    The main challenge to veterans' advocates in this new century is to
    protect and improve the hard won and well deserved benefits that
    veterans and their survivors have and to continue to redress the
    problems that remain within all three VA administrations. To that end,
    the President's fiscal year 2001 budget for VA sets forth a good
    beginning.
        The President's fiscal year 2001 budget for VA programs and
    services includes a budget authority of $47.6 billion, an increase of
    $1.7 billion over the enacted fiscal year 2000 level. The medical care
    budget of $20.9 billion includes a $1.35 billion appropriations
    increase; entitlement spending of $24.6 billion reflects an overall
    $200 million increase; and other discretionary spending totaling $2.1
    billion increases by $100 million. VA is projecting Medical Care Cost
    Fund revenues of $600 million to achieve a total medical care budget of
    $20.9 billion.
        Last September, I appeared before a Joint Session of the
    Congressional Committees on Veterans' Affairs to present The American
    Legion's fiscal year 2001 budget recommendations for VA. My
    recommendations and the President's fiscal year 2001 budget compare as
    follows:

                           FISCAL YEAR 2001 VA BUDGET
                            [In thousands of dollars]
    ------------------------------------------------------------------------
                                           President's
                                         fiscal year 2001   American Legion
                                             request         recommendation
    ------------------------------------------------------------------------
    Medical Care (appropriations).....        $20,300,000        $20,500,000
    Medical and Prosthetics Research..            321,000            375,000
    Major Construction................             62,000            200,000
    Minor Construction................            162,000            200,000
    Grants for State Extended Care....             60,000        \1\ 110,000
    National Cemetery Administration..            110,000            110,000
    State Grants Cemetery Program.....             25,000             25,000
    Veterans Benefits Administration            1,000,000            960,000
     General Operating Expenses (GOE).
    ------------------------------------------------------------------------
    \1\ The American Legion recommendation for the Grants Program for State
      Extended Care Facilities has subsequently been revised to $150
      million.

                      VETERANS HEALTH ADMINISTRATION (VHA)
        The American Legion believes the President's fiscal year 2001
    medical care budget is a responsible budget, but still falls short of
    necessary funding support. The medical care budget proposes an increase
    of $1.355 billion, to be targeted as follows:
      --Expend $548 million to fully meet the costs of the Veterans
            Millennium Health Care and Benefits Act, Public Law 106-117,
            regarding emergency care, extended care services, and
            specialized mental health services,
      --Continue an aggressive response to Hepatitis C by increasing
            funding by $145 million over fiscal year 2000 projections,
      --Enhance Patient Safety Management and Training by adding 190 full-
            time employees (FTE) for oversight safety issues (to a level of
            $137 million for patient safety and 484 FTE system-wide),
      --Access and Service Improvements with $400 million and 2,200 FTE
            realigned to meet the goal of veterans receiving a primary care
            appointment within 30 days, obtaining a specialty clinic
            appointment within 30 days, and being seen within 20 minutes of
            scheduled appointments ($200 million expenditure over the
            fiscal year 2000 level), and
      --Open 63 new outpatient clinics and treat 100,000 more veterans than
            in fiscal year 2000.
        These necessary initiatives account for nearly $1 billion of the
    total projected fiscal year 2001 medical care funding increase. The
    additional $355 million increase has to absorb the projected cost for
    current service adjustments, pharmaceutical increases, prosthetics
    services, dental services, and all other programs. In all honesty, $355
    million is not sufficient to cover all other fixed expenses. VHA is
    projecting new management efficiencies of $360 million just to stay
    within the budget targets. This is the portion of the Administration's
    fiscal year 2001 VHA budget that is fraught with danger.
        Therefore, The American Legion recommends at a minimum, a fiscal
    year 2001 appropriations increase of $1.5 billion for VA health care.
    With a slight increase in MCCF revenues, above the current year level,
    and with realistic efficiency enhancements, VHA will be in a much
    better position to meet its fiscal year 2001 obligations.

                        MEDICAL AND PROSTHETIC RESEARCH
        The Administration is proposing a fiscal year 2001 straight-line
    budget for medical and prosthetics research. Dollar for dollar, VA is
    widely recognized for conducting a very effective research program. VA
    devotes 75 percent of its research funding to direct clinical
    investigations and 25 percent to bioscience. Patient-centered research
    comprises one of every two dollars spent on VA research. While more
    responsibility is delegated to VA research through its Rehabilitation
    Research Centers of Excellence, the Geriatric Research, Evaluation and
    Clinical Centers, and the recently established Mental Health Research
    Centers of Excellence, it is negligent to propose a flat line budget
    for fiscal year 2001.
        Two years ago, the Administration committed to a goal of doubling
    VA's medical and prosthetics research budget over a five-year period.
    The research budget was then $282 million. VA's research appropriation
    requires a significant funding increase over several years to
    accomplish its mission and goals. It is essential to know what research
    programs and initiatives the Administration would propose reducing, in
    light of its failure to acknowledge a necessary funding increase over
    the current services level. With a flat-line budget for fiscal year
    2001, VA will be seriously challenged in attracting and retaining
    competent research professionals.
        VA research cannot maintain its current efforts or plan its future
    activities when its budget is so uncertain from year to year. The
    American Legion previously recommended that VA research funding be set
    at three percent of the Department's medical care appropriation.
    Currently, the research budget represents 1.5 percent of health care
    funding. Most major corporations devote at least three percent of their
    budget to research and development and there is no reason why VA cannot
    do the same. It's a struggle convincing the Department to devote more
    of its funding to research and development, aside from seeking these
    resources from Congress.
        VA recently expanded its Rehabilitation Research Centers from three
    to nine. This program, including its efforts in spinal cord, stroke,
    rehabilitation, multiple sclerosis, and low vision research will be
    significantly derailed under the fiscal year 2001 budget. VA has not
    funded one cooperative research project this year due to its current
    inadequate research appropriation. Cooperative research programs
    affected include diabetes, heart disease and Parkinson's disease.
        The Quality Enhancement Research Initiative (QUERI) will be further
    reduced under the fiscal year 2001 budget. This program started with
    ten separate areas of research investigation and has already been
    reduced to eight topics due to a shortage of funding. It is projected
    that the program will be further reduced to five topic areas under the
    fiscal year 2001 budget. QUERI is an exciting program that not only
    accomplishes patient related research but also translates that research
    into direct patient care.
        Department facilities are also seriously short of research space.
    With over 3,000 underutilized buildings across the system, minor
    construction improvements are critically necessary. VA estimates that
    infrastructure improvements at the 25 neediest sites will cost
    approximately $25 million.
        Nearly 75 percent of VA's medical investigators are physicians.
    These doctors will not remain with VA as the research program continues
    to grow smaller. While VA's research appropriation represents about
    one-third of its overall research budget, it is an important one-third.
    It is up to Congress to correct this glaring funding deficiency in VA's
    fiscal year 2001 budget and for the future.

                MEDICAL CONSTRUCTION AND INFRASTRUCTURE SUPPORT
        The Administration proposes $62 million for major construction
    projects for fiscal year 2001 and $162 million for minor construction.
    The initial VA proposal to the Office of Management and Budget was $260
    million for major construction and $222 million for minor construction.
        The American Legion believes both major and minor construction
    proposals are impracticable to the prevailing needs. VHA would greatly
    benefit from developing a five-year strategic plan for priority
    construction requirements--and making this plan available to all
    interested parties to generate maximum support. There is no consistency
    to what construction project's OMB supports. The infrastructure needs
    of VHA that receive OMB approval are totally budget driven, rather than
    needs driven. The American Legion supports the seismic correction
    project for VAMC Palo Alto, CA. However, seismic projects are also
    necessary for VAMCs Long Beach and San Diego, CA. There is also a
    compelling need to renovate various buildings at the Brecksville
    Division of VAMC Cleveland, OH and to construct a new spinal cord
    injury unit at VAMC Augusta, GA.
        For minor construction, the proposed $162 million budget will not
    begin to address the system's many requirements. Various VA facilities
    require significant clinical and ambulatory care renovations to
    accommodate the recent increases in primary care.
        The longer VA has to defer receiving the necessary funds to
    maintain state-of-the-art medical care facilities and address critical
    patient safety issues, the harder it becomes to catch up. Once again,
    there is ample evidence of a penny-wise, pound-foolish construction
    philosophy.

           GRANTS FOR CONSTRUCTION OF STATE EXTENDED CARE FACILITIES
        The recently enacted Millennium Act requires VA to provide long-
    term nursing care to veterans rated 70 percent service-connected or
    greater. It also requires VA to provide long-term nursing care to all
    other veterans for service-related disabilities and to those willing to
    make a copayment to offset the cost of care. Further, the bill requires
    VA to provide veterans greater access to alternative community-based
    long-term care programs. These long-term care provisions will place
    greater demand on VA and on the State Home Program for many years to
    come.
        It makes economic sense that VA look to the state homes to help
    fully implement the provisions of the Millennium Act. VA spends an
    average $255 per day to care for each of their long-term nursing care
    residents and pays private-sector contract nursing homes an average per
    diem of $149 per contract veteran. The national average daily cost of
    caring for a State Veterans Home nursing care resident is approximately
    $140. VA reimburses State Veterans Homes a per diem of only $40 per
    nursing care resident.
        The $60 million proposed for fiscal year 2001 would not come close
    to meeting the program's full requirements. The State of Texas alone
    requires $58 million in matching VA grants to fully fund all seven
    newly approved state veterans' homes. Throughout the Nation, 2,500 new
    long-term care beds (including domiciliary beds) are waiting for
    matching VA grants. The bottomline is that the State Veterans' Home
    Grants Program needs $150 million in fiscal year 2001 to cover every
    single new state home that has applied for matching funds. Afterwards,
    the program's annual requirements will be based on new applications.

                     NATIONAL CEMETERY ADMINISTRATION (NCA)
        I requested a funding level of $110 million for the NCA in fiscal
    year 2001 during his September 1999 testimony. The American Legion is
    pleased that the Administration recognizes the budgetary needs of NCA
    with its request of $110 million for fiscal year 2001.
        The workload and budget requirements of NCA will continue to grow
    over the next 15-20 years. The death rate of World War II veterans will
    peak in 2008, but the annual death rate of veterans will not return to
    the 1995 level until 2020.
        I am pleased the construction of four new national cemeteries is
    included in the fiscal year 2001 for advanced planning of new national
    cemeteries in Miami, FL; Detroit, MI; Atlanta, GA; and Sacramento, CA.
    The American Legion believes a new national cemetery in the vicinity of
    Pittsburgh, Pennsylvania is also a high priority. Advanced planning
    funds should be included in the fiscal year 2001 budget for a new
    national cemetery in Pittsburgh, PA.

                         STATE CEMETERY GRANTS PROGRAM
        The American Legion supports the Administration's request of $25
    million for the State Cemetery Grants program in fiscal year 2001.

                     VETERANS BENEFITS ADMINISTRATION (VBA)
        The Administration's budget for the VBA for fiscal year 2001
    provides $24.6 billion for the payment of statutory benefits to
    eligible veterans, their dependents, and survivors. The budget reflects
    higher average benefit payments, certain legislative proposals, and a
    proposed 2.5 percent cost-of-living-adjustment for fiscal year 2001.
        Discretionary funding for VBA would be increased to $1 billion,
    which represents an increase of $139 million over the fiscal year 2000
    appropriation. This will provide for an increase in staffing of 287
    full time employees (FTE) over the current authorized staffing level
    and 577 FTE over the staffing level for fiscal year 1999. The
    additional personnel resources, in conjunction with VBA's ongoing
    efforts to reengineer their business processes and other initiatives,
    will improve the quality and timeliness of service provided to veterans
    and their families.
        The performance and service improvements set forth in the fiscal
    year 2001 budget reflects the broad goals of VBA's strategic management
    plan and the expected progress toward meeting the specific performance
    measures established for this budget cycle. The funding and staffing
    levels proposed for fiscal year 2001 will permit VBA to continue the
    implementation of its strategic plan initiatives and be proactive in
    preparing for the large scale retirement among experienced adjudicators
    and other personnel expected in the next several years.
        In response to considerable criticism from its veteran clientele,
    stakeholders, and Congress, VBA has, within the last several years,
    begun implementing an ambitious plan to improve its overall operations.
    This includes the development of a broad spectrum of administrative,
    programmatic, and technological changes, which over time, should result
    in dramatic improvements in both the level and quality of service
    provided by VBA offices. The American Legion is strongly supportive of
    VBA's efforts to address the core problems affecting the claims
    adjudication and appeals process. However, we recognize this is a long-
    term process and, as such, will require continued budgetary support in
    fiscal year 2001 and beyond in order to ensure success.

                        BOARD OF VETERANS APPEALS (BVA)
        The American Legion requests $45.9 million for fiscal year 2001 for
    the operations of BVA. Staffing at BVA is to increase by 24 FTE for a
    total of 500 FTE. The additional resources will enable the BVA to
    continue improving its productivity and further reduce its response
    time. This will also provide continued support to the joint BVA/VBA
    efforts to resolve as many appeals as possible before they come to the
    BVA and to reduce the overall appeal response time.

                                    SUMMARY
        The Administration's fiscal year 2001 budget for VA is a
    responsible request and provides room for further improvement. The
    proposal allows both VHA and VBA to continue building on their current
    reform efforts. It would be completely inconsistent for the
    Administration to support the recent Veterans' Millennium Health Care
    Act and not provide sufficient funding to support the bill's various
    mandates. The increase in VBA's General Operating Expense is greatly
    needed and represents an important step towards meeting its Business
    Reengineering Plan objectives.
        The VA health care system must continue its efforts to generate new
    non-appropriated funding sources. Each year, VHA's current services
    budget requires nearly a $1 billion increase just to maintain its
    programs and services. The American Legion believes its GI Bill of
    Health is a realistic proposal and would generate a substantial amount
    of new annual revenues for VHA. It is time to enact on an incremental
    basis the various provisions of the GI Bill of Health that would
    generate new revenues for VHA. This includes providing VA health care
    to certain veterans' dependents, to military retirees and their
    eligible dependents, and to active duty personnel and their dependents.
        The American Legion supports the Administration's fiscal year 2001
    budget for NCA and the State Cemetery Grants Program. Both of these
    programs are proposed to receive needed increases. These budgets
    reflect a growing national commitment to recognize the service and
    sacrifices of all veterans.
        The American Legion believes the Administration's fiscal year 2001
    budget seriously undermines VA's medical and prosthetics research
    programs, the major and minor construction programs, and the State
    Extended Care Grants Program. The American Legion respectfully requests
    this Subcommittee to thoroughly review the Administration's budget for
    these programs in light of their reasonable budget requirements and
    their overall contribution to supporting VA's mission.
        Mr. Chairman, that concludes this statement.
                                     ______

             Prepared Statement of the Santa Rosa Memorial Hospital

        Mr. Chairman, and Members of the Subcommittee, thank you for the
    opportunity to submit testimony to the hearing record regarding the
    proposed Northern California Telemedicine Network. This network will
    consist of a hub located at Santa Rosa Memorial Hospital in Santa Rosa,
    California and will serve over 11 hospitals, health centers and clinics
    in Sonoma, Napa, Mendocino, and Humbolt counties.
        Santa Rosa Memorial Hospital is moving aggressively to build a
    permanent telemedicine infrastructure to expand health care services,
    as well as education and prevention programs into these currently
    underserved areas. The core of this initiative will be located at the
    Santa Rosa Memorial Hospital Emergency Department that will serve as
    the ``hub,'' for this regional telemedicine network, providing access
    to primary, specialty and trauma care services.
        The Northern California Telemedicine Network will work with other
    institutions to develop twelve ``spoke'' sites throughout northern
    California during the initial years of the project including:
      --St. Joseph's Hospital, Eureka, California
      --Redwood Memorial Hospital, Fortuna, California
      --Mendocino Coast District Hospital
      --Petaluma Valley Hospital
      --Rohnert Park Healthcare Center
      --Redwood Coast Medical Services
      --Anderson Valley Health Clinic
      --Mendocino Coast Clinics
      --Potter valley Community Health Center
      --Long Valley Health and Dental Center
      --Mendocino Community Health Clinic
        The growth of this network will enable a telemedicine program to
    achieve maximum cost effectiveness by serving multiple spoke sites from
    a single hub. In addition, it is anticipated that the spoke sites will
    develop some synergies as a result of their telemedicine technology
    that will allow them to communicate more effectively with each other
    and, importantly, with the communities most urgently in need of those
    services through the use of telemedicine technologies.
        As I am sure that you are aware, rural America is experiencing a
    shortage of primary care physicians and specialist care providers.
    Primary care physicians are the keys to meeting the basic health care
    needs of patients in these areas because they are able to provide a
    wide variety of basic health services and identify medical problems
    needing further attention. Twenty-nine percent of rural residents live
    in Health Professional Shortage Areas (HPSA) compared to only nine
    percent of urban residents. Statistics from the Office of Statewide
    Health Planning and Development in California show that in northern
    California alone, all of Del Norte county and portions of Sonoma,
    Mendocino, Lake and Humboldt Counties are all experiencing Primary Care
    Health Professional Shortages.
        People living in remote areas struggle to access timely, quality
    medical care. Residents of these areas often have substandard access to
    specialty health care, primarily because specialist physicians are more
    likely to be located in areas of concentrated population. Because of
    innovations in computing and telecommunications technology, many
    elements of medical practice can be accomplished when the patient and
    health care provider are geographically separated. This separation
    could be as small as across town, across a state, or even across the
    world.
        Many areas in California, specifically Northern California are
    medically underserved areas. The United States Department of Health and
    Human Services has classified portions of Sonoma, Mendocino, Humboldt,
    Del Norte counties and all of Lake county as federally designated
    medically underserved areas. Access to medical care, especially
    specialty and trauma care is limited and episodic at best.
        Often, these communities have been medically underserved due to the
    concentration of specialty care and health education in urban and
    suburban neighborhoods. The use of Telemedicine serves to provide
    California's underserved patients with the medical services they need.
    Instead of the patient being forced to travel long distances to reach a
    specialized provider, the patient, instead, could see their local
    provider and receive specialized care via telemedicine saving time,
    improving safety and providing a much needed service for the patient.
    Additionally, the need for emergency transport of patients would be
    significantly decreased due to the ability of telemedicine to assist in
    the diagnosis of a trauma patient on site. California could
    significantly benefit from the development of telemedicine due to its
    large geographical area with a population located in big cities,
    smaller towns and isolated rural regions.
        Telemedicine has the potential to improve the delivery of health
    care in America by bringing a wider range of services to underserved
    communities and individuals in both urban and rural areas. In addition,
    telemedicine can help attract and retain health professionals in rural
    areas by providing ongoing training and collaboration with other health
    professionals.
        Santa Rosa Memorial Hospital is grateful for the initial funding
    that your subcommittee provided in fiscal year 2000. This funding will
    enable us to establish the first like. We look forward to working with
    you to secure additional funds which will enable us to link the
    remaining 10 sites throughout California's north coast.
        Mr. Chairman, we believe that Santa Rosa Memorial Hospital's
    Northern California Telemedicine Network creates a national model for
    providing access to primary, specialty and trauma care services for
    remote and at-risk populations. Our desire is to provide a much needed
    service--primary and specialty care--to these underserved communities.
    Therefore, Santa Rosa Memorial Hospital is seeking $2 million in
    continued federal support in fiscal year 2001 for the implementation of
    the final phases of its Northern California Telemedicine Network. The
    federal investment will enhance our nation's commitment to protecting
    the health of our citizens. Your support for this effort will improve
    the quality of health care and contribute to the saving of lives for
    thousands of individuals in Northern California.
        Thank you for your interest.
                                     ______

      Prepared Statement of the American Association of Nurse Anesthetists

        The American Association of Nurse Anesthetists (AANA) is the
    professional association that represents over 28,000 certified
    registered nurse anesthetists (CRNAs) across the United States. The
    Association of Veterans Affairs Nurse Anesthetists (AVANA) represents
    over 500 certified registered nurse anesthetists across the United
    States and Puerto Rico. We appreciate the opportunity to present our
    testimony to the subcommittee and to offer recommendations on ways to
    cut costs without sacrificing quality of care for our nation's
    veterans.

                       BACKGROUND INFORMATION ABOUT CRNAS
        In the administration of anesthesia, CRNAs perform virtually the
    same functions as physician anesthetists (anesthesiologists) and work
    in every setting in which anesthesia is delivered including hospital
    surgical suites and obstetrical delivery rooms, ambulatory surgical
    centers, health maintenance organizations, and the offices of dentists,
    podiatrists, ophthalmologists, and plastic surgeons. Today, CRNAs
    administer approximately 65 percent of the anesthetics given to
    patients each year in the United States. CRNAs are the sole anesthesia
    provider in at least 65 percent of rural hospitals which translates
    into anesthesia services for millions of rural Americans. CRNAs are
    also the sole anesthesia providers in numerous VA facilities.
        CRNAs have been a part of every type of surgical team since the
    advent of anesthesia in the 1800s. Until the 1920s, anesthesia was
    almost exclusively administered by nurses. In addition, nurse
    anesthetists have been the principal anesthesia provider in combat
    areas in every war the United States has been engaged in since World
    War I. CRNAs provide anesthesia services in the medical facilities of
    the Department of Defense, the Public Health Service, the Indian Health
    Service, the Department of Veterans Affairs, and countless other public
    and private entities.
        The most substantial difference between CRNAs and anesthesiologists
    is that prior to anesthesia education, anesthesiologists receive
    medical education while CRNAs receive a nursing education. However, the
    anesthesia part of the education is very similar for both providers,
    and both professionals are educated to perform the same clinical
    anesthesia services. CRNAs and anesthesiologists are both educated to
    use the same anesthesia processes and techniques in the provision of
    anesthesia and related services. The practice of anesthesia is a
    recognized specialty within both the nursing and medical professions.
    Both CRNAs and anesthesiologists administer anesthesia for all types of
    surgical procedures, from the simplest to the most complex, either as
    single providers or in a ``care team setting''.

            NURSING SHORTAGE PREDICTED: HOW THIS COMMITTEE CAN HELP
        While both types of health professionals can provide the same or
    similar services, it costs the Department of Veterans Affairs
    significantly less to retain CRNAs because they draw a significantly
    lower salary than their physician counterparts. Therefore, it is in the
    best interest of the DVA, and this Committee, to implement policies and
    to support initiatives that assist in the effort to maintain adequate
    numbers of CRNA employees in the DVA.
        The current employment scenario for CRNAs and the DVA is
    complicated by the predicted national nursing shortage that has been
    well publicized in the press and professional journals. Enrollments in
    nursing educational programs continue to decline and the nursing
    workforce continues to age and retire. Recruitment of nurse
    anesthetists for the DVA becomes increasingly difficult when the
    civilian sector faces such critical shortages. According to a recent
    survey by the AANA Administrative Management Committee survey, as many
    as 59 percent of civilian institutions in the country are also actively
    recruiting CRNAs.
        Data gathered by Loretta Wasse, Deputy Director, Anesthesia
    Headquarters, indicates that 10-12 percent of CRNAs in the DVA will be
    retiring in the year 2000 alone. In real numbers, this means that the
    DVA will be losing over 50 CRNAs. These retirement numbers, combined
    with a nursing shortage, means that the DVA must work even harder at
    recruiting and retaining nurse anesthetists. This Committee can greatly
    assist in the effort to attract and maintain essential numbers of nurse
    anesthetists in the DVA by their support of competitive salaries.
        One thing that consistently attracts and maintains good employees
    is an attractive salary. Competitive salaries could assist the DVA with
    retention of cost-effective CRNAs to provide anesthesia services for
    our nation's veterans. But providing competitive salaries for employees
    can be an ongoing battle, especially in the face of restricted budgets.
    This is where this Committee can help, by providing adequate funding
    for personnel.
        If salaries cannot stay competitive in the face of a national
    nursing shortage, then the DVA will surely face a shortage of CRNAs.
    Historically, the cost to correct such a problem has been steep. The
    Department of Veterans Affairs faced a severe shortage of CRNAs once
    before in the early 1990s which was moderately corrected with the
    implementation of a locality pay system in 1991. In 1992, Congress
    expanded the authority of the local medical directors and allowed them
    to survey an expanded area to determine more competitive average
    salaries for CRNAs, which boosted pay and morale. Implementation of
    this expanded authority assisted the Department of Veterans Affairs in
    making great leaps in retention and recruitment of CRNAs at that time.
    However, the locality pay system has faltered in recent years.
        When the system was instituted, it was intended that the local
    medical directors would utilize the system to keep Department of
    Veterans Affairs salaries competitive with local markets, for the
    purposes of recruiting and retaining high quality personnel. However,
    it seems that some local medical directors have learned to manipulate
    the system to avoid having to maintain competitive salaries without
    regular raises, thus insulating their bottom line from rising personnel
    cost in the short term. A prime example is the VA facility in
    Providence, Rhode Island where CRNAs have not seen a pay increase for
    six years.
        The current locality pay system allows for many variables, which
    are not beneficial to CRNAs and may hamper efforts to maintain adequate
    numbers of nurse anesthetists. For example, CRNAs are not always
    included on the locality pay survey team, which makes it difficult to
    compare skills with salary. Often there is a large variance in the CRNA
    roles/scope of practice within surveyed hospitals, and there can be a
    large variance in clinical skill requirements for CRNAs within surveyed
    hospitals. All of these factors can lead to a miscalculation of average
    salaries for CRNAs.
        Current salary data was collected from 10 random DVA facilities.
    This data illustrates the severity of the situation. Entry level
    salaries in the DVA are far below the entry level salaries within the
    same state. Nurse I, Step I represents entry level for new nurse
    anesthesia graduates at the VA. The pay levels are 10 percent or more
    below mean state starting levels. This fact alone will make recruitment
    of graduating CRNAs very difficult.

    ------------------------------------------------------------------------
                                                      Nurse I,    Mean entry
                                                     Step I DVA   level for
                                                    entry level     state
    ------------------------------------------------------------------------
    New York......................................      $57,482      $71,482
    Minneapolis...................................       57,541       81,854
    Seattle.......................................       59,421       73,900
    San Diego.....................................       61,795       76,167
    Dallas........................................       58,192       76,385
    Houston.......................................       62,535       76,385
    Tampa.........................................       63,308       70,301
    Boston........................................       66,242       73,000
    New Orleans...................................       76,443       70,425
    ------------------------------------------------------------------------

        On the retention side, the advancement of a CRNA in the DVA from
    initial hire to Nurse III, Step 12 takes approximately ten years. CRNAs
    in many local communities reach the top in 4-6 years. Retention of new
    graduates will be difficult unless salaries are competitive with
    equally experienced CRNAs in the community.
        We strongly encourage this Committee to take a role in facing this
    nursing shortage head on, by providing adequate funding for personnel
    and by supporting new locality pay legislation that would include the
    following components:
      --CRNAs should be included on Locality Base Pay survey teams.
      --On-site visitation should occur to help clarify discrepancies with
            locality pay.
      --Hospitals being compared for locality pay should be of the same
            complexity.
      --Clinical privileges/scope of practice must be included for a close
            job match.

                                 RECOMMENDATION
        In conclusion, the AANA urges the Committee to strongly recommend
    that DVA facilities utilize the locality pay system to offer
    competitive salaries for nurse anesthetists, thus retaining valuable
    employees that provide high quality, cost-effective care. We also hope
    the Committee members will urge your colleagues on the authorization
    committee to restructure the locality pay program.
        The AANA thanks the Committee for the opportunity to testify before
    you today. We hope that we have provided information that will result
    in cost-savings for the DVA. If you have any questions or need further
    information, please do not hesitate to contact Greta Todd, AANA
    Associate Director or Federal Government Affairs, at 202-484-8400.
                                     ______

                Prepared Statement of the Joslin Diabetes Center

        Introduction Mr. Chairman, thank you for this opportunity to
    provide a status report on the Diabetes Project conducted jointly by
    the Joslin Diabetes Center in Boston, MA and the Department of Veterans
    Affairs, for which you provided $2 million in the fiscal year 2000
    Appropriations Act. Our request for fiscal year 2001 to continue and
    expand this project with the VA is $5 million, of which the VA's costs
    represent approximately 40 percent. I am Dr. Sven Bursell, Principal
    Investigator of the project and Associate Professor of Medicine at the
    Harvard Medical School.

                                   BACKGROUND
        As you may recall, Joslin Diabetes Center has been involved with
    the Department of Defense and the Department of Veterans Affairs in a
    two-site pilot demonstration project for the advanced detection,
    prevention, and care of diabetes. The Joslin Vision Network (JVN) will
    be deployed to three sites with current year funding. The JVN employs
    telemedicine technology to image the retina of patients with diabetes,
    through an undilated pupil, and produces a digital video image that is
    readable in multiple formats. This project was funded only through the
    Department of Defense Appropriations Act in fiscal years prior to the
    current fiscal year. The Department of Veterans Affairs medical staff
    was eager to expedite the deployment of this advanced diabetes
    technology beyond the limited resources available through participation
    in the DOD funded project. We petitioned this Subcommittee for
    additional resources to be made available to the VA for discretionary
    diabetes detection and care. We extend our sincere appreciation to you
    for your response to that request.

                          FISCAL YEAR 2000 ACTIVITIES
        The policy and program officials of the VA have visited Joslin
    Diabetes Center in Boston, and we have conducted several meetings here
    in Washington. Last week the consensus decision within the VA was to
    deploy the Joslin Vision Network (JVN) technology to three sites:
    Anchorage, Alaska, TriCities, Washington, and Billings, Montana. A
    Reading Center will be created and utilized in Seattle, Washington. In
    addition, the refinement of JVN technology, both hardware and software,
    will move toward developing a scalable system that is capable of
    widespread deployment agency-wide. This system, once completed, will be
    standards compliant and easily interfaced with the VA's VISTA Medical
    Records System.

                           1FISCAL YEAR 2001 REQUEST
        For fiscal year 2001, we request that in the VA Medical Account $5
    million be allocated to continue and expand this project. The positive
    response within the VA system indicates that with sufficient resources,
    the JVN technology would be deployed in a number of sites. As the
    technology, systems and production of equipment are standardized to off
    the shelf specifications, the expense per site will decrease. The
    request of $5 million includes $2 million to complete the refinement of
    the equipment and software to the point that the VA, and any other
    medical system, can purchase and utilize the advanced detection
    equipment and reading center technology.
        With the other $3 million, the VA and Joslin would determine the
    sites with the most need for portable advanced detection and begin to
    train personnel and equip additional VA facilities to utilize the JVN
    technology. The specific goals for fiscal year 2001 include the
    following:
      --Establish the utility of the JVN in multiple remote VA Outpatient
            settings;
      --Improve adherence to scientifically proven standards of diabetes
            eye care and diabetes care;
      --Improve/promote access to diabetes eye care;
      --Increase number/percentage of patients with Diabetes Mellitus
            obtaining eye care;
      --Provide education patients and providers in the clinical setting.
        The use of the JVN equipment and expansion of screening
    opportunities are a major focus for fiscal year 2001 activities.
    Expansion of this pilot demonstration project will entail the planning
    and implementation of new deployments that currently being considered
    for TriCities, WA, Billings, MN, and Anchorage, ALA. The actual number
    of sites deployed to will depend on the telecommunications
    infrastructure at the identified sites and the ease and costs
    associated with interfacing the JVN technology into the existing
    infrastructure.
        An equally important concentration of resources in fiscal year 2001
    is focused on refining the technical core using outcomes based medical
    and case management scenarios to develop a diabetes healthcare model
    that is modular, customizable and that can be seamlessly integrated
    into the existing VA telemedicine systems. The overarching vision for
    the VA/JVN project is a web-based comprehensive diabetes health care
    system that can be interactively used by both patients and providers,
    that incorporates diagnosis specific education and training modules for
    patients and providers and that incorporates software applications that
    allow outcome measures to be statistically assessed and individual
    treatment programs to be interactively adjusted based on these outcome
    measures. The JVN Eye Health care system exists as a component of a
    comprehensive diabetes management system, incorporating other clinical
    disciplines such as endocrinology, vascular surgery and internal
    medicine.
        In order to make the above vision a reality we will expend
    considerable effort in migrating the JVN demonstration technology
    platform into an application that is totally compliant with existing
    medical informatics infrastructures and the existing VISTA
    infrastructure of the VA system. This will encompass the integration of
    hardware and software in close collaboration with available resources
    from the VA VISTA program that will allow a highly scaleable
    transparent integration of the JVN Diabetes Eye Health Care system into
    the existing health informatics infrastructures of the VA system. The
    proposed development effort for fiscal year 2001 will result in an
    application that is cost sensitive and resource efficient with respect
    to support and maintenance of the JVN component for an accelerated
    deployment in the future.
        For the fiscal year 2001 project phase, we have established the
    following tasks, targets, and activities:
      --Deployment of a viable, sustainable, and refined operating JVN
            Diabetes Eye Health Care model which is currently being
            developed for this cooperative telemedicine project.
      --Develop a modularized medical outcomes based telemedicine diabetes
            intensive treatment program in collaboration with the VA with
            outcome measures incorporated into software based on clinical
            results and research experiences of the fiscal year 2000
            efforts.
      --Develop curriculum based patient and provider educational modules.
            Plan and develop a web-based comprehensive Diabetes Management
            System.
                                   conclusion
        Thank you for this opportunity to present this request for $5
    million for fiscal year 2001 and status report for fiscal year 2000 on
    a medical technology breakthrough for the patients and health care
    system within the Department of Veterans Affairs.
                                     ______

                        ENVIRONMENTAL PROTECTION AGENCY

     Prepared Statement of the County Sanitation Districts of Los Angeles
                                     County

        We would like to thank you for the opportunity to submit testimony
    to the Subcommittee in support of federal funding in fiscal year 2001
    for an exciting research program focused on strengthening scientific
    understanding of the efficiency and sustainability of Soil Aquifer
    Treatment (SAT) for indirect potable reuse of highly treated recycled
    water. This research, which is sponsored by the County Sanitation
    Districts of Los Angeles County (LACSD) and Arizona State University
    (ASU), has national implications for enhancing sustainable development
    of communities by augmenting and protecting valuable groundwater
    supplies with recycled water. Over $5 million in cash and in-kind
    services has already been committed to the investigation by various
    research sponsors and participants. In addition, Congress has
    appropriated $2.9 million over the last two fiscal years to support the
    project. We are seeking an additional $1 million in fiscal year 2001 to
    continue this important research.
        The Soil Aquifer Treatment Project is designed to provide the data
    necessary to support the rational design and operation of SAT systems,
    to predict water quality improvements provided by SAT, and to answer
    important public health questions. LACSD, which serves over five
    million people in 78 cities in Los Angeles County, California, and ASU
    are the project managers for the research in cooperation with the
    University of Arizona, the University of Colorado, Stanford University
    and the U.S. Geological Survey. We are joined in support of this
    funding by the Cities of Phoenix, Glendale, Mesa, Scottsdale, Tempe,
    and Tucson, Arizona; the Water Reclamation District of Southern
    California; the Los Angeles Department of Water and Power; the City of
    Riverside, California; the Bureau of Reclamation; the American Water
    Works Association Research Foundation, and the Water Environment
    Federation Research Foundation.
        As the arid West continues to develop and as sources for additional
    water supplies become more and more scarce, an increasingly important
    source of water for agricultural and urban use is recycled water. This
    water has the potential to alleviate water shortages and to provide
    important augmentation to existing sources. Soil Aquifer Treatment,
    which is currently in use in California and Arizona, is one technology
    that has the potential to economically supplement traditional treatment
    and storage systems for existing and future potable water supplies.
    This study will be of value not only in the West but in a number of
    other areas around the country where groundwater recharge is used to
    supplement potable water supplies, to control sea water intrusion in
    coastal groundwater aquifers, to control land subsidence caused by
    declining groundwater levels, to raise groundwater levels to reduce the
    cost of groundwater pumping, and to provide a means of treating
    wastewater prior to discharge. Most notably, the states of Florida,
    Massachusetts, Nebraska, Michigan, New Hampshire, New Jersey, New York,
    South Dakota, Texas, and Wisconsin, who already operate groundwater
    recharge facilities, will benefit from this research. This research
    will also benefit aquifer storage and recovery systems located in
    eleven other states.
        Our investigations of SAT will also help address the public health
    issues that all water suppliers in the nation face, such as source
    water protection and disinfection practices. The questions that will be
    answered by our study will be instrumental to the identification,
    characterization, and treatment of compounds in our nation's water
    supply so that we may better protect the health of our citizens.
        Further, soil aquifer treatment is being considered as one of the
    more promising means of treating stormwater and non-point source
    runoff. This will be an important breakthrough for dealing with these
    sources of pollution, since they are responsible for degrading over 70
    percent of the country's rivers and lakes.

                             THE NEED FOR THE STUDY
        While groundwater recharge using recycled water has been used in
    the United States for several decades and has been the subject of a
    number of studies, the scientific and technical community's ability to
    fully address a number of complex public health questions has been
    limited by the nature of existing testing and study methodologies. The
    funds approved by Congress in fiscal years 1998, 1999, and 2000, have
    enabled a higher standard of research on SAT by expanding the project's
    monitoring and analytical capabilities and will thus help enhance
    scientific understanding of the various biological, physical, and
    chemical processes in SAT that modify and improve the characteristics
    of recycled water. Funds have been used in part to follow up on
    research recommendations from the National Research Council's (NRC)
    Water Science and Technology Board study on the viability of augmenting
    potable supplies with recycled water. This work addresses critical
    areas of research identified by NRC as necessary to address the myriad
    of unknowns concerning SAT and the indirect use of recycled water for
    potable water supply including the fate and significance of
    disinfection byproducts, organics, and microbial pathogens.
        Currently the SAT Project is in its third year of study, and
    valuable information has been developed to better understand the impact
    of SAT on water quality in terms of chemical and microbial pollutants,
    identifying monitoring criteria for viruses and other pathogens, and
    increasing public knowledge and awareness of SAT. Fiscal year 2001
    funds will be used to address the following drinking water and
    treatment issues:
      --evaluate the importance of the organic content of municipal
            drinking water sources in determining water quality after SAT;
      --apply more sophisticated chemistry testing to further characterize
            organic pollutants in water before and after SAT;
      --develop toxicity tests to identify pharmaceutically active
            compounds such as endocrine disruptors, and potential health
            effects;
      --develop analytical methods to identify emerging pollutants such as
            new disinfection byproducts;
      --apply newly developed tracers to track the movement of recycled
            water as it infiltrates the groundwater;
      --adapt microbiological genetic techniques capable of determining
            pathogen viability into standardized monitoring techniques;
      --develop digital soil mapping capabilities to assess the
            sustainability of SAT systems for removing pollutants;
      --assess the sustainability of arsenic removal in SAT systems under
            different operating conditions;
      --expand the public outreach element of the research project; and
      --develop targeted epidemiologic studies to determine if the use of
            recycled water for groundwater replenishment has impacted
            public health.
        The results of our investigation will help us to better understand
    the complex nature of recycled water and SAT so that we may take
    advantage of the benefits offered by indirect potable reuse based on
    groundwater recharge such as:
      --additional water quality improvements;
      --seasonal or longer-term storage without evaporative losses;
      --protection of water resources against recontamination (with
            coliforms and parasites) by birds, mammals, and even humans;
            and
      --prevention of algae growth and associated water-quality problems
            such as algae- derived taste and odor.

                                  SAT DEFINED
        Soil Aquifer Treatment can best be described as a groundwater
    recharge method using recycled water. SAT relies on percolation of the
    recycled water through soil and groundwater transport to further
    improve water quality prior to reuse.
      --Soil percolation encompasses several processes that occur as water
            seeps downward through the soil under the influence of gravity
            to enter the groundwater system. The soil acts as a filter to
            improve the characteristics of the recycled water through
            physical, chemical, and microbiological processes.
      --Groundwater transport: After reaching the underlying aquifer,
            groundwater moves slowly to extraction wells. During transport,
            further water quality benefits are realized through a number of
            physical, chemical, and biological processes.

                         PURPOSE AND GOAL OF THE STUDY
        The SAT Project is the first research program to focus broadly on
    SAT as a system. Its goals are to provide the data necessary to support
    the engineered design and operation of SAT systems, and to address
    factors that are of interest to health regulators for the development
    of regulations governing groundwater recharge projects.
        Specific objectives of the project are to:
      --characterize processes that contribute to organic chemical,
            nitrogen and pathogen removal and transformation during
            transport through the soil percolation zone and underlying
            groundwater aquifer;
      --investigate and model relationships among above-ground treatment,
            wetlands polishing, and SAT;
      --identify monitoring criteria that will provide proper assurances
            regarding the elimination of viruses and other pathogens;
      --produce a framework or model within which SAT systems can be
            designed and operated to meet regulatory criteria.
      --compare the effectiveness of SAT to other technologies; and
      --increase public knowledge and awareness of SAT.
        The effectiveness of SAT will be investigated and systematically
    analyzed to determine the efficacy of the protective barriers inherent
    in SAT systems: the interface at the soil-water boundary of the
    infiltration surface; soil percolation; and groundwater transport. The
    water quality benefits derived from the treatment in each barrier will
    be evaluated based on the reductions achieved in levels of organic
    carbon, nitrogen, and pathogens.
        Field investigations and data gathering are being performed at six
    full- or pilot-scale recharge sites in California and Arizona.
    Additional information is being generated using drinking water from
    Texas. These sites offer a range of different effluent qualities and
    physical conditions such as depth to groundwater, soil and sediment
    type, etc. The facilities are located in Phoenix, Mesa, and Tucson,
    Arizona; Riverside, Los Angeles, and Los Angeles County, California;
    and Houston, Texas. Laboratory work is also being conducted to analyze
    the data and develop the applicable models. Some of the more unique
    research elements include use of genetic techniques to isolate and
    identify viruses; analytical methodologies capable of identifying over
    90 percent of the materials comprising the organic makeup of
    groundwater and recycled water; unique tracers to track the movement of
    recycled water as it infiltrates the groundwater; and a public
    education/outreach component to disseminate the results of the study.
        On behalf of the many public agencies, cities, and universities
    that are participating in this exciting and promising research project,
    we would like to thank the Subcommittee once again for the opportunity
    to submit this statement and for your previous support for this
    project. Soil Aquifer Treatment has great potential to alleviate the
    coming critical water shortages in the arid western United States and
    provide valuable information on a national level for source water
    protection and supply. Please feel free to contact our Washington
    representative John Freshman at (202) 298-1895 if we can provide you
    with any further information. We thank you again for your commitment to
    this project over the last three fiscal years and ask you for your
    renewed support to continue the research on this important project.
                                     ______

     Prepared Statement of the State and Territorial Air Pollution Program
       Administrators and the Association of Local Air Pollution Control
                                   Officials

        The State and Territorial Air Pollution Program Administrators
    (STAPPA) and the Association of Local Air Pollution Control Officials
    (ALAPCO) appreciate this opportunity to provide testimony regarding the
    fiscal year 2001 proposed budget for the U.S. Environmental Protection
    Agency, particularly regarding grants to state and local air pollution
    control agencies under Sections 103 and 105 of the Clean Air Act.
        STAPPA and ALAPCO are the national associations of state and local
    air pollution control agencies in the 54 states and territories and
    over 150 major metropolitan areas across the United States. Under the
    Clean Air Act, state and local air quality officials have the primary
    responsibility for implementing our nation's clean air program on
    behalf of our citizens. This responsibility calls for state and local
    air agencies to address particulate matter, ground-level ozone, toxic
    air pollution, acid rain and other types of air pollutants, many of
    which cause significant adverse health effects, including cancer,
    severe respiratory ailments and premature death. Air agencies must
    address new initiatives that focus on emerging problems, as well as
    carry out the core elements of our programs, which serve as the
    backbone of our nation's clean air effort.
        STAPPA and ALAPCO are very concerned that the President's request
    for state and local air grants in fiscal year 2001 represents merely
    level funding over the fiscal year 2000 appropriation. While EPA is
    characterizing the budget request as including a $5-million increase
    over last year, the fact is that it is not an increase at all, since
    Congress already provided $5 million under Section 105 last year within
    EPA's Environmental Programs and Management (EPM) budget for regional
    haze activities. The fiscal year 2001 request merely shifts those
    Section 105 funds from the EPM account to the State and Tribal
    Assistance Grants budget, resulting in no net increase to state and
    local air quality agencies.
        We are very worried that a budget request reflecting level funding
    will not address the serious funding shortfall facing state and local
    air quality agencies and would impede our ability to address the
    important public health problems throughout the country that result
    from air pollution. Accordingly, STAPPA and ALAPCO request an increase
    of as much as Congress believes is possible, but at least $10 million
    above the President's request for fiscal year 2001, which would provide
    a total of $213.7 million.

             STATE AND LOCAL AIR PROGRAMS ARE NOT ADEQUATELY FUNDED
        For many years, state and local air pollution control agencies have
    faced a serious deficit in federal grants. This shortfall is due to the
    fact that federal funding under Section 105 of the Clean Air Act has
    not kept pace with trends in air pollution control. Since fiscal year
    1995, Section 105 grants have decreased by over $25 million, while the
    costs and responsibilities facing state and local programs under the
    Clean Air Act have increased markedly. These responsibilities include
    both ongoing activities to preserve the improvements in air quality we
    have already made as well as new initiatives to address emerging
    issues.
        The budget shortfall is exacerbated by the fact that EPA, for a
    number of years now, has set aside portions of Section 105 grants to
    support activities that should be funded through EPA's own budget. For
    example, although funding training activities is clearly a federal
    responsibility, EPA has been using state and local grants,
    inappropriately, for these purposes for many years and plans to do so
    again in fiscal year 2001 (totaling $3.98 million). We have recommended
    each year, in commenting on the agency's proposed grant allocation,
    that training activities be funded through EPA's own budget. In
    addition, substantial Section 105 grants have been used to support the
    Emissions Inventory Improvement Program for several years. While this
    program is a worthwhile one that provides important information, we do
    not believe it is appropriate for state and local agencies to continue
    funding this program and have recommended that EPA support the effort
    with its own budget ($675,000 in fiscal year 2001). Finally, in the
    proposed allocation for fiscal year 2001, EPA is including a ``set-
    aside'' for a heavy-duty truck and bus idling and hoteling
    characterization study (totaling $300,000). We believe EPA should fund
    this study from its own budget, rather than through Section 105 grants.
    These types of diversions of Section 105 funding only diminish the
    amount of the funds distributed to state and local agencies and worsen
    our budget shortfall.
        Several years ago, EPA, in cooperation with STAPPA and ALAPCO,
    conducted an intensive study to determine the costs of Clean Air Act-
    related activities that Section 105 grants should support. This
    analysis concluded that a total increase of $98 million in federal
    grants to state and local air agencies under Section 105 of the Clean
    Air Act would be necessary to operate an adequate, although not
    perfect, air quality program. This calculation included both additional
    needs for emerging programs and deficiencies in existing activities and
    did not incorporate the costs of the fine particulate matter monitoring
    effort that has been funded with Section 103 grants in recent years. We
    have provided the Subcommittee with details of this study in recent
    years and would be happy to supply this information again, if needed.
        In spite of the fact that this study was carried out in cooperation
    with EPA and that the agency recognized the need for additional
    funding, to date the Administration's budget proposals have not called
    for the grant increases that this study indicated are necessary.
        While we realize Congress has many competing and worthy budget
    needs it must address and it would be unrealistic to expect to receive
    an increase of $98 million this year, we are requesting that Congress
    provide as large an increase as is possible. Even an amount such as $10
    million would help to ameliorate some of the shortfall we face.
        An increase would help to address many activities, including
    transportation-related projects; land use and air quality programs;
    compliance assistance programs, especially for small businesses;
    development, replacement and/or upgrading of monitors (apart from fine
    particulate matter monitoring); collection of essential emission and
    pollutant data; minor source inspections and permits; training;
    implementation of ozone strategies; multi-state approaches to regional
    air quality problems; public education and outreach. However, probably
    one of the most worthy issues we could address with additional grant
    funding is that of toxic air pollution.

         CONTROL OF TOXIC AIR POLLUTION REQUIRES SIGNIFICANT RESOURCES
        The Clean Air Act includes a comprehensive program to control
    emissions of toxic air pollution, specifically through provisions
    addressing a list of 188 hazardous air pollutants. The Act basically
    has a two-pronged approach: the first element calls for a technology-
    based effort in which EPA establishes Maximum Achievable Control
    Technology (MACT) to apply to sources of the listed pollutants and the
    second phase focuses on risk-based activities to address the risks that
    remain after the MACT standards have been implemented. Additionally,
    the Act includes additional provisions to address other issues,
    including air toxic air emissions in urban areas, among other things.
        State and local agencies have significant responsibilities under
    the toxic air pollution provisions of the Clean Air Act, many of which
    are costly to carry out. For example, state and local agencies are
    required to implement the many MACT standards EPA has established.
    Furthermore, if EPA misses its deadlines for establishing the
    standards, which is very possible for some of the MACT standards that
    are supposed to be set by this year, the Clean Air Act calls upon state
    and local agencies to develop the standards themselves, a costly and
    resource-intensive activity. Additionally, many sources of toxic air
    pollution are minor sources, the permitting of which is expensive and
    is not covered by permit fees under Title V of the Clean Air Act.
        In addition to the MACT-related responsibilities state and local
    agencies face, it will be necessary to assess the extent of the toxic
    air pollution problem in our country that will remain after the
    imposition of the technology-based standards. This step, which will be
    necessary to develop additional strategies to address both national and
    local problems, including ``hot spots'', will require state and local
    agencies to conduct significant monitoring and data analysis. But the
    resources used on such activities will be money well spent, since it
    will result in information that is essential for crafting appropriate
    control strategies that will address problem emissions.
        The activities mentioned above are just some of the efforts related
    to toxic air emissions that will require significant resources. While
    state and local air agencies desperately need many millions of dollars
    in grant increases to address these and other air-related activities,
    we recognize Congress faces many fiscal constraints. Accordingly, we
    are requesting as much in additional grants as Congress can provide,
    but at least $10 million that could be put to excellent use in
    addressing toxic air pollution and other air quality issues.

               THE CLEAN AIR PARTNERSHIP FUND SHOULD BE SUPPORTED
        STAPPA and ALAPCO are pleased that the Administration's requested
    budget calls for $85 million in additional funds for the Clean Air
    Partnership Fund, which will provide state and local agencies with
    excellent opportunities to develop multi-pollutant control strategies
    aimed at reducing air pollution in a cost-effective manner. We believe
    that the harmonization of various clean air goals is critical and we
    applaud EPA for promoting such activities. In fact, we have been
    engaged in discussions with our governmental counterparts regulating
    the energy and utility sectors and we agree that there is a need for
    multi-pollutant strategies with energy efficiency components, such as
    those that the Clean Air Partnership Fund will help foster. Such
    projects can help to increase certainty to industry by promoting
    integrated efforts to address air pollution, rather than requirements
    that apply to individual pollutants incrementally.
        However, while the partnership is a laudable new program, there are
    still many other critical activities that we can carry out only through
    traditional federal grants provided under Sections 103 and 105 and
    other authorities of the Clean Air Act. The partnership program should
    not be a substitute for those ongoing grant programs, nor does it
    address the enormous budget shortfall state and local agencies face.
    More specifically, the funds for the Clean Air Partnership Fund should
    be in addition to those federal grants (discussed earlier) that assist
    state and local air pollution control agencies in fulfilling their
    responsibilities.
                                   CONCLUSION
        In conclusion, we are extremely disappointed that the President's
    budget request calls for level funding for state and local air grants
    and we recommend at least a $10-million increase in fiscal year 2001.
        We support the Clean Air Partnership Fund and urge Congress to
    include funding for this program in the fiscal year 2001 appropriation.
    We do not believe this program can substitute for state and local
    operational air grants under the Clean Air Act, however, and the
    adoption of the partnership should not adversely affect appropriations
    for our current activities.
        Thank you very much for this opportunity to provide you with our
    testimony. Please contact us if you have questions or require any
    additional information.
                                     ______

         Prepared Statement of the Association of State Drinking Water
                                 Administrators

                                  INTRODUCTION
        The Association of State Drinking Water Administrators (ASDWA) is
    pleased to provide testimony to the VA, HUD and Independent Agencies
    Subcommittee on fiscal year 2001 Appropriations for the U.S.
    Environmental Protection Agency. ASDWA represents the drinking water
    programs in each of the fifty states and six territories in their
    efforts to ensure the provision of safe, potable drinking water to over
    250 million consumers nationwide. ASDWA's primary mission is the
    protection of public health through the effective management of state
    drinking water programs that implement the national Safe Drinking Water
    Act (SDWA).

                                TODAY'S MESSAGE
        States have been implementing Federal requirements for safe
    drinking water for more than 25 years. The 1996 Amendments to the SDWA
    significantly increased state drinking water program responsibilities
    and called for a host of new regulatory initiatives to be developed and
    implemented. The Act also created a new Drinking Water State Revolving
    Loan Fund (DWSRF) to provide loans to public water systems to enhance
    both their infrastructure and compliance capabilities and to offset
    some of the programmatic costs. The Act authorized annual
    appropriations of $100 million for the state Public Water System
    Supervision (PWSS) program and $1 billion for the DWSRF. Since the SDWA
    enactment in 1996, neither of these authorizations have been fully
    requested in the President's budget nor appropriated by the Congress.
    As a result, state drinking water programs are facing a significant
    shortfall and cannot keep pace with current and future regulatory and
    other Agency SDWA initiatives.

                                   THE FACTS
    The PWSS program
        The State PWSS program has not had a funding increase since fiscal
    year 1997, the year in which the SDWA was reauthorized. Yet, states
    have been expected to maintain effective implementation of all of their
    pre-1996 core responsibilities and take on an overwhelming list of
    additional tasks, programs, and regulatory implementation requirements,
    the majority of which are expected to occur over the next five years.
        As a result of the 1996 Amendments, states are now responsible for
    development, implementation, and enforcement of more than 20 new
    regulations within a five year period, including radon, arsenic,
    sulfate, groundwater, radionuclides, filter backwash, the microbial/
    disinfection byproducts cluster, unregulated contaminant monitoring,
    and Class V wells under the Underground Injection Control program.
    States are also responsible for implementing revisions to the surface
    water treatment, lead and copper, public notification, and variances
    and exemptions rules.
        Massive new programs for capacity development, drinking water
    source assessment and delineation, consumer confidence reports and
    public outreach, and expanded operator certification requirements are
    also mandated over the next five years. These new requirements are in
    addition to the pre-96 core state program responsibilities for
    activities such as compliance monitoring, data management, training,
    and enforcement for 88 regulated contaminants. States also ensure
    public health protection through preventive measures such as disease
    surveillance, risk communication, sanitary surveys, laboratory
    verification, permitting, and emergency response.
        ASDWA and EPA undertook an initiative last year to update the
    resource needs and funding gap for state drinking water programs.
    Although the report is yet to be published, the results indicate that
    there are significant funding and staff shortfalls for state PWSS
    programs, as the table below and attached charts indicate. These are
    the shortfalls that remain after the addition of the $87.3 million in
    PWSS funds, the significant contribution made by state programs, and
    authorized set-aside program funds from the DWSRF.

                              [Dollars in millions]
    ------------------------------------------------------------------------
                                                       Staff       Funding
                         Year                        shortfall    shortfall
    ------------------------------------------------------------------------
    1999..........................................        1,627          $83
    2001..........................................        2,008          104
    2003..........................................        2,389          159
    2005..........................................        2,397          185
    ------------------------------------------------------------------------

        Without a sizeable increase in PWSS funding, state drinking water
    programs will be forced to continue deciding on implementation
    priorities, redirecting critical resources from high priority public
    health efforts to the ``rule-of-the-day,'' and ultimately fall far
    short of achieving the significant new health protections envisioned
    under the 1996 Amendments.
        Given the resource shortfall expected in fiscal year 2001, ASDWA
    respectfully requests that the Subcommittee appropriate $190 million to
    support the PWSS Program for fiscal year 2001 even though the current
    authorization is set at $100 million.

                                   THE DWSRF
        The 1996 SDWA authorized $1 billion annually from fiscal year 1995
    through fiscal year 2003 to establish and support a drinking water
    state revolving loan fund. The primary purpose of the DWSRF is to
    facilitate water system compliance with national primary drinking water
    regulations through the provision of loans to water systems to improve
    drinking water infrastructure.
        The Water Infrastructure Network (WIN), a coalition of water,
    wastewater, engineering, construction, and financing organizations, has
    recently completed an assessment of drinking water and wastewater
    infrastructure needs. The report, entitled Clean and Safe Water for the
    21st Century, concludes that, ``America's water and wastewater systems
    face an estimated funding gap of $23 billion a year between current
    investments in infrastructure and the investments that will be needed
    annually over the next 20 years to replace aging and failing pipes and
    meet mandates of the Clean Water Act and Safe Drinking Water Act.''
    When the report combines this need with the cost of building,
    operating, and maintaining needed drinking water and wastewater systems
    over the same period, the figure jumps to nearly $2 trillion dollars.
    On an annual basis, this would require $95 billion, of which
    approximately $50 billion is attributable to drinking water
    infrastructure needs and $45 billion for wastewater needs. If this gap
    is not closed, much of the progress already made will be lost to aging
    and deteriorating infrastructure and many of the public health
    protections envisioned under the new SDWA will not become a reality.
        ASDWA respectfully requests that the Subcommittee appropriate at
    least the $1 billion authorized to support the DWSRF Program for fiscal
    year 2001 and work with pertinent Congressional committees to create
    funding mechanisms to close the gap.

                                    RESEARCH
        The use of sound science is the foundation of the new standard-
    setting process under the SDWA Amendments of 1996. Extensive research,
    particularly in the area of health effects, will be critical to ensure
    that future contaminants are being regulated at the levels needed to
    provide a meaningful opportunity for risk reduction to protect the
    public. While recent efforts have been successful in closing the gap,
    ASDWA strongly supports designating and funding drinking water research
    at $48.87 million as requested in the President's fiscal year 2001
    budget. ASDWA also supports the $5 million request by the AWWA Research
    Foundation to fund priority drinking water research needs.
        ASDWA respectfully requests that the Subcommittee appropriate the
    requested level of $48.87 million for drinking water research and $5
    million for research conducted by AWWARF.

          EPA DRINKING WATER PROGRAM AND COMPLIANCE ASSISTANCE EFFORTS
        As a result of the 1996 SDWA Amendments, EPA's Office of Ground
    Water and Drinking Water (OGWDW) took on many new challenges including
    rule and program development covering a wide range of new initiatives.
    As part of this process, they have greatly expanded the role of the
    public and other stakeholders in helping define and develop these
    rules. Like the states, OGWDW faces a critical need to ensure that
    adequate funding is available to meet the myriad new requirements in
    the law. ASDWA therefore supports the President's budget request of
    $37.8 million for drinking water regulation development and $32.2
    million for drinking water implementation activities for EPA.
        ASDWA respectfully requests that the Subcommittee appropriate the
    requested level of $37.8 million for drinking water regulation
    development and $32.3 million for drinking water implementation
    activities for EPA.

                                   CONCLUSION
        The SDWA of 1996 created an enormous new, expansive drinking water
    program that calls for many of the requirements to be implemented
    within the next five years. Many of the initiatives must begin today to
    ensure full implementation in the future. Without a fully funded, well-
    trained and technically competent state drinking water program
    structure in place, many of these new efforts will never realize their
    full potential.
        State drinking water programs are committed to achieving the goals
    of the new Act but are in desperate need of sufficient funding to carry
    out their public health protection mission effectively and efficiently.
    The tremendous number of SDWA generated new regulatory requirements
    combined with a significant number of new programmatic initiatives
    places drinking water programs in the untenable position of being
    unable to meet the expectations of Congress, the EPA, and the public
    because the necessary tools and funding were not provided with the
    expanded program responsibilities. States are fast approaching a
    crossroads in their drinking water public health protection
    responsibility. Many would argue that years of inadequate funding and
    erosion of current funding levels have already placed the program in
    jeopardy.
        ASDWA strongly urges this Subcommittee to fund state programs at a
    level that is sufficient to ensure success in their efforts to meet the
    new public health goals of the SDWA. It would be a travesty if five or
    ten years from now, we look back and see that much of the opportunity
    and vision of the new law was lost or only partially accomplished
    because we did not have the commitment and foresight to provide the
    funds needed to make it a reality.
        A strong drinking water program supported by the Federal
    government, states, water utilities, and the public will ensure that
    the quality of drinking water in this country continues to improve and
    that the public can be assured that a glass of water is safe to drink
    no matter where they travel or live. Achieving these goals, however,
    will require a significant financial commitment from all parties.
        ASDWA appreciates the opportunity to present testimony before the
    Subcommittee for its consideration.
                                     ______

       Prepared Statement of the Metropolitan Water District of Southern
                                   California

        The Metropolitan Water District of Southern California (MWD) is
    pleased to submit comments for the record regarding programs contained
    in the U.S. Environmental Protection Agency's (EPA) fiscal year 2001
    budget for your Subcommittee's hearing on April 7.
        MWD is responsible for meeting the supplemental water requirements
    of 16 million people living in the Southern California coastal plain
    and the economy which supports them. Our sources of water supply are
    the Colorado River and surface waters from Northern California. Of
    particular interest to MWD and our 27 member agencies are those federal
    programs that provide assistance and facilitate partnerships for
    addressing critical water resources issues.
        One of the most challenging water resource issues in Southern
    California is ensuring adequate supply of high quality water. To
    increase our ability to achieve these goals, we strongly urge that you
    designate $2 million of funding appropriated for State and Tribal
    Assistance Grants (STAG) to ensure the continuation of the Desalination
    Research and Innovation Partnership (DRIP). DRIP is a major applied
    research program which seeks to develop and demonstrate new and
    innovative technologies to substantially reduce the cost of
    desalinating Colorado River water and other brackish water sources.
    DRIP is also investigating ultraviolet (UV) light technologies for
    disinfection and biofouling control in potable water applications.
        MWD also asks that you support adequate funding for another STAG
    program, the Drinking Water State Revolving Fund (DWSRF). Although the
    President's budget requests increased funding over the amount enacted
    for the prior fiscal year, the level falls short of the $1 billion
    authorized by Congress. We urge that you support funding at the
    authorized level. We further ask that you fully support the $48.9
    million request for safe drinking water research in the President's
    budget and designate $5 million of this amount for research through the
    American Water Works Association Research Foundation (AWWARF).
        While significant progress has been made in improving the quality
    of our nation's water, many surface and ground waters do not meet water
    quality standards. As our understanding of the relationship between the
    contaminants found in our water supply and their effect on human health
    increases and detection methods are improved, new risks have been
    uncovered. Adequate protection of drinking water quality requires
    research to identify contaminant sources and effective control methods,
    financial assistance for implementation of end-of-the-pipe treatment
    and source water protection measures, and compliance monitoring to
    ensure existing laws and regulations are upheld.

                 THE STATE AND TRIBAL ASSISTANCE GRANTS (STAG)
        Desalination Research and Innovation Partnership (DRIP) Funding.
    Water quantity and quality are priority issues in Southern California
    where approximately 60 percent of the water used is imported. Much of
    our imported supply is from the Colorado River, a source that is high
    in salinity (i.e., mineral content). Although not a health concern,
    high salinity can cause scaling and corrosion of plumbing fixtures,
    adversely affect salt-sensitive agricultural crops, and limit the
    ability to recycle water. Local groundwater supplies cannot always be
    utilized, in part because of high salinity.
        Several years ago, MWD and its partners embarked on a program
    (DRIP) to develop innovative technologies for cost-effectively reducing
    salinity in Colorado River and other non-traditional sources such as
    brackish groundwater, municipal wastewater, and agricultural drainage
    water. The program was subsequently expanded to evaluate new
    technologies for the inactivation of pathogens resistant to commonly
    used disinfectants. In its first three years, DRIP has investigated the
    use of ultra-low pressure membrane technologies that will improve the
    economics of salinity removal from a variety of water sources, and the
    effectiveness of ultraviolet light as a disinfectant for resistant
    pathogens like Cryptosporidium. In part because of these early
    successes and to address the statewide concern with high salinity, the
    partnership now includes water utilities from Northern California. MWD
    asks that you identify $2 million of the STAG appropriation to support
    the continuation of DRIP. This funding will leverage the financial
    commitments made by the DRIP partners and support near-term activities
    aimed at demonstrating large-scale reverse osmosis (RO) technologies,
    increasing the amount of water recovered from RO processes, and
    improving methods of brine handling and disposal.
        Drinking Water State Revolving Fund. STAG funding is also critical
    for the DWSRF. In California, water suppliers have identified drinking
    water infrastructure projects totaling in excess of $7 billion that
    could benefit from low-cost DWSRF financing. Nationwide, community
    water systems estimate they must invest over $138 billion over the next
    20 years to ensure delivery of safe drinking water. Of this amount,
    approximately $12 billion is needed to meet current Safe Drinking Water
    Act (SDWA) requirements. Low-cost financing for projects which ensure
    safe drinking water supplies is critical for protecting the health of
    the more than 240 million Americans served by public water systems, and
    MWD strongly urges that you provide $1 billion, the amount authorized
    by Congress for fiscal year 2001. This amount, while greater than the
    amount requested in the President's budget, is still only a small
    fraction of the funding needed by drinking water suppliers to meet
    existing SDWA requirements.
        Clean Water State Revolving Fund. Significant investments are
    needed to repair and replace aging municipal wastewater infrastructure
    and combined sewer systems. Low-cost financing is necessary to support
    substantial municipal water quality infrastructure needs over the next
    20 years. Further, there is a need to provide funding for qualifying
    projects that prevent nonpoint source pollution, and EPA has proposed
    allowing states to use up to 19 percent of their Clean Water Act State
    Revolving Fund (CWSRF) capitalization grants to provide grant funding
    of up to 60 percent of the cost of such projects. The President has
    requested $800 million for fiscal year 2001 for the CWSRF to support
    these activities, many of which are vital for ensuring protection of
    drinking water sources. MWD asks that you support funding at least at
    the level in the President's budget. The President's request represents
    a substantial decrease from the funding enacted for the prior fiscal
    year and may not be sufficient to fully meet the needs of the CWSRF
    program.

                            NON-POINT SOURCE GRANTS
        Another critical source of funding for source water protection
    projects is grants under the Clean Water Act's Section 319 Non-point
    Source Program (NPS). NPS grants are particularly important for smaller
    projects and projects where debt financing is unsuitable. Further, the
    NPS grant program is necessary to support the many watershed management
    activities fostered by the states. The President has requested $250
    million for NPS grants for fiscal year 2001, and MWD requests your
    support at the level in the President's budget. Although this amount is
    an increase over last year's budget, nonpoint source pollution is the
    primary cause of impairment of our nation's waterways.

                              OTHER GRANT PROGRAM
        Other EPA grant programs which help maintain or improve water
    quality and need your support are the CWA Section 106 Control Agency
    Resource Supplemental Grants ($160.5 million), Wetlands Program
    Development Grants ($17.3 million), and the Water Quality Cooperative
    Agreements (WQCA; $19.0 million). Among other activities, section 106
    grants provide funding for monitoring, water quality planning, and
    development of Total Maximum Daily Loads for impaired water bodies. The
    wetlands grants program will enable EPA to meet its goal of a net gain
    of 100,000 acres of wetlands by the year 2005. Wetlands provide an
    important cleansing mechanism which can protect drinking water sources.
    WQCA provides funding to address water quality problems created by
    storm water, combined sewer overflows, and confined animal operations,
    all of which potentially threaten drinking water sources. Your support
    for the President's fiscal year 2001 budget request for the above
    programs will enable EPA to carry out its mission.

                          SAFE DRINKING WATER RESEARCH
        Scientifically sound research provides the underpinnings for
    effective drinking water quality programs. EPA's fiscal year 2001
    budget, under its strategic goal of clean and safe water, includes
    $48.9 million for safe drinking water research. This research will
    focus on developing dose-response data for certain contaminants such as
    disinfection by-products (DBPs) and pathogens, filling data gaps for
    contaminants on the Candidate Contaminant List (CCL), and identifying
    cost-effective methods for removing and inactivating microbial
    contaminants. Although not specifically identified in the budget, we
    understand that EPA's research may also focus on perchlorate.
        Dose-response data is critical for the proper characterization of
    potential acute risks of drinking water contaminants, yet reliable data
    is frequently absent. The CCL is the basis of potential new drinking
    water regulations, and accurate data is essential in order to determine
    whether new regulations are warranted. The proper evaluation of
    treatment technologies for contaminant removal will facilitate the
    adoption of needed regulations. Perchlorate has been detected in
    groundwater sources of drinking water, and approximately two dozen
    wells in California have been taken out of service as a result of
    concentrations which exceeded state action levels.
        We ask that you fully support the President's request of $48.9
    million for drinking water research and designate $5 million of this
    amount for research by AWWARF on issues consistent with EPA's
    priorities. AWWARF and public water suppliers will provide 100 percent
    matching funds, and thus offer an opportunity to leverage EPA's
    research budget.

        DRINKING WATER--PUBLIC WATER SYSTEMS SUPERVISION PROGRAM GRANTS
        EPA's 2001 budget allocates $93.3 million for Public Water Systems
    Supervision Program grants. This funding is necessary for states with
    primary enforcement responsibilities to carry out their duties,
    including implementation of the 1996 SDWA regulations. Additional
    resources will be necessary to implement the changes resulting from the
    1996 SDWA amendments, and we ask that you support this funding level.
        We look forward to working with you and your Subcommittee. Please
    contact Brad Hiltscher, MWD's Legislative Representative in Washington,
    D.C. at (202) 296-3551, if we can answer any questions or provide
    additional information.
                                     ______

                  Prepared Statement of The Nature Conservancy

                          INTRODUCTION AND BACKGROUND
        Mr. Chairman and members of the Subcommittee, I appreciate the
    opportunity to submit written testimony on fiscal year 2001
    appropriations for the U.S. Environmental Protection Agency (EPA).
        The Nature Conservancy is an international, non-profit organization
    dedicated to conserving biological diversity. Our mission is to
    preserve the plants, animals, and natural communities that represent
    the diversity of life on Earth by protecting the lands and waters they
    need to survive. The Conservancy has more than one million individual
    members and over 1,500 corporate members; we have programs in every
    state and in 20 nations. To date, our organization has protected more
    than 11 million acres in the 50 states and Canada and has helped local
    partner organizations preserve millions of acres overseas. The
    Conservancy itself owns more than 1,600 preserves--the largest private
    system of nature sanctuaries in the world.
        Biological diversity is important for a number of reasons. Species
    and natural communities harbor genetic and chemical resources that
    contribute to advances and products in medicine, agriculture and
    industry. The value of these goods is enormous; however, it represents
    only a fraction of the value these ecosystems provide to humanity in
    terms of services, such as waste assimilation and treatment, climate
    regulation, drinking water, and flood control. One estimate of the
    value of these services for the entire biosphere is $33 trillion, which
    is nearly double the gross national product (Costanza et al 1997). In
    addition to these benefits, the environment also serves as an
    instrument through which educational, cultural, aesthetic and spiritual
    values are often expressed.
        The Nature Conservancy and the Association for Biodiversity
    Information recently released a new study documenting America's
    astonishing natural abundance. Among the book's key findings are the
    following: The United States is home to more than 200,000 native
    species of plants and animals and ranks at the top in its variety of
    mammals and freshwater fish. Ecosystems in the United States are also
    among the most diverse. They range from tundra, to deserts, prairies,
    and various forest types. However, as many as one-third of the nation's
    species are at risk and at least 500 species have already gone extinct
    or are missing. The single biggest threat to species survival is loss
    of habitat, which generally occurs as a result of human activities.
    Almost 60 percent of America's landscape is already severely altered.
        Reversing the trend will require working at larger scales and
    across traditional, geopolitical lines. The Nature Conservancy is
    committed to this effort. In fact, we are pledging to invest $1 billion
    in private funds over the next five years to protect critical natural
    areas around the country and abroad. These investments alone, however,
    will not be enough. True conservation success will only be achieved
    through the work of partners, including the Federal government. Funding
    is needed at the Federal level to support on-the-ground conservation
    projects and to ensure policies that promote a sustainable environment.
    Without public investments in conservation, private investment
    strategies may in fact be undermined.
        EPA is responsible for administering a number of programs that
    protect public health and the environment. The Nature Conservancy
    offers support for five programs with which we have had direct
    experience and that we are confident help preserve biodiversity. The
    five programs include the following:
      --Nonpoint Source Management Program (Section 319 Program)
      --Coastal Watersheds and National Estuaries Program
      --Wetlands Protection Program
      --Clean Water Act State Revolving Fund
      --Innovative Community Partnership Program
        The first four programs, which focus on water quality, have
    important conservation benefits, especially with regard to the wealth
    of aquatic plants and animals in the United States. The fifth program
    supports local efforts to develop sustainable solutions to address
    multiple forms of pollution, such as water and land pollution.
        Before presenting our comments regarding the five programs, we wish
    to commend EPA for working to align its strategic planning and
    budgeting processes. The goals articulated by EPA in its Strategic Plan
    and fiscal year 2001 Budget are indeed challenging. The ability of the
    Agency to achieve these goals, however, will be limited if resources
    are not commensurate with the scope of work to be completed. One means
    to demonstrate the Federal commitment to the nation's natural resources
    is to ensure that EPA remains a vital and healthy institution.

                                RECOMMENDATIONS
    Nonpoint source management program (section 319 program)
        Nonpoint source pollution is the leading cause of water quality
    problems. Surface runoff from farms and urban areas contain sediment
    and other pollutants that result in beach closures, destroyed habitat,
    unsafe drinking water, fish kills, and other severe environmental and
    human health problems.
        The Section 319 program affords EPA and states the opportunity to
    address nonpoint source problems on a site-specific basis but within a
    watershed context. The program is flexible in that it does not
    prescribe specific solutions. Instead, the local parties involved
    determine remedies. Under the Section 319 program, The Nature
    Conservancy and its partners have implemented science-based solutions
    for nutrient and sediment problems in some of the rivers and streams in
    which we are working. We have also increased public investments by
    matching resources and using the funds to leverage other private
    contributions.
        The Nature Conservancy supports an appropriation of $300 million
    under the State and Tribal Assistance Grants Account and an
    appropriation of $17 million under the Environmental Programs and
    Management account for the Section 319 program. These recommendations
    reflect increases above the President's request by $50 million and
    $100,000, respectively.
        While the Conservancy is appreciative of Federal funding
    constraints for discretionary programs, we believe the magnitude of
    nonpoint pollution warrants increased appropriations in this area. The
    additional resources to the Section 319 program will enable states to
    complete their comprehensive management plans and target money to local
    projects of importance. Additional resources could also be used to help
    fund monitoring activities, which would enable specific projects and
    tools to be evaluated for their effectiveness. This is an area in which
    resources are drastically lacking.
    Coastal watersheds program, including the national estuary program
        Shallow-water habitats such as estuaries, coral reefs, mangroves
    and seagrass beds are important to the nation's economic, environmental
    and social well being. They provide habitat for various life stages of
    important plants and animal species, including threatened and
    endangered species and those having commercial or recreational value.
    They also harbor species that filter pollutants from water, control
    sedimentation, and protect against shoreline damage and floods. The
    ability of these systems to perform these functions, however, is
    increasingly being curtailed by human activities.
        The Nature Conservancy is working to better understand the
    connections among terrestrial, riverine and marine systems on an
    ecological as well as sociological basis. We are identifying specific
    sites and biological endpoints to conserve, assessing the threats to
    these targets, and working with local partners to implement
    economically viable solutions for the communities affected. Similar
    work is being performed at the 28 demonstration sites listed under the
    National Estuary Program, which is administered under EPA's Coastal
    Watersheds Program.
        The Nature Conservancy recommends an appropriation of $20 million
    under EPA's Environmental Programs and Management account for the
    Coastal Watersheds Program in fiscal year 2001. This recommendation
    reflects a $3.9 million increase above the President's request. The
    increased funds will provide much needed support for the base
    operations of the 28 demonstration sites under the National Estuary
    Program. The Conservancy, however, recommends that some of the
    additional funds be used to support other local coastal watershed
    activities, beyond the 28 estuaries, that are recognized by states as
    important conservation and restoration areas.
    Wetlands protection program
        Like the nation's riverine and coastal systems, wetlands harbor
    significant biodiversity. They are vital to numerous plants and
    animals, including those that are threatened and endangered like the
    whooping crane, salmon, and Florida panther. They also provide
    important services to humans: natural products for consumption,
    increased water quality, flood protection and shoreline erosion
    control, and recreational and educational opportunities. Despite these
    important values, more than half of the nation's wetlands has vanished.
        To stop these losses, a number of Federal and state protections
    have been put in place. Often, however, the attentions have focused on
    the numbers or acres of wetlands saved instead of their functional
    value. We wish to commend EPA in its efforts to shift attention toward
    the importance of the functional value of wetlands in addition to their
    sheer quantity.
        We believe the Agency's work with states and others to develop
    biological assessment tools has been especially important. Biological
    assessment tools are used to evaluate the ecological health and
    condition of a wetland, diagnose particular stresses on wetlands biota,
    better define management approaches, evaluate success of restoration
    and protection activities, and develop related water quality standards.
    These tools will enable more informed decisions to be made about
    wetland uses and management.
        The Nature Conservancy recommends an appropriation of $18.5 million
    under the Environmental Programs and Management Account and $18 million
    under the State and Tribal Assistance Grants account for the Wetlands
    Protection Program for fiscal year 2001. Our recommendations reflect
    increases above the President request by $1.2 million and $3 million,
    respectively. The increased resources should be used to support public
    and private parties in their efforts to preserve and restore valuable
    wetlands. Further resources should also be used to expand the
    development and use of biological assessment tools.
    Clean water act state revolving fund program
        The Clean Water Act State Revolving Fund (CWASRF) is an important
    tool that states use to fund high priority water quality and wastewater
    treatment projects. While traditionally used to finance public
    wastewater treatment projects, some states are beginning to use their
    Funds to help finance public and private nonpoint source, wetlands, and
    estuary projects. This is a positive trend, given the magnitude of
    nonpoint source problems in freshwater and coastal systems. The loans
    from these Funds also allow entities like The Nature Conservancy to
    leverage resources to achieve bigger conservation gains.
        For example, the CWASRF made possible an $8 million loan to The
    Nature Conservancy as part of a $13.6 million project. The project
    involved the purchase of 12,362 acres of ranch land in California's
    Cosumnes River watershed. The purchase protects rare springtime
    wetlands called vernal pools from increasing development pressures from
    agriculture, mining, and urban growth. To keep the land on the tax roll
    while also achieving conservation goals, The Nature Conservancy plans
    to resell much of the property to a ranching company subject to
    conservation easements to be held by the Conservancy and the Natural
    Resources Conservation Service.
        The Nature Conservancy recommends an appropriation of $1.35 billion
    under EPA's State and Tribal Assistance Grants account for the CWASRF
    in fiscal year 2001. This recommendation reflects an increase of $550
    million above the President's request. It is based on the knowledge
    that EPA and third party organizations have each documented funding
    gaps for wastewater infrastructure needs and for nonpoint pollution
    control; however, the request is tempered by concern that other EPA
    programs that conserve biodiversity also face funding constraints.
    Finally, the Conservancy strongly encourages expanded use of the CWASRF
    for nonpoint source, wetland and estuary-related projects.
    Innovative community partnership program (formerly called the
            sustainable development challenge grant program)
        The EPA's Innovative Community Partnership Program provides
    financial support to communities acting through partnerships to develop
    place-based solutions to local environmental, economic, and social
    problems. The program is unique in that it supports projects that offer
    environmentally and economically sustainable solutions over the long-
    term to address interrelated pollution concerns such as land and water
    pollution. This program goes where other EPA programs do not. It
    provides critical funding for new community efforts, and it leverages
    public and private resources to achieve holistic responses to
    interrelated and complex problems.
        The Nature Conservancy supports the Administration's request of
    $4.8 million under the Environmental Programs and Management account
    for the Innovative Community Partnership Program. There is demonstrated
    demand for the program as evidenced by the numbers of proposals
    received by EPA under the former Sustainable Development Challenge
    Grant Program. For example, EPA received over 960 proposals totaling
    over $100 million in response to its fiscal year 1998 Request for
    Proposals. Assuming that only one-quarter to one-half of these
    proposals were viable would suggest a funding base of approximately $25
    to $50 million (assuming the same cost across proposals). Given the
    competitiveness of the program and associated costs to develop
    proposals, it seems reasonable to estimate need for this program based
    on the numbers of proposals previously received.
        We have learned in our nearly 50 years of work that the key to
    conservation success lies at the local level. Moreover, our ecoregional
    and watershed-based work tells us that multiple tools must be available
    to truly minimize the threats to specific ecological systems and that
    the tools must be applied with an understanding of the connectivity
    between terrestrial and aquatic systems. This requires working at
    multiple scales within a landscape and with a consideration of all
    elements of the environment. Few EPA programs enable support for such
    important interrelated environmental and community-based work. We,
    therefore, urge Congress to provide funding for this important program.

                                    CLOSING
        Thank you for the opportunity to submit these remarks. Adequate
    protection of the environment is critical in the fight to conserve
    biodiversity. We recognize that the challenge is a daunting one, but we
    would not be investing so heavily with our own resources if we did not
    believe the cause to be both worthwhile and achievable. We look forward
    to continuing our work with Federal agencies, state and local
    governments, non-governmental organizations, and the private sector to
    ensure the long-term protection and sustainable use of the environment
    toward the ultimate goal of preserving the diversity of life on Earth.
    We appreciate congressional support for the EPA programs that help make
    this important work possible.
                                     ______

      Prepared Statement of the Upper Mississippi River Basin Association

        The Upper Mississippi River Basin Association (UMRBA) is the
    organization created 19 years ago by the Governors of Illinois, Iowa,
    Minnesota, Missouri, and Wisconsin to serve as a forum for coordinating
    the five states' river-related programs and policies and for
    collaborating with federal agencies on regional water resource issues.
    As such, the UMRBA has an interest in the budget for the U.S.
    Environmental Protection Agency (EPA), particularly as it affects
    funding of water quality programs administered by the states.

                  STATE POLLUTION CONTROL GRANTS (SECTION 106)

        The UMRBA enthusiastically supports the $45 million increase that
    the Administration has requested for Section 106 State Pollution
    Control Grants in fiscal year 2001. Of that increase, the five states
    of the Upper Mississippi River Basin would receive a total increase of
    $6.17 million, bringing the five-state Section 106 grants total to
    $18.5 million in fiscal year 2001. These federal funds, in combination
    with the states' own fund match, support the core state water quality
    programs including water quality monitoring and related laboratory
    costs, surface and groundwater standards, effluent limit calculations,
    NPDES permit issuance, and compliance and enforcement actions.
        The 50 percent increase in Section 106 grant funding that each of
    the five basin states is scheduled to receive in fiscal year 2001 is
    critical. EPA is targeting this increase for state implementation of
    total maximum daily loads (TMDLs), including watershed
    characterization, training and data input support for computer modeling
    and related analyses, allocation of permissible loads, development of
    TMDL reports and plans, and public outreach and stakeholder
    involvement. The states have a variety of serious concerns about the
    TMDL guidance that EPA has recently proposed. Among other things,
    states' TMDL responsibilities have the potential to overwhelm state
    agency resources that are in many cases already strained. In fact, EPA
    and states are cooperatively developing a workload model in an effort
    to identify the gap in fiscal and staff resources for water program
    activities. This gap analysis has preliminarily determined that
    financial support for state programs must triple to adequately support
    the new TMDL requirements and meet the core program requirements.
    Regardless of how the most controversial provisions of EPA's TMDL
    guidance are ultimately resolved, TMDL planning and implementation
    promises to be a major challenge. Increases in funding to enable states
    to meet these challenges, as well as base program needs, is imperative.

                       CLEAN WATER STATE REVOLVING FUNDS
        The UMRBA is deeply concerned about the lack of support in the
    Administration's fiscal year 2001 budget proposal for the Clean Water
    State Revolving Fund (CWSRF), which helps meet wastewater
    infrastructure needs. In contrast to fiscal year 2000 funding of $1.35
    billion, the budget request for fiscal year 2001 is only $800 million.
    Under such a reduced funding level, the five states of the Upper
    Mississippi River basin would experience a total cut of roughly $74
    million or 41 percent.
        EPA is proposing to allow states to reserve up to 19 percent of
    their CWSRF capitalization grants to make grants for nonpoint source
    projects. Although this new provision is designed to offer states
    increased flexibility, in a climate of decreased funding, it would have
    the effect of further decreasing the number of wastewater
    infrastructure projects that can be supported and would decrease the
    ability of SRFs to provide a continual source of loan funding for all
    projects. The high demand for nonpoint source water pollution project
    funding underscores the need to reauthorize CWSRF funding and increase
    annual federal appropriations to $2 billion.

                   STATE NONPOINT SOURCE GRANTS (SECTION 319)
        The UMRBA strongly supports the Administration's request for a 25
    percent increase of $50 million for state nonpoint source grants under
    Section 319 of the Clean Water Act. Such a funding increase will
    translate into a total of approximately $36.5 million for nonpoint
    source pollution activities in the 5 states of the Upper Mississippi
    River Basin. Nonpoint sources are one of the major causes of pollution
    in this basin's rivers and streams, which drain the country's
    agricultural heartland.
                                     ______

      Prepared Statement of the Washington Drama Society, Inc. T/A Arena
                                     Stage

        Thank you for this opportunity for the Washington Drama Society
    Inc, T/A Arena Stage to submit a statement for the hearing record
    concerning fiscal year 2001 funding. The purpose of this statement is
    to:
      --Provide the Committee a brief history of Arena Stage, its community
            engagement programming in Southwest Washington, DC, and its
            renown as a national performing arts organization; and,
      --Present a $650,000 project proposal for your consideration under
            Title II--Department of Housing and Urban Development:
            Community Development Block Grants.

                                   BACKGROUND
        For five decades, Arena Stage has been the flagship for the
    American resident theater movement, bringing challenging works of great
    richness and diversity to communities both in Washington and abroad.
    The theater opened its doors at the corner of Sixth and Maine on the
    waterfront 40 years ago, and today more people attend Arena Stage than
    any other producing theater in the Washington region.
        Recently, after many months of analysis for a proposed relocation
    to Washington's downtown cultural and entertainment district, Arena
    Stage decided to remain at the waterfront. Although keenly aware of
    Arena's recognition as a national treasure, the Board of Trustees
    believes the theater is firmly rooted in Southwest, a community
    bulldozed and rebuilt by urban renewal in the 1960s.
        The theater's commitment to stay has been applauded by community,
    civic and business leaders who view Arena Stage as the ``good
    neighbor'' who can take the lead in sustainable community development.
    Therefore Arena is exploring ways in which it can help ensure that the
    area's disappointing urban development history is not repeated. Plans
    are to integrate Arena Stage's renovation and expansion plans into a
    comprehensive economic and cultural revitalization and development
    program in the Southwest, particularly in conjunction with the
    ``Waterfront Revitalization Endeavor,'' the recent partnership between
    the District of Columbia and the Federal Government to create a new,
    energized waterfront.
        Arena Stage's facilities plan will include: the renovation of its
    820-seat arena theater; renovation of its 514 seat proscenium theater;
    a new 200-seat black box theater; expanded administrative offices,
    public spaces with lobby, concessions, and ticketing facilities;
    additions for rehearsal studios, production shops, dressing rooms, and
    storage; acquisition of actor and artist housing; parking improvements;
    and the critical addition of classrooms and meeting spaces.
        Our renovation and expansion plans would not be complete without
    consideration for technological upgrading that enhances the total
    theater experience. Arena plans to transform its public and support
    spaces into a living, state-of-the-art interactive theatrical museum.
    Arena wants to offer its 300,000 visitors, which include students,
    adults, tourists and native Washingtonians, a complex, enriching
    experience off stage as well as on. Arena's technology and viewing
    galleries will serve as a model for putting the craft and magic of
    theatrical art no further away than a button, a touch-screen, or a
    tour.

                    COMMUNITY ENGAGEMENT AT SIXTH AND MAINE
        Community Engagement is the umbrella under which Arena's
    programming for education, audience enrichment and social outreach is
    managed. These three areas of arts concentration operate in tandem to
    create strong internal and external relationships between children and
    adults, patrons and artists, and the community and the Arena family at
    large through a series of programs that extend straight to the artistic
    core of the theater.
        At present, Arena serves over 27,000 students through its Student
    Matinee and DC Ticket Exchange programs. In addition to these
    performance incentives, we offer educational programming comprised of
    an intense four-month, in-class arts immersion program, master classes,
    performance intensives and a student playwrights project. All of these
    arts education programs are offered off-site and in partnership with
    local area elementary-, middle- and high schools. Our audience
    enrichment programming includes an array of meet-the-artist events, a
    demonstration/lecture series, and regular interactive audience
    dialogues. Living Stage Theatre Company, located at 14th and T Streets,
    NW, for over 30 years, is Arena's critically acclaimed social outreach
    initiative which has provided programming to help transform the visions
    that youth and adults have of themselves in relation to their community
    through creative empowerment.
        Renovation plans at Sixth and Maine pivot on our desire to better
    serve these students by expanding these community engagement
    activities. At present, no classrooms or meeting spaces exist on our
    main campus in the Southwest community. This frustrates the theater's
    strong desire to enrich our educational and social outreach services
    provided to Southwest area children and adults, especially given the
    reduced arts education programs in the schools. Community engagement
    activities could benefit from new and expanded on-site facilities. In
    addition to adding classroom and meeting room space in Arena's proposed
    new facility programming, duplicating the success of Living Stage
    Theatre Company in the Southwest community has become one of Arena's
    top priorities.

                   A MODEL FOR SOCIAL OUTREACH IN SOUTHWEST
        Living Stage was founded in 1966 and later moved to the corner of
    14th and T Streets, NW as Arena's professional social outreach program
    in the Shaw/Columbia Heights community of Washington, DC. Dedicated to
    the special needs of youth, and adults from under-served communities,
    Living Stage offers unique programs that integrate a deep respect and
    understanding for the needs of people living in difficult and sometimes
    dangerous circumstances with an equally deep appreciation for human
    creativity and the art of theater. Programs are intended to help
    audiences confront crucial social issues, explore creativity and
    imagination, and above all, build self-esteem and resiliency. By
    encouraging the imagination of their audiences, Living Stage seeks to
    empower them to express themselves and to gain the self-confidence to
    explore new solutions to real life problems.
        Living Stage has achieved an international reputation for artistic
    excellence and has been the recipient of numerous honors and awards for
    its programming success. Duplicating Living Stage's successful model in
    the Southwest is a natural segue for Arena as it assumes the mantel of
    leadership in the revitalization of the community in which it has
    operated its main campus for 40 years. In conjunction with community
    and business leaders and the Mayor's Office of Planning for
    revitalizing Southwest and the waterfront community, Arena will be
    exploring the merits of duplicating the Living Stage model at Sixth and
    Maine (or a site nearby,) and will examine the implications of its
    additional programming.

                         ARENA AS PARTNER AND NEIGHBOR
        Arena's initial planning and conceptual design for its overall
    renovation and expansion program has been conducted with a mindful eye
    towards both the theater's artistic mission and its responsibility as a
    ``good neighbor.'' By integrating our renovation and expansion planning
    into a comprehensive waterfront revitalization program, Arena looks
    forward to assuming a leadership role in energizing this historic
    community development program. In so doing, we will be fully supporting
    the March 22, 2000, Memorandum of Understanding (MOU) between the
    Federal and District of Columbia Governments which outlines the
    agreement of numerous departments and agencies ``to create a new
    partnership that will help attain a vision for the waterfront areas.''
    Arena's plans to work in concert with the parties identified in the MOU
    affirm our commitment to be ``of'' the community as well as ``in'' it.

                       FISCAL YEAR 2001 PROGRAM PROPOSAL
        Approximately $40 million must be raised from government,
    foundation, corporate and individual sources to successfully make the
    vision outlined above a reality for Arena Stage in the waterfront. But
    in recognizing the necessity, and in offering our pledge, to work in
    partnership with the District of Columbia and the Federal Government
    for the Waterfront Revitalization Endeavor, it becomes apparent that
    our planning, design and construction schedule will be contingent upon
    the City's and the Federal Government's timetables. These timetables
    and the expanded planning efforts will create extra costs for Arena.
        Arena Stage therefore requests that $650,000 be allocated in the
    2001 fiscal year Appropriations Budget for the planning, conceptual
    design and project development portion of the costs for Arena Stage's
    renovation and expansion project--the planning phase being the first
    essential, and most costly, step in the process. Funding to support
    these one-time non-recurring expenses will also assist us in addressing
    a substantial amount of our building's deferred maintenance as well as
    our growing administrative, technical production, audience and
    educational needs.

                                   CONCLUSION
        Artistic Director Molly Smith's vision, which I fully support, is
    to produce huge plays of all that is passionate, exuberant, profound,
    deep and dangerous in the American spirit by creating a vibrant
    emotional and intellectual theatrical landscape through storytelling
    and through community engagement, civic dialogue and genuine
    communication. Arena's decision to stay in the community and to
    renovate and expand its main campus facility at its present site is not
    only an affirmation by our Board of Trustees and staff to support this
    vision, but is also a strong statement about Arena's commitment to
    neighborhood preservation and restoration.
        As an anchor institution and stakeholder in what happens in
    Southwest, Arena recognizes its role as an educational and social
    outreach resource as well as a contributor to the enhancement of
    visitor participation in cultural arts activity along Washington's
    greatest natural asset, its waterfront. Assuring a bright and vigorous
    future for Arena Stage means assuring a bright and vigorous future for
    the shoreline neighborhood in which it is firmly fixed.
        Funding to get our project off the ground through a Congressional
    appropriation in the Fiscal 2001 Budget is a vital first step if Arena
    Stage is to realize its full potential as a partner in the Waterfront
    Revitalization Endeavor.
        Thank you again for this opportunity to submit this statement for
    the hearing record.
                                     ______

        Prepared Statement of the Northwest Indian Fisheries Commission

        Mr. Chairman, and Honorable Members of the Committee, I am Billy
    Frank, Chairman of the Northwest Indian Fisheries Commission (NWIFC)
    and on behalf of the tribes in the state of Washington I would like to
    thank you for the opportunity to provide testimony concerning the
    Environmental Protection Agency's (EPA) fiscal year 2001
    appropriations.
        We are specifically requesting that you earmark $700,000 within
    EPA's Clean Water Act Section 104(b)(3) program for the tribes in
    Washington State, through the Northwest Indian Fisheries Commission,
    for the purpose of maintaining an existing and successful mechanism for
    inter-governmental cooperation. Further, we request that Congress
    directs the agency to incorporate this amount into NWIFC and tribal
    base level funding for future years.
        The purpose of our request is to continue implementation of the
    model Coordinated Tribal Water Quality Program (CTWQP) for twenty-six
    participating tribes and tribal organizations in the state of
    Washington for fiscal year 2001. This program, has provided a forum for
    continuous and meaningful communication between tribal, state and
    federal agencies for a decade. Strong congressional support for
    implementation of this tribal initiative began in 1990, and is present
    today.
        However, we are losing ground in the implementation of these
    efforts. In recent years Congress has been very responsive to tribal
    environmental protection issues through unprecedented increases in the
    Environmental Protection Agency's General Assistance Program (GAP) for
    tribes. Paradoxically, the reality here in EPA Region 10 is that the
    number of tribes eligible for GAP funding far outpaces the availability
    of dollars. In fact, during this remarkable time of growth in EPA
    Indian Programs, the tribes in the state of Washington are actually
    experiencing a reduction in their program dollars. Erosion of base
    level funding is jeopardizing the federal government's long-term
    investment of this efficient and effective water quality protection
    program.
        The intent of this testimony and funding request is to bridge the
    shortfall in these EPA funds and maintain this important and successful
    tribal initiative by:
      --Stabilizing the EPA base funding level at each of the twenty-six
            participating tribes; and
      --Maintaining centralized program coordination at the Northwest
            Indian Fisheries Commission.
        Support for this model tribal initiative is timely, as it
    implements the goals and objectives of the President=s Clean Water
    Action Plan. It is an existing program that centers around watershed-
    based water quality protection by building partnerships, and fostering
    inter-jurisdictional cooperation. It is a critical component in the
    protection and restoration of our northwest salmon and shellfish.
        Justification for this funding request is based on:
      --Legal rights and obligations of the federal government to protect
            the treaty-reserved rights of the tribes;
      --The United States' trust responsibility to protect the health and
            environment of the tribes on a government-to-government basis;
      --Cost effective use of a cooperative inter-governmental strategy to
            accomplish national clean water goals; and,
      --The minimization of conflict between multiple jurisdictions who
            manage water quality.
        To assist the Committee Members, I would like to summarize
    background relevant to our request.

                                   BACKGROUND
        The NWIFC request is made on behalf of our nineteen (19) member
    treaty fishing tribes, the Hoh, Chehalis, and Shoalwater Bay tribes in
    western Washington, and the Yakima Indian Nation, Colville
    Confederated, Spokane, and Kalispel Tribes in eastern Washington. The
    funding request is to continue implementing the model Coordinated
    Tribal Water Quality Program that began in 1990.
        Washington State has been blessed with bountiful rivers and
    streams. Five species of Pacific salmon and three species of anadromous
    trout use streams in the state of Washington during the fresh water
    stages of their life cycles. Historically, there were ample supplies of
    fish for ceremonial, subsistence, commercial and recreational purposes.
    Old growth conifer removal, riparian zone impacts, farming activities,
    and channelization of the streams has reduced the productive capacity
    of these streams to extremely low levels. Currently, there are Puget
    Sound salmon stocks listed under the Endangered Species Act.
        In 1979, the United States Supreme Court re-affirmed the treaty
    tribes--right to catch half of the harvestable number of anadromous
    fish passing through tribal usual and accustomed areas. In 1980, the
    Federal District Court held that the United States and the state of
    Washington must not permit degradation of fish habitat which would
    diminish the treaty harvest right. This decision specifically included
    degradation by point and non-point pollution. The federal courts have
    recognized that protection of water quality and other attributes of
    fish habitat are necessary to secure the Constitutionally-protected
    rights of the tribes to harvest fish.
        The sovereign authorities of the Tribes and the legal principles
    enunciated in United States v. Washington and other federal court
    decisions support tribal involvement with both on and off- reservation
    environmental issues. The federal court decisions recognized the tribes
    as Aco-managers@ of the fish resource and water quality in our state.
    As co-managers in Washington, the tribes must have the resources to
    adequately participate in environmental protection programs.
        The EPA Indian policy (1984) of working with federally recognized
    tribes on a government-to-government basis concerns more than 375
    Indian tribes in the lower 48 states which control more than 52 million
    acres of land base. In our state, tribal reservations make up
    approximately six percent (6 percent) of the state of Washington. Our
    tribes have also retained usual and accustomed fishing grounds that
    include most of the state of Washington.
        The combined area of Indian reservations nationally is larger than
    all of New England, yet EPA now devotes only a tiny fraction of its
    personnel and funds to environmental protection for the tribes. This is
    clearly a discriminatory prioritization of federal funds. On a national
    level, tribal reservations represent three percent (3 percent) of the
    land base of this nation. Although the EPA has worked closely with the
    states to implement adequate environmental programs, little has been
    done, until recently, to accomplish the same for the tribal
    governments. Indian tribes are over two decades behind the states both
    in resources received from the EPA and in technical assistance provided
    by the EPA in developing tribal water program offices. A Afront end@
    investment will promote cooperation and increased tribal involvement in
    environmental protection, as has been the case between the EPA and
    state governments for the past 20 years. The Coordinated Tribal Water
    Quality Program enables and fosters cooperative inter-jurisdictional
    partnerships.
        We recognize, support, and appreciate the successful efforts that
    have been made to improve EPA Indian Programs and tribal funding. Our
    request for additional funding is intended to stabilize existing
    program implementation activities. Clearly, a means must be found to
    support the long term funding of tribal programs that seek to protect
    tribal treaty rights, their waters, and their peoples, or the efforts
    being made by EPA will not continue to be successful.

                               TRIBAL/STATE ROLES
        Beginning in 1990, the state of Washington supported tribal
    involvement in environmental protection, both off and on-reservation.
    The state is committed to work with the tribes on a government-to-
    government basis as Aco-managers@ of the water resource in the
    implementation of this program. The federally recognized Indian tribes
    in our region have a long legacy of working cooperatively with the
    state of Washington. The intent to foster that kind of relationship was
    articulated in the Centennial Accord with Governor Gardner in 1989 and
    was recently re-affirmed with Governor Locke in the 1999 Leavenworth
    Agreement. The water quality protection efforts supported by EPA
    funding are part of sustaining that kind of inter-governmental
    cooperation.
        The Coordinated Tribal Water Quality Program, an EPA/Tribal
    partnership, has generated successful models of state/tribal inter-
    jurisdictional cooperation. Examples of these models are:
      --the Tribal Water Quality Standards Template, which encourages
            inter-governmental uniformity and coordination of water quality
            management, and
      --the Clean Water Act 19303(d) Cooperative Management Program, which
            provides a forum for state/tribal government-to-government
            relations throughout the CWA 19303(d) listing and
            implementation process.
        The tribes must be part of the solutions to prevent and control
    water pollution in the state of Washington. The tribes must participate
    in these activities to protect their governmental interests and treaty-
    protected fishing rights. In this time of existing and pending listings
    of salmon stocks under the Endangered Species Act, neither we, nor the
    resource, can afford to lose programs integral to our inter-
    governmental cooperative watershed program. The Coordinated Tribal
    Water Quality Program is part of protecting our nation's environmental
    heritage.
        For the past decade, Congress has recognized and supported the
    Coordinated Tribal Water Quality Program by appropriating funding to
    maintain its operation. Even with the increased EPA General Assistance
    Program tribal set aside, tribes in the state of Washington are in
    danger of losing this successful tribal water quality initiative. This
    model program demonstrates how tribes can develop environmental
    programs and work with EPA to realize its long-range objective of
    including tribal governments as partners in decision-making and program
    management of tribal lands and resources.
        We appreciate the difficulty Congress is facing in making decisions
    for this next fiscal year. In the case of the EPA, Congress and the
    Administration will probably direct their resources to address those
    areas of highest risk to human health and the environment. Therefore,
    we want to reiterate that tribal reservations and protection of their
    treaty resources have not been adequately addressed for the past twenty
    years and thus represent the highest of risks to this nation. Failure
    to acknowledge this would represent environmental genocide to Native
    Americans.
        Sufficient and permanent funding is necessary to continue the
    tribal cooperative program. Certainty of funding is necessary for the
    tribes to hire permanent and professional staff to implement this
    program. Without an ongoing investment by Congress much of the good
    that has been accomplished to date will be lost.
        Please consider our request for $700,000 for the Washington State
    Tribal Water Quality Initiative. Once again, thank you for the
    opportunity to provide testimony. Thank you also for your support in
    developing a national model, which demonstrates the ability of tribal
    governments to address environmental protection priorities through
    cooperative watershed processes with state and local governments.
        Thanks to this Committee, we are making significant progress, and
    initiative is being supported at all levels. We hope that you and the
    Committee will continue to look favorably on our request.
                                     ______

       Prepared Statement of the Mickey Leland National Urban Air Toxics
                                Research Center

        The Mickey Leland National Urban Air Toxics Research Center is
    requesting a $2.5 million appropriation for fiscal year 2001 to
    continue the air quality research on air toxics in urban areas as
    directed by the U.S. Congress. The Leland Center is a 501(c)(3)
    institution, which was authorized by Congress in the Clean Air Act
    Amendments of 1990 (Title III, Section 301 (p)).
        The Leland Center has been operational for seven years and receives
    EPA assistance awards based upon Congressional appropriations. We
    leverage these federal funds with private sector funding, with
    industrial firms being the major contributors. NUATRC has a small staff
    and utilizes an administrative services agreement with The University
    of Texas-Houston Health Science Center in the Texas Medical Center
    complex. This arrangement allows the Leland Center to take advantage of
    the world-renowned scientific community at The University of Texas and
    the Texas Medical Center, as directed by Congress.
        The Leland Center's mission is to sponsor and direct sound, peer-
    reviewed scientific research on the human health effects of air toxics
    in urban populations. It is an integral part of the air toxics strategy
    designed by Congress to assess the risks posed by these materials in
    susceptible groups of individuals living in areas where air quality
    concerns have been expressed by both medical and scientific experts and
    urban community leaders.
        The NUATRC is governed by a nine-member Board of Directors,
    appointed pro rata by the Speaker of the U.S. House of Representatives,
    the Majority Leader of the U.S. Senate, and the President of the United
    States. In turn, the Board appoints a 13-member Scientific Advisory
    Panel, selected from national research institutions, academic centers
    and private sector scientists. The current membership of both the Board
    of Directors and the Scientific Advisory Panel is carried in Attachment
    1.
        The NUATRC's research program has grown significantly over the past
    several years to the point where nine research projects are being
    carried out, primarily focused on human personal exposures to air
    toxics, and more recently, on the non-cancer health effects of selected
    air toxics. We are planning a major initiative in 2000 to explore the
    role of certain air toxics in asthma exacerbation in children. Our work
    on personal exposures has gained national recognition in the scientific
    and private sector communities and the U.S. Environmental Protection
    Agency, as witnessed by a major scientific workshop just concluded in
    early March, in which recent progress and future research planning in
    the air toxics personal exposure research field were addressed. The
    agenda for this meeting is carried as Attachment 2 to this testimony.
    The workshop entitled, ``The Role of Human Personal Exposure Assessment
    in Determining Health Impacts of Urban Air Toxics'', was attended by
    personal exposure experts, both nationally and internationally. It
    advanced the knowledge base on such studies and pointed to new research
    directions to better understand the human personal exposure/health
    effects area.
        We believe that the Center's research program, as discussed below,
    meets Congressional intent to gather sound scientific data to address
    the public health risk from air toxics in urban areas, to allow more
    cost-effective risk strategies and management by federal and state
    regulators.

                            NUATRC RESEARCH PROGRAM
    Personal Exposure
        The NUATRC will soon complete two major air toxics research
    studies, one at the Environmental and Occupational Health Sciences
    Institute (EOHSI) in New Jersey, and the other at Columbia University
    in New York City.
        Adults and children are included in the EOHSI study, which is
    testing the hypothesis that outdoor sources of air toxics influence
    indoor air and personal exposures in urban areas. The results suggest
    that indoor air plays an important role in daily human exposures to air
    toxics and indeed may be the predominant exposure route. Such data may
    cause a rethinking of the regulatory and risk management strategies
    employed for these materials. This work represents the NUATRC's first
    major field study, and has drawn considerable interest from the
    regulators and the regulated community. One hundred homes each in
    Elizabeth, New Jersey, Houston, Texas, and Los Angeles, California are
    included in the EOHSI work. Volatile hydrocarbons (VOC), aldehydes and
    air toxics on fine particles are the major targets of the EOHSI study.
        The Columbia University study will contrast air toxics (VOC's,
    aldehydes and air toxics on fine particles) in two urban high-school
    populations in New York City and Los Angeles, with the important
    variables including city-specific and seasonality differences. This
    study is expected to provide descriptive exposure data for minority
    children in the central core neighborhoods in the two largest urban
    areas in the U.S. Early results suggest similar findings to those in
    the EOHSI study. The outcomes of both studies are eagerly anticipated
    by the scientific community. EPA's directions for future research and
    regulatory control strategies are dependent to a large degree on the
    relative indoor and outdoor exposures to air toxics experienced by
    people living in urban areas.
        Another important exposure initiative is the NUATRC's participation
    in the Center for Disease Control/National Center for Health
    Statistics' NHANES Program (National Health and Nutrition Examination
    Survey). For the first time, a non-federal entity, NUATRC, is involved
    in gathering data on personal exposures to air toxics in a
    representative sample of the U.S. population, to augment the public
    health data (blood pressure and content, TB test, etc.) being obtained
    in this massive federal study. This is the first time that NHANES will
    include environmental data on personal exposures to selected air toxics
    in a statistically meaningful number of U.S. citizens in a nationwide
    distribution. Coupling these field exposure data with CDC/NCHS data on
    health parameters of the same individuals offers real promise in
    addressing the impact of air toxics on public health.
    Health Effects
        In the health effects area, NUATRC has started two new studies to
    address the role of air toxic metals on fine particles in respiratory
    and cardiovascular responses. These studies, at Harvard and Washington
    State Universities, will hopefully allow us to move directly into more
    comprehensive exposure and health outcome research programs. The work
    at Harvard is directed at relationships between occupational exposures
    of boilermakers and cardiopulmonary problems with the goal of moving
    further toward similar environmental exposures. The health studies at
    Washington State University are environmentally-oriented toward
    respiratory effects in the population from exposure to air toxics
    metals. Both are epidemiological studies from which future personal
    exposure/health effect field studies can be developed.
    Particle Monitor for Air Toxics
        The Leland Center is currently funding the development of a new
    generation of particulate matter (PM) personal monitor to improve our
    ability to assess personal exposure to the air toxics that are carried
    on fine particulate matter. These include metals and semi-volatile
    organics, many of which are suspected of presenting health risks. This
    new monitor and pump system will take two years to develop and will be
    lightweight, user-friendly, and technically advanced. The Leland Center
    is the first institution to sponsor this type of technology development
    for personal exposure studies. Once completed, the new monitor will
    enable larger scale population exposure studies, will be a major
    contribution to particulate matter research and will enable air toxics
    risk assessments to be more accurate and realistic. The initial phase
    of the air toxic particle sampler development will be conducted in
    2000, with completion in 2001.
    Small Grants
        The Leland Center has also undertaken two small grants for new
    investigators, which foster the development of short-term research
    projects on air toxic exposures and health effects by ``new''
    investigators; i.e., those scientists without long research experience
    and who perhaps might not have resources to carry out larger studies,
    but whose ideas and community involvement may prove useful. These
    studies are usually less expensive than full research designs, but will
    allow testing of new research hypotheses in a cost-effective manner.
    One such study at the University of Illinois at Chicago deals with
    polycyclic hydrocarbons in indoor environments. The other program at
    Johns Hopkins University is directed at hydrocarbon air toxics in an
    industry-impacted urban community in Baltimore.
        The most recent research initiative that the NUATRC is planning is
    an effort to understand asthma exacerbation in school children as a
    function of the presence and level of oxygenated air toxics in the
    atmosphere. We are seeking funding from other federal agencies and
    foundations for support of this effort, which springs from an earlier
    NUATRC investigation which concluded that oxygenated hydrocarbons and
    metals on fine particles were the most likely air toxics to impact and
    worsen asthma. As we all realize, asthma is a most important emerging
    respiratory disease, especially among inner city children. We are not
    including support for this study in this appropriations request.

                          ALTERNATIVE RESEARCH SUPPORT
        In developing its research program, NUATRC interacts with other
    research organizations and public and private institutions to ensure
    that the Leland Center's research builds upon previous research, does
    not duplicate research of others, and leverages both financial and
    scientific resources. NUATRC has interacted with the National Center
    for Health Statistics, the National Institute for Environmental Health
    Sciences, the Environmental Protection Agency, the Health Effects
    Institute, and the Center for Air Toxics Metals Research and a number
    of corporations to assess critical research needs.
        NUATRC has made a priority of leveraging its research monies by
    working with other funding sources and institutions, to allow more
    comprehensive and cost-effective studies. For example:
      --Research at EOHSI, after being initiated by NUATRC, is now funded
            in part by the Health Effects Institute in Cambridge,
            Massachusetts
      --The NHANES Program is funded primarily by the National Institutes
            of Health and the National Center for Health Statistics
      --The health studies at Harvard and Washington State Universities are
            also being leveraged by support from NIEHS and EPA,
            respectively.
      --The research initiative on asthma and air toxics is part of a
            large, comprehensive air quality study to be funded primarily
            by U.S. EPA.
        NUATRC believes strongly that bringing additional resources, both
    scientific and financial, to these research investigations, allows
    federal resources to be used more cost-effectively, and brings
    additional expertise to the design and interpretation of the results.

                                 ADMNISTRATION
        The Leland Center operates with a very small administrative staff
    of four full-time employees, one consultant, and important in-kind
    support from The University of Texas Medical School. Our staff are all
    employees of The University of Texas, which obviates the need for
    considerable personnel support and allows us the benefit of residence
    at The University, providing important scientific and administrative
    benefits, including access to Medical School and School of Public
    Health faculty. We are proud of the high rate of monies spent directly
    on research compared to administrative costs. We have enjoyed a ratio
    of about 70:30, which is greater than many similar institutions, and we
    continue to strive for additional economies.

                                     BUDGET
        Our request for $2.5M in appropriated monies in fiscal year 2001 is
    based on the following items:

    Population-based air toxics exposure..........................  $400,000
    Collaboration with NHANES.....................................   125,000
    Health Effects Research.......................................   400,000
    Particle Monitor for Air Toxics...............................   150,000
    Small Grants/Workshops........................................   175,000
    Personal Monitor Validation Studies...........................   150,000
    Administration................................................   750,000
    Emergency Response............................................   150,000
    Exploratory Research..........................................   200,000
                        --------------------------------------------------------------
                        ____________________________________________________

          Total................................................... 2,500,000

                                     ______

                   Prepared Statement of Texas A&M University

        Mr. Chairman and members of the Committee, I am Ed Hiler, Vice
    Chancellor for Agriculture and Life Sciences in the Texas A&M
    university system. I appreciate the opportunity to appear before you
    today, to describe a few exciting research projects we have underway,
    and to ask for your support for continued federal funding. New
    technology is the life blood of American agriculture. With the 1996
    Farm Bill and resulting phase down in federal farm programs, it is
    imperative that research continues providing a technological
    underpinning for agriculture. Today, I will describe several examples
    of how we can provide this underpinning.

       CONSORTIUM FOR AGRICULTURAL SOILS MITIGATION OF GREENHOUSE GASES
                                    (CASMGS)
        A consortium of eight Land Grand universities, federal agencies,
    and a private-public research laboratory seeks funds to develop and
    verify scientifically defensible methods to measure and estimate the
    effects of soil conservation and crop management practices on carbon
    sequestration in agricultural soils. The consortium will also assess
    the economic and environmental consequences of programs designed to
    sequester atmospheric carbon dioxide in agricultural soils. We are
    requesting funding of $5,000,000 from EPA for this project for fiscal
    year 2001.

               AGRICULTURE AND THE ENVIRONMENT--LANDSCAPE ISSUES
        The focus of the Texas Institute for Applied Environmental Research
    is on agriculture and the environment. Funding for this initiative will
    be used to continue development of (1) conceptual approaches that can
    be used to resolve environmental problems in agriculture while
    maintaining the competitiveness of the industry, (2) modeling tools
    that analyze policy alternatives to determine their effectiveness in
    achieving environmental objectives and their economic impacts on the
    targeted industry, and (3) implications of smart growth initiatives on
    production agriculture. We are requesting funding for this project from
    EPA at $750,000 for fiscal year 2001.

                            AGRICULTURAL AIR QUALITY
        The Texas A&M University System and the University of California at
    Davis propose to establish a national program for research and
    technology transfer of methodologies that can be used by agricultural
    producers, processors, and managers of Concentrated Animal Feeding
    Operations to economically comply with air pollution regulations
    mandated by the Federal Clean Air Act (FCAA) and required by State Air
    Pollution Regulatory Agencies (SAPRAs). The goal of this initiative
    will be a reduction of public exposure of pollutants from agricultural
    operations while minimizing the economic burden on managers of
    agricultural operations. We are requesting funding for this project
    from EPA at $1,000,000 for fiscal year 2001.

                        NASA TECHNOLOGY FOR AGRICULTURE
        Appropriations are sought to adapt existing NASA technologies to
    create products and services that will increase the profitability and
    sustainability of U. S. agriculture. A cooperative relationship has
    been established among NASA, the Texas A&M University System, and
    agribusinesses to identify critical problems limiting the profitability
    of agricultural industries, determine whether NASA has developed
    technologies that could be used to overcome those problems, adapt
    appropriate NASA technologies to the needs of agriculture, and assist
    private enterprise to commercialize adapted technologies. We are
    requesting increased funding for NASA to support this project at
    $5,000,000 for fiscal year 2001.

    ECONOMICALLY & ENVIRONMENTALLY SOUND RICE PRODUCTION AND MANAGEMENT IN
                                    THE U.S.
        Privately held rice lands provide several societal and ecological
    benefits. Rice has an annual impact of about $13 billion on the economy
    of the U.S., and represents the economic, social, and environmental
    underpinning of major sections of the Gulf Coast. Rice production in
    these soils provides several environmental benefits, including wildlife
    habitats, water filtration through wetlands, and flood protection.
    Federal support is needed to identify and place values on ecological
    services provided by rice production and to design and evaluate
    technologies and policies that increase these public benefits while
    improving the industry's economic viability. We are requesting funding
    from EPA for this project at $1,000,000 for fiscal year 2001.
                                     ______

                     Prepared Statement of American Rivers

        Mr. Chairman and Members of the Appropriations Subcommittee on VA-
    HUD-Independent Agencies, on behalf of more than 450 conservation and
    recreation organizations, community groups, religious affiliations,
    companies, and other groups across the country, American Rivers would
    like to thank you for the opportunity to testify.
        We urge you to support increased funding for Environmental
    Protection Agency's Office of Water programs that play a critical role
    in the health of many rivers across the nation and the communities that
    depend upon them. Specifically, we urge you to increase funding for
    Total Maximum Daily Load provision of the Clean Water Act and the Fish
    Passage Workgroup.
        Total Maximum Daily Loads (TMDLs).--We urge you to create a $400
    million line item in your appropriation for EPA's State Program
    Management Grants (Section 106 of the Clean Water Act) for grants to
    states for TMDL development and implementation in fiscal year 2001. The
    TMDL provision is one of the most powerful tools the federal government
    has to reduce water pollution. The TMDL provision--unique because it
    addresses pollution regardless of its source--requires states to
    identify and rank waters that do not meet or are not expected to meet
    state water quality standards and to develop cleanup plans (TMDLs) to
    correct the water quality violations.
        According to EPA, there are on average at least 300 impaired water
    bodies in every state in need of a TMDL. To meet this need, Congress
    should create a $400 million line item for grants to states for TMDL
    development and implementation to help create an accounting system for
    watershed restoration across the nation.
        Fish Passage Workgroup.--We urge you to appropriate sufficient
    funds for the Chesapeake Bay Program so that EPA can allocate $800,000
    for the Fish Passage Workgroup. This program works to reopen the Bay's
    blocked tributaries to provide access to important habitat for
    migratory fish. Some 2,500 blockages on the Bay's tributaries, along
    with excessive harvesting, have reduced annual harvests of Bay shad
    from 17.5 million to less than 2 million pounds in this century,
    crippling an important seasonal industry.
        The Fish Passage Workgroup.--which includes members from the
    District of Columbia, Maryland, Pennsylvania, Virginia, EPA, the
    National Marine Fisheries Service, and the Chesapeake Bay Foundation--
    has made great strides towards restoring fish populations by
    constructing fish passage facilities; breaching, notching, or removing
    dams; and rebuilding highway culverts. Restoring the Chesapeake Bay's
    fisheries will have a significant economic impact on the region.
    According to the Fish and Wildlife Service, healthy fish populations in
    the Bay and its tributaries would generate $10-30 million a year in
    shad sport fishing alone. We urge you to appropriate sufficient funds
    for the Chesapeake Bay Program so that EPA can allocate $800,000 for
    the Fish Passage Workgroup.
                                     ______

          Prepared Statement of the American Public Power Association

        The American Public Power Association (APPA) is the service
    organization representing the interests of the more than 2,000
    municipal and other state and locally owned utilities throughout the
    United States. Collectively, public power utilities deliver electric
    energy to one of every seven U.S. electric consumers (about 45 million
    people) serving some of the nation's largest cities. The majority of
    APPA's member systems are located in small and medium-sized communities
    in every state except Hawaii. We appreciate the opportunity to submit
    this statement concerning fiscal year 2001 appropriations for programs
    under this Subcommittee's jurisdiction.

                           CLEAN AIR PARTNERSHIP FUND
        APPA supports funding of the Clean Air Partnership Fund at the
    level of $85 million in fiscal year 2001 (Administration's request). As
    locally-owned providers of electricity to nearly 45 million consumers
    across the country, we are strongly interested in pursuing projects
    that benefit the environment. Along with the states, local governments,
    business and the environmental community we lend our enthusiastic
    support for this program that offers an innovative approach to
    addressing multi-pollution problems in a cost-effective way. The fund
    would help finance environmental technologies and environmentally
    related energy technologies and programs.
        We believe at an adequately funded level, the Clean Air Partnership
    Fund could become a significant incentive available to locally owned,
    not-for-profit electric utilities to make new investments in renewable
    and clean energy projects. Such projects have the potential of
    providing important economic and environmental benefits to the
    communities served by the municipal utility. Along with significant air
    quality benefits resulting from accelerated use of emissions-free
    energy sources, new jobs are created each time these technologies are
    deployed.
        Among other projects, we would look to the Fund to spur development
    of landfill gas-to-energy projects. These projects are valuable in
    reducing methane gas emissions. As municipally owned electric
    utilities, we have unique opportunities to partner with cities and the
    landfills they operate.

                              GREEN LIGHTS PROGRAM
        The Green Lights program encourages use of energy efficient
    lighting to reduce energy costs, increase productivity, promote
    customer retention and protect the environment. Program partners agree
    to survey lighting in their facilities and to upgrade it, if cost-
    effective. Environmental benefits result from more efficient energy use
    and from reductions in emissions of carbon dioxide, sulfur dioxide and
    nitrogen dioxide, thus improving air quality. EPA provides program
    participants public recognition and technical support. Both large and
    small APPA member systems participate in this program including City
    Utilities of Springfield, MO; Concord Municipal Light Plant, MA; City
    of Georgetown, TX; Grant County Public Utility District, WA; Gray's
    Harbor County PUD, WA; Greenville Utilities Commission, NC; Indiana
    Municipal Power Authority, IN; Los Angeles Department of Water & Power,
    CA; Mason County PUD, WA; New York Power Authority, NY; Norwood
    Municipal Light Department, MA; Omaha Public Power District, NE;
    Orlando Utilities Commission, FL; Port Angeles City Light Department,
    WA; Puerto Rico Electric Power Authority, PR; Sacramento Municipal
    Utility District, CA; City of St. Charles Electric Utility, IL; Salt
    River Project, AZ; Virgin Islands Water & Power Authority, VI;
    Springfield Utility Board, OR, and Taunton Municipal Lighting Plant,
    MA.

                              ENERGY STAR PROGRAMS
        A number of EPA's Energy Star programs build on the successes of
    Green Lights. These important EPA programs are examples of successful
    public/nonpublic partnerships that promote the use of profitable,
    energy-efficient technologies as a way to increase profits and
    competitiveness while at the same time minimizing pollution. They
    include Energy Star Buildings, the Energy Star Transformer Program,
    Energy Star office equipment and the Residential Energy Star Program.
    APPA member systems participate in and support EPA's Energy Star
    efforts.

                       LANDFILL METHANE OUTREACH PROGRAM
        The Landfill Methane Outreach Program provides environmental
    benefits by encouraging utilities to make use of landfill gas as an
    energy source. Several APPA member systems participate in this program,
    including Illinois Municipal Electric Agency, IL; Jacksonville Electric
    Authority, FL; Emerald People's Utility District, OR; Los Angeles
    Department of Water and Power, CA, and Orlando Utilities Commission,
    FL. Utilities voluntarily agree to take advantage of the best
    opportunities to use landfill gas in generating power. EPA recognizes
    and publicizes the utility's efforts and provides technical assistance.
    One of the success stories cited by EPA occurred with APPA member
    system Emerald People's Utility District in Eugene, OR. This public
    power utility worked collaboratively with the State of Oregon, Lane
    County officials and a private investment company to develop a 3.4 MW
    plant at the Short Mountain Landfill. EPUD's general manager says
    landfill energy recovery is like ``turning straw into gold,'' providing
    additional revenue to EPUD as well as a fee to the county.

                     COUNCIL ON ENVIRONMENTAL QUALITY (CEQ)
        APPA supports the Administration's fiscal year 2001 budget request
    of $3,020,000 for the Council on Environmental Quality (CEQ). As units
    of local government APPA member utilities have a unique perspective on
    environmental regulation. Public power utilities and others from
    industry have experienced a general lack of consistency in federal
    environmental regulation. While additional layers of government should
    be avoided, a central overseer can perform a valuable function in
    preventing duplicative, unnecessary and inconsistent regulations. The
    council is responsible for ensuring that federal agencies perform their
    tasks in an efficient and coordinated manner. For these reasons, APPA
    supports the existence and continued operation of CEQ.
        Again, APPA member systems appreciate your consideration of our
    views on priority appropriations issues for fiscal year 2001.
                                     ______

       Prepared Statement of Metropolitan Water Reclamation District of
                                Greater Chicago

        I am Terrence J. O'Brien, President of the Metropolitan Water
    Reclamation District of Greater Chicago, and on behalf of the Water
    Reclamation District, I want to thank the Subcommittee for this
    opportunity to present our priority for fiscal year 2001, and express
    our appreciation for your support of our requests over the years. The
    Metropolitan Water Reclamation District (District) is the sponsor for
    the federally approved combined sewer overflow (CSO) project, the
    Tunnel and Reservoir Plan (TARP), in Chicago, Illinois. Specifically,
    we are asking that $10 million be included to continue construction of
    this Environmental Protection Agency-sponsored project in the
    Subcommittee's VA, HUD and Independent Agencies Appropriations Bill for
    fiscal year 2001. The following outlines the project and the need for
    the requested funding.

                                  INTRODUCTION
        The District was established in 1889 and has the responsibility for
    sewage treatment, and is also the lead agency in providing sponsorship
    for flood control and stormwater management in Cook County, Illinois.
    In fact, the District was established in response to an epidemic, which
    killed 90,000 people in 1885. By 1900, the District had reversed the
    flows of the Chicago and Calumet Rivers to carry combined sewage away
    from Lake Michigan, the area's main water supply. The District has been
    involved with major engineering feats since its inception.
        In an effort to meet the water quality goals of the Clean Water
    Act, to prevent backflows into Lake Michigan, and to provide an outlet
    for floodwaters, the District designed the innovative TARP. The TARP
    tunnels, which were judged by the Environmental Protection Agency (EPA)
    on two occasions as the most cost-effective plan available to meet the
    enforceable provisions of the Clean Water Act, are a combined sewer
    overflow elimination system. The TARP reservoirs, also under
    construction, will provide flood control relief to hundreds of
    thousands of residents and businesses in the Chicagoland area.

                           TUNNEL AND RESERVOIR PLAN
        The TARP is an intricate system of drop shafts, tunnels and pumping
    stations which will capture combined sewer overflows from a service
    area of 375 square miles. Chicago will remove three times the amount of
    CSO pollution as Boston's projected removal--for approximately the same
    cost. The remaining Calumet tunnel system will provide 3.1 million
    pounds of biological oxygen demand (BOD) removal versus Boston's one
    million pounds of BOD removal per year. In fact, Chicago's CSO
    pollution problems are worse than the combination of Boston, New York,
    and San Francisco's pollution problems. The Chicago Metropolitan Area's
    annual BOD loading is 43 million pounds per year. This contrasts with
    the combination of Boston, New York and San Francisco's combined annual
    BOD loading of 35 million pounds.
        A good portion of the remainder of the TARP system is to be built
    in the southeast side of Chicago and the southern suburbs (Calumet
    system), a low-income, highly neglected and highly polluted area. This
    community suffers from tremendous land, air and water pollution--
    literally a dumping ground for multi-media pollution ranging from
    chemical waste to serious water pollution.
        Due to the enormous risk to the community, the District as the
    local sponsor cannot afford to leave the citizens vulnerable.
    Therefore, it is imperative that this work must continue. Because the
    construction industry is already doing work in the area, the climate is
    favorable for proceeding with this work at this time, producing
    significant cost savings. What we are seeking, then, is funding to
    advance federal work.
        We have a proven and cost-effective program. In fact, we have
    estimated that TARP's cost is about a quarter of the cost of separating
    the area's existing combined sewer systems into separate sewage and
    stormwater systems. Upon reanalysis, the EPA has consistently found the
    TARP program to be the most cost-effective solution that will reduce
    the impacts by the greatest degree to meet the enforceable requirements
    of the Act, with the least amount of dollars. The project, while
    relating most specifically to the 52 tributary municipalities in
    northeastern Illinois, is also beneficial to our downstream communities
    such as Joliet and Peoria. These benefits occur because of the capture
    of wastewater in the tunnels during the storm periods and by treatment
    of the discharge before being released in to the waterways.
        Since its inception, TARP has not only abated flooding and
    pollution in the Chicagoland area, but has helped to preserve the
    intergrity of Lake Michigan. In the years prior to TARP, a major storm
    in the area would cause local sewers and interceptors to surcharge
    resulting in CSO spills into the Chicagoland waterways. Since these
    waterways have a limited capacity, major storms have caused them to
    reach dangerously high levels resulting in massive sewer back-ups into
    basements and causing multi-million dollar damage to property. To
    relieve the high levels in the waterways during major storms, the gates
    at Wilmette, O'Brien, and the Chicago River would be opened and the
    excess CSOs would be allowed to backflow into Lake Michigan. Since the
    implementation of TARP, some backflows to Lake Michigan have been
    eliminated. After completion of both phases of TARP, all backflows to
    Lake Michigan will be eliminated.
        Since implementation of TARP, 358 billion gallons of CSOs have been
    captured by TARP, that otherwise would have reached waterways. After
    the completion of both phases of TARP, 99 percent of the CSO pollution
    will be eliminated. The elimination of CSOs will result in less water
    needed for flushing of Chicago's waterway system, making it available
    as drinking water to communities in Cook, DuPage, Lake and Will
    counties, which have been on a waiting list. Specifically, since 1977,
    these counties received an increase of 162 mgd, partially as a result
    of the reduction in District's discretionary diversion in 1980.
    Additional allotments of Lake Michigan water, beyond 1991, will be made
    to these communities, as more water becomes available from sources like
    direct diversion.
        With new allocations of lake water, communities that previously did
    not get to share lake water are in the process of building, or have
    already built, water mains to accommodate their new source of drinking
    water. The new source of drinking water will be a substitue for the
    poorer quality well water previously used by these communities. Partly
    due to TARP, it is estimated by IDOT that between 1981 and 2020, 283
    mgd (439 cfs) of Lake Michigan water would be added to domestic
    consumption. This translates into approximately 2 million people that
    previously did not receive lake water, would be able to enjoy it. This
    new source of water supply will not only benefit its immediate
    receivers but will also result in an economic stimulus to the entire
    Chicagoland area, by providing a reliable source of good quality water
    supply.
        TARP was designed to give the Chicago metropolitan area the optimal
    environmental protection that could possibly be provided. More
    importantly, no other project was found to be as cost-effective. In
    addition, the beneficial use of the project is being enhanced by the
    addition of the flood control reservoirs now being designed and
    constructed by the Corps of Engineers, which will be connected to the
    tunnels for additional capture and storage of combined sewage during
    flood events. We believe TARP stands as a tribute to our nation's Clean
    Water goals and one that is being accomplished within the most
    economical constraints.

                                REQUESTED ACTION
        The $10 million we are seeking in fiscal year 2001 funding in the
    Subcommittee's bill will help keep the local sponsor whole for the
    advance construction it plans to accomplish on the Torrence Avenue Leg
    for the Calumet System of the congressionally-authorized TARP project.
    This funding will complete the Torrence Avenue tunneling segment. While
    the TARP project was originally authorized at 75 percent federal
    funding, the District as local sponsor has been contributing at least
    50 percent of the total project cost. We greatly appreciate the
    Subcommittee's endorsement of our request over the years to advance the
    construction of this work. This fiscal year 2001 work will go a long
    way to address serious water quality, stormwater and safety problems.
    It will have a tremendously beneficial impact on a community, which
    suffers from water pollution and significantly flooding problems. The
    EPA has approved the facilities plan for the overall TARP project and
    design has been completed. The EPA has identified this particular
    segment of work as the next critical section of the plan to be
    constructed based on significant water quality benefits.
        Once on-line, the Torrence Avenue Leg of the Calumet System will
    capture 2.0 billion gallons of CSOs per year and will protect 15.6
    square miles of the City of Chicago from raw sewage backup and
    flooding, will protect the Calumet River from backflows and local
    infrastructure, including a public water supply plant from damage.
        We urgently request that this funding be included in the
    Subcommittee's bill for the construction of the Calumet System of the
    TARP project. We thank you in advance for your consideration of our
    request.
                                     ______

     Prepared Statement of the California Industry and Government Central
                    California Ozone Study (CCOS) Coalition

        Mr. Chairman and Members of the Subcommittee: On behalf of the
    California Industry and Government Central California Ozone Study
    (CCOS) Coalition, we are pleased to submit this statement for the
    record in support of our fiscal year 2001 funding request of $2 million
    from the Environmental Protection Agency (EPA) for CCOS as part of a
    Federal match for the $8.6 million already contributed by California
    State and local agencies and the private sector.
        Ozone and particulate matter standards in most of central
    California are frequently exceeded. In 2003, the U.S. Environmental
    Protection Agency (U.S. EPA) will require that California submit SIPs
    for the recently promulgated, national, 8-hour ozone standard. It is
    expected that such SIPs will be required for the San Francisco Bay
    Area, the Sacramento Valley, the San Joaquin Valley, and the Mountain
    Counties Air Basins. Photochemical air quality modeling will be
    necessary to prepare SIPs that are acceptable to the U.S. EPA.
        The Central California Ozone Study (CCOS) is designed to enable
    central California to meet Clean Air Act requirements for ozone State
    Implementation Plans (SIPs), as well as advance fundamental science for
    use nationwide. The CCOS field measurement program will be conducted in
    the summer of 2000 in conjunction with the California Regional PM10/
    PM2.5 Air Quality Study (CRPAQS), a major study of the origin, nature,
    and extent of excessive levels of fine particles in central California.
    CCOS includes an ozone field study, a deposition study, data analysis,
    modeling performance evaluations, and a retrospective look at previous
    SIP modeling. The CCOS study area extends over central and most of
    northern California. The goal of the CCOS is to understand better the
    nature of the ozone problem across the region, providing a strong
    scientific foundation for preparing the next round of State and Federal
    attainment plans. The study includes six main components:
      --Developing the design of the field study (task already underway)
      --Conducting an intensive field monitoring study, scheduled for June
            1 to September 30, 2000
      --Developing an emission inventory to support modeling
      --Developing and evaluating a photochemical model for the region
      --Designing and conducting a deposition field study
      --Evaluating emission control strategies for the next ozone
            attainment plans
        The CCOS is directed by Policy and Technical Committees consisting
    of representatives from Federal, State and local governments, as well
    as private industry. These committees, which managed the San Joaquin
    Valley Ozone Study and are currently managing the California Regional
    Particulate Air Quality Study, are landmark examples of collaborative
    environmental management. The proven methods and established teamwork
    provide a solid foundation for CCOS. The sponsors of CCOS, representing
    state, local government and industry, have contributed approximately
    $8.6 million for the field study. In addition, CCOS sponsors will
    provide $4 million of in-kind support. The Policy Committee is
    continuing to seek additional funding ($9.0 million) for a future
    deposition study, data analysis, and modeling.
        For fiscal year 2001, our Coalition is seeking funding of $2
    million from the Environmental Protection Agency (EPA). There is a
    national need to address issues related to the 8-hour ozone and PM2.5
    standards set by EPA. Nationally, research and data gaps exist in
    effectively coordinating particulate matter and ozone control
    strategies, in understanding ozone deposition, and in using models for
    future ozone and particulate matter SIPs (and updating existing SIPs).
    To address these national, SIP-related issues effectively, requires
    federal assistance, and CCOS provides a mechanism by which California
    pays half the cost of work that the federal government should otherwise
    pursue. California should not have to bear the entire cost of the
    addressing these issues.
        The CCOS field study will take place concurrently with the
    California Regional Particulate Matter Study--previously jointly funded
    through Federal, State, local and private sector funds. The quality and
    concurrency of these studies bring both technical and financial
    benefits that merit EPA funding for the purpose of addressing national,
    SIP-related issues.
        Financially, CCOS is timed to enable leveraging of the efforts for
    the particulate matter study. Some equipment and personnel can serve
    dual functions so that CCOS is very cost-effective. The study itself is
    also very cost-effective since it builds on other successful efforts
    including the 1990 San Joaquin Valley Ozone Study.
        From a technical standpoint, carrying out both studies concurrently
    is a unique opportunity to address the integration of particulate
    matter and ozone control efforts. Regarding the need for ozone
    deposition research (how much ozone is removed from the ambient air),
    California is an ideal natural laboratory for studying deposition given
    the scale and diversity of the various ground surfaces in the region
    (crops, woodlands, forests, urban and suburban areas). With respect to
    SIP-based modeling, evaluating and testing various models with the
    extensive data provided by both CCOS and the California Regional
    Particulate Matter Study will advance the use of models for future SIPs
    nationwide since the region covered by the study is large and
    technically challenging. Improving model performance for SIPs is
    essential since models drive emission reduction targets and control
    strategies. The federal government should fund continuing efforts to
    improve the performance of models used in SIPs.
        Thank you very much for your consideration of our request.
                                     ______

    Prepared Statement of the Environmental Science and Engineering Center,
                                Marietta College

        Mr. Chairman and Members of the Subcommittee, thank you for the
    opportunity to submit testimony to the hearing record regarding an
    important initiative for which Marietta College, in Marietta, Ohio, is
    requesting $2 million in federal partnership assistance from the
    Environmental Protection Agency in fiscal year 2001. Specifically, the
    College is seeking a total of $3 million in federal partnership funding
    for the establishment of an on-campus Environmental Science and
    Engineering Center and field station. This Center will physically link
    the various current ongoing environmental education and research
    activities with research to be conducted at an environmental field
    station and will provide outreach to industries and environmental
    scientists in the surrounding region.
        The Environmental Science and Engineering Center will house an
    Environmental Science and Engineering Program at Marietta College. This
    program will build upon the College's considerable expertise in the
    environmental area, including departmental and programmatic resources
    in Environmental Science, Biology, Chemistry, Geology, Physics, Health
    Sciences, Leadership, Business, Entrepreneurship, and the only
    Accreditation Board for Engineering and Technology (ABET) accredited
    Petroleum Engineering program in the US offered at a small, private
    liberal arts college. The purpose of the Center will be to provide
    opportunities for teaching and research into critical areas of
    environmental concern for the greater Ohio Valley, for the region, for
    the country and even internationally through exchange and education
    projects. Further, it will provide a clearinghouse of environmental
    compliance information and assistance to local industry.
        These facilities will also be places where new models and
    techniques for processes such as groundwater contamination remediation
    can be developed, taught, and disseminated in conjunction with such
    organizations as the U.S. Environmental Protection Agency, the U.S.
    Fish and Wildlife Service, the Natural Resource Conservation Service
    and the Ohio EPA. A further goal of the program is to provide the
    capacity for an improvement of data collection across the environmental
    spectrum. Along with greatly expanding the College's on-campus
    capacities and enhancing them further through a field station, the
    funding sought will be used to develop and monitor a number of fixed
    air and water quality monitoring sites within the region and to develop
    a mobile sampling and analysis capability.
        Washington County, of which Marietta is the county seat, presents a
    textbook set of conditions and situations within which quality
    environmental science and engineering teaching and research can be
    accomplished. Marietta is loca is located at the confluence of the Ohio
    River and one of its major tributaries, the Muskingum River. It
    presents a marvelous environment for the study of all aspects of the
    riverine environment, from the biological to the chemical--to the
    cultural and political. Marietta is also surrounded by a considerable
    number of pristine, undeveloped natural areas. Directly adjacent to the
    city to the north, west and east are large expanses of the Wayne
    National Forest. To the south, there are islands that are part of the
    USFWS-administered Ohio River Islands National Wildlife Refuge. This
    section of the Ohio River is an especially exciting area for the study
    of certain biological resources, particularly of benthic freshwater
    life forms.
        Within the region, there is a significant amount of industrial
    concentration, especially in the field of chemical engineering and
    petrochemical processing. Washington County has had the highest (worst)
    rating in the state of Ohio for hazardous air pollutants for years, and
    a considerable amount of hazardous waste site remediation is taking
    place within and adjacent to the city of Marietta. Marietta, the oldest
    town in what was the Northwest Territory, has had over 200 years to
    develop business and industry, along with the attendant environmental
    problems. In-stream gravel extraction and quarry mining are present
    within the county, and there are operating farms in the area. Within
    the county, there are numerous sites of operating or capped natural gas
    and petroleum wells. New wells are continually being drilled in the
    vicinity of the college and offer our students the opportunity to study
    oil and gas well drilling, completion and production technology
    firsthand. Ohio is also a leader in the area of natural gas storage,
    whereby old, depleted gas reservoirs are converted to storage
    reservoirs where gas is injected during spring and summer, and
    withdrawn during the fall and winter to supplement pipeline supplies of
    gas. In short, a great number of historical and current activities have
    direct impact upon the quality of the local and regional environment.
    All of this activity is taking place with relatively little ongoing
    testing, analysis of data, and monitoring of environmental quality.
        Despite the general economic conditions of the surrounding regions,
    in the two counties most proximate to the college, Washington County,
    Ohio and Wood County, West Virginia, there is a considerable industrial
    base. There are a large number of industrial operations of major
    national and international firms as well as a number of locally based
    supportive industrial firms. These plants and supporting industrial and
    commercial enterprises provide foundational elements for the local
    economies and are key employers. The presence of these firms presents
    both opportunity and challenge for Marietta College. On the one hand,
    they represent a key consumer of our educational product, both in the
    form of interns and of permanent employees. On the other hand, they are
    also key sources for much of the pollution that our Environmental
    Science students study to help them with compliance issues. As federal
    and state authorities move forward in regional and basin regulatory
    initiatives, the plants in the Valley have ever increasing needs for
    students and graduates with expertise in Environmental Science and
    Engineering. Beyond the local region, demand for Environmental Science
    and Engineering graduates, especially ones who do their coursework at
    schools like Marietta College where they can become exposed to ``real
    world'' environmental problems, appears to be growing steadily.
        Southeastern Ohio, in general, and Marietta/Washington County, in
    particular have been left out of most past governmental initiatives in
    the area of environmental analysis and research. At the edge of
    Appalachia, it lies at the far southeastern end of U.S. EPA region 5,
    with the greater area being situated in the intersection of three U.S.
    EPA districts (5, 3, and 4). The nearest OEPA office is nearly 70 miles
    away. The county usually has to rely on a single monitoring station for
    air quality data and not even that for water quality monitoring.
        The Environmental Science and Engineering Center of Marietta
    College will provide space, facilities and equipment for students and
    faculty doing work in a range of environmental programmatic tasks and
    functions. The Center will contain classrooms, laboratories, offices
    and other facilities collectively housing the program and all its
    components. Marietta College with its unique mixture of a traditional
    liberal arts curriculum with strong Science and Professional programs,
    such as Petroleum and Environmental Engineering, presents a resource of
    the region, state and nation to provide the education and training
    necessary to produce top-flight professionals in this area.
        Marietta College is the only small, private, liberal arts college
    in the U.S. that offers a professional accredited degree in petroleum
    engineering. Its program has been compared to that of much larger
    research institutions such as Texas A&M, University of Oklahoma, and
    Louisiana State University. Marietta's petroleum engineering faculty
    bring a wealth of experience to the classroom, having worked in the
    industry in research and development both in the U.S. and abroad. The
    size of the College makes it possible for faculty to bring this
    experience into a one-on-one teaching environment, which is something
    not seen at larger universities.
        The Environmental Science Program at Marietta College is continuing
    to develop as a College ``peak of distinction.'' An Environmental
    Engineering program is being developed as a natural outgrowth of the
    current interaction between environmental science and petroleum
    engineering programs. Plans have also been implemented to integrate
    Environmental Science into the Education curriculum and the core
    general education curriculum to improve K-12 teacher abilities in the
    sciences.
        Close to 30 companies, foundations/associations, government
    agencies, and academic institutions have been a partner or sponsor of
    the Marietta College Environmental Science Program. It is expected that
    many of these groups will benefit from the establishment of an enhanced
    program in environmental science and engineering and utilize a field
    station through the provision of environmental compliance monitoring,
    information and technical engineering assistance. Professionals from
    these entities also participate in Marietta College's training
    programs.
        The Environmental Science and Engineering Center will physically
    link the various current ongoing environmental education and research
    activities research to be conducted at the environmental field station
    and for the provision of outreach to industries and environmental
    scientists in the surrounding region. The purpose of the Center will be
    to provide opportunities for teaching and research into critical areas
    of environmental concern for the greater Ohio Valley, for the region,
    for the country and even internationally through exchange and education
    projects. Further, it will provide a clearinghouse of environmental
    compliance information and assistance to local industry.
        The field station of the Marietta College Environmental Science and
    Engineering Center will be located on a riverine site, with sufficient
    land area and vegetation/habitat to accommodate a variety of research,
    examination, demonstration, and other educational activities. This lab
    will be equipped to allow for work in environmental chemistry, field
    biology, field geology and petrochemistry/physics. Provision will be
    made for acquiring at least three other sites for the placement of
    water and air sampling remote from the field station. The field station
    will have assigned to it permanently a van equipped for field sampling
    and field analytic chemistry. Ideally this vehicle could have the
    capacity to transmit and receive voice, visual and data streams so that
    field sampling could be integrated with remote classroom instruction
    for use by the college and cooperating local primary and secondary
    schools.
        Marietta College is seeking federal partnership grant assistance of
    $3 million to establish the Environmental Science and Engineering
    Center and the initial Field Station with the technology necessary to
    link it to campus. The Center will be an integral part of a new and
    renovated $21.5 million science complex. The Center for which we are
    seeking assistance will house several environmental laboratories,
    including a state-of-the-art Geographic Information Systems laboratory,
    a field ecology/field sample laboratory and sample storage areas, an
    analytical chemistry laboratory/water & air sample testing facility, a
    data collection station, and other discipline specific equipment. This
    funding will go toward constructing and equipping the Center and Field
    Station and will include the telecommunications interface to the main
    campus and uplinking capabilities to share information with local and
    regional primary and secondary schools. Federal assistance in the
    amount of $2 million in fiscal year 2001 would establish and equip the
    field station as well as provide for the technology and equipment on
    campus to interface with field station activities.
        The College plans to equip most of the laboratories in the science
    complex and teaching spaces through internal expenditure, grants
    (public and private) and appeals to industrial and commercial partners.
    The College, like other private liberal arts colleges, is somewhat at a
    disadvantage when compared to public state supported schools in access
    to many state and federal grant funds. Further, the current size and
    existing facilities base works against the competitiveness of the
    College in other grant competitions.
        It is our firm belief that this will be not only a unique teaching
    program but also one with the added benefit of providing needed
    expertise to state and federal environmental entities and to local
    industries in need of assistance.
                                     ______

          Prepared Statement of the American Society for Microbiology

        The American Society for Microbiology (ASM), the largest single
    life science organization in the world, comprised of more than 42,000
    members, appreciates the opportunity to provide written testimony on
    the fiscal year 2001 budget for the scientific research programs within
    the National Science Foundation (NSF) and the United States
    Environmental Protection Agency (EPA).
        The ASM represents scientists who work in academic, industrial and
    governmental institutions worldwide. Microbiologists are involved in
    research to improve human health and the environment. The ASM's mission
    is to enhance the science of microbiology, to gain a better
    understanding of basic life processes, and to promote the application
    of this knowledge for improved health, and for economic and
    environmental well being.
        This testimony will outline the ASM's funding recommendations for
    both the NSF and EPA research and development programs for fiscal year
    2001.

                          NATIONAL SCIENCE FOUNDATION
        The ASM, a member of the Coalition for National Science Funding
    (CNSF), strongly endorses the coalition's recommendation to provide the
    NSF with at least the 17.3 percent, or $675 million, increase proposed
    by the Administration for fiscal year 2001. This would raise the NSF's
    overall budget from $3.89 billion in fiscal year 2000 to $4.57 billion
    in fiscal year 2001. The ASM also urges Congress to consider the
    recommendation to sustain this expansion of the NSF budget over the
    next five years in order to reach the Agency's budget goal of $10
    billion.
        The NSF's mission is to promote and advance scientific,
    mathematical, and engineering research and education in the United
    States by funding the highest quality academic research and education
    programs. The NSF is the premier basic science agency in the United
    States and has effectively stimulated and supported the best scientific
    talent in the country, which has led to cutting edge research
    discoveries. The NSF budget, however, has not grown commensurate with
    its record of achievement and broad and unique responsibilities to
    support science, mathematics and engineering research across
    disciplines. This year, the Administration has recognized this
    deficiency by proposing a substantial increase that will restore
    balance among scientific fields. The NSF must ensure that the entire
    spectrum of research fields receives strong federal support and that
    America's human resources in science and technology are replenished.
    Enhanced support for the NSF's efforts to improve science education
    will help expand our nation's intellectual capital. Strong links
    between research and education are essential to a healthy research
    enterprise, an educated public, and a well trained future workforce.
        The NSF is a key part of this Nation's great enterprise of
    discovering new knowledge, which in turn creates new industries, better
    products and services--all contributing to our economic strength,
    national security and general well-being. The NSF is one of the few
    government agencies that support fundamental basic research. United
    States leadership in science and technology is dependent on sufficient
    funding for basic research. Most of today's scientific achievements in
    areas such as bioremediation of past industrial pollution, the
    development of new antibiotics and drugs, biopesticides, and
    biotechnology all have their roots in basic research. The many future
    public health and environmental challenges the United States will face
    can only be overcome through the potential of basic research to
    generate crucial new scientific knowledge and advancements that lead to
    new technologies for the future.
        The NSF is the primary source of funding for scientists in the
    United States working in many areas of biological research. Programs
    supported by the NSF, for example, are critical to microbiologists,
    especially as they relate to the exploration of biodiversity and the
    roles of microorganisms in global biogeochemical cycling reactions that
    maintain the environmental quality of the earth.
        Microorganisms surround us and affect our lives in many ways. They
    play key roles in processing our wastes, recycling the nutrients that
    support our agriculture, forests and fisheries, yield new
    pharmaceuticals, provide key tools for biotechnology, affect the
    quality of our food and water, control some pests (biocontrol), and
    cause disease. The NSF is to be complimented for recognizing a few
    years ago the important role microorganisms play in our well-being and
    in opportunities for basic science advances through its Microbial
    Biology initiative. This led to new programs such as LExEN (Life in
    Extreme Environments), Microbial Observatories which focus on the
    discovery of important but uncultured microorganisms, and the first
    Biocomplexity Program which is focused on microbially based ecosystems.
    ASM applauds these new initiatives. Microorganisms do present very
    different types of research challenges and opportunities than those for
    macroorganisms. Hence we encourage NSF to maintain its momentum in
    Microbial Biology programming to ensure that basic discoveries for this
    group of organisms is realized.
        New advances in science have provided new opportunities and needs
    in microbiology research which should be considered in NSF programming.
    These areas are the following.

                               GENOMICS RESEARCH
        The tremendous improvements in DNA sequencing technology have
    reduced sequencing costs and greatly enhanced the number of complete
    microbial genome sequences currently available and becoming available
    in 2000. Complete genome sequence data revolutionizes the approach to
    microbiology and for the first time gives the complete gene information
    necessary for an organism's function and success. There are new
    obstacles, however, to fully understanding this information, requiring
    advances in software, computation, proteomics, gene function, and
    informatics. NSF is a key agency for supporting research that utilizes
    genomic information in new and creative ways. The ASM encourages the
    Foundation's efforts through workshops and the development of an
    interagency group designed to identify gaps and opportunities within
    genomic research. This should extend beyond the more obvious areas of
    molecular biology and genetics to the areas of ecology, taxonomy and
    population biology as well as to the geosciences, and the computational
    and engineering areas.

                                 BIOCOMPLEXITY
        ASM supports NSF's bold initiative to better understand the
    complexity of interactions between organisms and their environment so
    that organism success, human impact, and trends in our global
    environment can be better understood and properly managed. Advances in
    the underlying disciplines from molecular biology, ecology and the
    geosciences to mathematics and the computational sciences have now made
    it feasible to begin to understand more complex interactions.
    Microorganisms are key members of the soil, water, plant, and animal
    environments and therefore are dominant factors in understanding these
    interactions. Furthermore, only a small percentage of the microbial
    species on earth are known, leaving their functional role unknown.
    These unknown organisms are the largest untapped source of biodiversity
    and a potential source of new pharmaceuticals, enzymes, biocontrol
    agents, and tools for nanotechnologies.
        The ASM also endorses NSF's initiative to establish cutting-edge
    technologies for exploring the earth's global biology in the form of
    the National Ecological Observatory Network (NEON). We could expect
    that microbes, the most important catalysts of global elemental cycles,
    would be comprehensively explored with NEON-based technologies.

                             MICROBIAL INFORMATICS
        Information from genomics, biocomplexity, and NEON, as well as
    other physiological, systematic, and biochemical studies needs to be
    organized and integrated in a manner that is easily accessible to the
    scientific community. The jobs of the many practitioners of
    microbiology would be more efficient if microbial data were available
    in an integrated electronic database and new insight about the most
    numerous organisms in our universe could be more readily realized. NSF
    needs to recognize that biological databases, such as microbial
    databases, are a central and vital infrastructure need to modern day
    biological research and should be treated as a central national
    facility. NSF's information technology research (ITR) appears to also
    provide for advances useful in future biology research, including
    microbial informatics. With more intensive and extensive data, we need
    better ways to analyze, visualize and compute the information. ASM
    looks forward to the benefits from ITR.
        Members of the ASM, whose activities include research concerned
    with the impact of microorganisms on the well-being of humans, animals,
    plants, and the environment, are very supportive of NSF's increased
    focus on microbial biology. For years, research efforts have
    concentrated on the study of microbes in human and animal health. The
    unknown microbial world provides opportunities to discover new
    knowledge about microbial life forms and their potential application in
    industry, medicine and agriculture. In addition, microbiological
    research continues to provide the foundation for today's advances in
    biotechnology and for understanding the role microbes play in
    sustaining our global environment. Future accomplishments and their
    safe application to increased agricultural productivity (an important
    by-product of biotechnology) will not be possible without NSF funded
    basic research.

                        ENVIRONMENTAL PROTECTION AGENCY
        The EPA funds important basic research activities in focused areas
    related to the Agency's mission of protecting the environment. The
    EPA's scientific research and development programs are of interest to
    many of ASM's members who work in the fields of applied and
    environmental microbiology. Research on environmental microbiology is
    essential for maintaining air, water, and soil quality; for assuring
    the safety of potable water supplies; for providing safe means for
    waste disposal; and for cleanups of environmental contaminants by
    bioremediation. The ASM believes that sound public policy for
    environmental protection depends on adequately funded programs of
    intramural and extramural research based on a system of peer review to
    assure that support is awarded to research programs having both quality
    and relevance. The EPA, which has partnered with the NSF in recent
    years for peer review of some extramural research programs, has begun
    its own peer review system based upon the NSF model. Critical peer
    review of both the intramural and extramural research programs of the
    EPA are necessary for ensuring the quality and scientific validity of
    studies that are funded.

                       SCIENCE TO ACHIEVE RESULTS PROGRAM
        The EPA's Science to Achieve Results (STAR) program is an important
    mission-driven, extramural research initiative. This program is
    targeted to receive $110 million for fiscal year 2001. This program
    funds important environmental research proposals from scientists
    outside the federal government and is a valuable resource for the EPA
    in finding solutions to many of the complex environmental problems we
    face today. Grants made under the STAR program last from two to three
    years and provide about $150,000 of scientific support per grant year.
    The STAR program funds projects in specific focal areas including
    drinking water, ecology of harmful algal blooms, water and watersheds,
    ecological indicators, and pollution prevention, which have significant
    microbiological components. The ASM urges the Congress to fully fund
    the STAR program at the requested level of $110 million. ASM
    recommends, however, that at least 20 percent of the STAR budget be
    open for exploring broader issues not covered by targeted RFA's. This
    mechanism captures the creativity of the scientific community to
    foresee EPA relevant needs and solutions.

                              CLEAN AND SAFE WATER
        The ASM supports the Administration's request of $48.8 million for
    Safe Drinking Water Research. The ASM applauds the EPA's support of
    such program initiatives as drinking water safety standards, cost-
    effective water treatment technologies focusing on microbes, improved
    water safety guidelines and pollution indicators, and a federal
    database of beach advisories and closings across the United States. ASM
    also commends the EPA's continued research efforts to strengthen the
    scientific basis for drinking water standards through use of improved
    methods and new data to better evaluate the risks associated with
    exposure to microbial and chemical contaminants in drinking water.
    Additionally, the ASM is pleased with the EPA intra-agency initiative
    to address scientific and methodology gaps across water programs. ASM
    hopes that this will serve as a model for improved coordination among
    several federal and state agencies in dealing with microbial pollutants
    in the nation's drinking and recreational water.

                   GRADUATE ENVIRONMENTAL FELLOWSHIP PROGRAM
        The EPA's Graduate STAR Environmental Fellowship Program has been
    an outstanding success in attracting some of the best young talents to
    environmental research. This program has been level funded at $10
    million per year since fiscal year 1998 years and is proposed for level
    funding again in fiscal year 2001. ASM strongly endorses this program
    and, based on its success, suggests that the funding be increased to
    $15 million for fiscal year 2001. Both the public and private sectors
    will benefit from a steady stream of well-trained environmental
    specialists. The fellowship program has had a major impact in
    attracting exceptionally talented young people to pursue careers in
    environmentally related fields. With environmental challenges facing
    the nation including cleaning up toxic waste, ensuring cleaner air and
    water, and providing safe food and drinking water, there is a clear
    need for highly skilled, well-trained environmental experts to find
    solutions to these pressing issues.
        Mr. Chairman, on behalf of the American Society for Microbiology,
    thank you for the opportunity to testify before your Committee on the
    fiscal year 2001 appropriations for the EPA and the NSF. I would be
    pleased to answer any questions from you here today, or in writing at a
    later date.
                                     ______

     Prepared Statement of the Environmental Institute of Western Michigan
                                   University

        Good morning. I am Charles Ide, Director of the Environmental
    Institute at Western Michigan University in Kalamazoo, Michigan. It is
    an honor to be here before you today to discuss extremely important
    environmental issues that are shaping both the quality of life and
    economic development in southwestern Michigan. The Environmental
    Institute carries out activities in three important areas:
    environmental research, education, and community outreach. In this
    regard, the Institute provides cutting-edge research that builds upon
    studies sponsored by federal and state agencies, educates students and
    the public about complex environmental issues, and works with local
    environmental stakeholder groups in producing real solutions to
    problems that are currently limiting economic development.
        The state of Michigan economic base is characterized both by heavy
    industrial and agricultural activities. For years, these activities
    have placed a legacy of environmental contaminants in the forests,
    farmland, waterways and lakes that give Michigan its reputation as a
    beautiful place to live and recreate. This is this certainly the case
    in the Kalamazoo River watershed which has been designated a Great
    Lakes area of concern and a Superfund site because of its degraded
    environmental quality.
        The Kalamazoo River watershed is a system of lakes, rivers and
    other waterways stretching 162 miles and terminating in Lake Michigan.
    There are about 2,450 lakes and ponds totaling 37,500 acres and 542
    linear miles of major streams scattered across the watershed. About
    400,000 people live in the Kalamazoo watershed, which covers about
    2,000 square miles in 10 counties.
        The Kalamazoo River Watershed contains a 35-mile-long Superfund
    site, listed for its polychlorinated biphenyl (PCB) contamination--
    primarily due to discharge from deinking operations at local paper
    mills from the 1950s to the mid-1970s. There is evidence that PCBs
    continue to be released into the watershed from contaminated stream
    banks when water levels rise. The total mass of PCBs in the river
    sediments has been estimated at 230,000 pounds. The Kalamazoo River is
    one of the major sources of contaminant flow into Lake Michigan.
        Wildlife such as fish, ducks, turtles, and eagles sampled along the
    river showed high tissue levels of PCBs. Mink showed the highest whole
    body PCB concentrations of any mink tested in the United States. These
    levels greatly exceed levels known to inhibit mink reproduction. In
    addition, recent epidemiology studies indicate that, although fish
    advisories have been in effect for some time, a substantial number of
    humans--mostly economically disadvantaged--eat fish from the river and
    show elevated levels of contaminants in their blood.
        A variety of other contaminants are also present in river sediments
    including methyl mercury pesticide residues. Several tributaries that
    are also part of the Kalamazoo River watershed are contaminated with
    heavy metals and industrial hydrocarbons. Much of the watershed is also
    impacted by non-point source pollution caused by agricultural and urban
    run-off and unsound land-use practices.
        Due to our recognition of the limitations of Superfund and the need
    to respond to community and interested parties request for a
    comprehensive assessment of potential future uses of the entire
    Kalamazoo River watershed, the Western Michigan University
    Environmental Institute is serving as a catalyst for the development of
    a universal plan for the watershed.
        Working with leaders from a diverse cross-section of community
    stakeholders and environmental professionals, the Environmental
    Institute is gathering data related to agriculture, recreation,
    economic development, human health, ecological impacts, and other land-
    use issues encompassing the watershed. The research produces neutral,
    third party data that extends and augments state and federal studies.
    Duplication of resources is avoided at all levels. The work is being
    carried out in conjunction with the city of Kalamazoo's efforts to
    restore contaminated river properties for revitalization of the city's
    waterfront as a shopping and tourist attraction. Thus, Western Michigan
    University--the only major research university in southwestern
    Michigan--is playing a vital role in helping people in the community
    deal with environmental problems inherited from previous decades. The
    Environmental Institute will develop option to shape present and future
    activities that will assure a sustainable and beneficial watershed
    resource for future generations.
        In addition, the research activities included in this initiative
    will provide for the development of new environmental technologies
    which can be transferred to the private sector to serve as a base for
    high-tech economic development in the region. These new technologies
    include biotech based molecular tools for rapid, reliable, and
    inexpensive ecosystem and human health risk assessment. Additional
    technologies include new ways for cleaning-up contaminated soils and
    sediments and assuring that contaminants are actually degraded and not
    merely moved to a new location to become someone else's problem.
        All data, including historical data and data provided by government
    agencies and government contractors, will be placed in a database
    accessible on the World-Wide-Web. This will allow for the electronic
    layering of many types of data onto maps of the watershed which can
    then be used by academics, the public, and environmental policy makers.
        The project involves collaboration among academics, state and
    federal workers, local policy makers, and local stakeholder groups in
    planning and carrying out watershed management and restoration. The
    university is serving as a source of new research, development, and
    technology transfer for solving long-standing environmental problems.
    The university is also facilitating communication and joint decision
    making across the many jurisdictions that regulate economic activities
    and the quality of life related to the watershed. This collaborative
    venture will serve as a model for the more than 700 other comparable
    Superfund and related sites nationwide. The tools developed will also
    be applicable for restoring and managing polluted watersheds
    worldwide--some of which have been damaged far beyond watersheds found
    in the United States.
        Given the magnitude of the Kalamazoo River Watershed Initiative and
    its potential to develop solutions for environmental problems that can
    be utilized in similar sites across the country, I respectfully request
    that the Chairman and members of the Subcommittee provide $3 million
    through the Environmental Protection Agency in fiscal year 2001 to
    Western Michigan University for the continued development of the
    Kalamazoo River Watershed Initiative. Thank you for the opportunity to
    appear before the Subcommittee and for your consideration of this
    request.
                                     ______

        Prepared Statement of the Passaic Valley Sewerage Commissioners

        Good afternoon Chairman Bond and Members of the Committee, my name
    is Robert Davenport and I am the Executive Director of the Passaic
    Valley Sewerage Commissioners (PVSC) in Newark, New Jersey. I would
    first like to thank you for the opportunity to testify today.
        PVSC owns and operates one of the largest wastewater treatment
    plants in the nation. We treat wastewater from 1.3 million people in 47
    towns and cities and from over 300 large industries in Northern New
    Jersey.
        When I addressed this distinguished committee last year our Passaic
    River/Newark Bay Restoration Program was just getting started. This
    year I'd like to thank you for your past support and update you on the
    progress and the achievements of the program we've made in the last
    year. Your funding assistance of $5 million, combined with state and
    local funding, made possible the construction of the first phase of our
    high priority combined sewage overflow protection project.
        This project has a particular importance for our region of the
    country. New Jersey is distinguished as being the birthplace of
    industry and manufacturing in the United States. The industrial centers
    of Newark, Jersey City and Paterson developed and thrived in the
    1800's; generating the goods and capital that contributed to the
    building of our state and nation.
        Unfortunately, the engineering standards at the time of this great
    development called for the combining of both storm water and sanitary
    sewers into one system. Therefore, when it rains, storm water enters
    the combined sewer systems and the capacity of the sewer lines is
    exceeded which causes a mixture of untreated wastes and rainwater
    runoff to discharge into the local waters. This, as you know, is called
    a Combined Sewer Overflow, or CSO. Engineers were simply unaware of the
    environmental detriment caused by combining both systems into one.
    Science followed the principle that dilution of wastewater by
    stormwater runoff in a combined sewer system would have minimal impact
    upon the environment. We have since learned that this is not the case.
    The Passaic River and Newark Bay are now faced with swimming
    prohibitions due to elevated coliform bacteria concentrations and
    fishing and shellfishing bans due to the contaminated river sediments.
    Dredged material disposal options are limited due to toxic contaminants
    such as heavy metals and organic compounds in the river sediments.
    Floatable debris impacts the aesthetic qualities of these water bodies.
        While in the process of discovering the impact of CSOs on the
    environment, the economic base of Passaic Valley's combined sewer
    communities has experienced dramatic erosion. The cities of Newark,
    Jersey City, Paterson, Harrison, East Newark, Bayonne and Kearny are
    among the poorest communities in New Jersey, and each has a combined
    sewer system which continually threatens the water quality of the
    Passaic River and Newark Bay during wet weather events.
        The traditional solution for reducing CSOs is to separate the storm
    water from the sanitary sewers. The estimated cost of this traditional
    solution will be well over $5 billion. This has never been and will
    never be a feasible solution.
        For the last 30 years New Jersey has been struggling to find a
    solution that is both economically viable and environmentally
    acceptable to the problem of CSOS. PVSC found just such a solution. The
    Passaic River/Newark Bay Restoration program has a three pronged
    approach to alleviate the ongoing pollution to these NJ resources.
        The first element of the program is the implementation of plant
    wide improvements to increase the treatment plant's wet weather
    capacity from 368 million gallons per day to 700 million gallons per
    day. Combined sewer discharges will be reduced by 332 million gallons
    per day to attain 106 percent of EPA's Long Term Control Requirement
    for wet weather flow pollutant removal. The program will result in the
    removal of 4,000 lbs/year of Organic Compounds, 90,000 lbs/year of
    toxic heavy metals, and 12,000,000 lbs/year of Conventional Pollutants
    which is now discharged to the Passaic River and Newark Bay during wet
    weather.
        The second element is a trackdown of toxic discharges to the sewer
    system. This work is being implemented in conjunction with the NJ
    Department of Environmental Protection. The goal is to locate and
    identify unknown sources of ongoing discharges of toxic chemicals of
    concern.
        The third element is the Shoreline Cleanup portion of the program.
    We provide coordination and support to municipalities, counties,
    citizens, service groups, and local businesses to remove trash along
    the riverbanks in their communities. Gloves, trash bags, trash disposal
    and other supplies are given to volunteer groups to help them with
    their clean up efforts. We also launched a 50-foot skimmer vessel which
    removes floating debris from the waterways in our district. Funds for
    the vessel's purchase were provided by the Port Authority of New York
    and New Jersey, and the cost of operation will be borne by PVSC.
        PVSC is working with the State of New Jersey, the State of New
    York, and the USEPA on a bi-state program to reduce discharges of toxic
    materials throughout the New York/New Jersey Harbor Estuary. Led by
    PVSC, ten NJ wastewater agencies were awarded over $1,200,000 to sample
    and analyze for toxic materials in combined sewer, stormwater and
    treatment plant effluents. We have applied to the State of NJ for an
    additional $2 million to enable us to track down the sources of the
    toxic compounds.
        The real key to improving the water quality of the Passaic River
    and Newark Bay is to reduce Combined Sewer Overflows. PVSC's solution
    will cost $82 million compared to the traditional solutions cost of
    over $5 billion. The State of NJ awarded PVSC $15 million for the
    engineering design for the plant improvements needed to implement the
    program. The construction of three projects to be funded by funds
    authorized by your committee in the fiscal year 1999 the fiscal year
    2000 Appropriations Bill is imminent. Local funds have been used to
    provide the match for the special appropriations grant. In an effort to
    accelerate the program, PVSC has obtained a $25 million state revolving
    loan to finance the construction of a major component of the plan. The
    first phase of these projects are now underway.
        In spite of all the progress we've made, PVSC has exhausted its
    ability to fund additional work without continued Federal assistance.
    We are respectfully requesting $12.3 million in Federal funds for this
    year to complete construction of the first phase of plant improvements.
    The completion of this phase will get us half way to our goal of
    doubling our wet weather flow.
        Once again, I would like to thank you and the committee for your
    continued support for the Passaic River/Newark Bay Restoration Program.
    This program will restore the Passaic River and Newark Bay as a
    recreational and economic resource for the region with direct
    environmental benefits for the 17 million people living in the New
    Jersey/New York area.
                                     ______

                 Prepared Statement of the University of Tulsa

        It is proposed that the U.S. Environmental Protection Agency
    continue to support a focused, university-based program, the Integrated
    Petroleum Environmental Consortium (IPEC), with the goal of increasing
    the competitiveness of the domestic petroleum industry through a
    reduction in the cost of compliance with U.S. environmental
    regulations. Continued Federal support of $4 million is specifically
    requested as part of the fiscal year 2001 appropriation for the
    Environmental Protection Agency through the Science and Technology
    account or other source the Subcommittee may determine to be
    appropriate.
        Mr. Chairman, on behalf of the Integrated Petroleum Environmental
    Consortium (IPEC), I would like to take this opportunity to thank the
    Subcommittee for providing $1.5 million in funding for IPEC in the
    fiscal year 1998 and fiscal year 1999 appropriations bills and $750,000
    in the fiscal year 2000 appropriations bill for the Environmental
    Protection Agency (EPA). Under the Subcommittee's leadership both
    houses of Congress and the final appropriations bills included funding
    for this Consortium each year. Specifically this funding was provided
    for the development of cost-effective environmental technology and
    technology transfer for the domestic petroleum industry. With funding
    under the Science and Technology account of EPA, IPEC is implementing a
    comprehensive mechanism (Center) to advance the consortium's research
    expertise in environmental technology. IPEC's operating practices and
    linkages to the independent sector are ensuring that real problems in
    the domestic petroleum industry are addressed with real, workable
    solutions. The consortium includes the University of Tulsa, the
    University of Oklahoma, Oklahoma State University, and the University
    of Arkansas.
        We are pleased to report that, as envisioned and proposed by the
    Consortium, State-level matching funds have been obtained to support
    IPEC, creating a true Federal-State partnership in this critical area.
    In fiscal year 1998 and fiscal year 1999, IPEC received $375,000 in
    matching funds from the Oklahoma State Reagents for Higher Education.
    In fiscal year 2000, IPEC received $185,000 from the Reagents. A
    similar amount has been pledged by the Reagents as matching funds for a
    fiscal year 2001 appropriation.
        Since December, 1997 IPEC has worked closely with the EPA to meet
    all internal requirements for funding of research centers. These
    efforts have resulted in an excellent working relationship with the
    Environmental Engineering Division of the EPA National Center for
    Environmental Research and Quality Assurance with IPEC's grant from EPA
    (fiscal year 1998 appropriation) finalized September 2, 1998. Since
    September 1998 IPEC has funded 12 research projects that promise to
    help ease the regulatory burden on the domestic petroleum industry.
    These funded projects include: the use of plants to clean contaminated
    soils; the natural biodegradation of gasoline by microorganisms in the
    absence of oxygen; the beneficial use of petroleum wastes as road
    materials; the control of the formation of toxic hydrogen sulfide in
    oil wells; the development of simple sampling devices to replace
    expensive live organisms to assess toxicity in contaminated soils; the
    treatment and disposal of naturally occurring radioactive material
    (NORM) in oil production equipment; the remediation of brine-impacted
    soils; development of a sound scientific basis for ecological risk
    assemement of petroleum production sites; and enhancing the remediation
    of oil contaminated soils. These projects were first reviewed and
    approved by our Industrial Advisory Board (dominated by independent
    producers) as relevant to our mission of increasing the competitiveness
    of the domestic petroleum industry and finally reviewed and approved by
    our Science Advisory Committee (SAC) on the basis of scientific
    quality. Each member of the IPEC SAC has been endorsed by the EPA.
        IPEC has provided $1,080,264 in funding for these projects.
    However, another $977,765 in funding for these projects have been
    secured by the investigators as matching funds from industry and
    industry organizations such as the Gas Research Institute, the American
    Petroleum Institute and the Petroleum Environmental Research Forum.
    This is over and above the matching funds provided by the Oklahoma
    State Reagents for Higher Education. IPEC has pledged to Congress to
    work for a 1:1 match of federal dollars. As you can see IPEC is living
    up to that promise! IPEC is a true public/private partnership.
        IPEC's technology transfer program is directed toward providing
    useful tools for environmental compliance and cost reduction to
    independent producers. The first objective of this program is to raise
    the level of technical training of the field inspectors of the oil and
    gas regulatory bodies of Oklahoma and Arkansas including the Oklahoma
    Corporation Commission, the Arkansas Oil and Gas Commission, and the
    Osage Agency of the Bureau of Indian Affairs with regard to first
    response to spills, pollution prevention, and remediation of oil and
    brine spills. The second objective of this program is the development
    of checklists for independent producers to assist them in environmental
    audits (``staying out of trouble checklists''), remediation of oil and
    brine spills, and first response to spills. Oklahoma and Arkansas
    regulatory field agents will be used to deliver these tools to the
    independent producers.
        IPEC's technology transfer flagship is the International Petroleum
    Environmental Conference. In November, 1999 IPEC held the 6th
    International Petroleum Environmental Conference in Houston, TX. There
    were over 370 in attendance from all facets of the oil and gas industry
    including independent and major producers, service industry
    representatives, and state and federal regulators. The program for the
    6th conference featured several plenary lectures, over 150 technical
    presentations, exhibits, a poster session and a special symposium on
    the promise of new technology in the oilfield. Co-sponsors of the
    conference included the Interstate Oil and Gas Compact Commission, the
    Railroad Commission of Texas, the Texas Independent Producers and
    Royalty Owners Association, the Gas Research Institute, the Oklahoma
    Independent Petroleum Association, the Oklahoma Energy Resources Board,
    the EPA Office of Research & Development, and the National Petroleum
    Technology Office of the U.S. Dept. of Energy. IPEC sponsors the
    participation of ten state regulators from Oklahoma and Arkansas each
    year at the conference. The 7th International Petroleum Environmental
    Conference will be held November 7-10, 2000, in Albuquerque, NM.

            THE CONTINUING CRISIS IN THE DOMESTIC PETROLEUM INDUSTRY
        Much attention has been paid recently to the high costs to
    consumers of gasoline and home-heating oil. The price of crude oil is
    the dominant influence on the costs of all petroleum products and the
    cost of crude oil has been increasing for the last 13 months. Energy
    experts agree that the price increases currently being experienced were
    brought on by short-term shocks that resulted from sudden changes in
    supply and demand. On the demand side there has been increasing demand
    for petroleum worldwide, especially in the Far East. On the supply
    side, OPEC and several non-OPEC countries have removed significant
    amounts of crude oil from production. Once again America has been held
    hostage to the marketing whims of foreign producers and we are in no
    position to respond. Since 1990 there has been a 27 percent decline in
    the number of jobs in the U.S. exploring and producing oil and gas. Ten
    years ago there were 657 working oil rigs in the U.S.; now there are
    less than 175. Thirty-six refineries have closed since 1992 and no new
    refineries have been built since 1976.
        In order to regain energy security the U.S. must have a coherent
    domestic energy strategy. Some may be willing to entrust the health of
    the U.S. economy to windmills and solar-powered cars, but it will be a
    stable and profitable domestic oil and gas industry that is the
    nation's best defense against OPEC market manipulations. The current
    upswing in crude oil prices may eventually stimulate the industry.
    However, the record low prices that preceded the current increases have
    left many companies in financial positions that make it impossible to
    launch new exploration activities. Additionally, many in the industry
    are simply uneasy with the volatility that has come to characterize the
    industry. Much of U.S. domestic oil production is carried out by
    independent producers who are producing from mature fields left behind
    by the majors. Although there is a significant resource base in these
    fields, this is the most difficult and the most costly oil to produce.
    The independent producer has only one source of revenue--the sale of
    oil and gas. There is no vertical depth to his business.
        A major factor in the high cost of production in the domestic
    petroleum industry is the cost of environmental compliance. IPEC is
    working to strengthen the domestic petroleum industry and reduce the
    impact of market volatility by providing cost-effective environmental
    technologies to solve those problems that are having the greatest
    impact on production costs. A strong and stable domestic petroleum
    industry is our best hedge against foreign market manipulation.

                   IPEC'S RESPONSE TO CRITICAL RESEARCH NEEDS
        IPEC is well on its way to fulfilling its pledge to you of
    responsiveness to the needs of domestic petroleum industry and fiscal
    responsibility. IPEC is continually probing our Industrial Advisory
    Board for new ways to assist the industry and continually seeking out
    cost-effective technical solutions to these problems through an
    aggressive solicitation and review process.
        IPEC will continue to work with the domestic petroleum industry to
    provide technical solutions to those environmental problems that
    represent the greatest challenge to the competitiveness of the
    industry. In addition IPEC proposes to launch two new technology
    transfer initiatives.

                              NEW IPEC INITIATIVES
    Petroleum extension agents
        There are over 3500 independent oil producers in Oklahoma and
    Arkansas. Most of these are very small companies, the ``mom and pop''
    operations whose business is run from the pickup truck and the kitchen
    table. These small producers are especially vulnerable to industry
    volatility. The ongoing crises in the domestic petroleum industry
    requires a multi-level response with a specific outreach effort to the
    smallest of the independents, those without in-house experts, to advise
    them on the latest production techniques to minimize costs; how to
    prevent spills and the accompanying clean-up costs; and how to comply
    with state and federal regulations to avoid fines and costly loss of
    production. This type of assistance is not currently provided by the
    private sector engineering and service companies because the small
    producers cannot afford private sector services of this kind.
        IPEC proposes to provide these services to small independent
    producers through a system of petroleum extension agents (PEAs). Up to
    ten (10) full-time equivalent petroleum professionals will be hired in
    a pilot program to call on small independent producers throughout
    Oklahoma and Arkansas to provide direct assistance in every aspect of
    operating a profitable and environmentally friendly business as an oil
    producer. These PEAs will be seasoned veterans of oil and gas
    production in the state in which they will operate and operate from the
    major oil producing areas of the states. PEA services will be made
    known to producers through advertisements and through field agents of
    the Oklahoma Corporation Commission and the Arkansas Oil and Gas
    Commission. PEAs will also seek out and call on small producers in the
    same way that county agricultural extension agents call on small
    farmers. In difficult situations PEAs will be able to draw on the
    significant resources of the IPEC institutions and the IPEC Industrial
    Advisory Board. Since representatives of the state regulatory bodies
    serve on the IAB, IPEC can also serve to help resolve problems.
        The results expected from this program are: a reduction in the
    costs of production and increased profitability among small independent
    producers; lesser numbers of small producers going out of business;
    less abandoned resources; greater state tax revenues; and increased
    compliance with environmental regulations and greater protection of
    natural resources. The Oklahoma and Arkansas PEA program will serve as
    a model and pilot program for other oil-producing states.

       TRAIN THE TRAINER--EXPANDING ENVIRONMENTAL KNOW-HOW AMONG NATIVE
                                   AMERICANS
        Historically much of the oil and gas produced in Oklahoma has come
    from Indian land. In the culture surrounding the early days of oil and
    gas production there were few environmental regulations or concerns.
    This past lack of proper environmental practice resulted in damage that
    is still visible and problematic today. The most persistent problems
    are soil and groundwater contamination resulting from spills and
    discharge of produced water brine. Historic brine are seen today as
    scars on the land, devoid of vegetation, and highly eroded. Because of
    the age of these spills many of the companies responsible are no longer
    in business. Historic brine scars not only represent a loss of use of
    land but also a continuing source of pollution of valuable surface
    waters and groundwater. These brine impacted sites contain salt which
    jeopardizes public and private sources of drinking water through runoff
    and drainage. The sole solution to this continuous source of salt
    pollution is remediation. Many Oklahoma tribes occupy lands scarred by
    brines and the salt in these scars threatens tribal recreational and
    drinking water sources.
        IPEC proposes to provide tribal organizations with an in-depth
    training program in environmental know-how related to these oil and gas
    problems resulting in the education of Native American environmental
    specialists. Further IPEC proposes to give these specialists the skills
    and resources to allow them to train others in methods of remediation
    of oil and brine spills and pollution prevention.
        The remediation of crude oil spills and brine scars does not
    require expensive instrumentation or highly specialized equipment. The
    major equipment required is simply earth-moving equipment. Most tribes
    have equipment of this type currently used for road work and other
    municipal projects. Therefore, remediation of oil and brine spills is
    not economically beyond the reach of the tribes. By ``training the
    trainer'' IPEC extends its reach beyond the classroom into the tribes
    building self-sufficiency within the tribes to solve environmental
    problems on tribal lands and protect precious natural resources.

                                FUNDING OF IPEC
        IPEC is seeking appropriations of $4 million for fiscal year 2001
    and the succeeding fiscal years fiscal year 2002 and fiscal year 2003
    through the Environmental Protection Agency. This request is a $2
    million increase over the fiscal year 2001 request. The additional
    funding will be used to fund the PEA pilot program and the Train the
    trainer program. The consortium will be responsible for at least a 50
    percent match of federal appropriations with private sector and state
    support over any five-year period. The Consortium will be subject to
    annual review to ensure the effective production of data, regulatory
    assessments, and technology development meeting the stated goals of the
    Consortium.
                                     ______

       Prepared Statement of the Lovelace Respiratory Research Institute

        It is requested that the U.S. Environmental Protection Agency (EPA)
    continue to support the National Environmental Respiratory Center to
    conduct research on the respiratory health risks of combined exposures
    to mixtures of multiple air pollutants, and provide information and
    research resources in this field. Funds for the Center are requested in
    the fiscal year 2001 EPA appropriation.

             WHAT IS THE NATIONAL ENVIRONMENTAL RESPIRATORY CENTER?
        The National Environmental Respiratory Center (NERC) was initiated
    through the fiscal year 1998 EPA appropriation to establish a multi-
    sponsor, multi-disciplinary effort to determine how complex mixtures of
    environmental air pollutants affect human health. Subsequent
    appropriations have continued to provide core funding, around which
    other support has been built. The Center is operated by the
    independent, non-profit Lovelace Respiratory Research Institute (LRRI)
    in Albuquerque, NM.
        NERC is the nation's sole laboratory program focused completely on
    how each of the huge number of individual air pollutants and their
    sources contribute to the respiratory health effects caused by the
    highly complex pollutant mixtures that people actually breathe. The
    research is leveraged by opening the Center's studies to collaborations
    with investigators in other research organizations. The Center also
    maintains a specially-designed, continuously-maintained collection of
    published information on the pollution atmospheres and health effects
    under study. This information resource is available to Congress,
    researchers, regulators, and the public through the Center's internet
    web site.

                          WHY WAS THE CENTER CREATED?
        Under our current implementation of the Clean Air Act,
    environmental air quality regulations focus largely on single
    pollutants, pollutant classes, and sources, which are reviewed and
    debated one at a time. In reaction, research has also focused on one
    pollutant, pollutant class, or source at a time. Of course, people do
    not actually breathe one pollutant, or pollutants from one source, at a
    time--they are always exposed to very complex, ever-changing mixtures
    of air contaminants from many sources. Congress, researchers,
    regulators, industry, and the public are increasingly aware that the
    ``single pollutant'' approach does not provide a full understanding of
    the true relationship between air quality and health. However, the
    ``pollutant mixtures'' problem has been avoided due to its complexity
    and the many pressures to continue the present regulatory-research
    cycle.
        High stakes are associated with correctly attributing health
    effects to the proper air contaminants, or combinations of
    contaminants, and thus correctly estimating both the health-
    effectiveness and cost-effectiveness of management strategies aimed at
    specific man-made pollutants and sources. The more we learn, the less
    it appears plausible to attribute adverse health impacts solely to
    individual regulated pollutants independent of the effects of the many
    other regulated and unregulated co-pollutants. Until NERC was
    established, there was no substantive, coherent research program aimed
    specifically at developing a foundation of information that might
    support the consideration of alternate research and management
    strategies. Today, NERC and the EPA air pollution ``supersites''
    programs are the only large efforts in this area. NERC was created to
    conduct laboratory-based research using controlled pollution
    atmospheres. The supersites program will conduct detailed pollution
    measurements in the field under uncontrolled atmospheric conditions,
    with the intent that population health studies will also be done in
    these locations. Both of these complementary strategies are needed.

               HOW DOES THE CENTER FUNCTION AND WHAT DOES IT DO?
    Management strategy
        Authority for guiding NERC has been vested in an External
    Scientific Advisory Committee (ESAC), which is listed in Table 1. This
    broad-based Committee encompasses diverse technical backgrounds,
    affiliations, and views, but all members are widely-recognized veterans
    in the air pollution research, regulatory, compliance, and advocacy
    arenas. Vesting authority in the ESAC reduces the potential impact of
    conflicts of interest among the diverse government and non-government
    organizations supporting the Center. The research described below was
    recommended unanimously by the ESAC.

                Table 1.--External Scientific Advisory Committee

    Morton Lippmann, PhD, Chair New York University
    Michael Bird, MSc, PhD, DABT, C.Chem, FRSC Exxon Biomedical Sciences,
    Inc.
    Bill Bunn, MD, JD, MPH Navistar
    Glen Cass, PhD California Institute of Technology
    Jonathan Samet, MD, MS Johns Hopkins University
    Gerald van Belle University of Washington
    John Vandenberg, PhD US. Environmental Protection Agency
    Ron White, MST American Lung Association
    Ron Wyzga, MS, ScD Electric Power Research Institute

        The Center's management strategy focuses on conducting a tightly-
    managed multi-year program of integrated studies designed to fill
    specific information gaps. This strategy allows the resources provided
    by multiple sponsors to be focused in a unified, goal-directed manner
    to resolve key issues. Center management has solicited advice from the
    broader scientific community in designing the details of the
    experiments, thus optimizing both the research and the acceptance of
    its results.

                                 RESEARCH GOALS
        The Center's research plan has goals that are both primarily
    theoretical and primarily practical. The primarily theoretical, longer-
    term goal is to create a new, very detailed database on pollution
    composition vs. health effects to test the abilities of different
    statistical approaches to determine which pollution components and
    combinations of components cause the health effects associated with air
    pollution. To do this, identical health assays will be applied to
    animals and cells exposed to several complex pollution atmospheres
    having different, but overlapping, composition. This work will help
    determine the plausibility of basing future air pollution research and
    management strategies on statistical analyses of increasingly detailed
    air quality and health data. It will also facilitate the selection and
    development of optimal statistical strategies for evaluating future
    epidemiological and laboratory data.
        The primarily practical, shorter-term goal is to provide direct,
    head-to-head comparisons of the health effects of pollutants and man-
    made emissions from sources whose health impacts are currently debated.
    This goal is accomplished by using real-world, source-based atmospheres
    to produce the data required to accomplish the theoretical goal.
    Because many of the pollution atmospheres to be used in constructing
    the database are emissions from combustion sources, this work will also
    provide very useful comparisons of the health hazards from different
    combustion emissions.

                                 RESEARCH PLAN
        A series of separate, but identically-designed, studies is being
    conducted to evaluate the nature and dose-response characteristics of
    the respiratory and cardiac effects of 12 complex pollution atmospheres
    recommended by the ESAC. As shown in the table below, the 12
    atmospheres will include diesel (contemporary and outdated engines and
    fuels) and gasoline (contemporary on-road, catalyst-equipped and off-
    road) engine exhaust, road dust (paved and unpaved) wood smoke
    (hardwood and softwood), cooking fumes (meat and vegetable), tobacco
    smoke, and coal-fired power plant emissions. The composition of these
    atmospheres will be analyzed in detail in order to relate health
    responses to the several classes of components and many individual
    components in the atmospheres.
        Numerous health assays will be applied to exposed animals and cells
    to obtain data encompassing the five general categories of respiratory
    and cardiac effects that have been associated statistically with air
    pollution. These interrelated health categories include airway and lung
    irritation and inflammation, allergic responses and asthma, resistance
    to respiratory viral and bacterial infections, lung and heart function,
    and cancer potential. Together, the health assays and atmospheres
    comprise the research matrix shown in Table 2.

                                             TABLE 2.--NERC RESEARCH MATRIX
    ----------------------------------------------------------------------------------------------------------------
                                                                                         Defenses   Heart &
                                                               Irritation &  Allergies   against     Lung     Cancer
                                                               Inflammation   & Asthma  Infection  Function
    ----------------------------------------------------------------------------------------------------------------
    Diesel exhaust (contemporary, outdated)..................           +           +          +          +        +
    Gasoline exhaust (on-road, off-road).....................           +           +          +          +        +
    Road dust (paved, unpaved)...............................           +           +          +          +        +
    Wood smoke (hardwood, softwood)..........................           +           +          +          +        +
    Tobacco smoke............................................           +           +          +          +        +
    Cooking fumes (vegetable, meat)..........................           +           +          +          +        +
    Coal power plant.........................................           +           +          +          +        +
    ----------------------------------------------------------------------------------------------------------------

                             VALUE OF THE RESEARCH
        The matrix of data on health response vs. atmosphere composition
    across the different pollution atmospheres will have considerable value
    of three general types. First, the data will allow taking advantage of
    the similarities and differences among the compositions of the
    atmospheres to determine the individual components, classes of
    components, and combinations of different components that have the
    strongest associations with the different health outcomes. This is the
    underlying goal of the Center. Second, contemporary health data will be
    generated for each atmosphere. For some of the atmospheres, no such
    data exist, and for others, no data using contemporary laboratory
    assays exist. Third, the results will allow direct comparisons of
    health hazards among the different man-made pollutant atmospheres.
    Despite the value of knowing the comparative health hazards of these
    atmospheres, no directly comparable data exist.

                              SUBSEQUENT RESEARCH
        The results of these initial studies will not only provide the
    benefits described above, but will also lay a foundation for
    determining the roles of other air contaminants that are not included
    in the initial studies. There are innumerable atmospheric reaction
    products, pollens, molds, toxins, infectious agents and other natural
    and man-made outdoor air contaminants whose potential effects and
    interactions with the pollutants in the initial atmospheres need to be
    understood. There are also many potential interactions between
    environmental air pollutants and exposures in the workplace and home
    that may contribute to the health effects associated statistically with
    outdoor air pollution. As results from the initial studies and from
    other research programs are evaluated, further research needs will be
    identified and prioritized.

           OTHER CENTER FUNCTIONS: RESEARCH AND INFORMATION RESOURCES
        The research resources of the NERC studies and the LRRI facilities
    are being leveraged by facilitating collaborative participation in
    Center research by scientists in other institutions. External
    scientists are encouraged to make use of the pollution atmospheres or
    biological samples to conduct exploratory research extending beyond the
    ``core'' health assays in the Center's research matrix. This allows
    university and EPA intramural researchers to conduct complementary
    research in a very cost-effective manner. Collaborations are already
    planned or underway with researchers at the University of New Mexico,
    Washington State University, New York University, University of
    Cincinnati, and EPA's National Health and Environmental Effects
    Research Laboratory.
        An information resource consisting of an extensive bibliographic
    database encompassing the pollution atmospheres and health effects
    under study is available via the Center's web site (www.nercenter.org).
    This is the most comprehensive integrated collection of such
    information in the world, and consists both of citations available
    through other search databases and citations from older literature and
    government reports that are not available in an indexed manner from any
    other single source. Anyone can access this information to conduct
    searches or download pre-prepared bibliographies on selected topics. Of
    course, the web site also contains other information on the Center's
    purpose, activities, and status.

                   WHAT IS THE CENTER'S STATUS AND SCHEDULE?
        The advisory committee was formed and, together with the ESAC, LRRI
    has developed the strategy, and research plans, and other functions
    described above. The web site is established, its bibliographic
    database contains over 22,000 citations, and the site is being
    continuously updated. Five preliminary studies selected by the ESAC and
    conducted while the core research matrix was being developed are either
    completed or nearing completion. These studies examined: (1) airway and
    lung irritation from wood smoke; (2) the role of fine particles in the
    development of asthma; (3) toxic interactions between ozone and fine
    particles; (4) the effects of particle-borne metals on heart function;
    and (5) the development of statistical approaches to estimating risks
    from multiple pollutants.
        The design of the myriad details of the studies constituting the
    Center's core research matrix is nearly completed. During the past
    year, workshops and discussions were held at LRRI to obtain broad
    advice and develop consensus on the statistical design of the studies,
    the selection of health assays, and modifications to the LRRI engine
    emissions exposure laboratory.
        The study of the first of the pollution atmospheres, contemporary
    diesel emissions, will begin late this spring. Once this study is
    underway, the details of the study using the second atmosphere, most
    likely tobacco smoke, will be finalized, the exposure laboratory
    suitably modified, and the study initiated. The studies of the
    different atmospheres will be initiated in a staggered manner, with the
    number underway at any given time determined by the available funding.
        The funding level will be critical to accomplishing the work within
    a time frame consistent with decisionmaking needs. At a funding level
    of $4 million/year, completion of the studies of the 12 atmospheres is
    expected to require approximately 5 years, with data analysis requiring
    an additional year. Of course, results from studies of the individual
    atmospheres and comparisons among them will be reported in the interim
    as each study is completed.
    what is the center's financial status and what support is being sought?
        Continuation of support from EPA is critical. Progress has been
    made in developing the required funding from multiple stakeholder
    organizations, but the target level is not yet in hand. EPA funding
    continues to be the foundation upon which the remainder of the
    necessary funding is being developed. Other current and prospective
    sponsors are supporting the program on the basis that the EPA funding
    will continue, although all recognize that continued support is not
    assured. There is support for the goals and strategy of NERC within
    EPA, and incorporation of the Center into EPA's budget would be a very
    positive sign to other current and prospective sponsors. At present,
    the Congressional appropriation is critical to the continuation of the
    program.
        The list of non-EPA NERC sponsors is growing continuously. Among
    federal agencies, the Department of Energy's Office of Heavy Vehicle
    Technologies allocated $300 thousand in fiscal year 2000 funds to NERC,
    and the Department of Transportation has committed verbally to the
    program with the amount yet to be resolved. Funds received or committed
    from non-federal sources now total $503 thousand. Among states, the
    California Air Resources Board has committed to the program. Non-
    government support has been received or committed from American
    Trucking Association, California Trucking Association, Caterpillar
    Inc., Chemical Manufacturers Association, Cummins Engine Co., Deere and
    Co., Detroit Diesel Corp., Exxon Corp., Ford Motor Co., Japanese
    Automobile Manufacturers Association, Navistar International, Phillips
    Petroleum, and Southern Co. Discussions are underway with a number of
    additional organizations.
        Lovelace respectfully requests that $2 million be designated for
    the National Environmental Respiratory Center in the fiscal year 2001
    EPA appropriation. This support is essential to ensuring continuation
    of the Center and further development of the complementary support from
    other stakeholder organizations that is required to accomplish this
    important work.
                                     ______

     Prepared Statement of the Rosenstiel School of Marine and Atmospheric
                                    Science

        Mr. Chairman and Members of the Subcommittee: I appreciate the
    opportunity to submit testimony on behalf of my colleagues at the
    Rosenstiel School of Marine and Atmospheric Science at the University
    of Miami. We respectfully seek your continuing support in fiscal year
    2001 for two important projects.
        First, my colleagues and I seek third-year funding through the
    Environmental Protection Agency for the National Center for Atlantic
    and Caribbean Coral Reef Research to conduct research to protect and
    preserve the nation's endangered coral reef resources. Next, we seek
    second-year funding through the National Aeronautics and Space
    Administration for the National Center for Tropical Remote Sensing
    Applications and Resources--the SAR Facility. We have special expertise
    in both coral reef research and in remote sensing technology and
    applications, and it is for these reasons that I appear before you
    today.
        Founded in 1925, the University of Miami is the largest private
    research university in the Southeastern United States and the youngest
    of 23 private research universities in the nation that operate both law
    and medical schools. Through its 14 colleges and schools, 1,915 faculty
    instruct 13,715 students in more than 110 areas of undergraduate study
    and 162 disciplines for graduate study.
        The Rosenstiel School is recognized as one of the premier academic
    oceanographic research facilities in the world and ranked among the top
    six nationally. Located on a 16-acre tract on Virginia Key in Miami's
    Biscayne Bay, the Rosenstiel School provides the only subtropical
    marine research facility in the continental United States, and is
    adjacent to and coordinates daily with the national NOAA lab and
    research facility. Because of our unique location--the Gulf Stream is
    immediately offshore; just to the south lies a vast expanse of the only
    living coral reef off the shores of the continental United States; and
    just to the east the Florida-Bahamas Carbonate Platform--we are an
    extraordinary resource for the nation, as well as for Florida and the
    southeast region. Our more than 100 recognized scientists, researchers,
    and educators collaborate closely with other institutions--in Florida
    and beyond--in addressing critical national, regional, and Florida's
    natural, environmental, and climatic challenges.

         NATIONAL CENTER FOR ATLANTIC AND CARIBBEAN CORAL REEF RESEARCH
        The Rosenstiel School is a major national research institute
    focusing on the living coral reef as a unique and critical national and
    international resource, critical to the vitality and health of the
    marine life and coastal marine environment of Florida and the
    southeast. Florida's coral reefs are the only living coral reefs off
    the continental United States. The environmental, climatic, and man-
    made challenges to and stress on these precious resources are
    extensive. To preserve and protect our reefs requires the organization
    and coordination of the broadest range of talent and resources.
        We have committed to a major investment of our resources and seek
    to enlist a broad range of Florida, regional, and national expertise to
    coordinate the most advanced and productive research that will ensure
    the protection of living coral reefs. For fiscal year 2001 we seek $3
    million through the EPA to continue and expand the National Center for
    Atlantic and Caribbean Coral Reef Research Center (NCORE), begun in
    fiscal year 1999, a parallel to the Hawaii-based and focused effort.
    Together, these centers will provide a balanced, focused, critical
    scientific mass brought to bear on these precious, unique, and
    vanishing natural resources.
        Coral reefs are the only ecosystems on Earth constructed entirely
    by the secretions of a complex assembly of marine animals and plants.
    They are economically important resources of humans as sources of food,
    medicinals, building materials, and coastal protection. They are
    especially invaluable, in our increasingly crowded world, for the
    spiritual relief they provide the millions of people that journey to
    visit them each year. Unfortunately, changes in water quality due to
    coastal development, environmental changes potentially related to
    global climate change, and over-exploitation of coral reef fisheries
    resources, are contributing to world-wide coral reef deterioration at
    an alarming pace, especially in the Caribbean region. U.S. coral reefs
    in Florida are down-stream of the entire Caribbean coral reef system,
    and are thus dependent on Caribbean reefs for larval recruits and
    maintenance of fisheries stocks. Florida reefs could also be affected
    by pollutants released into marine waters by nations in the region, and
    from our own rivers via discharge into the Gulf of Mexico.
        Scientists are hampered in helping government make critical and
    socially difficult management decisions by our rudimentary
    understanding of coral reef ecosystem processes. Coral reef
    environmental research has historically been piece-meal and under-
    funded with few attempts at true interdisciplinary process-oriented
    research. Local changes in water quality, broad scale environmental
    changes potentially related to global climate change, and fisheries
    over-exploitation of coral reef ecosystems, are thought to be
    contributing to deterioration of coral reefs worldwide.
        NCORE initiated a new approach to coral reef research. The Center
    seeks to coordinate U.S. coral reef policy and research, and assemble
    major national and international initiatives pertaining to coral reefs.
    The Center fosters organization and collaboration within the U.S.
    scientific community, leads the development of a new level of
    understanding of the processes and environmental conditions necessary
    for the establishment, survival, and sustainable use of coral reef
    ecosystems public. The initial focus is on problems faced by coral
    reefs in Florida and U.S. possessions in the Caribbean region (Puerto
    Rico and the U.S. Virgin Islands), and also to coordinate these efforts
    with those of coral reef researchers within the Caribbean region, in
    recognition of the importance of larger scale relationships between
    coral reef systems within the Inter-America Seas.
        NCORE invites nation-wide participation of scientists with
    expertise in coral reef research, and involves scientists from related
    disciplines. The specific functions of the National Center for Atlantic
    and Caribbean Coral Reef Research are: (1) to study fundamental
    scientific aspects of the function of coral reef ecosystems; (2) to
    establish a database of past and ongoing coral reef research in the
    United States; (3) to directly interact with resource managers at local
    to national levels; (4) to provide accurate, but non-technical
    syntheses to the public; and (5) to develop instrumentation and
    observational strategies for coral reef research.

            NATIONAL CENTER FOR TROPICAL REMOTE SENSING APPLICATIONS
        Synthetic Aperture Radar (SAR) is a powerful remote sensing system,
    able to operate in all weather, day or night. Space-based satellite SAR
    systems are able to monitor the movement of targets on land or ocean in
    near real-time, map topography with unprecedented accuracy, assess
    storm and flood damage to urban and rural infrastructure, locate
    wildfires, and assess soil moisture and vegetation health. SARs provide
    data that can be used to forecast major volcanic eruptions and
    understand the earthquake process, and a host of other military,
    civilian, and scientific applications. SAR can make a major
    contribution to SouthCom's various missions, especially in the area of
    drug interdiction, civil defense (e.g., storm damage assessment), and
    natural hazard mitigation.
        The University of Miami uses SAR data for a variety of terrestrial
    and oceanographic applications, and has a large amount of experience in
    the analysis and use of SAR data, and expertise in the operation of
    satellite downlink facilities.
        The SAR receiving facility currently under construction at the
    University of Miami will provide a unique capability for the Caribbean
    and southeastern U.S., with a wide range of scientific applications in
    earth, atmosphere, and ocean sciences, as well as more practical
    applications in environmental monitoring, natural hazard assessment,
    civil defense, and defense tactical applications. The station will
    initially operate at X-band, receiving data from a wide variety of low-
    Earth orbiting satellites. Initial operations will focus on SAR and
    visible and infrared imagery, providing a wealth of information about
    the earth's surface. A high priority will be placed on reliable data
    reception to low elevation angles (2 degrees above local horizon). A
    heavy launch schedule over the next few years will place many new
    satellites with SAR and other radiometric sensors in orbits that
    require at least two antennas to enable data recovery during
    simultaneous satellite passes. The voluminous data flow associated with
    high-resolution satellite sensors such as SAR will require high
    reliability data archiving with rapid retrieval, rapid dissemination of
    data (both raw and analyzed), full data analysis capability, and higher
    level software products for data interpretation.
        Last year you provided support to launch this vital initiative. We
    hope to continue our partnership with the National Aeronautics and
    Space Administration in fiscal year 2001 and seek $5 million for the
    NASA Advanced Tropical Remote Sensing Center--the SAR Facility.
        For purposes of illustration, I will provide three examples of
    applications for the SAR Facility: natural hazard mitigation, drug
    interdiction, and educational opportunities.

                  NATURAL HAZARD MITIGATION AND CIVIL DEFENSE
        It is appropriate that NASA's remote sensing research program
    include a component of natural hazard mitigation for Central America,
    South America, and the Caribbean region. The reason is that the
    nation's long-term security is best served by having prosperous,
    politically stable democracies in this hemisphere. The U.S. has a role
    to play in promoting the economic and political ``health'' of the
    region. Even ignoring strictly humanitarian considerations, problems
    such as poverty and civil unrest can negatively impact the U.S.
    directly and indirectly. Examples include illegal immigration, reliance
    on a drug economy, and lost market opportunity for U.S. business. The
    poor infrastructure that is endemic to much of the hemisphere is
    exacerbated by natural disasters via negative feedback: poor countries
    generally have weak infrastructure that is easily damaged by natural
    disasters (witness the recent devastation in Honduras during passage of
    tropical storm Mitch). The region is especially vulnerable to
    earthquakes, volcanic eruptions, and hurricanes. Techniques to mitigate
    the effects of these disasters can be of enormous benefit.
        Volcano Hazard.--For volcanoes, SAR interferometry generates
    accurate topographic data (DEMs) enabling accurate prediction of the
    direction and speed of lahars, a type of volcanic mudslide. Lahars are
    often the major ``killer'' from volcanoes, claiming more than 20,000
    lives at Nevado del Ruiz, Colombia in 1985. A mudslide from a dormant
    volcano was responsible for most of the casualties in Honduras during
    the recent passage of tropical storm Mitch. SAR interferometry also
    allows detection of pre-eruption swelling of a volcano, which can be
    used to help predict eruption. Such studies are only of academic
    interest at present, because it takes so long to acquire imagery from
    available ground stations (three month or longer waits are typical). A
    South Florida ground station can provide at least several weeks warning
    of major eruption to authorities in the affected area.
        Earthquakes.--A major hazard for much of the western Americas. A
    relatively small earthquake in Los Angeles several years ago caused $20
    billion in damages. An earthquake in the 1970's in Managua, the capital
    of Nicaragua, so severely damaged the city that parts of it were never
    rebuilt. The associated economic devastation is believed by many social
    scientists to have been a contributing cause to two decades of civil
    war. At present most researchers do not feel it is feasible to predict
    earthquakes. Nevertheless, SAR can play a critical role, by precise
    mapping of ground displacement during earthquakes, which can lead to
    better understanding of the earthquake process. SAR is probably the
    best tool available for this type of study. In some cases, SAR is the
    only tool, e.g., in inaccessible parts of South America.
        Hurricane Damage Assessment and Civil Defense.--As more people and
    societal infrastructure concentrate in coastal areas, the U.S. is
    becoming more vulnerable to tropical cyclones. Hurricanes are the
    nation's costliest natural disaster. Early and accurate warnings can
    save millions of dollars and reduce the detrimental impact of storms.
    Quick-look SAR can assess storm damage and identify areas of immediate
    need. SAR images can also provide information on sea state and surface
    wind speed, important to weather forecasters and civil defense
    planners. Radar frequencies are also sensitive to the intensity of rain
    and can better locate concentrations of strong rainfall within tropical
    storms. Such real time observations can provide better estimates of
    storm strength prior to landfall.

                               DRUG INTERDICTION
        Small, fast moving boats are one of the major vectors for drug
    delivery to the coastal southeastern United States. These boats travel
    exclusively at night without running lights, and are very difficult to
    detect. Their low radar cross sections mean that P3 Orion surveillance
    aircraft equipped with standard ocean surface radar only rarely detect
    them (the targets have to be fairly close to the aircraft). Given the
    large area of ocean used by traffickers, and the relatively small
    numbers of surveillance flights, detection success rate is low.
        SAR can easily detect such targets. It does so not by direct
    detection of the boat, but by wake imaging. The center line wake of a
    small fast moving boat is typically 100-200 meters long, and is
    relatively smooth compared to the adjacent ocean surface, and thus is
    easily detected by standard civilian SAR. A recent test by the Office
    of Naval Intelligence had virtually 100 percent success at detecting
    this class of target during nighttime RADARSAT passes. The test target
    was a fiberglass boat operated by the University of Miami.
        At the present time, there are two civilian SAR satellites that a
    South Florida ground station can access, RADARSAT and ERS-2. On an
    average, we can expect to image a given ``patch'' of ocean every few
    days with these systems, and thus would not detect and track all
    targets. On the other hand, we could expect to track a much larger
    number of targets than are currently possible, and could generate, with
    ``post-diction'' analysis, an accurate picture of where most illegal
    traffic is originating and landing. Over the several day transit period
    of these small craft to the southeastern U.S., approximately 30 percent
    to 40 percent of targets would be detected in ``real time'' with
    available satellite coverage, enabling direct interdiction by the Coast
    Guard. This assumes, of course, that the data can be made available
    quickly. The South Florida SAR Facility will make this possible.
        In summary, satellite SAR data could make a major impact on the
    drug interdiction program. However, realizing its full potential
    requires a dedicated facility in South Florida, integrated into the
    chain of command of the drug interdiction effort, and integrated into
    academic efforts in the area of rapid data processing and rapid image
    analysis. The proposed University of Miami SAR ground station is an
    excellent vehicle for this collaboration.

               EDUCATION: K-12, UNDERGRADUATE, AND GRADUATE LEVEL
        The Florida Space Grant Consortium (FSGC) is a voluntary
    association of 17 public and private Florida universities and colleges,
    all the community colleges in the state, Kennedy Space Center Astronaut
    Memorial Foundation, Higher Education Consortium for Science and
    Mathematics, and Spaceport Florida Authority. Collectively, it serves
    more than 230,000 students. FSGC represents the State of Florida in
    NASA's Space Grant College and Fellowship Program. With programs now in
    place in the 50 states plus Puerto Rico and the District of Columbia,
    Space Grant joins the Land Grant and Sea Grant Programs to form a triad
    of federally mandated programs addressing critical national needs in
    education, research, and service.
        The new National Center for Tropical Remote Sensing at the
    University of Miami would provide a unique opportunity for FSGC to
    begin dedicated education and training of the use of space-based remote
    sensing and imagery. Furthermore, opportunities also exist to broaden
    the educational use of the Tropical Remote Sensing site through a K-12
    education partnership with Miami-Dade County Public Schools. We
    envision the development of a magnet studies program in space science
    that would be modeled after a very successful existing program in
    marine science and technology in collaboration with the University of
    Miami. This partnership would educate first-rate students and help
    produce the next generation of scientists, engineers, and technology
    experts for the nation.
        Mr. Chairman, we recognize that this will be another difficult
    year. However, we hope that you and your colleagues on the Subcommittee
    will find it possible to continue to support these two important
    initiatives that deal with issues of crucial national importance. The
    National Center for Atlantic and Caribbean Coral Reef Research will
    make important contributions to the national effort to save our
    endangered coral reef communities. Similarly, our proposal for the SAR
    Facility will enable us to continue our partnership with NASA in
    developing a vital resource in South Florida that will benefit the
    entire nation.
                                     ______

       Prepared Statement of the National Utility Contractors Association

        Mr. Chairman and Honorable Members of the Subcommittee, my name is
    Angelo Di Paolo. I am the owner of Di Paolo Company, a utility and
    highway construction company in Glenview, Illinois, a suburb of
    Chicago. I am delighted to participate in this hearing on behalf of the
    National Utility Contractors Association (NUCA). NUCA is a family of
    about 2000 companies from across the nation that build, repair, and
    maintain water, wastewater, gas, electric, and communications systems
    and manufacture and supply the necessary materials and services.
        My family emigrated to the United States in 1956. I cried and
    begged to return to Italy all the way here, while my grandmother
    diligently reassured me that everything would change for the better in
    America--the land of opportunity. It wasn't until I became a small
    business owner that I fully understood my grandmother's abundant
    wisdom. Grandmother also taught me the importance of speaking one's
    mind and backing up those words with actions. NUCA's efforts year after
    year to ensure appropriate funding for the Clean Water State Revolving
    Loan Fund for wastewater infrastructure is a model of Grandmother's
    diligence. We are hopeful to once again convince you to reject the
    President's proposed cut to the SRF, a program vital to our nation's
    public health, environment, and economic stability.

                             PREACHING TO THE CHOIR
        I suspect I am largely preaching to the choir today. This time last
    year, one of my NUCA colleagues asked you to reject President Clinton's
    lowball request for the Clean Water SRF. Just as he did for fiscal
    2000, President Clinton played the budget shell game and requested only
    $800 million in funding for the SRF for fiscal year 2001. Based on
    previous experience, Mr. Clinton knows this Subcommittee recognizes the
    importance of the wastewater infrastructure program. After all,
    research by the U.S. Environmental Protection Agency (EPA) and various
    independent studies conservatively estimate that there are more than
    $300 billion in wastewater infrastructure needs nationwide over the
    next 20 years. We hope the President does not lose his bet that you
    will appropriate available funds. For the last two years, Congress has
    appropriated $1.35 billion for the program. NUCA respectfully requests
    that you appropriate, at a minimum, level funding for the program. We
    must stress, however, that $1.35 billion is not enough to meet the
    ever-increasing wastewater infrastructure needs and to protect the
    health of citizens currently playing and working in our contaminated
    lakes, rivers, and streams.

                            A VIEW FROM THE TRENCHES
        As a utility contractor, I have a unique window into the maze of
    underground infrastructure, including wastewater infrastructure. I must
    say, the view is not pretty. As the EPA's 1996 Clean Water Needs Survey
    and 1999 EPA Needs Gap Analysis demonstrate, we as a nation have
    knowingly failed to maintain vital wastewater infrastructure in a
    meaningful way. We have the capacity to fix the cruddy pipes and
    protect public health and the environment. It's time we do so before we
    irreversibly contaminate our water supply, before sewer moratoriums
    shut down our communities, and before your constituents' sewer rates go
    through the roof.
        What's out of sight and out of mind to most is clearly visible to
    utility contractors each day. When prospecting wastewater jobs, we walk
    along easement lines in residential areas that are sinking ground--
    ground saturated with raw sewage that has overflowed from failed
    leaching systems. I see children in these residential neighborhoods
    cross the same paths.
        We regularly uncover pipes with gaping holes from which raw sewage
    has been escaping into the surrounding ground for months if not years.
    To make matters worse, the sewer systems are often within yards of
    waterways.
        NUCA has attached the needs (as of 1996) in each of your states to
    your copies of the testimony. At that time, EPA estimated the nation's
    needs were $135.9 billion over the next 20 years. The combined
    wastewater infrastructure needs of the 11 states represented by the
    members of this Subcommittee were $26.3 billion as of 1996.

        SKYROCKETING INFRASTRUCTURE NEEDS, DECLINING FEDERAL INVESTMENT
        Over the last year, a lot of updated dollar estimates for the cost
    to repair and replace the nation's failing infrastructure over the next
    20 years have been tossed about. The EPA has preliminarily increased
    its 1996 estimate from $139.5 billion to more than $200 billion.
    Private studies demonstrate that the needs will exceed $300 billion.
    Two hundred or three hundred billion does not really matter when the
    federal contribution to the SRF the last two years was less than 1
    percent of either figure.
        Wastewater infrastructure needs are ever-increasing, yet federal
    capital investment has remained on a steady decline ever since the
    Clean Water SRF authorization expired five years ago. Because the
    current lack of authorization unintentionally widens the investment gap
    by sending an implicit message that wastewater collection and treatment
    is not a national priority, companion bipartisan bills have been
    introduced by Sen. George Voinovich, and Representatives Sue Kelly and
    Ellen Tauscher. The Clean Water Infrastructure Financing Act (S. 1699,
    H.R. 2720) would reauthorize Clean Water SRF at $3 billion per year for
    five years. We sincerely hope the spirit of the bill will spill over
    into the fiscal 2001 appropriations process.

                           THE CLEAN WATER SRF WORKS
        The Clean Water State Revolving Loan Loan Fund is a concise,
    pragmatic, efficient, and bold preventive measure. The 12-year
    performance of the SRF has been spectacular. The following highlights
    are taken from the U.S. EPA's National Information Management System.
    The information is current through June 30, 1999.
      --Cumulative federal capitalization grants of $15.4 billion have been
            supplemented by state contributions of $3.2 billion, net
            leveraged bonds of $11.6 billion, loan principal repayments of
            $3.8 billion, loan interest payments of $3.3 billion, and
            investment earnings of $2.0 billion. After subtracting $1.7
            billion for leveraged bonds repaid, $188 million for state
            match bonds repaid, $2.7 billion for interest paid on bonds,
            $431 million for administrative expenses, and $3.8 billion for
            debt service reserves, there has been $30.3 billion in SRF
            funds available for projects.
      --Of the $30.3 billion available for projects, $26.1 billion (or 86
            percent) has been provided for 8,200 wastewater collection and
            treatment, nonpoint source, and estuary projects. The number of
            projects rose from just 3 in the year ending June 30, 1988, to
            1,280 in the year ending June 30, 1999.
      --Of the 8,200 projects approved to date, 58 percent (23 percent of
            the dollars loaned) serve communities with populations less
            than 10,000; 31 percent (36 percent of the dollars loaned)
            serve communities with populations in the 10,000 to 99,999
            range; and 12 percent (40 percent of the dollars loaned) serve
            communities with populations of 100,000 or more.

                     TAKE THE LEAD, PROVIDE THE SEED MONEY
        Over the years, the annual federal investment in the Clean Water
    SRF Program has been cut in half, yet there remain thousands of miles
    of barely functioning sewer pipelines that are leaking gallons of raw
    sewage into underground aquifers daily.
        The state revolving funds have become increasingly efficient and
    effective, but sufficient federal seed money must be invested to ensure
    that human and environmental costs of the multi-billion dollar funding
    gap are prevented.
        People intuitively understand that their lives are directly linked
    to water quality and the collection and treatment of wastewater. NUCA
    thanks the members of this Subcommittee for previously rejecting the
    President's proposed cuts to the wastewater SRF program. Please
    continue to take the lead and appropriate, at a minimum, level funding
    for fiscal year 2001. Better yet, if budget constraints permit, please
    act in the spirit of the pending bipartisan Clean Water SRF
    reauthorization bill (H.R. 2720) by appropriating $3 billion for fiscal
    year 2001.
        Thank you for the opportunity to submit testimony.
                                     ______

     Prepared Statement of the National Jewish Medical and Research Center

        Mr. Chairman, and Members of the Subcommittee, thank you for the
    opportunity to submit testimony to the hearing record regarding the
    newly established Environmental Lung Center at the National Jewish
    Medical and Research Center in Denver, Colorado. The National Jewish
    Center, formerly the National Jewish Center for Immunology and
    Respiratory Medicine, is the world's foremost center for the study and
    treatment of lung disease.
        As you know, funds for research at the Environmental Lung Center
    were included in recent EPA Appropriations. We successfully completed
    the Environmental Protection Agency peer review process and are now in
    our fourth year of working with the Agency. First, I would like to take
    this opportunity to thank the Subcommittee for its support and to
    report on the excellent research that is being undertaken as a result
    of this support. We believe that a very productive relationship with
    the agency has been fostered. Essentially, the mission of the
    Environmental Lung Center will be to provide the sound science
    necessary to assist the agency with regulatory policy in specific
    areas, specifically respiratory health effects of air pollution.
        The goals of the Center include determining the health effects of
    air pollution in patients with pre-existing lung disease and the
    mechanisms whereby air pollutants produce adverse health effects. This
    year, we began to investigate the effects of air pollution in children
    with asthma and adults with chronic obstructive pulmonary disease
    (emphysema). We are working to improve our understanding of the
    scientific basis for evaluating health hazards and the risk for
    patients with pre-existing lung disease.
        This research is extremely important given the fact that in the
    United States, lung disease is a leading cause of death. It is now well
    known that man-made environmental and occupational pollutants
    contribute significantly to the rising numbers of those afflicted,
    particularly impacting residents and commuters to urban areas and those
    who work in occupations such as mining, construction, textiles and
    manufacturing. Indoor air pollution and improper ventilation also cause
    the spread of respiratory illnesses. To eradicate these illnesses and
    address general environmental concerns, the Clean Air Act authorized
    EPA to set exposure standards for six widespread air pollutants. As you
    know, these standards continue to provoke heated debate in the
    scientific and regulatory communities. Our task is to find out the
    extent to which the exposure thresholds are true, as measured against
    individual susceptibility, and to assist the regulatory bodies in this
    country to come up with decisions regarding toxic thresholds of
    compounds and the medical relevance of the EPA's fixed testing-station
    data to surrounding populations.
        As the only high ranking institute in the nation that concentrates
    on lung disease and the only one that sees patients as well as conducts
    research, National Jewish has made great contributions to the
    advancement of medical knowledge about the effects of environmental
    pollutants on the human pulmonary system. Its location in Denver is
    significant in that the city is plagued with environmental pollutants
    (nearly 300,000 Colorado residents have chronic lung disease, which is
    well above the national average, although our patients come from all 50
    states). Our dedicated research at National Jewish has shown definite
    linkages between certain types of ambient air pollutants and asthma and
    chronic obstructive pulmonary disease (COPD). We are currently
    exploring this further.
        The Environmental Lung Center's research efforts will range broadly
    from studies of molecular biology and immunology to direct studies of
    air pollution on patients with lung disease. The focus of our work
    during the current year will be on the special features of the lung as
    an immune organ, the pathogenesis of oxidant and particulate inhalation
    injuries, and two specific cohorts of patients, childhood asthma and
    adults with emphysema. For the purposes of this testimony, I will
    describe the proposed studies in a very general way that will give the
    Subcommittee a view into the complexities of determining safe levels of
    airborne toxins given human susceptibility factors.
        Our research program is designed to determine the effects and
    mechanisms of injury of particulates and oxidant gases on the
    respiratory system. We have chosen particulates because of the national
    concern expressed by the Environmental Protection Agency and the
    National Academy of Sciences on how little we know about the health
    consequences of exposures to particulates. Our institution has great
    strength in respiratory medicine and immunology, so we can readily
    bring scientific expertise to bear on this program. These funds will
    have an immediate impact on our understanding of the scientific basis
    of the effects of air pollutants on the respiratory system. We have
    chosen to focus our clinical studies on two groups of patients who are
    thought to be very susceptible to air pollution. The first group are
    children with asthma. We have a school on site for children with
    asthma. We will have a unique opportunity to evaluate the relationship
    of particulate air pollution to asthma symptoms, clinical and
    physiologic changes, and medication use. The other group that we have
    chosen are patients with chronic obstructive pulmonary disease (COPD).
    This group of patients have a higher mortality rate during times of
    heavy particulate air pollution. To learn more about the mechanisms
    whereby air pollutants effect patients with asthma and COPD, we have
    developed unique murine models of these two human conditions. We will
    expose mice with genetically defined respiratory and immunologic
    abnormalities to air pollutants in a defined, well-characterized manner
    in order to determine the mechanisms of how air pollutants effect the
    respiratory system. Finally, we have two projects which will determine
    the effects of ozone and nitrogen dioxide on specific critical proteins
    and cells of the respiratory system. These systems might provide a new
    sensitive biomarker to detect adverse health effects without having to
    use complex clinical indicators of hospital admissions and morbidity.
        In fiscal year 2001 we are again requesting $1.75 million to
    continue these projects. We are particularly proud of our studies on
    two susceptible populations of individuals with pre-existing
    respiratory disease. Children with asthma are a special patient
    population requiring additional studies to define the health risks of
    air pollution by the EPA. The second patient group are patients with
    moderately severe COPD or emphysema. It is in this latter group that
    epidemiologic evidence has indicated an increase in hospitalization and
    mortality related to particulate air pollution. We are in a unique
    position for studying the effects of air pollution on individuals with
    pre-existing respiratory disease.
        The major thrust for the next five years is to take advantage of
    modern molecular biology and genetics in order to study environmental
    lung disease. Never before have researchers had the ability to
    determine the genetic basis for individual susceptibility and the
    molecular mechanisms of disease. Our institution is internationally
    known for its research in immunology, and we want to utilize this
    expertise to study environmental lung disease.
        Mr. Chairman, we believe that we are the best partner to provide
    the type of sound scientific research necessary to assist the agency
    with its regulatory decision-making goals. Our desire is to grow this
    relationship and hope that the subcommittee will again provide $1.75
    million for fiscal year 2001 to continue this relationship for another
    year. This federal investment will enhance our nation's commitment to
    protecting the health and safety of its workers, citizens and
    individuals the world over. The research conducted by the Center will
    lead to medical breakthroughs and environmental findings that will
    assist the federal government to set new standards for both government
    and business. Your support for these efforts will save lives and
    ultimately, save costs for the federal government and for businesses
    who are currently struggling to comply with new standards.
        Thank you.
                                     ______

        Prepared Statement of the Ohio Department of Natural Resources,
                            Division of Oil and Gas

        Mr. Chairman and members of the committee, thank you for the
    opportunity to testify today on behalf of the Ground Water Protection
    Council (GWPC) in requesting $950,000 in funding for the RBDMS Program,
    an Environmental/Information Management Suite, or EMIS.
        At the Ohio Division of Oil and Gas, we are charged with the
    regulatory responsibility over Ohio's oil and gas laws and rules. Our
    mission is to ensure the protection of public health, safety and the
    environment while providing for the orderly development of oil and gas
    resources. Of paramount importance within our regulatory responsibility
    is the protection of ground water resources.
        The Ground Water Protection Council is governed by 20
    representatives of state oil and gas agencies, and state ground water
    agencies. The GWPC also invites as ex-officio participants, industry
    representatives, environmentalists, and the public. Through its
    members, GVRC, promotes the protection of water resources through the
    use of best management practices, conservation policy development,
    education and research to protect ground water as well as remediate
    contaminated ground water.
        In 1996, the Ohio Department of Natural Resources was moving from a
    mainframe environment of data management to a client server
    environment. Through our partnership with the members of the GWPC, we
    were introduced to the Risk Based Data Management System (RBDMS) and,
    in 1996, received state capital improvements funding and GWPC funding
    to customize RBDMS for Ohio.
        Since we went ``on-line'' with RBDMS in July of 1997, Ohio has
    issued in excess of 4,500 permits to drill and plug oil and gas wells,
    processed the transfer of ownership of 8,000 wells, and registered 750
    wells owners. All of our oil and gas well data management, permitting
    and bonding responsibilities are maintained through RBDMS and are
    available to anyone with a personal computer.
        With significant downsizing experienced within our Division in the
    1990s (50+ percent) and the oil and gas industry, we needed a very
    easy-to-use database our staff, oil and gas industry, and consultants
    could use in order to meet our statutory obligations and expectations
    of our customers. RBDMS has proven to be easy to use and adaptable to
    Ohio's data management needs.
        In 1998, the Division of Oil and Gas developed a CD-based version
    of RBDMS that can be updated via the Internet. The CD-based RBDMS
    provides the oil and gas industry with a ``self-help'' mechanism to
    acquire and maintain an accurate oil and gas well database. This easy
    access to oil and gas well data is providing a cost-saving mechanism
    for Ohio's oil and gas well owners and others to conduct business as
    efficiently as possible in our state.
        With my testimony, I have included letters/E-malls of support we
    have received from Ohio's RBDMS users. This support reflects the use by
    large Ohio independent producers (3000+ wells owned), small producers
    (50+ wells) and consultants. Both the regulators and the industry they
    regulate have benefited from RBDMS.
        We would like to thank the Committee for the previous support of
    RBDMS. This support has enabled Alaska, Montana, Nebraska, Mississippi,
    North Dakota, Alabama, Utah, New Mexico, Kentucky, Michigan, Kansas and
    New York to install RBDMS. To date, state expenditures account for in
    excess of 50 percent of the funding for RBDMS development and
    implementation. This depicts the states commitment for development use
    of RBDMS across the nation. Continued funding for RBDMS would allow for
    additional state installations, basic support to the states with RBDMS,
    and the development of GIS (Geographic Information System) as a RBDMS
    add-on which would enhance its use by the general public.
        Another measure of the RBDMS success is its nomination by the U.S.
    Department of Energy to receive ``The Energy 100 Award,'' honoring the
    100 best scientific and technological accomplishments since the
    formation of the USDOE in 1977.
        Thank you for the opportunity to appear before you today and for
    your consideration of continued funding for an already very successful
    multi-state initiative coordinated through the GWPC.
                                     ______

                 Prepared Statement of the Village of Weedsport

        EPA RURAL WATER TECHNICAL ASSISTANCE AND GROUND WATER PROTECTION
        Good morning Chairman Walsh and Members of the Committee. My name
    is John O'Connell. I am the superintendent of Public Works for the
    Village of Weedsport, a small New York municipality serving 750 homes.
    I am also on the Town Council of the Town of Sennett, New York.
        Our New York Rural Water Association and the other state rural
    water associations greatly appreciate the funding that you provided
    last year.
        My message today is that we believe the funding for rural water
    technical assistance and small community groundwater protection is the
    most effective use of EPA funds you appropriate from the drinking water
    program. Each year this subcommittee approves hundreds of millions of
    dollars for the EPA to increase the regulatory burden on small towns.
    In turn, EPA increases the number and stringency of the regulations,
    passing billions in compliance costs onto our small towns.
        Much of this effort is misdirected because improving drinking water
    in small communities is more of a RESOURCE problem than a REGULATORY
    problem. Every community wants to provide safe water and meet all
    drinking water standards. After all, local water systems are operated
    by people whose families drink the water every day, who are locally
    elected by their community, and who know, first-hand, how much their
    community can afford.
        Numerous studies have concluded that a majority of non- compliance
    with EPA regulations is not due to actual water contamination, but is
    caused by the complexity of the regulations. Also, studies by the
    National Rural Water Association and EPA have shown that small towns
    will quickly remedy any water problems when provided understandable
    education and additional resources. More regulations won't help poor
    communities which can't afford the current regulatory regime, much less
    a new set of regulatory hurdles. What works in small towns is providing
    common-sense assistance in a form they can understand and afford. It
    takes someone sitting down with them evening after evening, and working
    with them through the ENTIRE process. Giving them a copy of the federal
    register and a phone number to call is not helping. Attached is a list
    of the over one thousand on-site visits carried out in the State of New
    York last year. A similar list is provided to the other Members of the
    Committee for their states.
        Each time we help a community we educate them on their resources so
    that they can solve their problem on their own next time. THIS IS KEY .
    . . ENCOURAGING LOCAL responsibility and building local know-how. If
    the community does not accept and support measures to protect their
    water, no amount of regulation will protect it. The TA program promotes
    this kind of local initiative.
        The need for technical assistance is increasing with the dramatic
    increase in new federal regulations including: consumer confidence
    reports, radon, ground water rules, operator certification, source
    water protection, disinfection byproducts, etc. Our rural water
    technical assistance staff will get thousands of the calls for help
    from each of these regulations. (attached is the EPA's schedule for
    additional regulations)
        When local communities take responsibility for protecting their
    environment they do it more effectively and economically than
    governmental regulations. This has been documented in our groundwater/
    wellhead protection program's rapid expansion to small communities all
    over the state in the last four years, a list of affected communities
    is attached to my testimony. My reason for pointing this out is that we
    are facing the same challenge in source water/non-point source
    pollution in rural areas.
        As the Congress provides additional EPA funding (under the Safe
    Drinking Water Act and the Clean Water Action Plan) for source water
    protection, clearly we need a grassroots source water protection effort
    that will do for source water what the grassroots groundwater
    protection program did for groundwater. To this end, we urge you to
    support transferring EPA funds to a rural water source protection
    program to be operated through the USDA Natural Resources Conservation
    Service (NRCS). Last year Congress provided $1.5 million for an
    innovative grassroots source water protection program. We urge you to
    again provide this funding and to specifically designate it to be
    transferred to the NRCS program under authorities in Clean Water Act.
    This will ensure a bottom up, locally supported alternative to expanded
    federal regulations.
        Mr. Chairman, I will close with our request that the Committee
    include $8.8 million in the EPA's budget for all state rural water
    technical assistance and our groundwater protection initiatives and to
    again provide $1.5 million for an innovative grassroots source water
    program. Thank you for your past support and the opportunity to appear
    before you today.
                                     ______

            Prepared Statement of State Oil and Gas Board of Alabama

        Mr. Chairman, thank you for the opportunity to provide testimony.
    My name is David Bolin, I am Past President of the Ground Water
    Protection Council (GWPC) and the Assistant Oil & Gas Supervisor for
    the State Oil and Gas Board of Alabama. My agency is a typical member
    agency in the Ground Water Protection Council. We are responsible for
    the environmental safeguards related to oil & gas exploration and
    production. Many of us are also responsible for state ground water and
    surface water protection programs. Through the GWPC, my agency and the
    other states work together to protect ground water resources while
    reducing the cost of compliance to industry.
        We feel that GWPC's mission reflects the future of environmental
    protection: that we regulators must form partnerships, together with
    industry and local government, to protect the environment. This is the
    alternative to a command and control regulatory model, which we feel
    often results in unintended consequences, like unnecessary cost to
    industry and local government. Neither of these consequences help
    protect our environment nor effectively utilize limited resources.
        In addition to expressing the state governmental agencies'
    appreciation for your assistance last year, Mr. Chairman, I would like
    to emphasize one main point today--that success in implementing the
    Safe Drinking Water Act's source water protection program, AND the
    Act's oil and gas exploration programs depend primarily on state
    government agencies like mine. And because we are the keys to success
    and workability of these two EPA-delegated programs, we urge the
    Subcommittee to look at increasing funding to innovative state programs
    as an alternative to expanding the federal programs.
        We urge you to include $550,000 in the fiscal year 2001 EPA's
    Budget for the Ground Water Protection Council. This proposed funding
    would be used for environmental initiatives essential to protecting
    states' natural resources and compliance with EPA requirements.
        GWPC has been the only organization providing objective assessments
    of hydraulic fracturing, a commonly used method of coal bed methane
    production. This historically safe and non-controversial practice has
    been the focus of environmental lawsuits questioning state programs.
    States are relying on the continued technical assistance, development
    of best management practices, and scientific analysis of hydraulic
    fracturing by GWPC to settle this controversy. This assistance and
    scientific assessment is critical to the future of safe oil and gas
    industry injection practices including hydraulic fracturing. State oil
    and gas agencies strongly feel that GWPC is uniquely qualified to
    provide this service.
        Another federal program where GWPC is providing exclusive technical
    assistance to all states is the Class V underground injection control
    program. This year, EPA began enforcement of the federal ban on any new
    motor vehicle waste disposal wells (septic systems) and large capacity
    cesspools. These shallow wells are typically owned by very small
    businesses. GWPC is providing technical and public outreach/assistance
    to the states so they can enforce these rules, while at the same time
    minimizing the harm to small local business owners.
        An example of environmental innovation is GWPC's proposal to
    provide states with a data system that helps them comply with the 1996
    Safe Drinking Water Act's requirement for source water protection
    plans. Using funds provided by Congress last year, we developed a data
    system that many states will use as the core of their source water
    program. There is no other data system being developed by EPA or anyone
    else to assist the states.
        This year we are urging the committee to support funding to provide
    the core database to additional states. We are requesting less funding
    this year because a significant portion of last year's funding was used
    to develop a pilot system. The system is up and working in Oklahoma
    (the first state) and accessible over the Internet. Oklahoma's
    information system will allow the state to:
      --Comply with EPA requirement for state source water
            assessmentprogram under the Safe Drinking Water Act;
      --Provide the public with a useable environmental source water
            protection tool;
      --Provide local governments and environmental planners access to al
            state (and EPA) data of regulated entities (Superfund, Clean
            Water Act, RCRA, etc.)
      --Provide water systems' Consumer Confidence Reports via the
            Internet.
        The Other states that plan to implement the system in the next year
    include: Ohio, Illinois, New Hampshire, Nebraska, Nevada, among others.
        In closing, on behalf of all the GWPC state members, I would like
    to thank you for your help last year including funding for our priority
    source water and drinking water protection requests and ask for your
    support again on these state environmental priorities.
                                     ______

                Prepared Statement of Colorado State University

        Mr. Chairman, Members of the Subcommittee, my name is Judson M.
    Harper. I am Vice President for Research and Information Technology at
    Colorado State University, located in Fort Collins, Colorado. I
    appreciate this opportunity to submit my testimony for the record of
    proceedings on the fiscal year 2001 Budget for the Environmental
    Protection Agency. I would like to testify in support of the budget
    request for funds related to carbon sequestration mitigation strategies
    and take this opportunity to inform you of the ongoing work in this
    field being conducted by the Consortium on Agricultural Soils
    Mitigation of Greenhouse Gases.
        The Consortium for Agricultural Soils Mitigation of Greenhouse
    Gases (CASMGS) includes Colorado State University, Texas A&M
    University, Iowa State University, the University of Nebraska, Kansas
    State University, Michigan State University, Montana State University,
    The Ohio State University and Battelle-Pacific Northwest National
    Laboratory. These institutions have been working individually and
    collectively for the past few years in the fields of soil carbon
    dynamics, soil-derived greenhouse gases, soil erosion, water quality
    and computer modeling, land resource data analysis, agricultural
    resource economics and integrated assessment.
        The Administration's Budget for the Environmental Protection Agency
    proposes $227 million for the third year of the Climate Change
    Technology Initiative, focusing on reducing greenhouse gas emissions.
    We support these initiatives and feel prepared to partner with the
    federal government in reaching its objectives.
        The goal of CASMGS is to provide the tools and information needed
    to successfully implement soil carbon sequestration programs intended
    to lower the accumulation of greenhouse gases in the atmosphere, while
    improving the soil and providing income and incentives to farmers.
    Specifically, the Consortium will:
      --Produce national inventories of all major greenhouse gas fluxes
            from soils.
      --Provide measurement and modeling tools for quantifying and
            verifying soil carbon sequestration rates to support carbon
            dioxide emission credit or trading schemes.
      --Provide integrated assessment models to evaluate alternative
            national and global economic and policy strategies for carbon
            sequestration. These models will provide insights on the
            impacts of such programs on crop production potential, food
            security and environmental quality.
      --Provide a standing capability to meet the short-term needs of
            Federal agencies, Congress and the White House, for
            information, data and analysis on issues relating to soil
            carbon sequestration and soil greenhouse gas emissions.
      --Participate in the transfer to and adoption of technology by other
            countries for quantifying and verifying carbon sequestration
            rates.
      --Provide information to each of the stakeholder groups:
            policymakers, agricultural sector, energy and transportation
            industries, the scientific community and the general public,
            through annual and special reports, scientific and trade
            journals, popular publications and an internet website.
        With seed money received in 1999, CASMGS has been developing an
    assessment tool to help evaluate potential government policy options
    for carbon sequestration at the national level. Additionally, CASMGS is
    testing and validating the Century ecosystem and EPIC models for
    improving predictions of carbon sequestration rates. Century was
    developed by members of CASMGS and is the most widely-used model of
    soil carbon and nutrient cycling, world-wide. EPIC estimates soil
    erosion, water quality, soil nutrient dynamics, yields and economics
    for different agricultural management systems and policy scenarios.
    Funding provided by this Committee in fiscal year 2000, is being used
    to continue the policy analysis and to synthesize current research
    results by CASMGS scientists, making it available for use by government
    agencies.
        The work of the Consortium is important to the goals of the
    Environmental Protection Agency to reduce greenhouse gas emissions. I
    am hopeful that this Committee will continue to recognize the
    contributions already being made by CASMGS and continue to make funding
    available to support its research and development activities.
                                     ______

        Prepared Statement of the National Association of Conservation
                                   Districts

        The National Association of Conservation Districts is the
    nonprofit, nongovernment organization that represents the nation's
    3,000 conservation districts and more than 16,000 men and women who
    serve on their governing boards. Established under state law,
    conservation districts are local units of state government charged with
    carrying out programs for the protection and management of natural
    resources at the local level. Conservation districts work with nearly
    two-and-half million cooperating landowners and operators each year and
    provide assistance in managing and protecting nearly 70 percent of the
    private land in the contiguous United States.
        Since the passage of the 1972 Clean Water Act, tremendous strides
    have been made in cleaning up point sources of water pollution such as
    industrial and municipal wastewater discharges. The progress in
    treating point sources has been made possible, in large part, by an
    investment of more than $100 billion in federal funds for the
    construction of municipal wastewater treatment plants. Nonpoint sources
    of pollution--runoff from cropland, construction sites, mining
    activities, lawns and city streets--are much more elusive targets and
    pose significant obstacles to achieving the nation's water quality
    goals. Pollution prevention remains the key to effectively dealing with
    nonpoint source pollution.
        Section 106 of the Act authorizes funding to assist state and
    interstate agencies in administering programs to prevent, reduce and
    eliminate water pollution. The President's budget request calls for a
    $45 million increase in Section 106 for a total of $160 million in
    fiscal year 2001. These funds would be used to focus on the listing of
    impaired monitoring, assessments and development and implementation of
    Total Maximum Daily Load (TMDL) programs. Conservation districts
    support the President's request.
        When Congress enacted Section 319 in the 1987 amendments to the
    Act, it recognized that nonpoint source pollution control is best
    addressed through state and locally driven cooperative, incentive-based
    management programs. With federal assistance and state matching
    efforts, Section 319 state management programs have resulted in
    considerable progress in controlling nonpoint source pollution. Some 38
    states have also established companion agricultural nonpoint programs
    that provide technical and financial assistance to farmers and ranchers
    to help them implement conservation practices that stem runoff.
        Although progress has been made, changing rules and regulations and
    lack of adequate funding are the primary obstacle to addressing the
    nation's nonpoint source pollution control problems. Further, in
    addition to the already overwhelming need for technical and financial
    assistance, the joint EPA-USDA Unified National Strategy for Animal
    Feeding Operations (AFO) calls for the voluntary development of
    comprehensive nutrient management plans (CNMPs) for some 450,00
    agricultural operations that confine animals but that are not subject
    to the National Pollutant Discharge Elimination System permit program.
    While the strategy recognizes that voluntary, incentive-based programs
    are the key to restoring and protecting the nation's waters, it creates
    a tremendous new workload for states to provide assistance to producers
    in developing the CNMPs. Estimates of the number of staff years needed
    at the field level to assist farmers and ranchers in this endeavor
    range as high as 8,000 FTEs. The existing staff available from NRCS,
    states and conservation districts cannot handle the current workload.
        In fiscal year 1999 Congress recognized this issue by nearly
    doubling funding for EPA's Section 319 grants to states program to $200
    million. This figure remained level in the fiscal year 2000 budget. The
    President's budget request for fiscal year 2001 seeks an additional $50
    million for Section 319 and includes allowing states to use up to 20
    percent of their allotments to develop and implement TMDLs. Given the
    rapidly increasing workload in addressing animal waste issues,
    conservation districts believe that level is still inadequate and
    recommend a funding level of at least $300 million for the Section 319
    grants to states program.
        Over the past two years, conservation districts and the Natural
    Resources Conservation Service have conducted a national workload
    analysis to determine what our conservation needs are relative to the
    resources we have to address them. The results have been shocking--even
    to us. Data show that, at a minimum, we need an increase of $300
    million in technical assistance funding alone.
        Conservation districts also support the initiative begun last year
    to allow states to reserve up to 19 percent of their Clean Water State
    Revolving Fund Grants (CWSRF) for use as grants for nonpoint source
    pollution control and estuary management. However, the President's
    budget request again this year proposes to cut funding for the program
    by $550 million, which conservation districts believe is a step in the
    wrong direction. At the very least, funding for the CWSRF program
    should be maintained at the fiscal year 2000 level of $1.35 billion.
        Congress recognized long ago that the Great Lakes are a national
    treasure and has passed specific legislation, the Great Lakes National
    Program (GLNP), to protect them. The President's budget proposal
    provides a significant increase over the current funding level of $13.6
    million. In fiscal year 2001, GLNP would receive a significant boost to
    $67.3 million: $17.3 million from the Environmental and Programs
    Management account and $50 million from the State and Tribal Assistance
    Grants (STAG) account million. The additional funding from the STAG
    account will be targeted to a state and municipal competitive grants
    program to improve water quality through stormwater pollution control,
    wetlands restoration and contaminated sediment remediation.
    Conservation districts support this expanded Great Lakes water quality
    initiative.
        In addition to its water quality and other programs, the
    President's budget initiative again proposes a new undertaking called
    the Better America Bond (BAB) program. The BAB provides $2.150 billion
    in bonding authority in fiscal year 2001 to help communities preserve
    green spaces, protect water quality and clean up abandoned industrial
    sites (brownfields). Much of the program will be aimed at obtaining
    easements for those purposes. Since easements are voluntary and often
    accomplish significant conservation purposes, conservation districts
    support the Better America Bond program.
        Specific recommendations for funding other selected EPA water
    quality programs are outlined in the table below.

      FISCAL YEAR 2001 RECOMMENDED APPROPRIATIONS FOR SELECTED PROGRAMS OF THE U.S. ENVIRONMENTAL PROTECTION AGENCY
                               NATIONAL ASSOCIATION OF CONSERVATION DISTRICTS, APRIL 2000
                                                [In millions of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                               Fiscal year
                                                    ----------------------------------------------------------------
                                                                                   2000
                                                     2000 Admin.   2000 NACD     Enacted     2001 Admin   2001 NACD
    ----------------------------------------------------------------------------------------------------------------
    Environmental Protection Agency:
        State Programs Grants......................      115.500      120.000      115.530      160.530      160.530
        NPS Control Grants (319)...................      200.000      300.000      200.000      250.000      300.000
        Water Infrastructure.......................      800.000     1350.000     1350.000      800.000     1350.000
        Drinking Water Infrastructure..............      825.000      825.000      820.000      825.000      825.000
        Great Lakes National Program...............       13.367       16.000       13.600      67.3000       67.300
        Gulf of Mexico Program.....................        4.300        7.300        4.300        4.020        7.300
    ----------------------------------------------------------------------------------------------------------------

                                     ______

       Prepared Statement of the American Society of Mechanical Engineers

        The Environmental Engineering Division (EED) of the Council of
    Engineering, American Society of Mechanical Engineers (ASME
    International), is pleased to have this opportunity to provide written
    comments on the fiscal year 2001 budget request for the Environmental
    Protection Agency (EPA).
        ASME International is a worldwide engineering society focused on
    technical, educational and research issues. It sets many industrial and
    manufacturing standards, and holds several technical conferences and
    professional development courses each year. This testimony represents
    the considered judgment of the ASME Environmental Engineering Division,
    and is not necessarily a position of ASME as a whole. The ASME
    Environmental Engineering Division promotes the art, science and
    practice of environmental engineering in all issues pertaining to the
    environment. Its members are engaged in a broad range of environmental
    engineering areas, including air, water and waste management.

                                   BACKGROUND
        Mechanical engineers have a long-standing professional interest in
    engineering, research and technology to protect the environment and
    human health.
        The EPA plays an essential role in the nation's efforts to protect
    human health and to safeguard the natural environment. Protection of
    the environment is defined as actions that directly or indirectly
    protect human health and ensure that other living species are not
    endangered. Accordingly, research and development (R&D) in
    environmental protection includes environmental health, ecology,
    environmental monitoring, environmental technology, pollution
    prevention, and related topics.
        In 1996, the EPA established a Science and Technology (S&T) budget
    to fund those programs within the Agency that provide significant
    scientific, engineering, and technical expertise in meeting the
    Agency's broad array of environmental goals. The majority of the fiscal
    year 2001 S&T budget request, $492.5 million of the $674.3 million
    total, is allocated to the Office of Research and Development (ORD).
    ORD administers programs across two broad categories: problem-driven
    research to solve environmental problems of high risk and high
    scientific uncertainty; and, core research to improve the underlying
    scientific tools for understanding and protecting human health and the
    environment.

                                RECOMMENDATIONS
        ASME's EED believes that responsible public policy is predicated
    upon sound science. Policy makers benefit from the counsel of highly
    trained scientists and engineers on how best to incorporate ``best
    practices'' into legislative and regulatory directives. To ensure that
    the Agency's research and policy agenda continue to be founded on sound
    science, today's students and researchers need to be encouraged to
    participate in cutting-edge research.
    Science Advisory Board (SAB)
        EPA is requesting $2.7M, a reduction of $0.2M, to fund its Science
    Advisory Board in fiscal year 2001. The EPA, through its SAB,
    prioritizes research areas using risk and other factors. The Agency
    also provides technical advice to Congress and establishes its research
    priorities based on requests from Congress. The SAB promotes sound
    science and gives direction on methods to incorporate science
    appropriately.
        ASME's EED supports the March 1999 findings of the SAB's Research
    Strategies Advisory Committee (RSAC) that encourage EPA to:
      --``strengthen its strategic planning processes to fund the longer-
            term research on critical environmental issues that transcend
            the year-to-year budget frame- work . . .;
      -- ``establish a mechanism to identify emerging issues . . . because
            emerging issues often form the basis for future research and
            science and technology programs . . .; and,
      --``move forward with evaluations of research programs by
            environmental outcomes rather than outputs''.\1\
    ---------------------------------------------------------------------------
        \1\ An SAD Report: Review of the Fiscal Year 2000 Presidential
    Science and Technology Budget Request for the Environmental Protection
    Agency, Science Advisory Board, March 1999, p. 4.
    ---------------------------------------------------------------------------
        ASME's EED believes that EPA needs to continue to prioritize its
    research agenda, focusing on necessary research and developing a
    process to justify terminating research on those issues that are or
    have become low risk.
    Science to Achieve Results (STAR) Grants Program
        EPA created the STAR grants program six years ago to encourage the
    nation's best scientists to participate in the ORD research program.
    STAR complements the ongoing work in ORD laboratories, providing an
    opportunity for professors, students and researchers to focus on the
    Agency's priority issues. To date, there are more than 500 active
    grants in 49 states, Puerto Rico, Guam and the District of Columbia.
    Additionally, approximately 100 fellowships are awarded yearly for
    graduate study in environmental fields to prepare the next generation
    of scientists, industry professionals and government officials for the
    challenges of the future. ASME's EED supports the request of $107.3M to
    continue the STAR Grants Program in fiscal year 2001.
        ASME's EED strongly endorses EPA's programs that advance government
    and industry partnerships. ASME is a strong proponent of industry/
    government partnerships as a means of fostering technical innovation
    and leveraging resources to achieve desired outcomes. Within the
    context of the fiscal year 2001 budget request for ORD, ASME's EED
    supports the following partnering initiatives:
    Clean Air Partnership Fund
        The fiscal year 2001 budget request for the Clean Air Partnership
    Fund of $85M would provide technical support to communities to clean
    the regional air through innovative local, state and private
    partnerships. The Fund would demonstrate smart multi-pollutant
    strategies that reduce air toxics, soot and smog, as well as greenhouse
    gas emissions, to protect the nation's health and climate. Currently,
    businesses and municipalities often invest in short-term single
    pollutant control approaches. In contrast, the Fund would encourage
    industry to further reduce greenhouse emissions by pursuing
    comprehensive pollutant reduction while improving energy and
    operational efficiencies.
    Design for Environment
        EPA's fiscal year 2001 request for the Design for the Environment
    Program is $4.9M, an increase of $0.2M over the fiscal year 2000 level.
    This program provides industry with performance, cost and comparative
    risk information about alternative technologies and processes in order
    to facilitate environmentally informed decisions. Private sector
    partnerships enable EPA's techniques to be combined with industry
    specific expertise in production and process design.
    Environmental Technology Verification (ETV) Program
        The fiscal year 2001 request for the Environmental Technology
    Verification program is $6.7M, an increase of $0.3M. This program,
    which enjoys support from industry and other federal partners, will
    continue to test the performance of commercially ready technologies.
    Broader testing is needed on innovative technologies. Industry programs
    serve as incubators to test new commercial technologies.
    Hazardous Waste: Superfund Innovative Technology Evaluation (SITE)
        The Agency's fiscal year 2001 request for SITE is $5.9M, a
    reduction of $1.1M. SITE treatment research includes bioremediation,
    abiotic treatment and natural attenuation. Evaluations are conducted on
    biotreatment and chemical treatment and, dense nonaqueous phase liquid
    (DNAPL) extraction techniques are compared for effectiveness. Field
    tests on permeable reactive barriers are ongoing. Containment systems
    are being improved with new materials and methods. The SITE program
    promotes innovative technology and evaluates the effectiveness of pilot
    tests.
        Whether or not carbon emission reductions will ultimately be
    required to address global climate change, ASME believes that the
    United States has an obligation to continue prudent and cost-effective
    measures to promote carbon sequestration. Government and industry must
    work together to develop new renewable and non-renewable advanced
    energy technologies to maximize carbon reductions. Such technologies
    could result in reducing the cost of achieving carbon reductions and in
    the development of marketable new products. ASME's EED supports ORD's
    ongoing research in the areas of climate change that advances this
    approach:
    Climate Change Initiatives: Transportation
        The fiscal year 2001 request for the Climate Change Initiative:
    Transportation is for $65.0M, an increase of $35.4M over the current
    budget. The Partnership for New Generation of Vehicles aims to develop
    new technologies for vehicles. The National Academy of Sciences has
    determined that EPA's renewable fuels application for a four-stroke
    direct injection engine is the lead candidate technology. The design
    provides concepts for commercialization and innovation and will serve
    as the basis for additional research into technologies for light and
    heavy-duty truck applications.
    Climate Change Research
        EPA's fiscal year 2001 request for Climate Change Research is for
    $22.7M which represents an increase of $2.2M over fiscal year 2000. EPA
    has been working with industry to reduce potential emissions of global
    warming gases to achieve significant reductions of carbon dioxide
    equivalent metric tons. Deployment of advanced technologies could
    result in substantial reduction of greenhouse gas emissions. EPA is
    working in program design and start up programs. The Climate Wise
    program is working with industry to make the purchase or generation of
    renewable power a key element of the Action Plans over the next five
    years. A combined heat and power initiative will reduce carbon
    emissions by increasing the capacity of U.S. combined heat and power
    systems. EPA will identify and eliminate the regulatory and
    institutional barriers that are currently preventing more rapid
    dissemination of this technology.

                                   CONCLUSION
        Because of the complex nature of environmental issues, it is
    essential that EPA base its policies and recommendations on sound
    science. A strong R&D program is critical for the on-going development
    of that scientific based decision-making. ASME's EED supports:
      --ORD's program that advances government and industry partnerships,
            e.g., Clean Air Partnership Fund, Design for the Environment
            and Environmental Technology Verification Program;
      --a substantial increase in funding for R&D that will lead to
            reduction in carbon emissions; and,
      --on-going programs to assure that EPA's research and policy programs
            are based upon sound science.
        We look forward to the EPA's evaluation of past programs in its
    performance report to Congress. Assessing progress in R&D is
    challenging; however, assessing the quality of methodologies, planning
    and scope of research is done routinely. Funding of programs such as
    those discussed above should be based on clearly state programmatic
    objectives, as well as on a system of metrics to measure their
    effectiveness or success. A report detailing the progress or success of
    each program to date should be included with the annual budgetary
    request. Unfortunately, such information was not available to the EED
    for purposes of this review.
        ASME International's Environmental Engineering Division appreciates
    the opportunity to present its view to the Appropriations Subcommittee
    on VA, HUD and Independent Agencies.
        ASME International is a non-profit technical and educational
    organization with 125,000 members worldwide. The Society's members work
    in all sectors of the economy, including industry, academia, and
    government. This statement represents the views of the ASME
    Environmental Engineering Division, Environment and Transportation
    Group, Council on Engineering, and is not necessarily a position of
    ASME as a whole.
                                     ______

          Prepared Statement of the National Treasury Employees Union

        Chairman Bond, Ranking Member Mikulski, and distinguished Members
    of the Subcommittee, my name is Colleen Kelley, and I am the National
    President of the National Treasury Employees Union. The NTEU represents
    more than 155,000 federal employees, including many of those who work
    at the Environmental Protection Agency. I appreciate this opportunity
    to present testimony to you today on behalf of the men and women who
    help ensure our waterways are swimmable and fishable, our drinking
    water is free of harmful toxins, our air is breathable, and any
    polluted lands are made clean again. The actions of this subcommittee
    directly affect their lives and the livelihoods of every American.
        Whether it's cleaning up already contaminated lands and waterways,
    or taking pro-active measures to prevent future pollution or
    contamination, EPA employees are working to reduce the risks to the
    American public and our environment. If we are to continue our nation's
    progress in reducing pollution and cleaning up the environment, then we
    need to ensure that EPA has the staffing and resources it needs to
    effectively carry out its mission.
        As we stand here today in the Spring of 2000, the dawn of the 21st
    century, we need to ask ourselves what the state of the environment of
    this great nation will be at the dawn of the next century. Are we going
    to put the brakes on environmental progress? Are we going to accept
    that we have reached the pinnacle of scientific innovation and that
    there is no more to learn about how we can best go about cleaning up
    after environmental mistakes of the past and preventing similar
    mistakes in the future?
        I think we can all agree that we owe it to future generations of
    Americans to leave them with a clean environment. We are all stewards
    of the earth, and of our natural resources, and as such, we should
    continue to foster science-based innovation and public policy that
    protects the public health and our environment. One of the best ways we
    can go about this is by supporting a strong budget for the EPA. The
    scientists and analysts at the EPA are the ones who have years of
    expertise in these critical areas, and they are the ones who are in the
    best position to foster environmental progress.
        I am pleased that the President has requested an 11 percent
    increase in funding for the EPA's core operating programs for fiscal
    year 2001. President Clinton's proposed fiscal year 2001 budget of $7.3
    billion for the United States Environmental Protection Agency and $2.2
    billion for the Better America Bonds program will go a long way in
    supporting EPA's essential operations to provide cleaner air, fresher
    water, safer food and sound science. The budget will support increased
    staffing in these areas so that we can continue to make progress in
    protecting the public health and the environment for all Americans and
    their communities.
        We cannot expect the EPA to continue to protect the public health
    without the staffing and resources necessary to do the job. We need to
    increase funding for core EPA environmental programs such as
    researching and setting environmental standards, ensuring enforcement
    and compliance of our environmental laws, and providing assistance to
    our states and municipalities. I believe that the EPA budget request
    for fiscal year 2001 is a good first step, but I believe that the level
    of funding requested by the EPA should be viewed as a floor, not a
    ceiling. As the number and complexity of threats to our environment and
    to human health continue to increase, it is critical that the Congress
    provide additional funding for staffing at the EPA. While I believe
    that funding should be used to make technological improvements in EPA
    programs as well, and I applaud this subcommittee's commitment to this
    area, I am sure you will agree with me that technology alone cannot
    possibly address the demands the agency now faces.
        The budget proposal before you will allow EPA employees to continue
    working with states and localities to develop proposals to restore
    wetlands and to clean up our polluted rivers and lakes. The budget will
    support EPA efforts underway with industry and municipalities to
    modernize our drinking water systems. It supports ongoing research into
    children's vulnerabilities to exposure to lead and other harmful
    toxins. The budget will help ensure our food supply is safe by
    providing funds to develop alternatives to harmful pesticides. And the
    budget provides funds to clean up our Superfund and brownfield sites
    and restore these abandoned industrial sites to productive economic
    use. These are only a sampling of the many programs administered and
    implemented by the dedicated men and women who work at the EPA. These
    programs, as well as countless others within EPA need additional
    staffing to address the increasing demands of protecting and improving
    the health of the American public.
        NTEU supports the budget request of $68 million targeted at
    protecting the health of our children. The EPA has some of the best-
    trained and most experienced scientists in the world researching and
    conducting sophisticated tests to determine the effects of lead and
    other toxins on children. They are working to develop new standards and
    new techniques to better protect children and our most vulnerable
    members of society from environmental dangers. Among other things, the
    budget supports ongoing research efforts into the effects of air
    pollution on children with asthma. It targets $75 million for the
    implementation of the Food Quality Protection Act, which sets food
    safety standards designed specifically to protect our children. And the
    budget continues research efforts directed toward finding alternatives
    to those pesticides most harmful to our children.
        The budget provides $784 million for President Clinton's Clean
    Water Action Plan. This funding will allow the EPA to continue to work
    with other federal agencies, states, and local communities to improve
    environmental protections for our lakes, rivers, and waterways
    throughout this country. EPA scientists are constantly working to
    develop new techniques to make our waterways clean enough for drinking,
    fishing, and swimming. The funds administered by EPA employees will
    help reduce polluted runoff into our waterways, and will provide grants
    to enable water districts to find more cost effective and efficient
    ways to deliver even cleaner drinking water to our residents. The
    American public rightfully expects that their drinking water will be
    clean and the fish they eat from our lakes and bays will not be
    contaminated. They depend on this subcommittee and the Congress to give
    EPA employees the tools they need to establish strict water quality
    standards and to ensure that these standards are being met.
        The President's budget provides $1.45 billion for the Superfund
    program to continue the cleanup of the nation's most polluted toxic
    waste sites. Hundreds of Superfund sites nationwide have been cleaned
    up since the program's inception. Thanks to the work of EPA analysts
    and lawyers, polluters have been forced to pay for their neglect of our
    environment, and communities have been able to develop more cost
    effective means to clean up the sites. The budget also invests $92
    million in cleaning up our slightly less contaminated, but still highly
    toxic, brownfield sites. The new budget proposal will continue EPA's
    progress in helping our communities clean up these lands, put them back
    into productive economic use, and create more jobs where we most need
    them.
        The EPA has also taken successful actions to provide cleaner,
    healthier air for all Americans including setting the toughest
    standards ever for reducing harmful air pollution. Often times, these
    actions have come under fire by certain industry groups, but because
    the EPA actions have always been backed up by extensive research and
    sound science, the EPA has been able to prevail in courts and prevail
    in public media battles. The result has been reduced air pollution,
    increased pollution prevention efforts, and a decrease in the number of
    pollution-related illnesses and deaths. Under the 2001 budget, the
    President is requesting $215 million to continue to support
    partnerships with states, tribal governments and local communities to
    collectively work to improve air quality across the nation. In
    addition, the President has requested $85 million for the Clean Air
    Partnership Fund, which will help strengthen these partnerships, help
    foster local innovation and investment, and bring the most creative and
    most successful ideas for cleaning the air to communities where they
    are most needed. NTEU supports these EPA initiatives.
        Finally, we are also very supportive of the President's budget
    request of $30 million for the Information Integration Initiative. This
    initiative will expand the public's right-to-know through the
    development of an information network with the states to ensure that
    key environmental information will be made public in a timely manner
    through the internet and other means. This will help localities improve
    their decision-making, will reduce the burden of paperwork on the
    regulated community and the states, and will guarantee the taxpaying
    public reliable, high quality information about what threats to the
    environment exist in their communities, and what steps are being taken
    to address these threats. NTEU believes that not only do the American
    people demand to have this critical information at their fingertips,
    they also demand that their tax dollars are being spent to continue to
    expand the science base at the EPA so that we can better mitigate and
    prevent these environmental threats.
        The work performed by the men and women at the EPA is often taken
    for granted. Yet thanks to persistent science-based work by EPA
    employees, we are reducing air pollution, improving the quality of our
    drinking water systems, and allowing Americans to live longer and
    healthier lives. EPA employees are working with states and local
    communities to build on initiatives that get results and shelve those
    that have failed. And EPA scientists, analysts, lawyers, and others who
    have dedicated their lives to serving the public at the EPA continue to
    work to find the most cost effective and most efficient solutions to
    addressing our country's greatest environmental threats. And while we
    should continue to support technological advances in reducing pollution
    and cleaning up our environment, technology alone cannot clean up every
    lake, every Superfund site, or every particle of toxic matter in our
    air. Technology needs to be supported by sound science and by sound
    public policy. Science-based regulations need to be implemented,
    overseen, and enforced by knowledgeable scientists. We know that there
    are always better ways of doing things--more cost effective and
    innovative ways--and it's up to this subcommittee and the entire
    Congress to continue to foster this scientific innovation. Now is the
    time to build on our science base and expand it so that we can be
    assured that the planet we leave to our next generation is cleaner and
    in better shape then the one we inherited from earlier generations.
        I would like to thank the Subcommittee again for the opportunity
    for our Union to present its views on the budget for fiscal year 2001.
    As you continue your subcommittee's deliberations, I hope you will give
    special consideration to EPA's dedicated workforce, a team of public
    servants who have committed themselves to cleaning up our environment
    and protecting the health of the American people.
                                     ______

                  DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

                Prepared Statement of Elmira College, Elmira, NY

        Mr. Chairman, thank you for this opportunity to submit testimony
    for the record regarding Elmira College's proposed Technology
    Enhancement Initiative.
        Today, unlike any other time in history, we have a substantial
    opportunity to apply the information age technologies to schools that
    are so effective outside the classroom for educational purposes. For
    schools to make the most of this opportunity, they must rethink
    education from the ground up.
        The power of information technologies to reshape education and to
    ensure the economic and long-term viability of our industries and
    workforce is already becoming unmistakable. In scattered locations
    around the country, schools are using state-of-the-art technologies and
    interactive multi-media to engage students more actively in learning
    and to teach them skills they will need to thrive in an information
    based workplace and world. This is particularly true with non-
    traditional students who have little if any access to traditional
    classrooms and educational services.
        As information age infrastructure is developed, more and more
    students and teachers will gain access to a global web of information
    and exchange ideas, services and education globally.
        The Internet and other information technologies are bringing
    interactive instruction to schools in our cities and suburbs.
    Importantly, the past several years have witnessed a stronger focus on
    providing those information technologies in rural areas of the country.
    These technologies are allowing students to build ``communities'' with
    their counterparts around the world and create lifelong beneficial
    links between schools and the communities around them.
        Taking advantage of this new capability will require profound
    changes in the roles of teachers, students and schools. Instead of
    being the repository of knowledge, teachers will be guides who will
    help students navigate through electronically accessible information.
    They will use the new technologies to build networks with each other,
    with parents and students, with academic and industrial experts and
    with other professionals.
        In order to ensure that students (K-12, undergraduate, graduate,
    continuing education or professional development students, students in
    rural areas) receive the full potential of the technology age, the
    technological access must exist in flexible locations and provide
    continuous access to their extended communities. Equally as important,
    teachers must receive extensive training in how to use existing and
    emerging information technologies and how to design and implement
    appropriate curricula for a state-of-the-art 21st Century classroom.
        To make technology a viable instructional and professional
    development tool requires schools to have enough computers to provide
    full easy access for all students including students with disabilities.
        Institutions of higher education are central to the national effort
    to ensure that all students and teachers are equipped to maximize the
    employment, economic and benefit of today's technology. By providing
    education, training, and technical assistance these institutions can
    work in partnership with local school districts, human service agents
    and professionals to address problems associated with the rapid onset
    of the information age, including: educational, economic and social
    infrastructure of their surrounding communities.
        Elmira College is an institution of higher education that accepts
    that responsibility willingly, recognizing the benefit to its students,
    students in surrounding school systems and community colleges, and
    individuals in nearby communities in need of continuing education or
    professional development. As such, it is implementing its ``Technology
    Enhancement Initiative'' to address its own and regional educational
    and technology training needs.

          THE ``TECHNOLOGY ENHANCEMENT INITIATIVE'' AT ELMIRA COLLEGE
        As it approaches the 21st Century, Elmira College, in Elmira New
    York, stands at an important crossroads in the development and
    expansion of its educational and economic resources. To ensure its
    continued strength as a four-year institution of higher education the
    College is proposing the implementation of its ``Technology Enhancement
    Initiative'' to relocate and improve its technology infrastructure.
        This initiative will address the ever-growing need in the southern
    tier of New York and northern tier of Pennsylvania for access to higher
    education, teacher technology education and training and professional
    development services. It will provide the College the opportunity to
    expand its technology resources and to meet its own and regional
    technological and services demands.
        Elmira College proposes to establish a partnership with the federal
    government that will:
      --Relocate, consolidate and improve all student and administrative
            computing services from McGraw Hall, which is handicapped
            inaccessible, to the Gannett-Tripp Library which is handicapped
            accessible;
      --Upgrade existing ``hub'' hardware to state-of-the-art technology
            which will be able to meet and manage the demands of the
            upgraded system; and,
      --Wire every dormitory, classroom and administrative meeting room as
            well as every faculty, academic, and administrative office
            building for direct access to the Gannett-Tripp Library, the
            Steele Memorial Public Library and an interface with the local
            public library system and with the Internet.
        As a result of the improvement to its technological infrastructure,
    Elmira College will have the opportunity to expand existing and
    implement several new educational and training programs in partnership
    with local school systems and human service agencies. Specifically, the
    initiative will enable the College to:
      --Offer access to higher education courses in 12 rural and
            underserved counties and 21 K-12 school districts (58,308
            students), 8 community colleges and a variety of community
            sites via distance learning;
      --Offer access to Elmira College library resources, including the
            federal depository at the College, at a variety of community
            sites via distance learning to underserved counties;
      --Provide teacher technology education and training both on and off
            campus;
      --Provide expanded professional development and technology education
            and training services;
      --Provide leadership and technical assistance to local K-12 systems
            in the development of state-of-the-art technologically advanced
            classrooms and prepare its Education students (future teachers)
            and regional teachers to teach effectively in this
            technologically advanced era.
        In addition to the obvious educational benefits that the Elmira
    College ``Technology Enhancement Initiative'' will have for the College
    and its students, there are several significant benefits for teachers
    in the regional community.
        As a result of the Technology Enhancement Initiative, Elmira
    College will have the opportunity to work in partnership with regional
    school systems to address the education and training needs of their
    teachers and staff.
        Elmira College will work to identify technology education and
    training expertise in the region and the nation and work with local
    school districts to develop critical professional linkages needed for
    the local school system to take full advantage of that expertise for
    their students.
        In addition, as part of its own curricula, Elmira will provide
    expanded in-depth technology education and training for students in its
    Masters of Education programs.
        The Technology Enhancement Initiative will provide Elmira College
    the ability to offer these teacher education and training courses
    through any of its distance learning capabilities to teachers in the
    classroom, on-site at their own schools, at local libraries, community
    colleges or even in the home. Graduate students at Elmira will continue
    their training within the local schools, but will have an increased
    ability to conduct classroom observations, information exchanges and
    training as a result of the Technology Enhancement Initiative.
        To do so, the College will expand existing and implement new
    education, training and professional development programs, including
    courses such as Computers in Education, Interactive Media for
    Educators, The Internet for Educators, Video Production for Educators,
    and Microcomputer Applications for Educators. Finally, it will provide
    the College with the opportunity to play a leading role in improving
    the social and economic infrastructure of the region.
        The Technology Enhancement Initiative will create an expanded
    opportunity for cooperation in the provision of higher education
    courses between Elmira College and local community colleges. It will
    help those institutions to provide timely and relevant programming at
    the same time it helps to prevent unnecessary duplication of academic
    programs and/or courses at Elmira or the community colleges.
        As it is proposed, the relocation, expansion, and consolidation of
    all computing functions at Elmira College will provide three methods of
    distance learning in the future, including:
      --Computer Based Research
      --Internet Conferencing
      --Compressed Video
        Students and professionals in the field will have the ability to
    access education, training or professional development from home (if
    the connection exists) from libraries, other designated community sites
    or from any of the eight sites where Elmira currently provides minimal
    programming including: Bath; Corning; Ithica; Owego; Penn-Yan; Watkins
    Glen; Rome; and Syracuse (adult education).
        Elmira College will have the ability to share faculty experiences
    across institutions and establish partnerships on select courses with
    regional community colleges, including general education courses,
    courses to support selected major requirements, and coursework
    providing a valuable supplement to existing offerings. Elmira College
    currently holds articulation agreements with three regional community
    colleges that will be expanded as a result of the Technology
    Enhancement Initiative. Those institutions include:
      --Tompkins Cortland Community College
      --Corning Community College
      --Broome Community College
        To enable the completion of this important initiative, Elmira
    College is seeking $3,399,000 million in federal support. To date, the
    College has invested $500,000 in campus infrastructure in preparation
    for the implementation of this initiative (these dollars are not
    counted as part of the official project cost, but are calculated into
    the College's contribution). The College is firmly committed to the
    completion of the project and the implementation of this important and
    enabling technology infrastructure and therefore will contribute an
    additional $1 million towards the total cost of the initiative. Total
    project cost is $5,923,680 million.
        Mr. Chairman, this initiative is critical to the long-term
    viability of Elmira College as well as the regional the K-12,
    undergraduate, graduate, continuing education and professional
    development systems in the southern tier of New York and the southern
    tier of Pennsylvania. We look forward to working with you to secure the
    final phase of funding for this very important initiative in fiscal
    year 2001.
        Again, thank you for the opportunity to present this testimony for
    the record.
                                     ______

                   Prepared Statement of Fairfield University

        Mr. Chairman, thank you for again providing me the opportunity to
    submit testimony concerning an important initiative that Fairfield
    University is undertaking to ensure the progress of information
    technology education and training and to provide resources to regional
    small and medium-sized businesses. The initial focus of the effort is
    two educationally underserved cities--Bridgeport and Norwalk--in the
    State of Connecticut and the surrounding business community.
        First, I wish to thank you and Members of the Subcommittee for
    supporting this initiative with a $1.5 million EDI grant in fiscal year
    2000. This funding will allow us to begin work on an Information
    Technology Center (ITC) designed to provide outreach that will enhance
    the technology skills of primary and secondary school students and
    adults in and around the cities of Bridgeport and Norwalk. It will also
    become integral to a major effort by the University to address the
    needs of regional businesses. As President of Fairfield University, I
    would like to provide the Subcommittee with a brief overview of the
    state-of-the-art resources that the University currently has to address
    the educational and workplace challenges brought about by technology.
        As you are aware, constant advances in technology have resulted in
    an ever-changing workplace environment. This is especially true for the
    computer industry, where the Labor Department estimates that an average
    of 95,000 new computer scientists, systems analysts and programmers
    will be needed every year from now until 2005. As a result, studies
    have indicated that to ensure national economic growth into the
    millennium we must prepare our school systems to meet the demands of
    the technological era by providing cutting-edge skills at the primary
    and secondary level. In addition, educational programs must also be
    developed at the collegiate level for university students, as well as
    for returning adult students who need to modernize or enhance their
    skills.
        As Connecticut seeks to address the educational needs of its
    citizens and meet the workforce needs of employers it must develop
    strategies for capitalizing on the resources and strengths of its
    higher education system. Fairfield University, a leading university in
    Connecticut, has proposed a solution to meet the occupational needs in
    its State for the 21st century. The proposal involves the utilization
    of an existing state-of-the art telecommunication infrastructure that
    will provide the resources necessary to encourage collaborative
    teaching and learning--especially the study of how best to integrate
    technology into the curriculum. The resources to be provided in the ITC
    include facilities for distance learning, video conferencing, computer
    lab workstations for training, a faculty resource lab, a multimedia
    lab, an electronic classroom, and digital resources for businesses.
    With these resources and through the development of special programs,
    the proposed ITC will become a major training and information center
    that will enable the University to expand its services to the
    surrounding communities and beyond.
        There are three major audiences who are potential partners for the
    ITC--including community agencies, schools, and small to medium-sized
    businesses. The program proposed for these audiences is unique for a
    number of reasons. First, the ITC will provide technical education and
    training for primary and secondary school students and teachers in
    local urban public schools who have historically not received extra
    support for basic and advanced technical skills and training. While
    school funding at the local level remains scarce, this program will
    assist public schools in advancing the skills of the children without
    impacting budgets. Second, the Fairfield telecommunication
    infrastructure is unique in its ability to provide technical training
    through the creation of its convenient satellite learning programs.
    This is especially important for returning adult students who need to
    modernize their skills in order to be competitive in the contemporary
    workplace. Recent State of Connecticut employment cutbacks in the
    banking, insurance, and manufacturing industries have produced alarming
    unemployment rates among highly trained workers. The University is
    prepared to meet the challenges posed by this problem through satellite
    learning programs that will train these workers so they can re-enter
    the workforce. In addition, the satellite learning programs will target
    members of the community who have little or no technical skills, so
    they also can pursue successfully technical careers.
        The benefits of satellite learning programs from Fairfield
    University are thus twofold: The programs will decrease recent State
    unemployment rates among highly-skilled workers, and concurrently
    provide better job security for the low-skilled and low-income wage
    earner. The primary focus of these collaborations will be with
    community agencies, secondary education and business/industry. The
    proposed relationships can reduce high school dropout rates by infusing
    added resources and expertise into the school system, and can increase
    the caliber and breadth of job-training opportunities for local
    industry.
        Telecommunications technology is the vehicle through which
    institutions of higher education can provide broader educational access
    to the community. Students, educators, parents, senior citizens, and
    the unemployed are just a small sampling of the potential beneficiaries
    of on-line training sites throughout the community. Proposed outreach
    programs for the targeted audiences will include ``Train the Trainers''
    sessions for community agencies and local town government personnel.
    School district personnel will be able to utilize the ITC for similar
    faculty training programs or utilize the proposed distance learning
    conference room for delivery and retransmission of satellite downloads
    for K-12 programs. Small to medium-sized businesses will utilize the
    conference space to host technology-related meetings and conferences
    and tap into the University's extensive business resources that are in
    the process of being digitized.
        Fairfield University currently possesses a singular, award-winning
    resource that can bridge the gap and help accomplish these goals. An
    already established state-of-the-art telecommunications infrastructure
    consists of a fiber system that reaches every computer in every
    classroom, faculty office and student residence hall. In total, 23
    campus buildings share voice, video, and data services. The backbone
    portion of this system was recently upgraded to 1 Gbits from 155 Mbits.
    In addition, the University operates satellite dishes for program
    downlinking and teleconferencing and a campus television network with
    58 channels, eight of which are programmed exclusively by the
    University.
        Cablevision Head End is a facility on campus providing a high-speed
    networking hub for Cablevision in Connecticut. Through this resource,
    voice, video, and telecommunications are made available to
    Cablevision's residential and commercial customers. This facility has
    the potential of providing the University with access to Cablevision's
    entire customer base with national outreach potential. Cablevision Head
    End reaches a broad audience inclusive of local schools, private homes,
    work places, and community centers.
        The academic and administrative staff at Fairfield possesses
    extensive expertise in working with the local community, as witnessed
    by the multitude of community outreach projects that complement current
    programs. These efforts, which now reach nearly 3000 parents, students,
    teachers, business and engineering students and professionals, can be
    greatly enhanced, reaching broader audiences through the development of
    a comprehensive distance learning curriculum. What is required to take
    this step is modest when compared to what can be accomplished in a very
    short time. The establishment of the ITC will provide the central
    location for all departments and disciplines to meet to develop
    curricula for transmission via television or computer to classrooms,
    workplaces, community centers, or homes. It will also provide easy
    access to digital library resources for the students and the business
    community regionally and potentially statewide.
        To accomplish these goals and establish the ITC, Fairfield
    University plans to upgrade, expand, and renovate a large portion of
    its new $20.4 million library structure. The University has already
    invested about $2 million of this total in the ITC component of the
    Library which will be dedicated to utilizing the telecommunications
    infrastructure and providing digital library resources to improve
    community outreach efforts from all of the various departments of the
    University.
        The total of $5.5 million in federal partnership assistance
    requested by the University will be used to fund the Information
    Technology Center which will be used by University faculty and staff
    for internal instruction, and which will be available to residents of
    the surrounding communities through various partnerships designed
    collaboratively to meet the emerging needs of the community.
        Fairfield University has comprehensive career preparation resources
    that can be utilized and shared with the community. These include:
      --The School of Continuing Education
      --The Graduate School of Education and Allied Professions
      --The School of Engineering (undergraduate and graduate programs)
      --The School of Business (undergraduate and graduate programs)
      --The School of Nursing (undergraduate and graduate programs)
      --The College of Arts and Sciences
        Fairfield University's telecommunications capability is one of the
    best in the country. The construction of the ITC will help to
    coordinate and expand existing outreach as well as provide the
    foundation for new collaborations. Using expanded technology resources,
    faculty will be able to design and develop new curricula. The current
    technology resources at Fairfield, combined with the existing expertise
    of faculty and administrators, represent a strong foundation upon which
    the ITC will build and flourish.
        In summary, the specific programmatic components of this Center
    will include information technology and computer training as well as a
    Global Information Resource Center for the region's corporations.
    Fairfield University is seeking a continuation federal partnership
    grant of $2 million from HUD to assist in the establishment of the
    Information Technology Center at Fairfield University to foster the
    essential dialogue required to ensure that the University's curriculum
    is aligned with the ever-changing technology training needs of society
    and the workplace. This funding, along with the $1.5 million provided
    by the Subcommittee last year, will allow the University to construct
    the shell of the facility and bring the ITC very close to becoming a
    reality.
        We believe a Federal partnership demonstration at Fairfield
    University has the potential to meet the needs of Connecticut's schools
    as well as the economic development needs of businesses and the broader
    community throughout the State. We appreciate the Subcommittee's
    attention and consideration of our proposal for such a continued
    partnership opportunity.
        Thank you.
                                     ______

              Prepared Statement of the U.S. Conference of Mayors

        Mr. Chairman and Members of the Subcommittee, we appreciate the
    opportunity to present our views on fiscal year 2001 appropriations for
    the Department of Housing and Urban Development, and in particular, the
    two priority programs for local governments Community Development Block
    Grants (CDBG) and the Home Investment Partnerships program (HOME).
        We thank you, Mr. Chairman and Members of the Subcommittee for your
    continuing support for these priority local government programs. We are
    especially pleased by the $50 million increase in CDBG in fiscal year
    2000 to $4.8 billion, and maintaining HOME funding at $1.6 billion.
        As we stated in our testimony last year before this Subcommittee,
    local officials continue to be concerned about setting aside funds out
    of CDBG to fund ``boutique'', or one-time programs. We particularly
    oppose set-asides that are unrelated to the core purpose of CDBG.
    Despite increases in the appropriations for the program in recent
    years, the fact is over the past five years actual formula amounts to
    urban counties and central cities have been cut as a result of set-
    asides and an increase in the number of entitlement communities.
    Between fiscal year 1995 and fiscal year 2000, CDBG set-asides rose
    from $95 million to $560 million, more than 10 percent of the total
    appropriation.
        Mr. Chairman, local government officials urge you to increase CDBG
    formula grants to entitlement jurisdictions by increasing the overall
    appropriation for CDBG in fiscal year 2001 to at least $5 billion and
    by scaling back funds set-aside under CDBG for special purpose grants.

                  WHY CDBG IS EFFECTIVE AND CRITICALLY NEEDED
        Celebrating its 26th year, having been signed into law by President
    Gerald Ford in 1974, CDBG is the Federal government's most successful
    domestic program. The CDBG program's success stems from its utility,
    i.e., providing cities and counties with an annual, predictable level
    of funding which can be used with maximum flexibility to address their
    unique neighborhood revitalization needs. Based on HUD's most recent
    annual report to Congress, between fiscal year 1993 and fiscal year
    1996 an estimated 14-17 million households benefitted from the CDBG
    program. During that same period an estimated 114,799 jobs was created
    through CDBG-funded economic development activities. In fiscal year
    1993, entitlement communities spent funds in the following manner:
    housing rehabilitation, assisting over 200,000 households (35.8
    percent), public works and infrastructure (22.7 percent), planning,
    monitoring and program administration (14 percent), public services (12
    percent), acquisition and clearance of property (7.3 percent),
    preventing or eliminating slums and blight (6 percent), and economic
    development (6 percent).

                                 IMPACT OF HOME
        Like CDBG, the HOME program is producing very positive results in
    expanding the supply of affordable housing. Enacted as the centerpiece
    of the 1990 National Affordable Housing Act, the program became law
    with President Bush's signature.
        Testimony of HOME's effectiveness can be found in the Committee
    Report accompanying the House version of the fiscal year 1999
    appropriations bill where it praised the HOME program and gave it
    additional funding ``because it can document results.'' The report said
    that ``the program tracks the performance of its grantees and measures
    their performance to determine whether the federal investment is worth
    while.''
        According to cumulative HUD data, since HOME was created in 1990,
    it has helped to develop or rehabilitate over 495,401 affordable homes
    for low- and very-low income families. Ninety percent of the HOME funds
    used for rental housing must be targeted to families with incomes at or
    below 60 percent of the area median. The balance may assist those with
    incomes up to 80 percent of the median income.
        Targeting is very deep in the HOME program. The majority of HOME
    funds have been committed to housing that will be occupied by very low-
    income people and a substantial amount will assist families with
    incomes no greater than 30 percent of median. As of the end of
    February, 2000, more than 89 percent of home assisted rental housing
    was benefitting families at or below 50 percent of area median income.
    Sixty percent of all home-assisted rental housing (including tenant-
    based rental assistance) was helping families with incomes at or below
    30 percent of area median income.
        HOME funds help low- and very-low income families realize the dream
    of homeownership by providing for construction and rehabilitation of
    housing as well as providing the down payment and or closing cost
    assistance in the form of second mortgages necessary to bridge the gap.
    Since 1990, HOME funds have been committed to 277,334 homeowner units.
    All HOME funds used for homeownership must be targeted to households
    with incomes at or below 80 percent of area median.
        HOME is cost effective and provides the gap financing necessary to
    attract private loans and investments to projects. For each HOME
    dollar, $2.37 of private and other funds has been leveraged since the
    program's inception. This clearly illustrates the effective and
    judicious use of HOME funds by participating jurisdictions.
        Local officials urge you to fund the HOME program in fiscal year
    2001 at a level of $2 billion.

              RENEWAL OF EXPIRING SECTION 8 RENT SUBSIDY CONTRACTS
        Mr. Chairman, we commend the Subcommittee and the Congress for
    fully funding all expiring tenant-based and project-based rent subsidy
    contracts last year. We urge you to do the same this year at an
    estimated cost of $13 billion. We note, too, that the Administration
    has asked for 120,000 new incremental housing vouchers, a proposal we
    support. Despite the booming economy the need for affordable housing
    continues to grow as housing prices increase faster than wages for low-
    income Americans. In addition, and in the absence of specific
    authorizing legislation, we urge that you include within the
    appropriations bill both the authority for, and the funding to, renew
    from the Section 8 fund all expiring rent subsidy contracts under the
    Shelter Plus Care program. This will make available approximately $37
    million in fiscal year 2001 in HUD's ``Continuum of Care'' NOFA for
    communities to fund additional homelessness projects.

                            HOMELESS HOUSING FUNDING
        Mr. Chairman, we support the Administration's funding request of
    $1.2 billion for homeless housing programs. We have been working with
    the authorizing committees to craft legislation converting the McKinney
    Act's homeless housing programs into a pure, formula-driven block grant
    program. In order for such a program to give sufficient funds to
    communities to carry out meaningful projects at the local level, it
    needs an appropriation of at least $1.2 billion. In addition, we
    support the shifting of the Shelter Plus Care contract renewals into
    the Section 8 fund, as mentioned previously.

                                LEAD-BASED PAINT
        Finally, Mr. Chairman, we would like to briefly mention HUD's Lead-
    Based Paint final regulation. First, let us say, we support addressing/
    abating lead hazards in government supported housing programs. This
    rule which takes effect on September 15, 2000 requires all housing
    units assisted by CDBG and HOME to be assessed for lead-based paint
    hazards. This is a concern for local governments in addition to the
    lack of additional funds available to implement the rule. Because of
    this new regulation, local governments will be forced to spend more of
    their CDBG and HOME funds in meeting the requirements of this rule,
    which will include hiring certified contractors to conduct the
    activities of the rule, providing relocation costs to families in
    instances where they will have to temporarily relocate from their
    homes, and abating the lead hazards. Because of these requirements,
    local governments are concerned that their rehabilitation and
    homeownership programs assisted with CDBG and HOME will be severely
    curtailed, with some smaller programs possibly being eliminated
    altogether because of the cost and severity of the rule.
        Another major issue is the lack of, or the availability of trained
    contractors and laboratories to conduct the inspections, abatement,
    clearance, and testing of the lead-based paint. This will slow down
    programs affected by the rule and make spending of the CDBG and HOME
    funds a slower process. In addition, some programs need to be exempted
    altogether from the rule, such as volunteer programs like Christmas in
    April, and other minor repair programs (programs that provide less than
    $5,000 in repairs).
        We ask that additional funding be provided to local governments to
    meet the requirements of this rule. We support HUD's recommended
    funding level of $120 million for the Lead-Hazard Control Grant Program
    in fiscal year 2001. However, based on the comments and concerns we
    have received from local governments, a re-examination of this program
    and the final rule, with some recommended program changes is in order.

                                   CONCLUSION
        Mr. Chairman, local government officials believe that a strong
    Federal role in housing and community development programs must
    continue. Since the Housing Act of 1937, Congress has enunciated, and
    repeated in subsequent housing acts, that, as a matter of national
    policy, the Federal government has an obligation to assist states and
    local governments in providing decent, safe and sanitary housing for
    lower income households. Perhaps, Congress said it best in a
    ``Declaration of National Housing Policy'' included in Section 2 of the
    Housing Act of 1949:

        ``The Congress hereby declares that the general welfare and
    security of the nation, and the health and living standards of its
    people, require housing production and related community development
    sufficient to remedy the serious housing shortage, the elimination of
    substandard and other inadequate housing through the clearance of slums
    and blighted areas, and the realization as soon as feasible, of the
    goal of a decent home and suitable living environment for every
    American family.''

        We submit to you that, while progress has been made toward this
    goal, it has not been fully achieved. The Federal government must
    continue its commitment to this National Housing Policy, backed by the
    necessary resources with which to continue the battle against
    neighborhood deterioration and a decaying housing stock.
        Mr. Chairman, we look forward to working with you and the
    Subcommittee in adequately funding HUD's Housing and Community
    Development Programs for fiscal year 2001.
        Thank you.
                                     ______

               Prepared Statement of the Arc of the United States

                                  INTRODUCTION
        The Arc of the United States is the largest voluntary organization
    in the country devoted solely to the welfare of the more than seven
    million people with mental retardation and their families. There are
    approximately 1,000 state and local chapters of The Arc across the
    nation. For 50 years, The Arc has had the goal of ensuring that
    community-based services and supports, including an appropriate variety
    of housing options, are available to people with mental retardation.
    The Arc also seeks the deinstitutionalization of people with mental
    retardation residing in large, inappropriate, and extremely expensive
    institutions--places that many people have been forced to call home,
    often because there is no where to live, or no services and supports in
    the community. The Arc is extremely appreciative of the support this
    subcommittee has provided over the past several years. In all of
    Congress, it was the members of this subcommittee that first recognized
    that people with mental retardation and other disabilities face a real
    housing crisis and that their needs cannot be ignored.

                                   BACKGROUND
        The Arc's concern about the need for a range of housing options in
    the community is reflected in our national ``A Key of Our Own--Unlock
    the Waiting List'' campaign. This campaign was undertaken because
    people with mental retardation and their families face a crisis in
    relation to housing and other community-based supports and services.
    Nation-wide data indicate that, in 1997, at least 271,000 people with
    mental retardation were on waiting lists for community-based support
    and services, including housing. Some states, like California and Ohio
    have not kept statewide records and most experts agree that current
    numbers are an underestimate of need. The Arc of Ohio currently is
    compiling state-wide data that will be available at the end of this
    month. It is important to remember that many waiting list initiatives
    started out looking only at the need for funds for supports and
    services for people and not at the availability of affordable housing--
    this is beginning to change.
        Approximately 48 percent (325,650) of people with mental
    retardation and developmental disabilities, who receive a variety of
    support services, live at home with their families.\1\ Currently,
    adults with mental retardation wait at home with aging parents. These
    are the parents who decided 30-40-50 years ago to resist the pressure
    to institutionalize their children and instead kept them at home with
    their families. These are the families that, in doing so, saved the
    state and federal governments, hundreds of thousands of dollars. The
    average cost of institutional care is more than six times the average
    cost of community-based care--$94,348 for institutional care v. $14,902
    for community-based care.\2\ These are the parents that fought for
    their children's right for a public education and a life in the
    community. 1998, in Maryland there were over 1,100 people waiting for
    residential services and over 60 percent of them lived with a caregiver
    60 or older and--of those--13 percent lived with a caregiver over 80.
    Over the past two years, one-half of these people got access to housing
    services because of the statewide waiting list initiative. The ranks of
    these elderly parents are growing each day and they will be followed by
    those younger families who now expect--as they should--that their
    children with disabilities have every right to live, learn, work and
    play in the community. In addition, too many adults with mental
    retardation still wait in large inappropriate institutions and more and
    more people with mental retardation are being found among the homeless.
    ---------------------------------------------------------------------------
        \1\ National Conference of State Legislatures,
    Deinstitutionalization of Persons with Developmental Disabilities: a
    Technical Assistance Report for Legislators, (2000).
        \2\ Institute on Disability and Human Development, University of
    Illinois, (1998).
    ---------------------------------------------------------------------------
        Some people with mental retardation and their families have been
    waiting for housing for years. The adult son of one family in Oregon
    was on a waiting list for residential services for 16 years. The father
    of one young woman in New Jersey died before he could see an answer to
    his major prayer--a place of her own in the community for his daughter.
        Recently, HUD published its latest report on worst-case housing
    needs.\3\ Once again, HUD's report pays little attention to the housing
    crisis facing non-elderly people with disabilities. The report states
    there are now 5.4 million households or 12.3 million people with worst-
    case needs. It indicates that worst-case needs of the elderly and non-
    elderly individuals with disabilities grew at 8 percent each since the
    last report and the needs of families with children grew by 6 percent.
    Yet, the report also admits that its data do not capture the real needs
    of people with disabilities. The report argue the current worst case
    numbers validate HUD's request for 120,000 new vouchers and that
    ``rental assistance is a critical and flexible tool that provides
    access to decent and affordable housing for low-income families of all
    backgrounds, including the elderly, working families with children, and
    minority households''. The Arc believes all these groups need
    assistance but so too do people with disabilities, who are much less
    likely to be working and much more likely to be living in extreme
    poverty. Thank goodness for the foresight of this subcommittee.
    ---------------------------------------------------------------------------
        \3\ U.S. Department of Housing and Urban Development, Rental
    Housing Assistance-the Worsening Crisis, (2000). Technical Assistance
    Collaborative & Consortium for Citizens with Disabilities Housing Task
    Force, Priced Out in 1998: the Housing Crisis for People with
    Disabilities, (1999).
    ---------------------------------------------------------------------------
        In 1998, Supplemental Security Income (SSI)--the primary source of
    income for over 4 million people with disabilities--was $494 per month
    ($5,928 per year)--only 24 percent of median income nationally and less
    than 20 percent of median in eight states and the District of Columbia.
    Priced Out in 19984, showed there is not a single housing market in the
    country where a person with a disability, receiving only federal SSI
    benefits, can afford to rent a modest efficiency apartment for 30
    percent of their income or less. Using HUD housing market areas and
    Fair Market Rents as the standard, Priced Out documented that the
    national average cost of a one-bedroom apartment is 69 percent of
    monthly SSI income. This puts people with disabilities who receive SSI
    well in the range of worst-case needs. They have incomes below 50
    percent of their local median; would have to pay more than one-half of
    their income for rent and utilities; or live in seriously substandard
    housing.
        These are very real and sobering statistics. Clearly, the four
    million plus people with disabilities who receive SSI, as well as
    thousands of other people with mental retardation and other
    disabilities, who work at very low paying jobs, are too poor to find
    decent, safe and affordable housing unless they have some assistance
    from the federal government. These people are not benefiting from the
    current economic boom. In fact, they and other very poor people are
    facing even more problems as less and less of the existing housing
    remains affordable to them.
        Last year this Congress passed the Ticket to Work and Work
    Incentives Act and, a bill that was designed to remove some of the
    disincentives people with disabilities face when they get a job--like
    the loss of health care coverage through Medicaid or Medicare. The
    current reality is that, even with a chance to make more money, most
    people with disabilities remain among the very poor and remain in need
    of some housing assistance if they are ever going to be able to live a
    stable and productive life in the community.
        Last year the U.S. Supreme Court issued the landmark Olmstead
    decision. This decision requires states provide services and supports
    to people with disabilities in the least restrictive setting
    appropriate. It should lead to a number of very important things.
    First, states will become less reliant on large, expensive, segregated
    institutions. Second, communities will be where people with
    disabilities find needed supports and services. Obviously, more
    affordable housing for people with disabilities is a critical part of
    this picture and will help states and communities implement the
    Olmstead decision.
        There are many reasons why people with mental retardation face a
    housing crisis. These include:
      --The lack of a comprehensive federal housing policy for people with
            disabilities ranging from rental assistance to homeownership.--
            HUD--charged with addressing the housing needs of people with
            low incomes--has little idea of the range of housing needs of
            people with mental retardation and other disabilities. For
            years, The Arc and others have tried to educate HUD that all
            its programs should apply to people with disabilities. HUD
            promotes homeownership, community empowerment, the need for
            more tenant-based rental assistance, and fair housing
            enforcement--rarely mentioning the needs of people with
            disabilities. Without the support of Congress, people with
            disabilities would have little access to Section 8 tenant-based
            rental assistance and non-profit disability groups, like The
            Arc of the Northern Chesapeake, would not have access to
            Section 811 ``Mainstream'' tenant-based rental assistance.
      --The lack of affordable housing and tenant-based rental assistance
            and the continued under-funding of the Section 811 program.--
            The Section 811 program has had little if any support from the
            Administration in the past. Cuts to the Section 811 program
            during this Administration have seen its funding fall from $387
            million only a few years ago to its current level of $201
            million. The only reason that the program received $201 million
            in fiscal year 2000 was due to the actions of Congress. While
            the dollars for this program have gone down, HUD's expectations
            for it have gone up--without the corresponding request for an
            increase in funds. Amazingly, this year, HUD with its new
            emphasis on housing ``production'' is only recommending a $9
            million increase for Section 811 and is, once again,
            recommending that one-half of the Section 811 funds go to
            rental assistance--cutting its effectiveness as a housing
            ``production'' program in half.
      --Continued widespread discrimination and ``Not In My Backyard''--
            ``NIMBY'' policies.--In communities around the nation, people
            with mental retardation have benefited from the protections of
            the 1988 Fair Housing Amendments Act (FHAA). Prior to the FHAA,
            the doors to many communities were closed. Now, those doors
            have been opened and, in the majority of areas, people with
            mental retardation live in harmony with their neighbors.
            Unfortunately, discrimination will not die and NIMBY lives.
            People with mental retardation need strong enforcement of fair
            housing laws to help them fight discrimination and find a
            broader range of housing options in the community.
        The Arc believes that people with mental retardation and other
    disabilities are entitled to a fair share of federal housing resources.
    Many people in our nation are experiencing the benefits of a burgeoning
    economy. However, for many others--including people with disabilities
    with low incomes--the robust economy makes things worse as housing
    costs rise. The Arc makes the following recommendations for fiscal year
    2000.

                                RECOMMENDATIONS
    Section 8 tenant-based rental assistance
        The Arc believes that Section 8 tenant-based rental assistance is
    an effective too[ for helping people with mental retardation live
    integrated lives in their home communities. Many people with mental
    retardation are dependent on SSI benefits or have very low paying jobs.
    They are unable to afford a decent place to live unless they have a
    rent subsidy. Medicaid is a source of service funding for people with
    mental retardation. But, while Medicaid can help people get the
    services and supports they need, people still need a rental subsidy to
    allow them to be able to afford a place to live. HUD's fiscal year 2001
    budget includes a first time request for $25 million for 5,000 vouchers
    set-aside for non-elderly disabled tenants living in public housing
    projects that convert to elderly-only projects. The non-elderly
    disabled tenants are given vouchers so they can find housing
    elsewhere.\4\ This request shows that HUD continues to underestimate
    the needs of people with disabilities and does not understand that the
    existing Section 8 program for people with disabilities, which
    currently targets $40 million to off-set the loss of units in public
    and assisted housing, prohibits the use of these vouchers as an
    incentive to move people out of their current homes.
    ---------------------------------------------------------------------------
        \4\ U.S. Department of Housing and Urban Development, HUD Budget:
    fiscal year 2001, HUD: Back in Business (p. 31).
    ---------------------------------------------------------------------------
      --The Arc seeks your support for $50 million for Section 8 tenant-
            based rental assistance specifically for people with
            disabilities. The Arc realizes that problems have hindered the
            distribution of these funds, including the lack of interest by
            PHAs in applying for these funds (10 percent) or the inability
            of PHAs to help people with disabilities find suitable housing.
            While a few PHAs have partnered with non-profit disability
            groups, such as their local chapter of The Arc, and used the
            funds well, many more are sitting on ``disability vouchers,''
            not coordinating their efforts with disability organizations,
            and not helping people with disabilities find housing.
      --The Arc urges you--following in the footsteps of the action you
            took last year to open up eligibility for the Section 811
            ``Mainstream'' vouchers to non-profit disability
            organizations--to make these Section 8 funds available to non-
            profit disability organizations.
    Section 811 supportive housing for persons with disabilities
        The Arc has major concerns with HUD's fiscal year 2001
    appropriations recommendations for the Section 811 program. Section 811
    plays an important role in producing new housing, while assuring a
    level of individualized supports required by man individuals with
    severe disabilities. The Arc has worked to shape the Section 811
    program so it can help provide small, scattered-site housing in the
    community for people with disabilities. The Arc has many chapters who
    have acquired or developed housing through the Section 811 program.
        Last year seven chapters also applied to administer Section 811
    ``Mainstream'' rental assistance. A number of these chapters are in
    states represented on this Subcommittee (see chart below). However,
    only one was funded--The Arc of the Northern Chesapeake.) Right now
    chapters across the country are trying to decipher the Super NOFA and
    preparing to apply for both traditional and ``mainstream'' Section 811
    funds. These chapters will once again get technical assistance through
    the Technical Assistance Collaborative and the CCD Housing Task Force
    and not through HUD.
      --This year HUD has recommended an appropriation of $210 million for
            the Section 811 program. While this proposal represents a $9
            million increase, it also is another obvious example that HUD
            does not understand the housing crisis faced by people with
            mental retardation and other disabilities. Fortunately,
            Congress has ignored HUD's Section 811 recommendations for the
            past several years and has increased funding for the program.
            The Arc urges you to do so again and recommends an increase to
            $300 million.
      --HUD is once again--over the continued objections of this
            Subcommittee and The Arc and other advocates--proposing to
            target 50 percent of Section 811 funds to tenant-based rental
            assistance. The Arc urges you to reject this proposal. For many
            years, the Section 811 program has been a shining example of a
            public-private partnership that works. It has played a critical
            role in ``housing production''--one of HUD's ``new'' goals. It
            has added to the stock of affordable and accessible housing and
            has been proven to be one of HUD's most effective programs,
            successfully investing federal funding through non-profit
            disability organizations.
      --The Arc urges you to go one step further than last year and make
            non-profit disability organizations the only eligible
            applicants for Section 811 ``Mainstream'' tenant-based rental
            assistance. Last year approximately 100 non-profit disability
            groups applied to administer these funds and only 14 were
            funded, including The Arc of the Northern Chesapeake. The
            Executive Director of The Arc of the Northern Chesapeake is
            here today to talk about how the 75 vouchers they received will
            help change the lives of people with mental retardation and
            other disabilities.
      --The Arc urges the Subcommittee to target at least one-percent of
            any increase for the Section 811 program (or $1 million
            whichever is greater) to provide technical assistance to non-
            profit disability organizations.

    ----------------------------------------------------------------------------------------------------------------
                                                                       No. applied      No.         Amount      TAC
                     State                             Name                for        received     received     TA?
    ----------------------------------------------------------------------------------------------------------------
    AL....................................  The ARC of Fayette &                75  ...........  ...........    Yes.
                                             Lamar Counties.
    FL....................................  The ARC of Putnam County,           75  ...........  ...........    Yes.
                                             Inc.
    IN....................................  Passages (Arc)...........           75  ...........  ...........    Yes.
    MA....................................  North Shore ARC..........           75  ...........  ...........     No.
    LA....................................  ARC of Iberia............           10  ...........  ...........    Yes.
    MD....................................  ARC of Northern                     75           75   $2,495,496    Yes.
                                             Chesapeake Region.
    NC....................................  ARC or North Carolina,              75  ...........  ...........     No.
                                             Inc.
    ----------------------------------------------------------------------------------------------------------------

                      HOME, CDBG AND THE CONSOLIDATED PLAN
        The Arc seeks your support for requirements to ensure that funds
    from the HOME and CDBG programs are targeted to people with mental
    retardation and other disabilities. These two programs currently do
    little to add to the range of housing options for people with
    disabilities in the community. In light of the dwindling options and
    the growing need of people with disabilities, both of these locally
    driven programs should be required to help provide housing for those
    with the greatest need.
      --We urge the Subcommittee to direct HUD to provide information to
            all jurisdictions that people with disabilities and their
            advocates must be at the table when the ConPlan is developed.
            In addition, HUD should be directed to evaluate ConPlans for
            this inclusion, as well as to determine if the needs reflected
            in the final plan match the proposed uses of federal funds.

                                  FAIR HOUSING
        The Arc continues to be concerned with the discrimination faced by
    people with mental retardation in the community; with the building
    industry's ongoing attacks on the Fair Housing Accessibility
    Guidelines; and with HUD's lack of focus on fair housing rights for
    people with disabilities. Federal fair housing protections have opened
    doors in communities in numerous ways. According to the law,
    communities can no longer say ``we don't want your kind'' and
    developers can no longer ignore the accessibility needs of people with
    disabilities. Unfortunately, as stated earlier, discrimination refuses
    to die and communities and developers still keep up their efforts. The
    Arc seeks your support in sending the message to HUD that protecting
    the fair housing rights of people with mental retardation and other
    disabilities is an important part of its job.
      --The Arc urges the Subcommittee to require HUD to inform all those
            who receive federal funds (CDBG, HOME, LIHTC, etc.) of the need
            for compliance with the Fair Housing Act Accessibility
            Guidelines.
      --We also urge the Subcommittee to require HUD--when reviewing
            Consolidated Plans for the award of federal funds, to take into
            consideration a community's adoption of a building code that is
            compliant with FHAAG and a community's efforts to remove
            ``impediments'' to fair housing.
      --The Arc also recommends HUD and the Treasury Department be required
            to work cooperatively to ensure that tax credits are used to
            build housing for those with very-low incomes; that is
            physically accessible; and that housing providers are willing
            to make reasonable accommodations to meet the needs of people
            with mental and/or physical disabilities.

                                    SUMMARY
        Thank you for the opportunity to provide this testimony. The Arc
    appreciates your understanding and support in the past and would
    appreciate your continued support in the future. The Arc has attempted
    to work in collaboration with HUD with little success. The Arc strongly
    believes that the actions of this Subcommittee have improved the lives
    of thousands of people with disabilities. We wish HUD would place the
    same priority on their needs as you have. For more information, please
    contact: Kathleen McGinley, The Arc Governmental Affairs Office, 202-
    785-3388, McGinley@thearc.org
                                     ______

      Prepared Statement of the Consortium for Citizens with Disabilities
                               Housing Task Force

                                  INTRODUCTION
        Mr. Chairman and Committee Members, the Consortium for Citizens
    with Disabilities (CCD) Housing Task Force is grateful for the
    opportunity to provide testimony to the Subcommittee on the housing
    needs of people with disabilities and the problems they encounter
    within the nation's affordable housing system. We would like to take
    this opportunity to (1) thank this Subcommittee's strong leadership in
    helping to address the housing needs of people with disabilities; (2)
    provide an update on the acute housing crisis facing people with
    disabilities; (3) document the failure of HUD and the nation's Housing
    Authority system to address this situation; and (4) offer
    recommendations for Congressional action.
        The Consortium for Citizens with Disabilities (CCD) is a Washington
    based coalition of approximately 100 consumer, advocacy, provider and
    professional organizations who advocate with and on behalf of people of
    all ages with disabilities and their families. The CCD Housing Task
    Force focuses specifically on housing issues that affect people with
    disabilities, particularly the availability of affordable and
    accessible community based housing options and the protection of their
    fair housing rights. The individuals whom we represent--most of whom
    have very low incomes and many of whom depend solely on Supplemental
    Security Income (SSI) or other disability benefits--may be current
    participants of HUD assisted and public housing programs, may be on
    federal housing program waiting lists, or may need to apply for federal
    housing assistance.
        During the past year, the housing crisis confronting people with
    disabilities continued unabated. Rental housing costs continue to rise,
    making it more difficult than ever for people with disabilities to
    afford housing without government assistance. During 1999, the United
    States Supreme Court's Olmstead decision affirmed the rights of people
    with disabilities to live in communities of their choice rather than in
    restrictive institutional settings--yet there is no affordable housing
    available for people with disabilities in most communities across the
    country. Today, it is also abundantly clear that the nation's
    affordable housing system--meaning HUD, PHAs, and state/local
    government housing officials--have not made the housing needs of people
    with disabilities a priority. Once again, the CCD Housing Task Force is
    looking to the members of this Subcommittee to ensure that the housing
    needs of people with disabilities are addressed within our nation's
    federal housing policies.

             BACKGROUND: THE SEARCH FOR HOUSING FOR MATTHEW BAUSCH
        Since the 1980s, the disability community has made it clear that
    people with disabilities want and need affordable homes in the
    community. However, the key players in the affordable housing system--
    particularly HUD, the nation's Public Housing Authorities, owners of
    HUD assisted housing, and state and local government housing
    officials--have still not recognized or prioritized the housing needs
    of people with disabilities. As a result, people with disabilities
    receive a disproportionately small share of federal housing funding and
    have serious problems ``navigating'' through the housing system, as
    will be illustrated by Matthew Bausch's recent experience.
        The designation of elderly only housing means that more and more
    people with disabilities like Matthew Bausch are still being literally
    shut out of the subsidized housing market. Two years ago, the House
    HUD-VA Subcommittee directed HUD (in the fiscal year 1999
    appropriations report) to complete an inventory of HUD assisted housing
    that had been designated ``elderly only'' so that (1) people with
    disabilities would know where they were and were not eligible to apply;
    and (2) the full impact of ``elderly only'' housing policies on people
    with disabilities could be properly assessed. Two years later, this
    inventory has yet to be done!
        Matthew Bausch--whose income is limited to disability benefits of
    approximately $600 per month--recently moved to Southern Florida from
    Connecticut in order to take advantage of spinal cord injury
    rehabilitation services. Because HUD had not done an inventory of
    elderly only housing, Matthew Bausch and his family had to contact 30
    HUD assisted housing providers on their own in order to learn whether
    Matthew was eligible to live in a subsidized accessible unit in any of
    these properties. Despite the fact that the Bausch family had no
    knowledge of HUD's assistance housing programs, the family made a great
    effort and contacted all thirty properties. Every property said no to
    Matthew--he was not elderly, so he was not eligible. The Bausch family
    had no way to determine whether Matthew was being discriminated against
    on the basis of his disability, or whether the housing provider was, in
    fact, complying with federal law and regulations.
        Fortunately, Congress had taken steps to ensure that there would be
    some Section 8 rent subsidies available for people like Matthew.
    Through the TAC/CCD Housing Task Opening Doors publication, the
    Bausch's learned that one PHA in the area had Section 8 Mainstream
    vouchers appropriated by the Congress to off-set the loss of housing
    converted to ``elderly only''. Matthew applied and was given a Section
    8 voucher within a few months.
        Unfortunately, Matthew's problems didn't end when he received the
    Section 8 voucher. The PHA did not understand fair housing laws and was
    reluctant to grant a ``reasonable accommodation'' so that voucher could
    be used in a higher cost unit that was fully accessible. Matthew also
    needed help to find an accessible unit and help convincing a property
    manager that Low Income Housing Tax Credit properties were required by
    federal policies to accept Matthew's Section 8 voucher. [NOTE: The
    property manager claimed to have no knowledge of this requirement, and
    was preparing to reject Matthew's application because he had a Section
    8!] Thanks to the work of Congress and 6 months of technical assistance
    from the CCD Housing Task Force and TAC, Matthew finally moved into an
    accessible apartment he could afford.
        If Matthew and his family were here today (they did testify before
    the House HUD-VA Subcommittee), he would personally thank you for your
    work on behalf of people with disabilities and urge your continued
    support for new Section 8 vouchers for people like him. However, he
    would also tell you that the HUD and the PHA system did not work for
    him and is not working for thousands of other people like him. What
    happened to him is a perfect illustration of what happens when HUD does
    not do its job and a good example of why this Subcommittee should
    direct more federal housing funding to the non-profit disability
    organizations who are ready and willing to help people with
    disabilities obtain decent, safe, affordable and accessible housing in
    communities of their choice across the country.

                       HUD ACCOUNTABILITY RECOMMENDATION
        The CCD Housing Task Force urges this Subcommittee to hold HUD
    accountable for its failure to conduct, maintain, and post on HUD's web
    site a complete inventory of HUD public and assisted housing projects
    and their occupancy policies. This information should include housing
    with a specific percentage of units set-aside for people with
    disabilities; and whether the housing is (1) elderly-only housing; (2)
    disabled-only housing; (3) mixed housing equally available to both
    elderly households and people with disabilities under age 62.

              UPDATE ON HOUSING NEEDS OF PEOPLE WITH DISABILITIES
        One year ago, the CCD Housing Task Force and TAC published Priced
    Out in 1998:The Housing Crisis of People with Disabilities. This report
    documented that there was not one county or metropolitan area in the
    United States where a person receiving Supplemental Security Income
    (SSI) benefits could actually follow federal guidelines for housing
    affordability and pay only 30 percent of their monthly income for rent.
    Instead-as a national average-a person with a disability must spend 69
    percent of his or her SSI monthly income to rent a modest one-bedroom
    apartment priced at HUD Fair Market Rent (FMR).
        Priced Out still stands as the most accurate assessment of the
    housing needs of people with disabilities. Two weeks ago, HUD issued
    its latest worst case housing needs report entitled Rental Housing
    Assistance--The Worsening Crisis--a report that HUD readily admits
    undercounts people with disabilities. Given the lack of accurate HUD
    data, the CCD Housing Task Force and TAC are working to update the
    information, in Priced Out for the states represented by the members of
    this Subcommittee. The information is startling because it shows people
    with disabilities continuing to lose ground in the housing market as
    very small increases in federal SSI benefits do not keep pace with
    rapidly escalating costs.

                         ``WORST CASE'' RECOMMENDATION
        The CCD Housing Task Force urges the Subcommittee to require HUD to
    develop an accurate assessment of the ``worst case'' housing needs of
    people with disabilities. Such an assessment is essential if people
    with disabilities are to receive their ``fair share'' of housing
    assistance made available from the federal government.

         HUD BUDGET DOES NOT ADDRESS THE HOUSING NEEDS OF PEOPLE WITH
                                  DISABILITIES
        As people with disabilities are increasingly ``priced out'' of the
    rental housing market, and as federally subsidized housing for people
    with disabilities continues to disappear due to ``elderly only''
    housing policies, one must ask the simple question: ``Where will low
    income people with disabilities live?'' As a result of the leadership
    of this Subcommittee, over $170 million in new Section 8 rent
    subsidies--approximately 30,000 overall--have been appropriated for
    people with disabilities since 1997, including $40 million this past
    year. This year, HUD's budget proposal continues to be unsatisfactory--
    requesting only $25 million in new Section 8 funding, apparently to
    assist Housing Authorities to implement ``elderly only'' housing
    policies and relocate people with disabilities to alternative housing.
    Clearly this is an inappropriate use of these funds and much more
    funding is needed to help people like Matthew Bausch who are no longer
    able to live in HUD public and assisted housing developments and who
    cannot afford market rents.

                           SECTION 8 RECOMMENDATIONS
        The CCD Housing Task Force urges the Subcommittee to appropriate
    $50 million to support 9,000 new Section 8 tenant based rental
    assistance funding for people with disabilities. While a host of
    problems have hindered the effective distribution of these subsidies by
    HUD and PHAs, all of the funds have been allocated and the need is
    still critical. Each year, more PHAs are designating ``elderly only''
    public housing, and more than 58 percent of HUD assisted housing
    providers have implemented ``elderly only'' designation policies,
    according to a General Accounting Office study. We recommend that PHAs
    requesting the designation of ``elderly only'' public housing be
    required to set-aside 33 percent of their Section 8 turnover for people
    with disabilities.
        We also urge the Committee to expand eligibility for the
    administration of Section 8 vouchers targeted to people with
    disabilities to non-profit organizations with the interest and
    experience administering housing programs for people with disabilities.
        HUD proposes only $210 million for the Section 811 Supportive
    Housing for Person with Disabilities program--a small increase of $9
    million over fiscal year 2000. HUD also continues to propose that 50
    percent of the Section 811 appropriation be used to create new vouchers
    for people with disabilities. The CCD Housing Task Force strongly
    opposes this proposal because it ignores the original intent of the
    Section 811 program, as well as diminishes the important role the
    program has played in producing affordable and accessible housing in
    the community. it is vitally important that the Section 811
    appropriation be increased. This year, only $109 million was made
    available for new housing production activities, $48.5 was utilized for
    tenant based rental assistance, and $43 million for new and renewing
    Project Rental Assistance Contracts. In addition, the current cost-
    limits for the Section 811 program should be increased because they do
    not reflect the actual cost of developing housing in today's market.
    Tenant-based assistance is one part of the equation. It is not the
    answer for all people with disabilities, especially those with severe
    disabilities who need intensive services and supports. Given the future
    need for permanent community based supportive housing that will result
    from the Supreme Court's Olmstead decision, the production of new and
    accessible housing for people with the most severe disabilities must be
    a high priority.

                          SECTION 811 RECOMMENDATIONS
        CCD recommends increasing the funding for the Section 811 Program
    to $300 million and to appropriate no more than 25 percent of this
    funding for tenant based rental assistance. Housing production goals
    for people with disabilities must be increased. Given the housing
    crisis facing people with disabilities, the Section 811 program needs
    to be restored to the $387 million funding level of five years ago. A
    $300 million appropriation for fiscal year 2001 will send a strong
    message about the future of the Section 811 program, and encourage more
    non-profits to apply.
        We also urge the Subcommittee to direct HUD to exercise its waiver
    authority and permit only non-profit disability organizations--and not
    PHAs--to apply for the Mainstream tenant-based rental subsidies
    available through the Section 811 program. Given the poor track record
    of PHAs in administering Section 8s for people with disabilities, the
    CCD Housing Task Force believes that Section 811 tenant based rental
    assistance funds should be provided only to non-profit disability
    organizations, and that HUD refrain from converting Section 811 funding
    to Section 8.
        Finally we urge the Subcommittee to appropriate at least one-
    percent of this increased funding (or $1 million whichever is greater)
    to fund a technical assistance program for non-profit disability
    organizations administering the Section 811 tenant based assistance
    program.

                                 CDBG AND HOME
        The CCD is concerned that HUD overlooks its mainstream housing
    resources in addressing the housing needs of people with disabilities.
    HUD cannot document the number of people with disabilities nor federal
    funds associated with these two programs that have been used to expand
    housing opportunities for people with disabilities. HUD should use
    these two programs as well as others to require state and local
    jurisdictions to allocate adequate resources to people with
    disabilities.

                         HOME AND CDBG RECOMMENDATIONS
        The CCD recommends HUD be required to provide CDBG and HOME
    technical assistance on affordable housing targeted specifically to
    people with disabilities and their advocates.
        We also recommend HUD be required to report to Congress the number
    of people with disabilities who benefit from HOME and CDGB; the amount
    of federal and state funding involved; and community initiatives
    undertaken to alleviate the housing crisis for people with
    disabilities.

                                  FAIR HOUSING
        Federal fair housing protections are provided for people with
    disabilities basically the Fair Housing Amendments Act, Section 504 of
    the Rehabilitation Act, and the Americans with Disabilities Act. These
    important protections have opened doors in communities in numerous
    ways. Communities can no longer say ``we don't want your kind'' and
    developers can no longer ignore the accessibility needs of people with
    disabilities. Unfortunately, as stated earlier, discrimination refuses
    to die. Therefore we urge this Subcommittee to send a clear message to
    HUD about the importance of civil rights protections for people with
    disabilities.

                          FAIR HOUSING RECOMMENDATIONS
        The CCD recommends HUD be required to inform all those who receive
    federal funds (CDBG, HOME, LIHTC, etc.) of the need for compliance with
    the Fair Housing Act Accessibility Guidelines and that any HUD funds
    targeted to ``technical assistance'' be made equally available to
    disability organizations and the building industry.
        The CCD recommends that, in reviewing Consolidated Plans for the
    award of federal funds, HUD be required to take into consideration a
    community's adoption of a building code that is compliant with FHAAG
    and a community's efforts to remove ``impediments'' to fair housing.
        The CCD recommends HUD and the Treasury Department be required to
    work cooperatively to ensure that tax credits are used to build housing
    for those with very-low incomes; that is physically accessible; and
    that housing providers are willing to make reasonable accommodations to
    meet the needs of people with mental and/or physical disabilities.
        We thank the Subcommittee members for all that you have done to
    improve the lives of people with disabilities.
                                     ______

            Prepared Statement of Central Piedmont Community College

        Mr. Chairman and Members of the Subcommittee, thank you for the
    opportunity to submit testimony to the hearing record regarding Central
    Piedmont Community College's (CPCC) efforts to meet a regional and
    national need for forensics technician training. By way of background,
    CPCC is the largest institution of higher education in the State of
    North Carolina, with over 60,000 students, and is the leading provider
    of career training and re-training in the State. This testimony is
    concerned with the College's recent efforts to establish a National
    Academy for Forensic Computing and Investigation in response to
    requests from North Carolina's law enforcement community, including the
    Federal Bureau of Investigation, as well as the Charlotte-Mecklenberg
    business community.
        CPCC was specifically targeted to carry out this mission by virtue
    of a thirty-year history as the leading provider for criminal justice
    training in a 14 county area of North Carolina. The public safety
    program at CPCC has expanded quickly with the growth of the Charlotte-
    Mecklenberg region into a major regional criminal justice training
    center offering a comprehensive range of programs and services,
    including instruction in the high demand occupational skills area of
    forensics technology. This instruction is currently available to a
    variety of law enforcement and public agency officials who previously
    would have had to travel extensively for this type of current
    professional development and training.
        Citing extreme inability to find skilled workers in the field, a
    consortium of local industry leaders, including the Charlotte Chamber
    of Commerce, the Federal Bureau of Investigation, and representatives
    from the banking, insurance, law enforcement, and legal industries,
    asked CPCC's Department of Health & Public Safety to develop a training
    program in forensic technology. These industries also seek assistance
    in retraining and upgrading skills of incumbent workers.
        The challenge is to meet not only local public agency demand for
    criminal justice training, but also the increasing need from the
    private sector which is now requesting specialized skills training in
    criminal justice topics such as forensics technology. There are
    currently no forensic science degrees offered at the graduate or
    undergraduate levels at any of North Carolina's colleges and
    universities.
        The need for forensics training can also be translated to the
    national level. According to the National Institute of Justice (1999),
    49 percent of the cases prosecuted in the U.S. were successful solely
    because of the forensic sciences. Unfortunately, law enforcement,
    social services, and other governmental agencies, along with private
    corporations nationwide must search throughout the country to obtain
    forensic training. This translates into an investigative gap,
    particularly pronounced in the Southeast United States, costing reduced
    productivity, delayed justice, and loss of funds. Compounding this
    situation is the fact that the technology and science are changing so
    rapidly that ongoing training and skills upgrades are necessary.
        The establishment of a National Academy for Forensic Computing and
    Investigation (NAFCI) at centrally located CPCC can help to bridge the
    investigative gap both regionally and nationally while providing high
    skill careers for North Carolina
        CPCC's Public Safety facility at the North Campus is the home to
    the College's Criminal Justice Program. Today, the North Campus serves
    more than 12,000 citizens of the Charlotte-Mecklenberg region on an
    annual basis. In addition, the facility is the primary training site
    for ten local, two state, and three federal agencies, including the
    Federal Bureau of Investigation, the Secret Services, and Federal
    Probation.
        There are currently three course areas under the umbrella term
    public safety at CPCC's North Campus--police, fire, and rescue.
    Associates' degrees are available in Criminal Justice and in Fire
    Protection Technology, and in-service training for all three groups is
    available. An additional component within the criminal justice arena is
    a Regional Training Center, headquartered at CPCC that is responsible,
    in a 14-county area, for providing in-service training for criminal
    justice professionals in North Carolina. CPCC is also the primary
    training source for all Firefighter I and II level personnel with the
    Charlotte Fire Department and all volunteer firefighters in Mecklenberg
    County. Given this breadth of experience, CPCC is the institution best
    positioned to take on the responsibility of addressing the need for
    forensic training.
        The development and implementation of the NAFCI will serve to
    increase the skills of the current workforce reliant upon and adversely
    affected by a lack of appropriate training in forensic science. These
    groups include law enforcement officers, fire service, prosecutors and
    criminal attorneys, investigators, crime laboratory personnel, medical
    examiners and coroners, correctional personnel, insurance
    investigators, agents, and claims adjusters, fraud examiners, social
    services professionals, and nurses.
        The Academy's emphasis on Computer Forensics will demonstrate the
    value of the application of computer technologies in solving the
    information needs of anyone required to conduct forensic
    investigations. Each of the following topics represents a computer
    class; others will be developed as required:

    ------------------------------------------------------------------------
    Facial Reconstruction of Unknown Human      Digital Imaging.
     Remains.
    Information Systems Security..............  Cyber Crime.
    Identifying and Locating the Cyber          Voice Recognition.
     Criminal.
    Reconstruction of Damaged Computer          Fingerprint Identification.
     Software.
    Using the Computer to Determine Time of     Firearms Identification.
     Crime.
    Construction of new Evidence Tracking       Dental Identification.
     Systems.
    Computerized Collision Diagramming........  DNA Data Retrieval.
    ------------------------------------------------------------------------

        The workforce development goals of this initiative are to train or
    retrain 2000 workers in the forensics field within the first 5 years.
    This timely response will result in a significant change in the way
    that CPCC accomplishes workforce development. Through the creation of
    an effective bridge between industry and academia, CPCC hopes to become
    a national model for community colleges across the country not only in
    the field of forensic science but also in other fields where workforce
    gaps exist.
        Given industry's need and the characteristics of the target
    audience, CPCC proposes innovative strategies for success. One of the
    most unique features of this initiative is that CPCC has bridged the
    gap between industry and academia by forming an Industry Advisory Panel
    charged with providing direct and substantial course input throughout
    the life of this initiative. The panel includes a diverse array of
    leading edge companies dependent upon forensics for the success of
    their business. Needs assessments will be conducted to determine skill
    areas that require further development, and special courses will be
    designed and implemented based on statements of need. NAFCI will then
    create intensive courses for faculty in the various fields as well as
    for current professionals in the various areas. For example, social
    services workers can be educated on the indicators of child abuse and
    correct use of the multidisciplinary approach to child abuse
    investigation. Courses in forensic computing, accounting, arson
    investigation, forensic accident reconstruction, and bodily injury can
    be offered to fraud investigators.
        The NFTC seeks to develop curriculum strategies and educational
    materials that meet the needs of all the vast and varied types of life-
    long learners. Thus, in addition to the more standard educational
    materials, CPCC will develop and offer short-term training modules for
    the certificate seeker and on-line courses for the displaced or
    incumbent worker who is much better served by courseware unlimited by
    time or place. Opportunities for education in the field via service
    learning programs and/or internship experiences will also be utilized.
    NAFCI will also seek to provide state-of-the-art or ``hands-on''
    training for the investigative professional along with continuing
    education approved by the appropriate certifying board of each state
    serviced.
        NAFCI will increase the number of people who have the forensic
    skills to develop and support community-based investigations,
    especially in rural areas of the country. For example, the NAFCI will
    actively seek to train experienced Registered Nurses from rural areas
    to become forensic nurses by conducting advanced courses in forensic
    pathology, forensic dentistry, and forensic anthropology. These nurses
    may then assist rural law enforcement agencies with evidence collection
    from violent crimes. The Center will also promote public education
    concerning all disciplines in the forensic sciences, and serve as a
    major source for national certification by The American Board of
    Medicolegal Death Investigations.
        Educational materials will be produced and widely disseminated via
    various means including, electronic media, CD-ROMS, conferences,
    journal articles, manuals, newsletters, on-line courses with
    interactive laboratory experiences, summer institutes, videos, and
    workshops
        In addition, CPCC will liaison directly with the local high school
    populations via College Tech Prep, Upward Bound, and Talent Search
    programs to assist disadvantaged students prepare for forensics
    technology careers. Additional outreach to disadvantaged populations
    will take place via CPCC's collaborations with the local JOBSLINK
    (North Carolina's One-Stop Career Shop). JOBSLINK is a project
    sponsored by the State Employment Service Office, JTPA, the Department
    of Social Services, and Office of Vocational Rehabilitation. Although
    designed to meet the needs of everyone, JOBSLINK has specific
    responsibilities for working with welfare recipients and the
    unemployed. Because CPCC provides staffing to JOBSLINK, faculty will
    have the opportunity to intimately recruit students from the local
    disadvantaged population.
        CPCC will draw upon its experience in training Charlotte and
    Mecklenberg County's information technology specialists, law
    enforcement, fire service, and allied health professionals as well as
    the skills of its own Investigators and a team of nationally recognized
    forensic practitioners to establish the NAFCI. It will be necessary,
    however, given the rapid advances made in technology-related fields, to
    pursue immediately an aggressive faculty preparation and enhancement
    initiative. Specifically, faculty will receive knowledge of state-of-
    the-art developments and techniques in the field; instruction in modern
    teaching practices (including new instructional technologies);
    opportunities to synthesize knowledge that cuts across disciplines
    (computer science/engineering technologies); and opportunities to
    interact with industry.
        Conferences, workshops, electronic networks, and journal articles
    will constitute the preferred methods of dissemination for program
    deliverables. In addition, during training sessions, time will be set
    aside for information exchange among participants. A written summary of
    these information sessions will be available by request to qualified
    agencies. Training schedules and summaries of training points will be
    made available to members of the American Academy of Forensic Sciences.
    A limited number of ``train-the-trainer'' workshops are proposed for
    specific techniques and for instructors with appropriate credentials.
        There are no colleges or universities in North Carolina that
    currently offer degrees in forensic sciences at the graduate or
    undergraduate levels. There are, however, courses offered in various
    institutions, including University of North Carolina -Charlotte. There
    is potential for developing a ``pipeline'' between CPCC and 4-year
    institutions that allow students to specialize in areas of science
    related to forensics so that those students will be prepared to enter
    into laboratory work, field work or graduate forensic programs.
        In addition, the North Carolina State Bureau of Investigation
    maintains a full-service laboratory in Raleigh and a limited-service
    laboratory in Asheville, for the purpose of examining all types of
    evidence related to criminal investigations. The establishment of a
    National Academy for Forensic Computing and Investigation at CPCC could
    provide a training link to these two institutions.
        CPCC is seeking a federal partnership to assist with the
    development of the National Academy for Forensic Computing and
    Investigation (NAFCI) and its programs. The goal of the program is to
    upgrade the skills of North Carolina's criminal justice professionals
    and create, through training, thousands of needed sustainable skilled
    careers for the State.
        To accomplish this goals CPCC is seeking a total of $4 million in
    federal partnership assistance to establish the approximately $7.2
    million Center, which will include a state-of-the-art forensics
    laboratory. A federal investment in this initiative is warranted for
    the contribution that the NAFCI can make toward filling an
    investigative gap that exists in the region, for the new careers that
    will be established, and for the necessary upgrading of skill levels
    for the better functioning of North Carolina's criminal justice system.
        Thank you.
                                     ______

           Prepared Statement of St. Joseph's Hospital Health Center

        Mr. Chairman, thank you for the opportunity to submit this
    testimony and for the support that this Subcommittee gave to St.
    Joseph's Hospital Health Center last year. St. Joseph's, located in
    downtown Syracuse, New York, is a non-profit 431-bed hospital and
    health care network providing services to Onondaga County and to
    patients from 15 surrounding counties. St. Joseph's is best known for
    its ranking as the #1 hospital in New York State for open-heart surgery
    in terms of lowest overall mortality rate. We are very proud of this
    ranking, which we have held for four consecutive years. What many
    people do not know is that we are also the largest hemodialysis center
    outside metropolitan New York. My statement is focused on these two
    areas of expertise at St. Joseph's and how we plan to initiate a
    chronic disease management model that will benefit our current patients
    with heart and kidney disease and enhance the quality of life for at-
    risk patients in the region. We see this initiative as one with not
    only health enhancement benefits but also with significant positive
    economic implications for the community and the region.
        St. Joseph's provides over $7 million in bad debt and charity care
    to our service region. This comes to about 4 percent of our operating
    budget. This number has steadily risen over the years and we feel it
    will continue to do so unless some dramatic steps are taken. In order
    to increase access to patients who are underserved and at-risk for
    disease, we have implemented a program of ``patient-centered care.'' We
    believe we achieved our #1 ranking for cardiac care through this
    process, which employs a secondary prevention model for disease
    management. By applying a multidisciplinary team approach to heart
    disease and preparing patients before surgery and rehabilitating them
    after, we have reduced mortality rates as well as the number of second
    hospitalizations. We have done this to improve the overall health of an
    underserved and underinsured patient base, but also for practical
    financial reasons. While our rehabilitation and education programs for
    our cardiac patients are largely unreimbursed, we are rewarded by
    having to perform less expensive charity care on patients who would
    typically end up back in the hospital without disease management.
        Recognizing that early assessment is important to reducing the
    number of expensive treatments required later in life, St. Joseph's
    instituted a Wellness Place at a local mall so that people could stop
    in at their convenience. The Wellness Place provides free, general
    health screenings such as blood pressure readings, cardiac and diabetes
    risk assessment, counseling and patient education and seminars. Last
    year, approximately 15,000 people used the Wellness Place. Nearly 1000
    of these people were determined to be at risk for heart disease,
    diabetes, or vascular problems. These individuals were offered follow-
    up services intended to change lifestyle, such as nutritional
    counseling, smoking cessation, exercise programs and other similar
    regimens. They were also offered a choice of primary care physician if
    none was identified. This is all done at considerable unreimbursed
    expense to St. Joseph's but with the knowledge that a great deal of
    money will be saved in the long run--for the patient, the Medicare
    system and the hospital. The most dramatic economic implications I
    mentioned are encompassed within this concept--but not all. At risk
    patients are working people who may lose jobs if their disease
    progresses. It is important to realize, however, that patients with
    diagnosed diseases or who have congestive heart failure, may still work
    and lead productive lives if an effective disease management program is
    initiated at the earliest stage possible. The other economic benefits
    come in the form of the support required for this program. I will
    detail those later in this statement.
        Assessment is the first line of defense in chronic disease
    management; but, there are many other factors involved after this step
    is taken. A program for management of disease must adequately educate
    patients and then foster a sense of individual responsibility for the
    importance of following prescribed regimens. This takes a great deal of
    initial monitoring and time spent with patients by telephone, at
    community health centers, and in the home. This also requires
    coordinated community participation by physicians, nurses, pharmacists,
    physical therapists, educators, behavioral specialists and even
    employers.
        Diabetes, leading to kidney disease and kidney failure, is the most
    expensive disease in the country. The second most expensive, and #1
    admitting diagnosis for Medicare, is congestive heart failure. The U.S.
    spends more than $7 billion annually in Medicare dollars for these
    diseases. The clinical relationship between chronic kidney failure and
    heart disease (e.g., high blood pressure) requires similar early
    intervention techniques as well as later management, treatment, and
    rehabilitation. Utilizing resources already developed and in place for
    our cardiac rehabilitation program, St. Joseph's is proposing to
    further develop a chronic disease management program focused on
    hemodialysis. Combining resources in this way will be cost effective
    and has the potential to radically change the management of kidney
    disease.
        The specific objectives of the program will begin with early
    identification. Timely referrals to a nephrologist can be improved so
    that more aggressive treatment can be initiated to prolong kidney
    function and allow better preparation of the patient for dialysis.
    Second, we will identify, investigate, evaluate, and implement
    technology that will promote in-center self care and home hemodialysis
    modalities. The Aksys Corporation has developed a product that has the
    potential of achieving this objective. Third, we will utilize the St.
    Joseph's Cardiac Rehabilitation Model for the renal patient. This model
    will emphasize education and exercise with the goal of improving the
    percentage of patients that stay employed, reduce frequency and length
    of hospitalizations, and improve patient acceptance of and control over
    disease processes. Finally, we will apply our disease management
    techniques to our overall goal of reducing the percentage of candidates
    for kidney transplantation. The ultimate goal of the renal patient and
    the health care industry is to have renal patients lead a ``normal''
    life. Currently, kidney transplantation is the modality that is most
    associated with that goal.
        Our history of service and specialization in the areas of cardiac
    and kidney disease has proven that there is a demonstrable need for a
    chronic disease demonstration in these areas for the Central New York
    region. The demonstration will involve relationships and initiatives in
    Dialysis, Cardiac Care, Home Care, and Wellness. What we lack at this
    point, is a facility that can be shared by both cardiac and dialysis
    patients. Our current dialysis facility, the largest outside the New
    York Metropolitan area, is woefully inadequate in every way. The
    facility was originally built as a modular, temporary, unit over 20
    years ago. We now treat our overload of patients in the hallways and
    have legitimate safety concerns that come with overcrowding and
    questions as to the future structural integrity of the plant itself. We
    have not replaced this facility for financial reasons but, fortunately,
    have been able to treat patients satisfactorily. We have three
    satellite clinics in the region that are also operating at capacity.
    Our goal is to implement our demonstration program in an on-campus
    facility that will provide the space needed for dialysis, exercise
    facilities, classrooms, meeting rooms, examination rooms, an acute
    kidney unit, and nurse and allied professional training space. Training
    of personnel is an important aspect of implementing an innovative
    chronic disease model.
        In terms of economic development for the region, we believe that
    keeping our patients healthy and productive will have the most dramatic
    impact on the economy albeit in the long term. For the shorter term, we
    believe the training programs that we currently provide and will expand
    in areas such as home care, nursing, rehabilitation specialists, and
    counseling, to name a few, will bring employment opportunities to
    people in and around Syracuse. As we expand our efforts, we will likely
    train people outside the immediate area to be able to serve the
    outlying areas where our satellite clinics are and in homes in more
    remote locations. The facility we envision will also provide many
    construction jobs over the next couple of years. The two-story
    facility, equipment and program operation will cost approximately $13.2
    million. St. Joseph's has requested Federal partnership grant funding
    of $5.8 million that will also cover start-up operating costs. Our
    partnership funding request has increased over the past two year's by
    $300,000 due to our current need to upgrade our Acute Kidney Unit as
    part of our overall initiative. We estimate, based on our current
    services, that our operating budget will exceed $5.5 million per year.
        As you know, St. Joseph's received $750,000 in fiscal year 1999 and
    $1 million from this Subcommittee in fiscal year 2000 to begin the
    planning and site preparation necessary for the new Center. We are very
    grateful for this support and urge you to complete this investment with
    an additional $750,000 million in fiscal year 2001 toward our total
    requested federal share for the initiative. Having made this request,
    which we realize is considerable, we would like to assure the
    Subcommittee that St. Joseph's will provide, through private sources,
    the remainder of the estimated total for this effort or $7.4 million.
        We recognize the magnitude of this request but believe
    wholeheartedly that this facility, and the implementation of our
    chronic disease management model will repay this initial investment
    many times over in terms of Medicare savings and in terms of providing
    a national model for replication across the country.
        Thank you.
                                     ______

    Prepared Statement of the Chatham Area Transit (CAT), Savannah, Georgia

        Mr. Chairman, thank you for this opportunity to present a proposal
    for funding of a ferry service under the auspices of Chatham Area
    Transit (CAT), Savannah, Georgia.
        I am Scott Lansing, Executive Director of CAT. CAT is a modest
    transit system, operating 63 vehicles in the Savannah area. Our
    ridership has been increasing over the past three years, and we are
    providing improved service to our riders and the Savannah region.
        The purpose of my statement and request to the Committee concerns
    addressing unmet needs in our region and that of the neighboring State
    of South Carolina. We have a shortage of labor availability, and South
    Carolina has the labor force, but no viable manner in which to cross
    the river separating Savannah from the work force. We have developed a
    low cost solution to this problem. We propose to initiate a ferry
    service, and connecting transit routes, to bring the labor force to
    Savannah from neighboring jurisdictions in South Carolina. CAT will
    assume expenses for operation within our regular budget after the
    initial capital costs have established the necessary infrastructure to
    commence such a service. We earnestly request that this Subcommittee
    provide through the fiscal year 2001 Appropriations Act $650,000 for
    the costs associated with establishing this much needed transportation
    mode to the Savannah area.
        The attached project description outlines the specifics of this
    proposal. Thank you for this opportunity to submit this proposal for
    your consideration. Coastal Area High Speed Passenger Ferry Service
    Project Narrative
        Water borne transportation has long been a part of the coastal
    area's rich cultural heritage. From the cotton trade of the 1700's to
    today's container vessels, the Savannah River and its surrounding
    bodies of water continue to provide the community with economic benefit
    and recreational opportunities. The coastal area's future regional
    transportation needs will depend in large part upon leveraging this
    important natural resource. For this reason, CAT requests $650,000 to
    further develop high speed passenger ferry service in the Georgia/South
    Carolina coastal region.
        The coastal area is enjoying unprecedented economic prosperity.
    Experts expect that trend to continue. Some have predicted that the
    region's population will double in the next ten years. Both government
    and the private sector have invested heavily in infrastructure
    improvements that will ensure the continuation of this growth. For
    instance, the Westin Hotel and International Trade Center, located on
    Hutchinson Island directly across the river from downtown Savannah,
    represent some $200 million of combined investment.
        As part of the trade center development, Chatham County has already
    committed to building four new docking areas in support of the existing
    water ferry system. The water ferry system, now in operation with two
    vessels, will eventually be comprised of five boats. This service
    provides the vital link between the amenities on Hutchinson Island and
    historic Savannah.
        Additionally, future plans for Savannah riverfront development call
    for establishing Savannah as a cruise terminal location. Within the
    next few years the Port Planning Committee hopes to have at least one
    cruise line operating from Savannah. Long term plans call for the
    development of facilities to support multiple cruise lines.
        Growth in the South Carolina portion of the coastal area will also
    continue for the foreseeable future. Hilton Head, Jasper County, and
    Beaufort County have continued to enjoy their status as a destination
    of choice. Some eighty new golf courses are planned for construction in
    the near future.
        Unemployment in the South Carolina coastal area is very low, and
    some estimate unemployment of less than one percent on Hilton Head
    Island. Unemployment within Savannnah's lower socioeconomic
    populations, however, is estimated at 8 percent. The ability to match
    the needs of two communities would provide jobs for Savannah residents
    and staffing for the South Carolina coastal area.
        Finally, as populations and activity levels increase, existing
    transportation systems will become ever more congested and expensive to
    build and maintain. Travel times will increase, causing costly delays
    to individuals and businesses alike. As a result, opportunities for
    cross-marketing of the South Carolina and Savannah areas will be
    limited.
        The opportunity for a cost effective water borne transportation
    system exists today. Such a system would have as its basis the
    following objectives:
      --Alleviate demand on other transportation systems.
      --Provide a cost effective and efficient means to connect coastal
            areas.
      --Provide employment opportunities and meet employment demands on a
            regional basis.
      --Increase tourism activity by providing a high quality ferry
            service.
      --Enhance riverfront development and support cruise terminal
            activities.
      --Provide kiss-ride opportunities for commuters.
      --Seamless connectivity to other transportation modes.
      --Increased cooperation of regional public and private partners.
        Chatham Area Transit, in cooperation with regional partners, will
    conduct a thorough feasibility analysis and develop an operating plan.
    By creating such a plan, interested parties can more fully develop a
    means to successfully implement this very worthwhile and innovative
    project.
        Tentatively, CAT envisions a three-hundred passenger high speed
    passenger ferry operating on a regular schedule. The total trip time
    from Savannah to Hilton Head and back would not exceed one hour,
    thereby allowing multiple trips per day. The ferry would provide for
    the easy and efficient migration of persons to and from Savannah,
    Hilton Head, and other portions of the coastal area.
        Proposed budget for the requested funds is as follows:

    Feasibility Analysis/Operating Plan...........................  $100,000
    Purchase of facilities and equipment..........................   550,000
                        --------------------------------------------------------------
                        ____________________________________________________

          Total...................................................   650,000

        To support ongoing operation of the ferry, CAT will identify
    additional revenue sources, such as Federal Transit Administration
    funds, state funds, local funds, and passenger revenues. Once in place,
    operation of the high speed ferry could begin as soon as two years
    after completion of the operating plan.
                                     ______

         Prepared Statement of the International Center for Clubhouse
                                  Development

        Mr. Chairman, thank you for this opportunity for the International
    Center for Clubhouse Development (ICCD) to submit a statement for the
    hearing record concerning fiscal year 2001 funding. The purposes of
    this statement are
        (1) to provide the Committee an introduction to the work conducted
    by ICCD and its member clubhouses across the US and
        (2) To present a $650,000 project proposal for your consideration
    under the CDBG account of the Department of Housing and Urban
    Development.

                                   BACKGROUND
    Mental Illness
        The basic facts about mental illness are as follows:
      --It is anticipated that one in every five adults will suffer from
            some sort of mental illness in their lifetimes;
      --The Surgeon General's Report on Mental Illness states that 28
            percent of the US population suffers from mental/addictive
            disorders in one year, of which 15 percent receive care/support
            from mental health services;
      --The economic and personal losses from these disorders are massive
            and incalculable;--With the graying of America, there is a
            greater need and demand each year for community services to
            support the patient population and their recovery to a positive
            and productive life;
      --Patients emerging from mental care face a difficult time in
            societal reintegration;
      --Community based Clubhouses offer former patients much needed
            support services such as housing, medical services and
            vocational rehabilitation.

                                      ICCD
        The mission of the International Center for Clubhouse Development
    is to build and coordinate a strong network of clubhouse programs. ICCD
    clubhouses are founded on the realization that recovery from mental
    serious illness must involve the whole person in a vital and culturally
    sensitive community. A clubhouse community offers respect, hope,
    mutuality and unlimited opportunity to access the same worlds of
    friendship, housing, education and employment as the rest of society.
        In pursuit of this mission, the center promotes the development and
    strengthening of clubhouses, oversees the creation and evolution of
    clubhouse standards, facilitates and assures the quality of training,
    consultation, certification, research and advocacy, and provides
    effective communication and dissemination of information. Clubhouses
    are composed of members, not patients. Membership comes with
    responsibility, respect and opportunity.
        There are about 250 clubhouses in the US, with an average of 150 to
    200 members per clubhouse. There are pending certification applications
    to the ICCD from noncertified clubhouses seeking ICCD certification.
        ICCD trains and certifies staff and clubhouses across the US. There
    is a growing demand for clubhouse training and certification as
    increasing numbers of our society are diagnosed with mental and
    addictive disorders.
        There are five training facilities in the US: New York City,
    Greenville, SC, St. Louis, Mo., Salt Lake City, Utah, and Worcester,
    MA. All training facilities follow the same rigid certification and
    training protocol.
        ICCD has recently entered into a partnership with UMass Medical
    School in Worcester, MA. The partnership adds a prestigious research
    expertise to the ICCD and will enable scientific documentation of
    clubhouse performance and success.
        There is always a struggle to provide trained personnel for
    staffing new clubhouses. In addition, clubhouse professionals trained
    and talented personnel, are in high demand for similar health care and
    management positions from State and private institutions with
    compensation packages that clubhouses cannot match.

                       FISCAL YEAR 2001 PROGRAM PROPOSAL
        In order to maintain the standards of certified personnel within
    the existing or established clubhouse network and to train needed
    personnel for the growing number of clubhouses, the ICCD requests that
    $650,000 be allocated to the ICCD, which would allow clubhouse
    continuity and growth in providing opportunities and hope to our target
    population.
        The funds would be used to better equip the ICCD core management
    functions and training capability to meet the growing challenges and
    demands of mental health services. The supply of qualified and trained
    clubhouse directors is currently insufficient to meet the requests for
    the establishment of new clubhouses.
        The nonrecurring costs associated with this proposal would be used
    at the five training centers and in the ICCD headquarters in New York.

                                   CONCLUSION
        Mr. Chairman, thank you for this opportunity to present this
    proposal for a modest investment for fiscal year 2001 funding. The
    national benefit from this infusion of much needed resources will last
    far beyond fiscal year 2001, resulting in increased capacity to provide
    increased recovery and rehabilitation services to the portion of our
    nation's population that seek assistance in regaining their lives,
    independence and respect in society.
        Thank you again for this opportunity to submit this statement for
    the hearing record.
                                     ______

              Prepared Statement of the City of Newark, New Jersey

        Mr. Chairman and members of the Subcommittee, thank you for giving
    us the opportunity to submit testimony about project under your
    jurisdiction that are critical to the people of Newark, New Jersey.
    Newark is truly at a crossroads: we are a City with all of the problems
    of many major urban centers, but we are also a City with vast
    potential. We have begun to turn the corner--there is a renewed
    vitality and sense of optimism in Newark.
        Vibrant revitalization is ongoing in our downtown. The successful
    opening of the acclaimed New Jersey Performing Arts Center (NJPAC) in
    1997--which includes a new public plaza open space; an adjacent
    waterfront development along the Passaic River--which is began
    construction by the US Army Corps of Engineers late this year; a minor
    league baseball stadium where the Newark Bears began to play last
    summer; and a planned state of the art sports and entertainment
    complex, all are changing the face of Newark. But we know that the
    renaissance of our City cannot just happen in the downtown business and
    arts center; it must also include the residents and their neighborhoods
    in meaningful, substantive ways. The proposals for economic development
    activities outlined herein may be disparate, but they all relate to
    improvements in the quality of life for residents of and visitors to
    Newark.
        Newark is the largest City in New Jersey, with 275,221 residents in
    1990, and ranks sixty-third in the nation in population. Newark's
    twenty-four square miles of land makes it the smallest of the country's
    top one hundred cities, with the fifth highest population density in
    the nation. Much of our land is taken up by Newark International
    Airport, higher education and medical facilities, and other
    institutional uses, increasing the density of our actual ``livable''
    space. The median family income, according to the 1990 Census, was only
    $25, 816--as opposed to $47,589 for the State--and our population is
    five years younger than the State average. Twenty-nine per cent of our
    population was under the age of 18, and twenty-six percent lived below
    the poverty line. For people living in these conditions, there are
    basic needs which must be met: the availability of open space and
    recreation areas, the availability of jobs, and the availability of an
    infrastructure which is conducive to the development of neighborhoods,
    business and industry.

                       URBAN PARK RESTORATION INITIATIVE
        Fundamental to the goal of bringing Newark back is the
    revitalization of its neighborhoods. Key to this improvement is the
    revitalization of municipal parks in some of our poorest and most
    densely populated areas, in full partnership with neighborhood
    residents and community based organizations. In fiscal year 2000 the
    VA/HUD Appropriations Subcommittee recognized the importance of this
    initiative by including a listing through the Economic Development
    Initiative for $300,000. In fiscal year 2001 the City is again
    requesting funds in the amount of $4 million for this important
    community investment project.
        The City of Newark is seeking the support of this Subcommittee to
    help to implement the City's overall strategy for park and neighborhood
    revitalization. Based on community partnerships and a sense of pride
    and ownership, the children of Newark will truly have the opportunity
    to be a part of the City's renaissance. Projects have been selected in
    each of the City's five wards, with specific strategies developed for
    each. The City of Newark will make every effort to match dollar for
    dollar federal support through its operating and capital budgets,
    staffing and in-kind services. Support is also expected from the
    private sector, including foundations, corporations and individuals.
        With federal support, the City's Department of Neighborhood and
    Recreational Services will embark on a community partnership for parks
    strategy, currently being tested in the largest municipal park, Jesse
    Allen Park. Signs will be posted in each park, and a local grassroots
    campaign with advertising will be coordinated to invite all
    neighborhoods surrounding each of the thirty-five small city parks to
    collaborate and make theirs a community park according to the
    established process. In each location, a ``Friends Of'' park
    association is being formed of citizens who live around the park, and
    anchoring community institutions, such as schools, the faith--based
    community, community development groups, and local agencies. Each
    association will be helped by the City to form a board, create by-laws,
    and become a 501c3 non-profit organization. Each group will be expected
    to get at least 10 percent of the surrounding neighborhood residents to
    join the association and donate at least one dollar, and will
    participate in joint orientation and training with peers from similar
    groups citywide. The City will award additional funds for that
    particular park, which the ``Friends Of'' group will help to administer
    to execute improvements and create programming. It is anticipated that
    funding will be in the amount of $1,000 per acre of park, plus matching
    with various foundation and corporate partners who have expressed
    strong interest in aiding the resurgence of parks and neighborhoods.
        Federal support will be utilized to match municipal capital
    investment in improvements. The City administration will maintain its
    current efforts and services, such as lawn mowing, trash removal and
    basic landscaping. In addition, our comprehensive strategy will include
    support from other municipal departments. The Engineering Department
    will address capital needs. They will develop comprehensive physical
    plans and drawings for each park, to be compiled in consultation with
    the community group. In addition, the Police Department has pledged to
    create walk-ride units of officers who patrol in and between specific
    parks, train watch groups who undergo association training, and
    organize police youth and adult athletic leagues to compete in the
    parks. The Newark Public Information Office will coordinate the
    communications and media strategy, both for initial outreach and with
    each association in determining its own campaign direction and format.
        Specific municipal parks have been identified for participation in
    the demonstration project and unique strategies have been developed for
    each. For example:
      --Riverbank and Independence Park in the East Ward. These parks are
            in the crowded Ironbound section, where the neighborhood has
            very little open space. The City is working with local groups
            to develop the designated park area near the Passaic River with
            jogging trails, soccer fields, and new open space.
      --Jesse Allen Park in the Central Ward. This park is adjacent to one
            school and near several others. It was recently the focus of
            several discussions and meetings with community groups. It is
            in the heart of the City's poorest area, and has been subject
            to repeated vandalism. The City and the newly formed Jesse
            Allen Park Association are working jointly to develop and
            execute a plan that includes the refurbishment of ballfields, a
            revitalized playground, a new concert area, and security
            measures.
      --Kasberger Field in the North Ward. These playing fields and
            recreation area are virtually hidden in the neighborhood in
            North Newark. It has attracted the attention and interest of
            many little league groups who want to help fix up the facility
            for ongoing use. A security fence, lighting and better drainage
            have been identified as vital needs.
      --Boylan Center and West End Park in the West Ward. Boylan is the
            only City recreation Center in the West Ward, and West End is
            the only municipal park. Both need landscaping, furniture and
            signage to better serve their local area populations.
      --Mildred Helms Park and St. Peter's Recreation Center in the South
            Ward. Mildred Helms is a long narrow park in the heart of a
            dense residential neighborhood. It adjoins an elementary
            school, but is littered with crack vials, debris and broken
            glass, and has broken playground equipment. Despite this
            condition, the area children play there daily, as it is the
            only open space in the immediate area. This is a site where
            neighborhood organizing will potentially enable substantial
            change in the environment. St. Peter's is a complex including
            basketball courts, a pool and a center building on the other
            side of the ward. This facility, too, is in need of community
            support to overcome chronic vandalism and return it to full
            utilization.

                       QUEENS/PEDDIE DITCH REHABILITATION
        The second project is one that will have a tremendous impact on the
    redevelopment of industrial property close to Newark International
    Airport, known as the Airport Support Zone. In order to accommodate the
    expanding businesses which must be close to the airport and Port
    Newark/Elizabeth, adequate drainage and unflooded roadways are
    necessary. Queens/Peddie Ditches feed into the South Side Interceptor,
    and are the principal stormwater conveyances draining the southern part
    of the City of Newark.
        The Queens and Peddie Ditches are the principal stormwater
    conveyances for the East and South Wards of the City of Newark. Both
    ditches feed in to the Southside Interceptor and are in desperate need
    of cleaning and reconstruction. The regulating chamber at the
    intersection of the Queens Ditch and the Southside Interceptor also
    needs massive reconstruction. In their current state, these conveyances
    do not provide the necessary stormwater capacities. The result is
    severe flooding in critical areas, including a large urban park, the
    Newark Airport Support Zone, and along Amtrak's Northeast Corridor
    Line. During Hurricane Floyd, flooding from the Peddie Ditch caused
    suspension of rail services.
        The project is critical to the development of the warehouse/
    industrial complex along Frelinghuysen Avenue and the Waverly Yards
    property to support expansion of Newark Airport. Reconstruction of the
    South Side Interceptor will eliminate the flooding problems on
    Frelinghuysen Avenue, especially in the vicinity of the critical
    connections with Route 22 and I-78. The removal of standing water will
    enhance the connections of this area to Newark Airport and further its
    development as an Airport Support Zone. The rehabilitation of the
    Queens Ditch will reduce flooding in the vicinity of International Way
    and Waverly Yards. This area is located immediately adjacent to the
    Northeast Corridor, the Airport Monorail Extension, and the proposed
    conference center and hotel complex.
        The estimated cost of all required work is approximately $20
    million. To date, the City has received an appropriation of $475,000
    through the fiscal year 2000 VA/HUD Appropriations legislation. In
    fiscal year 2001 the City of Newark requests an additional
    appropriation of $2 million to complete the preliminary design and
    engineering and begin construction on this important project.

                      THE NEWARK MUSEUM SCIENCE INITIATIVE
        The Newark Museum seeks $2.0 million to support its new Science
    Initiative Education. The City of Newark has committed $1.7 million
    dollars to date toward the preparatory collections care necessary to
    make this initiative possible. Additionally, The Museum is involved in
    a $5 million dollar operating endowment fund based upon a public/
    private partnership to assure adequate on-going support, of which $1.2
    million has been raised to date. Research has shown that the ongoing
    maintenance cost of science galleries is several multiples of that of
    art galleries.
        The plan calls for the creation of a major permanent exhibition
    based upon its natural science collection. The exhibition, called
    Making Sense of the Natural World, will explore scientific phenomena
    through natural history specimens and live animals. Museum audiences
    will participate in mindful science learning through stimulating and
    engaging experiences that integrate the collections, Dreyfuss
    Planetarium and Mini Zoo. This gallery, along with the Museum's plan to
    institutionalize cohesive science education programs parallel to its
    distinguished art and culture programs, is the core of The Newark
    Museum Science Education Initiative.
        The cohesive science education at The Newark Museum will entail
    greater use and dissemination of their science gallery, planetarium and
    live animal resources, thus providing new learning opportunities for
    individuals, families, schools, and community organizations. This
    initiative also allows the Museum to safeguard the thousands of
    scientific specimens, so critical to its success, in proper housing
    both in the exhibition and in technologically advanced, environmentally
    appropriate behind-the-scenes storage.
        The Newark Museum is recognized as one of the nation's leading
    cultural institutions. It is located in Newark, New Jersey's largest
    city, and within Essex County, the State's most densely populated. The
    Museum's constituency is economically and ethnically diverse,
    reflecting the distinctive character of the city, northern New Jersey
    and the metropolitan region. In 1998, The Newark Museum served an
    audience of 462,000 children and adults.
        The Newark Museum's natural science collections of 74,000 specimens
    in the areas of geology, botany and biology are being utilized today in
    programs that allow for participatory and inquiry-driven experiences,
    to engage visitors in meaningful science learning. Science-related
    programs draw more visitors to The Newark Museum than any other
    offering, despite the fact that the science galleries have been closed
    for more than a decade. Realizing the opportunity to attract larger
    audiences and better serve Newark and New Jersey residents, the Museum
    has embarked on a new science initiative. It will enable the Museum to
    reopen the science galleries and builds upon the Museum's proven track
    record of excellence in interdisciplinary arts and humanities programs.
     the newark museum new science education initiative: reshaping science

                                   EDUCATION
        In planning the new Science Initiative, Museum staff and Trustees
    have been guided by the principles contained in Goals 2000 and by New
    Jersey's recently adopted Core Curriculum Content Standards for K-12
    education. Critical thinking, mathematical, and scientific
    understanding will be fostered as visitors question, experiment,
    compare, and analyze real specimens from the Museum's science
    collections, and participate in planetarium and Mini Zoo programs
    designed to effectively communicate complicated and abstract science
    concepts.
        The science plan will also include a Science Resource Laboratory
    for teachers, which will provide them with a space to research and test
    curriculum ideas for hands-on activities in the natural and planetary
    sciences. Based on the results of research conducted with Newark
    educators, these monthly multi-session and one-time in-service teacher
    professional development workshops will provide teachers opportunities
    to become more comfortable teaching science and meet the state-mandated
    re-certification requirements. The same Science Labs will be used by
    school classes and in after school and weekend programs to reinforce
    science concepts that are introduced in Making Sense of the Natural
    World, the projected new exhibition.
     the new natural science exhibition, making sense of the natural world
        This gallery, intended primarily for a family and elementary school
    audience, will be one of the few in the country to combine the best of
    natural history museums and science centers by marrying actual
    biological, geological and botanical specimens with hands-on, inquiry-
    driven activities.
        In this exhibit, visitors will experience the wonder of nature's
    diversity and then look at collections the way scientists look at them.
    They will begin to learn that natural history specimens individually
    and collectively provide volumes of information about science. They
    will understand how ordering the natural world led to the realization
    that the Earth is constantly changing and that life adapts to those
    changes. Moreover, they will appreciate that evidence of those changes
    is as close as their own backyard.
        The consideration of this committee is deeply appreciated. Newark,
    New Jersey is looking forward to your support of this exciting project
    and its innovative partnership.
                                     ______

               Prepared Statement of the City of Miami Beach, FL

        Mr. Chairman and members of the Veterans Administration, Housing
    and Urban Development, and Independent Agencies Subcommittee: The city
    respectfully submits a community sustainability project for a
    discretionary fund set-aside through the fiscal year 2001 VA/HUD
    Economic Development Initiatives Program. The city-proposed set-aside
    of fifteen million dollars will be used toward the implementation of a
    citywide network of alternative transportation and bicycle/pedestrian/
    greenway trails, known as the Atlantic Corridor Green Way Network,
    which will help create additional economic development opportunities
    for Miami Beach. The cost of implementing the network is estimated at
    $35 million, of which $20 million has already been funded by or awarded
    to local government. Only the $15 million requested herein remains
    unfunded.
        The Atlantic Corridor Greenway Network encompasses the trails along
    the Atlantic Ocean and Indian Creek Waterway, and several inland trails
    that will provide direct access to and from the various city
    neighborhoods, parks, entertainment, employment, commercial and
    business centers, including a residential causeway that reaches over
    Biscayne Bay and into downtown Miami. A listing of the elements of the
    greenway network is provided as an exhibit to this testimony.
        This integrated network of greenway trails will snake its way along
    the citys parks, beaches, waterways, and other natural ecosystems, and
    will include rest areas, vistas areas, and water recreation areas, and
    interpretive signage throughout the greenways, to provide enhanced
    heritage and eco-tourism amenities and recreational opportunities for
    trail users.
        The first segment of the greenway network, known as the North Beach
    Recreational Corridor-Phase I, will be constructed in 2001 as part of
    an economic revitalization plan for the North Beach area of the city.
    Other segments will follow as they reach full funding status. In
    addition, a project known as the Beachwalk Trail is also fully funded
    by the city and ready to be constructed, fringing the art deco historic
    district and the hotel area of South Beach, where the construction and
    renovation of several hotels and condominiums is underway, due to the
    ongoing investment interest in the area.
        By connecting the Atlantic Corridor with improved transit sites in
    strategic residential and employment centers, as well as regional
    parking facilities, the network will encourage greater mobility.
    Enhanced mobility along the Atlantic Corridor will, in turn, encourage
    new economic development opportunities in Miami Beach by reducing the
    concurrency restrictions currently limiting new, compatible development
    and redevelopment projects, and by providing new venues for the city's
    fashion, film, and eco-tourism industries. These improvements will also
    increase local business support by residents and visitors and will
    encourage the cross-utilization of the city's cultural, environmental,
    and economic resources, creating a balance that ensures a sustainable
    future.
        We wish to emphasize that a $15 million fiscal year 2001
    discretionary fund set-aside by VA/HUD-EDI toward the Atlantic Corridor
    Greenway Network is critical to the long-term effectiveness of Miami
    Beach in sustaining and strengthening its position as the number one
    beach tourism destination in the United States.
        In addition to the economic development initiatives mentioned
    previously, the city recognizes that housing is another key factor in
    sustaining the city's economic growth. Miami Beach has traditionally
    attracted a large resident elderly population, many of whom are retired
    persons dependent on fixed income social security insurance. Elderly
    households constitute the majority of the very-low income households
    residing in the city. Therefore, elderly households are often cost-
    burdened households and most of them are in need of assistance for
    housing, health, employment, and other services.
        In collaboration with local housing providers, the city's housing
    division has established and currently funds a variety of housing
    rehabilitation programs to provide affordable housing to groups in
    need, including the elderly. As an U.S. HUD entitlement community, the
    city relies on limited federal funds for its housing programs.
    Currently, the city is establishing an elder affairs program, which
    will collaborate with the housing division, and will provide
    specialized referral services to the elderly population. This program
    will assist the elderly in achieving maximum independence and quality
    of life by establishing programs and services that empower them to age
    in place, in an elderly friendly environment with security, dignity and
    purpose.
        Since housing is one of the most pressing needs of the elderly in
    Miami Beach, funding for elderly housing is a top priority for the
    city. Strong funding commitments for U.S. HUD entitlement programs,
    like CDBG, home investment partnerships program, and ESG program, are
    needed to continue assisting the elderly population. Expansion and
    increased funding of other U.S. HUD programs, including section 202 and
    section 811, is a highly needed investment for the elder community.
        Your consideration is sincerely appreciated.
                                     ______

     Prepared Statement of the University of Medicine and Dentistry of New
                                     Jersey

        The University of Medicine and Dentistry of New Jersey (UMDNJ) is
    the largest public health sciences university in the country. The UMDNJ
    statewide system consists of 3 medical schools, and schools of
    dentistry, nursing, health-related professions, graduate biomedical
    sciences and a school of public health. UMDNJ also provides clinical
    services through three core teaching hospitals, an integrated
    behavioral health care delivery system, a statewide system for managed
    care and affiliations with more than 200 health care and educational
    institutions statewide. No other institution in the nation possesses
    the resources, which match our scope in higher education, health care
    delivery, research and community service initiatives with state,
    federal and local entities.
        Robert Wood Johnson Medical School is one of three schools of
    medicine at the University of Medicine and Dentistry of New Jersey.
    Nationally, RWJMS ranks among the top ten medical schools in the
    percentage of minority student enrollment. The school ranks in the top
    one-third in the nation in terms of grant support per faculty member.
    It is home to four major research institutes: the only NCI-designated
    Cancer Center in New Jersey; Advanced Biotechnology and Medicine;
    Environmental and Occupational Health Sciences, and Child Health.
        We appreciate the opportunity to bring to your attention our
    priority project, the Child Health Institute, which is consistent with
    the mission of this committee. This project is statewide in scope and
    includes collaborations within the University system and with our
    affiliates. Our research projects also underscore UMDNJ's commitment to
    eliminating racial disparities in health care delivery and research.
    New Jersey with its small geographic size and its large diverse
    population is an ideal site in which to conduct research and develop
    activities that will address this important issue. The federal
    government has played and must continue to play a crucial role in
    funding biomedical research and economic development. We appreciate the
    strong support of this Congress to sustain the high standards of
    excellence in research and training sponsored by the NIH. The
    University's top priority project is the Child Health Institute of New
    Jersey.
        The Child Health Institute of New Jersey at the UMDNJ-Robert Wood
    Johnson Medical School in New Brunswick, is a comprehensive biomedical
    research center focused on the health and wellness of children. The
    Institute has been established in recognition of the expertise that
    exists in developmental biology on the New Brunswick and Piscataway
    campuses. No other entity in New Jersey approaches the depth of human
    expertise, research achievements and technological resources that the
    Child Health Institute will bring together in the discipline of
    development. The Institute will address unmet needs of children and
    their families in the areas of prevention, treatment and cure of
    environmental, genetic and cellular diseases including asthma, autism,
    diabetes, heart defects and birth defects such as cleft lip.
        The Child Health Institute is integral to the long-term plan for
    the enhancement of research at RWJMS in developmental genetics,
    particularly as it relates to disorders that affect a child's
    development and growth, physically and functionally. The program will
    enable the medical school to expand and strengthen basic research
    efforts with clinical departments at the Robert Wood Johnson University
    Hospital, in particular, those involved with the new Bristol-Myers
    Squibb Children's Hospital.
        The Child Health Institute will grow on a current NIH funding base
    at RWJMS and its academic partners of more than $50 million, $17
    million of which has developmental biology as a focus. The Child Health
    Institute of New Jersey builds on existing significant strengths in
    genetic, environmental, and neurosciences research at RWJMS and the
    associated joint research and advanced degree programs with academic
    institutions and the pharmaceutical industry.
        The Institute will be linked to the medical school and the Bristol-
    Myers Squibb Children's Hospital at Robert Wood Johnson University
    Hospital, the core teaching hospital of the medical school. Continued
    investment in research facilities will enable us to create a unique
    resource and build a world class infrastructure for child health to
    improve the lives of children and their families.
        Disorders of health affecting infants and children exact a terrible
    toll in both human suffering and economic impact on families and the
    community. State and Federal public policy places a priority on efforts
    to prevent and treat childhood disorders. The prevention of conditions,
    such as autism, asthma, diabetes and birth defects such as cleft lip,
    has nearly incalculable benefits to society. The metropolitan New York/
    New Jersey region does not have an academic research center designed
    specifically to address issues of child health. Approximately half of
    the admissions to a children's hospital are for genetic disorders. By
    far the majority of these are polygenic or multifactorial; that is,
    they are the result of groups of genes interacting among themselves and
    with the environment.
        The Child Health Institute will focus research on the molecular and
    genetic mechanisms that direct the development of human form,
    subsequent growth, and acquisition of function. Broadly, the faculty
    and students will investigate disorders that occur during the process
    of development; to discover and study the genes contributing to
    developmental disabilities and childhood diseases; to determine how
    genes and the environment interact to cause childhood diseases; and to
    identify the causes and possible avenues of treatment.
        As an example, asthma-related problems have risen by 50 percent
    over the past decade with hospitalization rates 4 to 5 times higher for
    African Americans. Effective prevention and treatment will require more
    exacting understanding of the molecular mechanisms of the stimulus-
    receptor reactions that elicit asthmatic attacks. Continued exploration
    of the basic molecular underpinnings of injury reactions will lead to
    more rational methods to prevent, minimize and treat asthmatic
    reactions and deaths. Urban academic medical centers such as RWJMS are
    at the epicenter of the current escalation in asthma and the Child
    Health Institute is well positioned, in conjunction with other
    institutes at the medical school to address this critical issue.
        Another example of important research is the role of smoking in
    development. It is now known that smoking plays a key role in the
    development of the cleft lip of the child of a smoking mother. What we
    are just learning and applying is the effect of smoking cessation on
    the developing child: if otherwise healthy mothers who have a silent
    gene mutation stop smoking she reduces the risk of her child developing
    a cleft lip five fold.
        Research with folic acid represents another potential area for
    collaboration. Folic acid prevents neural tube defects in infants when
    taken by pregnant mothers. Folic acid also plays a key role in the
    treatment of some childhood leukemias. In partnership with our NCI
    designated Cancer Institute, the researchers at the Child Health
    Institute will seek the answers to overlapping and interrelated
    questions.
        While the devastation of childhood diseases and injury can be
    horrific, amazing breakthroughs in treatment and new drugs or surgical
    techniques are occurring. These breakthroughs require painstaking
    research and testing, significant financial support, and a
    concentration of basic and clinical research expertise and potential
    research subjects in a controlled environment.
        Unfortunately, the lack of such a statewide focus in developmental
    biology has limited New Jersey's participation in and access to leading
    edge research, clinical trials and beta-site technology. The building
    of the Child Health Institute in partnership with the Bristol-Myers
    Squibb Children's Hospital will allow New Jersey to assemble the
    research faculty and clinical experts necessary to compete for the
    advanced basic science and clinical research projects that currently
    are out of reach. Also, the critical mass of expertise provided by the
    Institute will hasten the pace at which theories become therapies in
    New Jersey through its educational opportunities and sponsorship of new
    technology.
        The Child Health Institute will serve as a magnet for additional
    growth in research and health care in the region. New Brunswick has
    emerged as the premier ``Health Care City'' in New Jersey through the
    efforts of UMDNJ, its schools and affiliated hospital network, and the
    ongoing support of Johnson and Johnson, the largest manufacturer of
    health care products, and the Robert Wood Johnson Foundation, one of
    the largest philanthropic foundations in the world. The Institute will
    continue to promote the development of new partnerships with other
    affiliated hospitals and with the multinational pharmaceutical,
    biotechnology and chemical industries in New Jersey.
        The Institute will encompass 83,000 square feet, with more than 40
    research labs and support facilities. Fourteen senior faculty will
    direct teams of M.D. and Ph.D. researchers, visiting scientists,
    postdoctoral fellows, graduate students and technicians for a full
    complement of some 130 employees.
        At maturity, the Institute is expected to attract $7--$9 million of
    new research funding annually and its total annual operating budget is
    projected to be between $10--$12 million. The economic impact on the
    New Brunswick area is estimated to be between $50--$60 million per
    year.
        The best science requires creative scientists working in state of
    the art buildings using state of the art equipment. The construction of
    the Child Health Institute at RWJMS will fill a critical gap through
    the expansion, by new recruitment, of an intellectual base upon which
    basic molecular programs in child development and health will build.
    Construction costs for the Institute are estimated at $30 million, with
    about half of that amount associated with local employment.
        We respectfully request $5 million for infrastructure development
    of the Child Health Institute. These dollars will complement the $1
    million we have already received from this committee with the generous
    and strong support of Congressman Frelinghuysen and other members of
    the NJ Delegation and the $2 million funding we have already received
    from the Labor/HHS Appropriations Subcommittee. We have raised an
    additional $18 million in the private sector from individuals, industry
    and foundation sources and we expect to raise $10 million from the
    State of New Jersey. This combination of state, federal and private
    resources will enhance UMDNJ's commitment to children, health care and
    the economic development of our communities.
        We thank the members of this Subcommittee for your leadership in
    supporting national and international research and development
    initiatives. This committee has been a strong supporter of the
    universities and research institutions in this country. Your leadership
    on many biomedical initiatives is especially appreciated.
                                     ______

                 Prepared Statement of the City of Dayton, Ohio

        Chairman Bond, Ranking Member Mikulski, and Members of the
    Subcommittee, thank you for the opportunity to submit the following
    testimony which briefly details an extraordinary opportunity to
    redevelop a brownfield property for which we are seeking your support
    in the amount of $2 million.
        Historically, the city of Dayton had a large and successful
    manufacturing base. At its peak in 1960, Dayton's population swelled to
    over 260,000. However, between 1970 and 1995, Dayton lost almost 40,000
    jobs and 100,000 residents. Many factories were closed and over the
    years the weather, vandals, and owners' neglect turned those factories
    into eyesores, then nuisances and finally, brownfields.
        While there are over 25 brownfield sites in the city of Dayton, we
    have identified ten we believe to be most compelling. These ten total
    over 135 acres of valuable land that should be returned to safe and
    productive use. Most of these sites are in economically disadvantaged
    and minority neighborhoods and in addition to their blighting influence
    on these neighborhoods, they represent 3,620 jobs and $2,788,000 annual
    revenue lost to the city.
                               tool town proposal
        There is a current proposal to create Tool Town, an innovative
    industrial campus, on the Harrison property, a pivotal 35 acre
    brownfield located in downtown Dayton. Tool Town is a concept that was
    created by an industry-driven tooling and machining task force during
    the development of the comprehensive plan for the city of Dayton. It is
    a precision metalworking park that will concentrate tooling and
    machining companies, support services, and educational opportunities in
    a unique campus-like environment. It will provide the opportunity for
    companies to share equipment, staff, and resources and to cooperate in
    new ways. This unique approach will not only support the region, but
    also help the tooling and machining industry compete globally and
    retain these high-paying jobs in the United States.
        The Harrison property was identified by the task force as
    presenting an excellent opportunity for redevelopment and as a good
    site for Tool Town. The redevelopment of this particular property is
    especially important due to the revitalization of this area of Dayton,
    known as Webster Station. Webster Station is home to Dayton's Fifth
    Third Field; RiverScape project; and the Cannery, a redevelopment
    project that includes loft housing and street-level commercial
    development.
        In the short term, Tool Town would provide a home for 23 businesses
    employing over 1,500 people, and through its growth over the next 20
    years, would house over 80 tooling and machining businesses and still
    have the capacity for additional growth. Just within the city of
    Dayton, this industry would be the direct supplier of 5,600 new jobs
    and the generator of an equal number of new, spin-off jobs.
        Ensuring the success of the tooling and machining industry will
    help accomplish goals established in our comprehensive plan, including
    increased per capita income, poverty reduction, revenue generation, and
    job creation. These goals are relevant to the entire region, especially
    in areas that formerly were centers of manufacturing and distribution
    and whose citizens have suffered the most from the loss of those
    industries and the impacts of urban sprawl. The creation of Tool Town
    will support the long-term viability of the tooling and machining
    industry and provide jobs for people who need them.
        Tooling and machining businesses can provide secure, well-paying
    jobs with benefits and the potential for advancement. The jobs are
    available to a high school graduate after a nine month training program
    at Sinclair Community College, also located in downtown Dayton.
    Sinclair has a tooling and machining certification program that is
    recognized as the best in the United States. The average graduate has a
    minimum of three job offers and all graduates get jobs. Beginning in
    April 2000, Sinclair will also offer advanced training that will
    produce ``top gun'' machinists. The Tool Valley Foundation is working
    with Dayton Public Schools on a possible joint venture that could be
    located at the Tool Town campus.
        The Miami Valley region is the fourth largest concentration of
    tooling and machining industries in the United States and has
    tremendous strengths and a wide breadth of capabilities. A recent
    survey of 11 counties in this region indicates that there are currently
    over 825 companies employing approximately 26,000 people. This
    represents a $1 billion yearly payroll and $2.2 billion annual sales
    revenue.
        The industry is growing in our region. In the last five years, the
    number of jobs in tooling and machining has increased by 22.7 percent.
    This is compared to a total employment growth rate of 5.3 percent in
    the Dayton-Springfield area and 7.1 percent in the state of Ohio.

                                    PARTNERS
        There is a network of partners already involved in and committed to
    the tooling and machining industry and the redevelopment of the
    Harrison property. Partners at the local level include public and
    private organizations such as the Dayton Tooling and Machining
    Association, whose members contributed $250,000 to provide two years
    operating capital for the Tool Valley Foundation; Montgomery County;
    Sinclair Community College; and the Miami Valley Regional Planning
    Commission.
        Local funding contributions toward tooling and machining
    initiatives represent over $1.7 million, including the construction of
    the Dayton/Miami Valley Entrepreneurs Center, an Edison technology
    incubator to be located in Tool Town. Local in-kind contributions
    represent $835,000 worth of staff time dedicated over the next three
    years to implement these initiatives. At the state level, the Ohio
    Department of Development has pledged operating funds for the
    Entrepreneurs Center of up to $200,000 a year.
        The federal government is also partnering on the redevelopment of
    this property, including awarding Dayton a U.S. EPA Brownfield Pilot
    Program grant, a TCSP grant from the Federal Highway Administration, a
    $200,000 EDI award, and $1.1 million toward the Entrepreneurs Center
    contributed by the U.S. EDA. In addition, the city of Dayton has spent
    $670,000 of our HUD funds on the acquisition of a former foundry that
    will be part of the complex developed on the Harrison site.

                                   CONCLUSION
        The United States is facing stiff economic competition. The global
    market presents opportunities, but there are those who are working hard
    to take lucrative businesses away from the United States. The Pacific
    Rim countries already have 40 percent of the world market in tooling
    and machining, equivalent to the United State's share, and their stated
    plan is to acquire 80 percent of it.
        Facing these challenges requires a new paradigm for business. It is
    critical for Dayton to have the opportunity to help develop this new
    paradigm. The acquisition and redevelopment of the Harrison property to
    create an innovative industrial campus, such as Tool Town, will provide
    Dayton this opportunity. Its implementation will also provide a
    national demonstration project of a new way for businesses to work
    together to meet future challenges.
        The redevelopment of the Harrison site will also demonstrate the
    feasibility of reusing brownfields. A major brownfield project in our
    region will stimulate similar activities on other underutilized and
    abandoned industrial sites. Its location in the urban core permits
    economic development without additional major investments in public
    infrastructure by reusing the existing roadways and utilities that are
    already adequate to support full development of this site.
                                     ______

            Prepared Statement of the Babyland Family Services, Inc.

        Mr. Chairman and Members of the Subcommittee, thank you for the
    opportunity to submit testimony to the Public Witness Hearing Record
    regarding a model educational program that will close the ``digital
    divide'' among minority inner city children and families. Babyland
    Family Services (BFS) is a major non-profit child and family service
    organization, founded in 1968 in Newark, New Jersey, that provides
    comprehensive child and family development services at 14 sites to
    1,500 at risk children and their families each year. The Annie E. Casey
    Foundation, a national leader in children's issues, highlighted
    Babyland in its annual 1998 Kids Count report as a model in community-
    based child and family development. BFS was also one of a select number
    of agencies that received a 1999 Century of Caring award, from the NJ
    Division of Youth and Family Services (DYFS), for its service to
    children and families. Babyland has also taken the lead on several
    community-wide initiatives: Success By 6, Family and Children Early
    Education Services (FACES), Abbott Preschool Family Worker Program, and
    the Pediatric Asthma Reduction Effort (PARE). These initiatives include
    collaborations with over 30 other child care centers, several public
    and parochial elementary schools, and several service providers.
    Together these initiatives serve over 5,000 children and families.
        BFS integrates its wide network of services in order to enable each
    child and individual to reach their potential-intellectually,
    emotionally, spiritually, socially, and physically. Babyland's holistic
    philosophy-integrating child, family, staff and community development-
    serves as a model and has been studied by other communities throughout
    the nation and as far away as South Africa. Babyland serves at-risk
    children (from infancy to 18 years old), parents striving to be self-
    sufficient, teenage parents (including young fathers), struggling
    families and distressed neighborhoods.
        BFS programs provide a continuum of educational services to
    individual children as well as multiple support services for family
    members. By virtue of this continuum, the agency is able to build
    extensive relationships with families and to provide follow-up care. As
    a result, BFS is in a unique position to launch and oversee a major
    computer and technology initiative that will provide extensive training
    and technology support for individual families having no other tangible
    means of becoming computer literate or of acquiring the requisite
    skills necessary to be informed and self-sufficient. This initiative
    would empower not only present clients but also those who will receive
    BFS services in the future.
        BFS services include:
        Quality child care for children under three years old, through the
    Early Head Start Program; Early childhood education for preschoolers;
    After school and summer enrichment programs for school-age children;
    Pediatric health services, including a pediatric AIDS and asthma
    program; Parent education for teenage mothers and pregnant women, young
    fathers, severely distressed parents, foster parents, and grandparents;
    Emergency shelter and counseling for battered women and children;
    Foster care homes for boarder babies and sibling children; Self-
    sufficiency services that include: life skills, family literacy,
    substance abuse and mental health counseling, and employment training/
    placement in conjunction with networking partners; Training in the
    areas of child development, domestic violence, foster care, family
    support, health and parent leadership; and Community organizing and
    neighborhood leadership training for parents and residents.
        Computer technology is transforming the economic and social
    landscape of this country by offering information and educational
    opportunities for individual growth and community development. Inner-
    city children and residents are inadequately prepared to take advantage
    of these growth opportunities. If the gap in information technology--
    the digital divide--is not bridged, a large segment of society will be
    further polarized and left without the tools needed for full
    participation in society. Specifically, BFS is seeking to establish the
    telecommunications linkages necessary for the educational development
    of 670 children and to provide computer and technology training for
    2,000 parents, teachers, and employees. As a result, this initiative
    will strengthen children's educational skills; promote the self-
    sufficiency of and enhance the educational skills of parents; enable
    the agency to better track child and family needs in order to enhance
    client services; and link the community to local and national resource
    centers. The proposed technological network will link center and home-
    based child care facilities; community resources and service providers;
    educational, economic and resource information sources; training
    centers and administrative offices. The establishment of this network
    will be a model for educating urban children and serve as a conduit for
    comprehensive family support services.
        The Specific Provisions of the BFS proposal include:
        Computer hardware and software (technical assistance, installation
    and wiring, modems, printers etc.) for children, parents and residents,
    and teaching/social service staff in classrooms, homes and social
    service offices.
        Technology Center, as part of a new multi-purpose community
    resource center, that will provide distance learning, professional
    development and training in basic and advanced computer and technology
    skills for low-income parents, neighborhood residents and entry-level
    employees.
        Computer Training, Curriculum Development and Professional
    Development for children, parents and residents, educational and social
    services staff, as well as national and international community-based
    family service providers.
        The initiative will benefit:
        Preschoolers (550) at eight centers and 120 school-age children
    (after school/summer enrichment programs) at five centers.
        Parents and family members (1,750) at 13 Babyland sites with links
    to community resources;
        Agency Staff (250) for client tracking purposes; training and
    professional development; and access to community resources to be
    provided through workstations and/or palm pilots for caregivers/
    teachers and social service staff. Parents and children in the home for
    educational instruction and support, economic and resource information,
    links to other parents and teachers, parenting education (child and
    family health, child behavior and development, cultural sensitivity,
    etc) and professional education (ex. Certifications, GED, etc.).
        Family day care homes with links to community resources,
    professional education, BFS child care centers and other child and
    family resource centers.
        Child and family service providers throughout New Jersey, the
    nation and South Africa.
        The BFS digital divide initiative will seek specifically to greatly
    enhance:
      --Early childhood development and education for young children (three
            to 13 years old).
      --The ability of inner city residents, especially low-income parents
            and teenagers, to learn computer and technology skills.
      --Tracking of 1,500 children in center- and home-based child care
            facilities; teenage parents and victims of domestic violence;
            homeless families; foster children and families.
      --Provision and delivery of professional development for BFS staff
            and parent education programs and curriculum development
            efforts.
      --Delivery of clinical and therapeutic services to parents and
            children.
      --The ability to fulfill State and Federal reporting requirements.
      --The ability to provide consultation to international family service
            providers.
        Current BFS parent and staff training programs that will be
    continued and expanded through the implementation of this initiative
    include:
      --Foster parent training for over 300 candidates;
      --Domestic Violence training for nearly 40 community staff;
      --Family Worker training for over 50 Abbott Preschool family workers;
      --Child care training and accreditation for nearly 100 child care
            staff from 30 centers;
      --Parent leadership training for 30 parents from three public
            schools, through a grant from the Victoria Foundation
      --Family literacy training for 40 parents; and
      --Family day care training for 20 family day care providers.
        Of particular note, Babyland established an international training
    program with the Goldfield Metropolitan Corporation, a community-based
    organization in South Africa, in order to exchange information on child
    care, community development and family services. In 2000, we are
    looking forward to providing distance learning for over 100 parents and
    staff at the Early Head Start Program.
        Mr. Chairman, as your Subcommittee deliberates funding requests
    from many qualified candidates coming to you for assistance this year,
    I urge you to review and consider our request for a $1 million Economic
    Development Initiative Grant to bridge the digital divide among inner-
    city families in Newark. We make this request in order to help us
    fulfill our mandate as a provider for thousands in our city but also,
    in return, to act as a model for other agencies in cities around the
    country who may also be able to help the technologically disadvantaged
    gain access to the resources and skills necessary to survive in the
    21st Century.
        Thank you.
                                     ______

     Prepared Statement of the American Association of Homes and Services
                                 for the Aging

        The American Association of Homes and Services for the Aging
    (AAHSA) is pleased for this opportunity to present testimony on the
    fiscal year 2001 budget request for the U.S. Department of Housing and
    Urban Development (HUD). As you may know, AAHSA is the largest
    organization representing non-profit sponsors of senior housing who own
    and manage over 300,000 units of market rate and federally assisted
    housing--including the largest number of sponsors of HUD Section 202
    elderly housing facilities. As a stakeholder in helping to meet the
    suitable and affordable housing needs of older persons, the budget
    proposals for federally assisted housing affecting elderly Americans
    are critically important to our association.

                                    OVERVIEW
        As we have stated in previous testimony, as non-profit sponsors of
    elderly housing we respond to different motivations in developing
    housing for the poor, the needy, and the frail elderly. Our motivation
    is born of mission not profit. Ours is a mission of helping those whose
    needs are the greatest and of striving to provide housing and
    supportive services to all low-income elderly who need it. However,
    ours is a daunting task, borne out by the increasing elderly
    demographics and the critical shortage of housing and services by our
    nation's elderly. In its March 2000 report to Congress on ``worst case
    housing needs,'' HUD finds there is a ``worsening crisis'' in rental
    housing assistance. Despite a continuing, robust economic expansion,
    worst case housing needs have reached an all-time high of 5.4 million
    families containing some 12.3 million individuals. Of those 12.3
    million persons, over 1.5 million are elderly, and between 1991 and
    1997, the number of elderly persons with worst case housing needs
    increased by eight percent. A recent Harvard University study finds
    that renter households headed by a person aged 65 or older in 1995-one
    fifth of the elderly population-had a median net wealth of only $6,460,
    underscoring the fact that a large population of the elderly remain
    poor, with limited access to affordable housing options and services
    that are most appropriate for them.
        Last year, the Administration responded to several years of
    Congressional coaxing and industry advocacy to address some of the
    challenges presented by graying of America in proposing a continuum of
    care for the elderly as a part of their Housing Security Plan for Older
    Americans. We commend the committee for its interest in ensuring that
    increasing numbers of elderly persons are adequately housed with access
    to appropriate services. Due to the outstanding leadership of this
    committee, many provisions establishing a continuum of care for the
    elderly program, as recommended by the Administration and as a part of
    the overwhelmingly House-passed H.R. 202, the ``Preserving Affordable
    Housing for Senior Citizens and Families into the 21st Century Act,''
    were adopted by Congress in last year's fiscal year 2000 HUD budget,
    and serve as a foundation for the Administration's budget proposal in
    fiscal year 2001.
    fiscal year 2001 hud budget: continuum of care for the elderly proposal
        The Administration's proposals build on last year's success by
    expanding the continuum of care for the elderly. HUD's Housing Security
    Plan for Older Americans--``ensuring lifelong security''--would combine
    new and existing HUD programs; improve coordination with other federal
    assistance; create a comprehensive and cost-effective senior housing
    system that preserves security and independence; and include elements
    of the Housing Security Plan that were not passed by Congress last
    year. The funding total for the continuum of care proposal is $779
    million; however, there are three set-asides in the proposed budget
    totaling $150 million, and we believe modifications to the proposal and
    the funding are needed.
        Additionally, while we have high interest in other parts of the
    Administration's budget proposal, including sufficient funding for
    Section 8 expiring contracts; funding for the Section 811 program,
    HOME, and CDBG; and adequate housing vouchers, the focus on a continuum
    of care for the elderly is unique to AAHSA, and our testimony will
    focus on the Administration's continuum of care for the elderly
    proposal.
        Section 202.--In announcing the fiscal year 2001 budget proposal
    for the Section 202 program, the Administration called Section 202 the
    ``bedrock of HUD's elderly housing programs.'' We agree. HUD proposes
    $629 million for capital advance and project rental assistance to
    produce new construction units under Section 202. While this is an
    increase over the current level and given the tremendous need, we do
    not believe it goes far enough, and sets a funding baseline for the
    program that is well below last year's $700 million House-passed
    authorized level in H.R. 202. As clearly evident by long waiting lists,
    projected increases in the elderly population, and the emerging
    recognition of the role of elderly housing in long-term care
    strategies, the need for new development funding is obvious. We have
    seen Section 202 funding trend downward from $1.279 billion in fiscal
    year 1995, to $830 million in fiscal year 1996, to $645 million in
    fiscal year 1997, where it has since hovered in the $600 million range
    despite demographics, need and demand for the program. At least for the
    past six fiscal years, only 30 percent to 40 percent of eligible
    Section 202 applications are able to be funded. After many years, even
    the Administration is recognizing that housing vouchers do not add to
    the supply of affordable housing, and new production development
    programs are critical to meeting the demand for affordable housing.
        We also understand that HUD will propose statutory changes in their
    budget proposal permitting Section 202 to leverage other financing,
    including low-income housing tax credits. Last year, we urged the
    committee to encourage flexibility in the Section 202 program to enable
    mixed-financed, mixed-income, and mixed-use facilities. We supported
    flexibility which allows use of Section 202 funds for acquisition,
    modifies income limits in high vacancy areas, and allows Section 202
    funds to be used in conjunction with other federal and non-federal
    financing sources. We stated, the ``other sources of financing''
    feature would be particularly useful in coupling Section 202 with low
    income housing tax credits to develop and increase the production of
    new housing units, and expand the range to low- and very-low-income
    elderly. In last year's conference report to the fiscal year 2000 HUD
    budget, this committee urged HUD to explore alternative financing
    sources including allowing owners of Section 202 to be eligible for low
    income housing tax credits and the equity financing it generates by
    enabling projects to become the sole general partner of a for-profit
    limited partnership as long as the general partners meet the definition
    of private non-profit sponsors. Understandably, this was a
    recommendation we supported and is a change we would heartily welcome.
    In regards to the Administration-proposed set-asides under the Section
    202 program, these set-asides are intended for other discrete housing
    programs. While all of these programs serve the same low-income and
    frail elderly population, we believe they are for distinct purposes and
    their funding sources should reflect that distinction under separate
    funding streams.
        Similar to last year, we strongly support much in the
    Administration's continuum of care proposal, but some refinements are
    needed. Therefore, we encourage you to establish a separate Continuum
    of Care for the Elderly account under the Housing for Special
    Populations account, and restore funding under the Section 202 program
    to $700 million in fiscal year 2001 for new construction development
    and project rental assistance. We urge Congress to provide an
    additional $35 million for the Section 202 program to be available for
    mixed-financing in leveraging other development financing sources and
    enabling greater program flexibility. Program flexibility should
    include a change in statute to enable linkages between Section 202 and
    the low income housing tax credit program.
        Service Coordinators and Congregate Services: HUD proposes $50
    million for an expanded service coordinator program to serve residents
    of HUD-assisted elderly housing and other eligible elderly living in
    the project's neighborhood, and for continuing existing congregate
    service contracts. The use of service coordinators in elderly housing
    facilities is an integral part of the continuum of care, and helps the
    frail elderly to live independently with dignity and respect, and often
    defer or delay their need to move to a higher level of care.
        The Administration's $50 million expanded service coordinator
    program would be instituted as a set-aside under the Section 202
    program. We agree with, and support expanding the service coordinator
    program, including serving the nearby elderly non-residents. However,
    for the reasons outlined above, we believe funding for service
    coordinators should be under an account separate from the Section 202
    program, particularly since service coordinators are funded in all
    types of federally assisted elderly housing, including Section 236,
    Section 221(d) and Section 231 facilities.
        Funding for service coordinators is never sufficient to meet the
    demand (last year only 55 applications were funded out of 345
    submitted) and HUD continues to conduct a lottery in order to award
    service coordinator grants. We appreciate the leadership action by this
    committee last year in appropriating a substantial increase of $50
    million for service coordinator and congregate services funding, a
    level consistent with the funding originally provided when the service
    coordinator program was first established. However, if the unfunded
    eligible applicants from last year resubmit this fiscal year, and
    expiring service coordinator and congregate services contracts are
    funded, $50 million will once again be insufficient to meet the demand
    for service coordinators. Since last year's unfunded applicants will
    receive a preference, new applicants in fiscal year 2001 will not have
    any possibility to receive a grant. Increasing the $50 million proposal
    to $75 million will enable HUD to renew expiring contracts, fund last
    year's eligible applicants, and offer service coordination to new
    applicants.
        In addition, we reiterate our position that Congress establish a
    more reliable and stable source of funding for service coordinators, as
    a part of a facility's routine operating expense, and allow grant
    recipients the option to build the cost of service coordinators into
    their operating budget upon the expiration of the grant. Finally,
    because many elderly housing facilities are at the peak of the fair
    market cost limits on their Section 8 contracts, and thus prohibited
    from employing a service coordinator, Congress should waive the Section
    8 annual limits for facilities seeking to employ a service coordinator.
        Therefore, we urge Congress to establish a continuum of care for
    the elderly account in fiscal year 2001 and provide at least $75
    million in funding for 1) renewal of expiring service coordinator and
    congregate housing contracts, 2) unfunded eligible service coordinator
    applications from last year, 3) new service coordinator contracts, 4)
    expansion, to enable service coordinators to serve other residents
    residing in the community, and 5) statutory language that provides: a)
    the cost of a service coordinator program is exempted from the annual
    limits on expiring Section 8 contracts; b) costs proposed for any
    service coordinator program shall not exceed comparable market costs
    for the local jurisdiction; and c) insured or assisted housing projects
    without project-based Section 8 rent subsidy shall have existing
    service coordination grants continued through Section 8 amendment
    funds.
        Assisted Living Production.--HUD proposes $50 million in five-year
    operating subsidies as a set-aside under the Section 202 program to
    construct new affordable assisted living facilities to serve 1,500 low-
    income elderly. The funding would be linked to the Section 232 FHA
    insurance program to directly subsidize no more than 20 percent of the
    units in any given facility, thereby creating 7,500 new assisted living
    units. According to HUD, funding would go to states and localities
    offering the most innovative proposals that combine their service funds
    with HUD funds, and awarding both to qualified local developers. HUD
    believes that linking operating subsidies with FHA insurance will
    encourage banks and developers, who are only familiar with the higher-
    income assisted living market, to spur production of affordable
    assisted living.
        We enthusiastically support this proposal, particularly since the
    great need for affordable assisted living continues to grow. We believe
    it is good public policy for federally assisted housing programs, such
    as FHA mortgage insurance, to serve those whose low-income level would
    ordinarily prevent them from being served in the open market. To the
    extent that this proposal would target the lower-income, frail elderly
    needing the level of services provided by assisted living, we applaud
    HUD for taking this first step forward. However, as stated earlier, we
    believe the operating subsidy funding for this program should be under
    an account separate from the Section 202 program. Section 202 operating
    funding, in the form of a project rental assistance contract (PRAC), is
    specifically for non-profit sponsors and, unlike other assisted housing
    operating subsidies, is not budgeted or used for mortgage-debt
    payments. Since most developers currently using Section 232 for
    assisted living are for-profit, we expect that most developers using
    this affordable assisted living option will also be for-profit. We
    would prefer to maintain the integrity of the 202/PRAC by maintaining
    it for only non-profit sponsors. Therefore, we urge you to establish a
    separate Continuum of Care for the Elderly account to fund the HUD-
    proposed affordable assisted living program at $50 million in operating
    subsidies, separate from the Section 202 account.
        Assisted Living Conversion.--Continuing and building upon last
    year's initiative, HUD proposes $50 million for an innovative,
    competitive grant program in fiscal year 2001 to convert all or part of
    some existing Section 202 projects to assisted living facilities
    through rehabilitation, modernization or retrofit. HUD recently issued
    a fiscal year 2000 notice of funding availability implementing the
    assisted living conversion program (ALCP) for Section 202 facilities.
    We are strongly supportive of the use of grants for conversion of
    Section 202 facilities to assisted living, however we would urge that
    other non-profit sponsors of existing federally assisted elderly
    housing also have the opportunity to access grants for conversion to
    assisted living as originally proposed in H.R. 1624, the ``Elderly
    Housing Quality Improvement Act.'' Many of our members, including
    Section 236, 221(d), and other federally assisted housing members, have
    also expressed interest in participating in this program, and we
    believe limiting eligibility to only Section 202 facilities is an
    artificial restriction. Therefore, we urge Congress to establish a
    continuum of care for the elderly account in fiscal year 2001, separate
    from the Section 202 account, that does not restrict eligibility to
    Section 202 facilities, but provides $50 million in grants for
    conversion of any non-profit federally assisted elderly housing units
    to assisted living.
        Modernization and Retrofit.--Although the Administration's
    continuum of care for the elderly proposal does not include
    modernization and retrofit to accommodate aging buildings, and
    buildings which need to be adapted to facilitate supportive services,
    we believe this is an issue of sufficient concern which the committee
    should address. Just as our residents are aging-in-place, our housing
    is aging, and is in need of modernization and retrofit. H.R. 1624,
    before it was incorporated as a part of H.R. 202, would have
    established a $100 million capital grant program for the
    rehabilitation, modernization, and repair of most project-based
    federally assisted elderly housing, besides allowing for conversion of
    elderly housing units to assisted living. AAHSA has repeatedly urged
    Congress and the Administration to establish a modernization and
    retrofit program to address the problem of aging buildings. Since the
    loss of the Flexible Subsidy program and non-implementation of Project
    Retrofit under the Congregate Housing Services Program authorized in
    the 1990 National Affordable Housing Act, there has not been a federal
    program to specifically fund the modernization of federally assisted
    housing facilities. This should be corrected. Therefore, we urge
    Congress to establish a continuum of care for the elderly account in
    fiscal year 2001 that provides up to $50 million in funding for the
    rehabilitation, modernization and retrofit of project-based federally
    assisted elderly housing, in order to meet the long term physical plant
    needs of elderly housing facilities.
        Intergenerational Learning Centers.--Similar to last year, HUD
    proposes to use up to $5 million of assisted living conversion funds to
    provide space within elderly housing facilities for intergenerational
    learning centers that would offer affordable senior services and
    affordable child care. According to HUD, these centers would also serve
    as a focal point for sharing Internet technology. This co-location
    approach, of locating services and service providers on or in close
    proximity to elderly housing facilities, has long been promoted by
    AAHSA. However, we would expand the eligible use of funds to other co-
    location activities, including adult day care, senior centers, home
    health care centers, and other types of services and service providers.
    And, since we view these types of co-located facilities and services as
    community-oriented, and resources for the community-at-large, we
    believe another appropriate funding source is the community development
    block grant. Therefore, we urge Congress to support a continuum of care
    for the elderly account in fiscal year 2000 that provides up to $5
    million in funds for co-location activities, including child and adult
    day care; and to provide language that encourages the use of funds from
    the CDBG account for co-location.
        Existing Housing Preservation.--Though not a part of the continuum
    of care proposal, another critical concern to AAHSA is the preservation
    of existing affordable housing for seniors. As you know, between 1996
    and 1998, almost 100,000 affordable assisted housing units were lost
    because of opt-outs and prepayments, including a large number of
    elderly housing units. AAHSA urges Congress to focus on strategies that
    encourage non-profits to acquire existing facilities whose owners
    choose to opt out, including shifting available resources to an
    alternative site in the same community or reallocating the Section 8
    contracts, and encourage partnerships between local governments and
    non-profits to develop alternative sites for affordable housing.

                                   CONCLUSION
        Thank you for providing AAHSA the opportunity to testify on the
    fiscal year 2001 budget request for HUD. We are thankful for the
    leadership this committee has provided in affordable elderly housing,
    and we are pleased to be able to contribute to the committee's
    deliberation on these critical issues. We urge your support for the
    recommendations outlined in our testimony, and we hope that our
    comments will assist in helping you craft a budget that is responsive
    to the increasing needs of low-income elderly persons. If you desire
    additional information, please contact Gerard Holder, Associate
    Director for Housing Policy at 202-508-9476 or gholder@aahsa.org.
                                     ______

         Prepared Statement of the National Association of Housing and
                            Redevelopment Officials

                                GENERAL COMMENTS
        The National Association of Housing and Redevelopment Officials
    (NAHRO) welcomes the opportunity to offer comments on the fiscal year
    2001 budget for the Department of Housing and Urban Development (HUD).
    Founded in 1933, NAHRO is the nation's oldest and largest national
    organization representing housing and community development officials
    from all 50 states, Puerto Rico and the Virgin Islands. NAHRO
    represents more than 2,500 agencies and more than 6,500 professionals.
    NAHRO members participate in every national, state and/or local housing
    and community development program that currently exists in the country.
    This ranges from the community development block grant (CDBG) program
    to financing tax credit projects to administering the public housing
    and Section 8 programs to developing homeownership opportunities for
    low- and moderate-income families and individuals.

                        FISCAL YEAR 2001 PROGRAM FUNDING
    HOME program
        NAHRO continues to support increased funding for housing and
    community development programs. NAHRO urges funding the HOME program at
    a level of $2 billion. The HOME program is one of the few federal
    programs that add to the affordable housing stock in many local
    communities. It has proven to be a successful vehicle for this purpose,
    fostering partnerships and creativity at the local level, and
    leveraging private investment at a 2:1 ratio. The program has produced
    a good mix of rental units and home ownership opportunities for those
    of low and moderate income. The success and appeal of this program
    warrants an increase funding to $2 billion in fiscal year 2001.
    Community development block grants (CDBG)
        NAHRO supports a funding level of $5 billion for the CDBG program.
    The CDBG program has proven to be effective at providing resources that
    help local governments meet the given need of a community at the time
    that need must be addressed the most. It is a universally popular and
    appreciated program that just completed celebrating its 25th year of
    existence (seer attached publication). One of the major benefits of the
    program is that it is very effective in leveraging additional public
    and private investment dollars for neighborhood and community
    improvement. Equally important, the CDBG program is a major factor in
    the prevention of further decline in many low-income neighborhoods
    throughout the country.
        A major flaw in the funding of the CDBG program in the past has
    been the significant number of set-asides. On average, Congress sets
    aside more than 10 percent of the program's funds for specific
    activities and/or grantees. This is a misuse of this valuable resource.
    Every dollar that is set aside reduces the formula allocation to
    entitlement communities, and reduces the opportunity of all grantees to
    address their specific needs. Worthy programs should be funded
    independently and not set aside from needed and successful programs
    such as CDBG. Additionally, we are concerned about the latest rule
    promulgated by the department, which would require all units funded by
    CDBG, and containing lead needed to be abated immediately. We are
    concerned that this endeavor is a costly one that could have unintended
    consequences on the program. We strongly encourage the committee to
    seek a delay in implementation of this initiative until the full costs
    can be identified and the implications to program activities are
    determined.
    Public housing
        The Quality Housing and Work Responsibility Act (QHWRA) of 1998
    created more opportunities for public and assisted housing programs to
    be managed in a way that reflects the needs of local communities. It
    also included provisions designed to minimize the rent burden of public
    housing residents. Residents of public housing cannot live in a decent
    and safe environment if the managers do not have the resources that are
    necessary to provide the kind of services that create that kind of
    environment. Unlike the private sector, local housing authorities
    cannot rely solely on rent receipts to cover expenses but must also
    rely on Congress to appropriate sufficient funds to ensure that public
    housing buildings are operating efficiently. Private landlords are not
    required to provide supportive services and programs designed to lead
    residents to self-sufficiency or ensure that certain needs are met. Our
    experience over the years have proved that the local housing agency
    must be the provider of housing and related services.
        The Operating Fund is the vehicle that fills the gap between the
    rental income and the amount needed to operate the units and the
    programs to support the residents. To fund operations of the public
    housing program adequately, Congress must provide at least $3.55
    billion for fiscal year 2001. Despite the fact that QHWRA permits
    flexible use of capital fund monies for operations, the operating fund
    should not be deliberately short funded based on the assumption that
    capital funds will be used.
        The Capital Fund provides the resources to maintain the public
    housing physical plant. The modernization and maintenance of the 3,400
    public housing units across the country require that we address the
    unfunded backlog of modernization needs, as well as the accruing
    maintenance and replacement needs of these units. NAHRO urges Congress
    to fund the Capital Fund at no less than $3.5 billion for fiscal year
    2001.
        HOPE VI is performing the dual function of eliminating obsolete
    public housing projects and replacing them with mixed income,
    attractive, neighborhood revitalizing developments. This program has
    made a dramatic and positive impact and should be funded at $625
    million for fiscal year 2001.
        The Public Housing Drug Elimination Grant Program (PHDEP) funds
    practical solutions to fight drug and criminal activity that threatens
    the safety and well being of public housing residents. Some the
    solutions include specialized lighting that increases security on
    authority properties, increased police presence, tenant patrols,
    organized youth activities, drug education and treatment programs, and
    a myriad of other valuable activities. In the past, program funds were
    distributed through competition but are now distributed by formula. As
    a result of the success of the program, NAHRO urges Congress to
    increase funding for this program to $410 million.
    Housing certificate fund
        The largest housing program is the tenant-based assistance program.
    QHWRA merged the voucher and certificate program into one program, a
    voucher program, which will allow for easier management of the program.
    Tenant-based assistance is one tool within the affordable housing
    arsenal available to local agencies to provide housing assistance to
    low-income households. The program provides housing choices to families
    by utilizing the private market, thereby creating a win-win scenario
    for everyone. NAHRO strongly supports an appropriation of funds that
    will guarantee the renewal of all vouchers and certificates set to
    expire in fiscal year 2001. Congress should appropriate the level of
    funding necessary to ensure that renewals of these certificates and
    vouchers occur.
        In spite of the rental assistance program's success, there are two
    operational issues that merit attention. First, it is critical for
    Congress to increase the fair market rent (FMR) for vouchers from the
    current 40th percentile to the 45th percentile of rents. Many in
    Congress, HUD and OMB will raise concerns that the increase will cost
    the Federal government more money. The reality is that the increase
    will help ensure that the resources used for housing assistance will be
    spent for housing by those eligible to receive assistance. One
    criticism of the Section 8 program is that the vouchers and certificate
    are underutilized in some markets. Increasing the FMR provides
    recipients of this assistance greater housing choices to utilize the
    vouchers they have been given.
        Secondly, Congress needs to review the QHWRA provision that limits
    a household to not pay more than 40 percent of monthly-adjusted income
    for its Initial use of the subsidy. The limit restricts recipients'
    choice within the rental housing market.
        NAHRO recommends that the Shelter Plus Care vouchers be renewed as
    part of the Housing Certificate Fund. NAHRO believes this will ensure
    continued funding for this valuable program which ensures that housing
    and supportive services are provided to the homeless.

                          HOMELESS ASSISTANCE PROGRAMS
        Homelessness continues to be a major problem across the face of
    America. On any given night, there are 750,000 homeless persons on the
    streets. The Congress must continue to fund adequately the various
    programs that help homeless families and individuals. Housing
    authorities and community development agencies play a big role in
    providing assistance to the homeless in their communities. Working in
    partnership with local service providers and nonprofit organizations,
    NAHRO members are creating innovative solutions that coordinate the
    housing and support services needed to end homelessness.
        NAHRO supports a homeless block grant for homeless programs;
    however, we do not support national set-asides for permanent supportive
    housing. Local communities are in the best position to determine how to
    address the needs of the homeless within their jurisdiction. Without
    sufficient funding, a formula block grant will not work effectively.
    Sufficient formula allocations, without set asides, will help to ensure
    that the homeless problem is addressed in a fashion consistent with
    local needs.
        NAHRO supports an appropriation of $1.2 billion to fund programs
    that provide the essential continuum of care that the homeless require.

                           HOUSING PRODUCTION PROGRAM
        The Department of Housing and Urban Development has released a
    study that shows that more than 5 million Americans are in the midst of
    an affordable housing crisis. Families are forced to pay 50 percent or
    more of their income for rent because the cost of housing is so high.
    In communities throughout the country there is a need for an increase
    in the production of affordable housing to satisfy a need that is not
    currently being met. NAHRO supports a housing production program that
    results in a net increase in hard units and supplements existing
    affordable housing programs. This production program should be
    available to entities dedicated to providing affordable housing. This
    production program should not be overly regulated and should allow for
    local decision making regarding the type, targeting and financing most
    appropriate for the site being developed and the community where is
    located.
        The production program should include the following principles:
      --There shall be one fund, not separate pots of money to various
            eligible local agencies.
      --The funding distribution to local agencies will need to be
            determined (pipeline or conduit system, competition, formula).
      --All partners (non-profit, private sector, etc.) may be applicants
            to local agencies for the production program.
      --The funding is administered such that HUD is only a funding conduit
            for local agencies.
      --This is a new production program (demonstration/trust fund?)
      --That capital or internal subsidies are sufficient to serve
            extremely low-income families, and special market conditions.
      --Capitalization of sufficient operating reserves should be provided
            for if needed to support project affordability.
      --This proposal considers and takes advantage of private sector
            housing development, since that is the major source for housing
            development in the country.
      --This proposal would permit and encourages private partnership
            financing by reducing the risk involved in serving extremely
            low-income families.
      --This fund must be flexible enough to permit development of rental,
            rent-to-own and home ownership properties, as determined by
            local need.
      --Provide for targeting but allow for flexibility in the actual
            percentages, to maximize financial feasibility and facilitate
            combination with other programs. The Housing Committee felt
            strongly that these funds should go to those at 50 percent or
            less of AMI.
      --Permit the use of funds in the most flexible way possible,
            including mixing funds from a variety of sources as needed to
            make the units affordable and simplify program rules to match
            private sector delivery models.
      --Identify the resource or resources needed to fund the production
            program ($5 billion FHA now, future production funding to be
            determined).
      --Affordability terms should be ``permanent,'' meaning 50 years.
            Additional restrictions should be developed to prevent loss of
            the property to the affordable housing inventory. This may
            include restrictions on use of pro-rated proceeds from the
            property, right of first refusal, and other mechanisms.
        Units should be developed to fit into socially responsible
    environments. The program should not result in concentrations of
    poverty but a mixed-income, mixed-financed viable community.

    LANGUAGE SEEKING IMMEDIATE RELEASE OF FUNDS FROM HUD AFTER IT HAS BEEN
                                 APPROPRIATED.
        Housing and community development agencies have grown increasingly
    frustrated with an increasing tendency for HUD to delay issuing program
    funds in a timely manner. In some cases, agencies have waited more than
    a year for program funds from the department. This creates a number of
    programmatic and administrative problems for local agencies and
    disrupts services to needy citizens. NAHRO supports legislative
    language that requires the Department to disperse or allocate program
    funds with 90 days of appropriations from Congress.

                                    CLOSING
        We want to thank you for the opportunity to testify. We look
    forward to working with the committee to ensure that adequate funding
    is available for these programs.
                                     ______

        Prepared Statement of the Santa Marta Hospital, Los Angeles, CA

        Thank you Mr. Chairman for the opportunity to submit this testimony
    for the written record on a very important initiative underway at Santa
    Marta Hospital in Los Angeles California, The Diabetes Education and
    Management Program. This initiative has been implemented in response to
    one of the most critical and expensive medical crises threatening our
    patients. This program will provide a national model for diabetes
    education, outreach and disease for underserved and highly at-risk
    populations, specifically, Hispanic Americans.
        Santa Marta Hospital's three-year multi-site, Diabetes Education &
    Management Program will focus on the provision of diabetes education,
    outreach and health care services to an extremely at-risk, underserved
    and economically disadvantaged Hispanic population. Approximately 40
    percent of the target population for the Diabetes Education and
    Management Program are uninsured, and live at or below the federally
    defined poverty line.
        This initiative will address the urgent diabetic epidemic that is
    affecting the Hispanic population in Santa Marta's service area, the
    State of California and the nation. This innovative community-based
    program will use specially trained residents of the community to
    provide educational presentations, information and outreach to the
    residents of the hospital's service area. These ``Health Promoters''
    who will themselves be graduates of the Diabetes Education program,
    will be trained to provide screening, educational presentations,
    preventative services and outreach for primary medical care to
    residents of the neighborhood. The specific Objectives, Methods and
    Evaluation strategies that will be implemented as part of this
    initiative include:
                                   OBJECTIVES
        1. To train initially 20 (and ultimately 100 over the three year
    life of the demonstration) Community Health Promoters who will then
    provide diabetes education and medical services to at least 150 people
    in the East Los Angeles community annually, moving to 200 people in
    year three.
        2. To develop 70 courses annually that will include educational
    presentations addressing stages of diabetes, symptoms, nutrition and
    treatment options, both in Spanish and English.
        3. To provide low cost or no cost lab tests, medical care, and
    diabetes treatment to members of the East Los Angeles community.
        4. To expand the scope of community outreach to include a much
    broader range of diabetes medical, educational and psychosocial
    services provided to poor people in East Los Angeles.
          methods/strategies to be used to meet the program objectives
        1. The program will be composed of both diabetes education classes
    and preventative and primary care medical services. The education
    component will focus on diabetes presentations addressing symptoms,
    nutrition, and treatment. Approximately 10 or 12, 12-week courses will
    be offered serving approximately 30 people per class (at least 200
    people per year, by year three).
        2. Primary care programs will include: regular medical check-ups
    and lab work, screenings for diabetes, referrals to specialized
    physicians, and referrals to psychosocial services. Lab work and
    medical family history will be obtained at the beginning and end of the
    12-week program. Results will be compared and used as a performance
    evaluation tool for the Diabetes Education & Management Program.
        3. Diabetes education and management courses will be taught first
    by trained hospital staff. Eventually, 20 community Diabetes Education
    & Management Program participants, diagnosed diabetics themselves, will
    receive 50 hours of training to become diabetes educators in order to
    increase the number of people providing screenings in the community.
    This will improve program effectiveness because this community responds
    positively to community based programs.
        4. The community outreach program will continue to be supplemented
    by regular visits from Santa Marta's Mobile Health Care Delivery Van.
    This mobile clinic, staffed by doctors and nurses, will provide basic
    medical evaluations, testing, health education materials, and referrals
    to the Diabetes Education & Management Program.

                             EVALUATION STRATEGIES
        1. Monthly, the project Clinical Director will review progress and
    present status reports to Santa Marta Hospital. The project Clinical
    Director's report will list the number of people benefiting from the
    education program, accomplishments, problems, corrective actions, and
    campaign status.
        2. At the end of each 12-week course, participants will fill out
    evaluation forms assessing course effectiveness. The results will be
    compiled by the project Clinical Director quarterly and presented to
    the Hospital.
        3. At the end of year one, the program will be thoroughly reviewed
    by the hospital President & CEO to determine program effectiveness,
    formulate recommendations, and make required changes to ensure its
    continued success. Their report will be shared with all interested
    parties, including donors and local health and social service agencies.
        The Diabetes Education & Management Program will provide education,
    medical and psychosocial services to people living in East Los Angeles.
    The program includes: free educational classes, two free lab work
    visits per participant (one at the beginning of the 12-week course and
    one at the end to test compliance and program effectiveness), and low
    or no cost medical services for related health effects of diabetes.
        Diabetes is known to be one of the most under identified causes of
    and contributions to death and that it disproportionately affects the
    Hispanic population. Additionally, it is widely recognized that the
    Hispanic population is three times more likely to have diabetes than
    other non-Hispanic populations. Today, there are approximately 15.7
    million people or 5.9 percent of the population who have diabetes.
    While an estimated 10.3 million have been diagnosed, 5.4 million go
    undiagnosed. Hispanics represent 12 percent to 14 percent of all
    diabetes cases nation-wide. Additionally, it is estimated that
    approximately 22 percent of elderly Hispanics suffer from the diabetes.
    Hispanics are the second largest and fastest growing minority group in
    the United States. In 1993, there were 27 million Hispanics in the
    United States, representing 10 percent of the population. By 2050
    Hispanics will constitute 21 percent of the U. S. population.
        Ninety-seven percent of the population surrounding Santa Marta
    Hospital is Hispanic. The Hospital's census indicates that 66 percent
    of its patient population suffers from undiagnosed and diagnosed
    diabetes, and there are alarmingly high statistics for those who suffer
    from complications such as gangrene, kidney failure, heart disease and
    blindness. Of that number the Hospital estimates that it can target at
    least 2,440-2,840 with its Diabetes Education and Management Program.
        Located within an inner-city neighborhood plagued by poverty, gang
    violence and drugs, Santa Marta Hospital is a sanctuary of hope for the
    19,000 people who walk through its doors each year as well as the
    955,000 who reside in its service area. Ninety percent of Santa Marta's
    patients rely on Medicare and MediCal programs to access health care
    services. The remainder can pay only a small portion of their hospital
    expenses or rely on Santa Marta's charity care. Given the poverty of
    its patients, the hospital depends on the partnership of corporations,
    foundations and individual donors to fund the cost of new medical
    programs and necessary major capital expenditures.
        The per capita cost per diabetic admission to hospitals in
    California is $8,600. This does not include non-hospital-based dialysis
    and other medical supply costs; lost work time; or other societal
    effects. The cost of doing nothing is $4,472,000 (520 people
    $8,600), and these costs are generally supported by Medicare and
    MediCal (Medicaid) reimbursement. Santa Marta's proposed program will
    save Medicare/MediCal programs in California alone $2,400,000.
        Given the financial ability of the affected population and the high
    expense of diabetes, Santa Marta Hospital is seeking $2 million in
    fiscal year 2001 for the full implementation of this needed community
    based prevention, education and management initiative.
        Poverty, gang violence, drug dealing, alcohol abuse, rampant teen-
    age pregnancy and an exceptionally high school dropout rate are just
    some of the harsh realities impacting the seven-mile area surrounding
    Santa Marta Hospital. There are over 9,000 hardcore gang members and 58
    established gangs who shadow the community with a constant threat of
    violence. As the only Catholic Hospital in an overwhelmingly Catholic
    population, Santa Marta provides a sense of sanctuary where patients
    experience safety and care with dignity.
        Founded in 1924, Santa Marta Hospital was originally a ten-bed
    maternity hospital. Today the hospital's maternity department delivers
    over 1,500 newborns each year, and coordinates Comprehensive Perinatal
    Service Programs for the almost 1,000 poor pregnant women who walk
    through its doors annually. The hospital expanded in 1971, and grew
    into a 110-bed acute care facility offering medical services including:
    Radiology, Surgery, Labor and Delivery, Nuclear Medicine, Laboratory,
    Pharmacy, Cardiopulmonary, and Physical Therapy. In 1989, a 20,000
    square foot, 24-hour Emergency Room Intensive/Coronary Care Unit (ICU/
    CCU) transformed the hospital into a complete comprehensive medical
    facility.
        The hospital prides itself on offering several critical programs
    that impact the health of the larger community. Santa Marta is a place
    of hope and service in their community. They know that the hospital
    doors are open, and that no one is ever turned away or refused care on
    the basis of race, religion, gender, sexual orientation, age, national
    origin, disability, or ability to pay.
        Enhancing its broad range of hospital services, Santa Marta
    coordinates the structure for Pediatric, Family Care, and Obstetrical
    Clinics to assist overall outpatient health care. ``Health Fairs'' and
    ``Health Seminars for Seniors,'' reinforce the hospital's outreach to
    the medically indigent with an emphasis on preventative care.
    Additionally, the hospital coordinates a highly successful program for
    ``at-risk'' youth that has the collaboration of local area schools,
    social service agencies, juvenile authorities, and youth/adult
    employment programs. The program introduces teens to a professional
    environment where they can explore positive, future-oriented
    alternatives to the world of drugs and gang violence. Each year over
    250 at-risk residents of the community work more than 9,600 hours and
    are exposed to positive role models, while gaining the self-esteem
    resulting from helping others in need.
        In the fiscal year ending June 1999, Santa Marta Hospital treated
    over 19,000 patients and wrote off more than $11 million in fee
    reductions, and more than $2.1 million in charity care. The hospital
    also spent nearly $900,000 in community service programs. Nearly 90
    percent of Santa Marta's patients are government reimbursed cases (45
    percent Medicare and 45 percent Medi-Cal). And due to extreme hardship,
    the remainder are treated for a very low fee or at no charge.
        Santa Marta understands well that patient education is critical.
    People with diabetes can reduce their risk for complications if they
    are educated about their disease, learn and practice the skills
    necessary to better control their blood glucose levels, and receive
    regular checkups from their health care team. Santa Marta Hospital
    encourages its patients to work with them to set goals for better
    control of blood glucose levels, as close to the normal range as is
    possible for them. Health care education is vital.
        Because people with diabetes have a multi-system chronic disease,
    they are best monitored and managed by highly skilled health care
    professionals trained with the latest information on diabetes to help
    ensure early detection and appropriate treatment of the serious
    complications of the disease. Santa Marta Hospital is proposing its
    Diabetes Prevention and Management as a team approach to treating and
    monitoring this disease in an extremely at-risk population.
        Hospital statistics indicate that members of the East Los Angeles
    community are more likely than the national average to suffer, or be at
    risk of suffering from diabetes. In addition to genetic predisposition,
    many community members are obese, have poor nutrition, and do not
    practice strong preventative medicine. Consequences of untreated or
    unmanaged diabetes include blindness, amputations, kidney failure, high
    blood pressure and strained work, financial and family relations.
    Remember, there is no cure for diabetes.
        This initiative, at its core a twelve week program of diabetes
    screening, education, and management program, will be culturally and
    linguistically sensitive order to address diabetes from a prevention
    perspective, preserving the health and financial resources of our
    patients, our hospital, and governmental health care programs.
        Santa Marta estimates that the program cost to test, educate, and
    provide initial medical treatment to program participants will be
    between $1,000 and $1,500, depending upon the seriousness of pre-
    existing diabetes-related conditions. In 1997, the average cost of
    health care for people with diabetes nationally was $10,071, as opposed
    to $2,699 for individuals without the disease.
        By learning to manage their diabetes, participants of Santa Marta's
    Diabetes Education & Management Program can potentially eliminate days
    missed from work due to diabetes, costly hospitalizations, and
    permanent disability from blindness, amputation, or kidney-failure.
    Given program compliance, the cost of the educational program would be
    recouped in health care savings within three months. Using 1997 health
    care cost data, the initiative could demonstrate $200 million savings
    over a twenty-five year span.
        Thank you Mr. Chairman for the opportunity to submit this
    testimony. We look forward to working with you this year to secure $2
    million in fiscal year 2001 to implement this very needed community
    based diabetes education and management program.
                                     ______

                      FEDERAL EMERGENCY MANAGEMENT AGENCY

      Prepared Statement of the National Emergency Management Association

                                  INTRODUCTION
        Thank you Mr. Chairman, Ranking Member Mikulski and distinguished
    members of the Committee for allowing me the opportunity to provide you
    with testimony on the Federal Emergency Management Agency (FEMA) fiscal
    year 2001 budget. My name is Joe Myers and I am the Director of Florida
    Division of Emergency Management. I am here today representing the
    National Emergency Management Association (NEMA). As the current
    president of NEMA, I represent the state emergency management directors
    in the 50 states, District of Columbia and the U.S. territories who are
    its core members. NEMA's members are responsible to their governors for
    emergency preparedness, mitigation, response and recovery activities.
    These are also the people that you rely on to manage disasters that
    occur within your districts and ensure your constituents receive all
    the assistance they require to recover from any event that may occur.
    With the severe weather we've seen in recent years, I'm sure many of
    you have had declared disasters within your districts.
        The FEMA budget provides critical support to state and local
    emergency management programs through actual dollars, grants, and
    program support. NEMA is most concerned about FEMA's stagnant request
    for State and local assistance funding provided through the Emergency
    Management Performance Grant (EMPG). EMPG funds (formerly known as SLA
    funds) have been virtually the only major program area where FEMA has
    not requested a significant increase in the past seven years.
        State and local assistance funding in the EMPG consists of ``pass
    through'' grants whereby the state distributes approximately two-thirds
    of the federal funds to local governments to provide a foundation for
    basic emergency management capabilities. These pass through grants are
    used to support planning, training, exercises, public education and
    information and many other day-to-day activities designed to prevent
    disaster loss, enhance emergency management capabilities to handle
    disasters when they do occur and ultimately, to protect the public,
    their homes and communities in times of disaster or emergency .
        Emergency management activities have expanded in recent years, due
    to increases in the number of weather related events and new threats
    such as wildfires in urban settings, Y2K preparedness, international
    disaster relief, school safety, airline disasters, potential public
    health epidemics such as the New York encephalitis case, and the new
    and expanded threat of domestic terrorism. FEMA Director James Lee Witt
    recently stated at the NEMA Mid-Year Conference that we must be
    prepared for new threats, realize the increasing frequency and severity
    of events, and recognize the future impact of climate changes.
    Emergency management, like most sectors of government is faced with the
    challenges of doing more with less and doing it all at a higher level
    of service to the taxpayer and our constituencies. Coupled with this,
    is the looming threat by Congress to reduce overall disaster costs
    despite the fact that we are faced with more events and more threats.
        FEMA's request for level funding of $137 million for the Emergency
    Management Performance Grant (EMPG) would provide no means for state
    and local governments to increase their capacities to respond to
    additional threats and the charge of doing more with less.
        At NEMA's 2000 Mid-Year Conference in Washington, D.C., the state
    directors of emergency management unanimously approved a position paper
    requesting an additional $10 million in EMPG funding over and above the
    FEMA request of $137 million for a total request of $147 million.
        NEMA views these grants as a preventative measure that will likely
    mitigate the costs of disasters. For instance, a state grant could pay
    for a public education campaign on installing wind resistant shutters
    to survive hurricanes or building safe rooms to withstand tornadoes,
    effectively utilizing equipment for early warning systems and tracking
    weather-related events, or for training emergency management employees
    through drills and exercises. We are talking about saving lives with
    this money first and foremost, but this money also saves property and
    can assist in reducing the federal government's cost for disasters.
    EMPG is the most flexible grant program that states can use to mitigate
    and prevent disasters. The program allows state and local governments
    to use the funds according to their own needs. However, no amount of
    flexibility can make up for shortfalls in funding. The only option in
    that situation is for limited dollars to be shifted from one priority
    to another which results in little opportunity to increase the states'
    overall emergency management capability.
        Director Witt has proposed to NEMA that levels of disasters be
    created. Level one for example, would be a smaller disaster that would
    require federal disaster assistance through the Public Assistance and
    Hazard Mitigation Grant Program, but could be managed by the state with
    limited FEMA involvement within the state itself. The level of FEMA
    involvement and personnel on the ground would increase respectively
    with the level of disaster. This proposal would mean significant
    administrative cost savings to the federal government. It is an
    excellent chance for capable states to take on greater management
    responsibility for federally declared disasters. We believe we can
    implement programs more quickly and at less cost. But we need adequate
    EMPG funding to build and maintain those capabilities that would allow
    us to manage disasters on our own.
        Ten million dollars in additional funding may sound significant,
    but when you consider that amount is divided among 50 states and
    territories it is not a lot of money. For example, a $10 million add on
    would mean that the State of Florida would receive approximately
    $320,000 beyond the level funding proposed by FEMA. Most states,
    including Florida, pass two-thirds of that funding down to local
    governments--approximately $200,000 in this case meaning that each of
    my counties would receive $3,000. And each county would be required to
    provide match funding. As you can see, NEMA's request for $10 million
    additional dollars is quite small when broken down by 50 states and
    thousands of local jurisdictions.
        State and local emergency management programs cannot continue to
    effectively meet the growing challenges facing them today with little
    to no funding increases in a seven-year period. A 1998 NEMA survey
    revealed a $150 million shortfall in federal funding for State and
    local emergency management programs. In fiscal year 1997, states
    reported that shortfalls in SLA grants totaled more than $152 million.
    The 1997 shortfall is $27 million more than fiscal year 1996, and $68
    million more than fiscal year 1992. Spending by the states for
    emergency management has dramatically increased over the last five
    years. According to a NEMA survey, states spent $2.77 billion on
    emergency preparedness, mitigation, response, and recovery in fiscal
    year 1997, which is nearly double the amount of the previous five
    years. A survey to gather current spending levels is being conducted
    now and we anticipate the $2.77 billion in spending by states will
    increase drastically. Today, emergency managers must prepare and
    respond to ``new'' threats like domestic terrorism, Y2K date-related
    failures, international disaster relief, and school violence. Whether
    it is a hurricane along the East Coast or tornadoes in the Midwest,
    states need a federal commitment to recognize that each state and local
    government has unique disaster preparedness and response needs that
    require flexible, predictable, and adequate funding assistance like the
    EMPG grants.
        In fiscal year 2000, FEMA eliminated all 100 percent funding and
    instituted a composite 50 percent federal and 50 percent state cost
    share for all FEMA programs. (The composite represents the various cost
    shares for states participating in specific FEMA programs such as the
    hurricane program or the earthquake program.). FEMA's fiscal year 2001
    budget assumes that all composite shares will move to a flat 50/50 for
    all states, which means that many states will have to increase their
    match funding for the second time in two years.
        Funding inequities in FEMA's budget leave state and local
    governments holding the bag. It is beneficial to have new funding for
    special projects such as terrorism, but core funds that most affect the
    primary functions of emergency management should not be held hostage to
    pay for other increases. We cannot reduce or keep level the most
    important funding in the FEMA budget.
        While we cannot prevent events and natural disasters from occurring
    we can be prepared for them and help our communities minimize the
    impact of lives lost and destruction of our critical infrastructure. I
    ask that you please consider NEMA's request for additional EMPG funding
    as you consider difficult budget decisions this year.
        I'd like to take the opportunity to quickly address three other
    issues that may be of interest to this Committee.

                             DOMESTIC PREPAREDNESS
        NEMA is actively engaged in the issue of domestic preparedness. In
    addition to testifying before various congressional committees,
    developing model plans and strategies and providing information
    resources to the states, NEMA is also partnering with the National
    Governors' Association and the Office of Justice Programs to hold a
    series of regional forums around the country to bring together
    governors policy advisors, emergency management, law enforcement,
    public health and the fire service in order to discuss critical policy
    and operational issues related to domestic terrorism. States are
    working hard to develop their capacity to respond to such an event.
    Much progress has been made in a short period of time, but there is
    still much work to be done at the federal level to enhance coordination
    and communication among the various federal agencies involved with
    domestic preparedness. It is nearly impossible at this point for states
    to be fully informed on what each federal agency is doing in this area,
    what funding is available to states and for what purpose, how federal
    funding can be leveraged within states to maximize resources, and the
    debate continues about who is really in charge when an event occurs.
    FEMA Director James Lee Witt recently indicated to NEMA that he wants
    FEMA to become more engaged and play more of a co-leadership role with
    the Department of Justice. NEMA is pleased to hear that FEMA intends to
    elevate the importance of the issue within the Agency and we look
    forward to working closely with them to enhance state and local
    capabilities in this area.
        Cyber-terrorism is a related threat that needs increased focus and
    attention. The United States government, individual state governments
    and the private sector are extremely vulnerable to cyber-terrorism. We
    should take lessons learned and protocols established from the Y2K
    problem and direct them towards the cyber issue. Much work was done
    with regard to Y2K preparedness and we were successful in preventing
    major disruptions or failures. It makes sense to redirect that level of
    energy and focus to cyber-terrorism.

       COMPETITIVE GRANTS PROGRAM FOR THE HAZARD MITIGATION GRANT PROGRAM
        FEMA Director Witt also mentioned to NEMA at our Mid-Year
    Conference in February that Congressional appropriators are considering
    whether the Hazard Mitigation Grant Program (404 funds in the Stafford
    Act) should become a competitive grant program. As explained to NEMA,
    states would compete for grant funding and project proposals would be
    reviewed on a competitive basis and funded by a pool of funds. The pool
    of funds may be divided according to hazards with a certain percentage
    available for flood projects, hurricane projects, earthquake projects,
    and other projects. NEMA surveyed the states on the issue and 40
    responding states strongly opposed any changes to the HMGP program that
    would make it a national competition. The Hazard Mitigation Grant
    Program, in its current form, provides a fair and objective process for
    providing mitigation funds to states experiencing disasters. You should
    know that NEMA has been working in partnership with FEMA for the past
    several years to streamline the 404 Program in ways that will ensure
    state and local mitigation needs are identified and prioritized in the
    state mitigation strategy before disasters strike, speed up the project
    application and review process, and ensure quality projects that meet
    federal requirements. The efficiency of the program has improved
    dramatically, but there is still work to be done. NEMA strongly
    believes that allowing all interested and capable states to have
    greater administration and management of the program will further
    streamline the process, relieve FEMA of unnecessary administrative
    duties and most importantly, ensure that state and local mitigation
    priorities are appropriately addressed.

        EMERGENCY MANAGEMENT STANDARDS AND ACCREDITATION PROGRAM (EMAP)
        NEMA is leading the way in developing and implementing, for the
    first time, a national accreditation program for state and local
    emergency management programs. The Emergency Management Accreditation
    Program (EMAP) is a voluntary program that provides national standards,
    advances the profession, identifies and promotes states' best practices
    and lessons learned from past disasters, is based on service to the
    nation and to individual communities, and promotes continuous self-
    improvement.
        While NEMA is the lead organization in the development of EMAP,
    many other critical stakeholder organizations have pledged their
    support to NEMA in the effort including: National Governors'
    Association, The Council of State Governments, National League of
    Cities, National Association of Counties, FEMA, U.S. Environmental
    Protection Agency, U.S. Department of Transportation, International
    Association of Emergency Managers, International Association of Fire
    Chiefs and others.
        The development of national emergency management standards and
    accreditation is well underway with an alpha test planned in late 2000
    followed by a beta test with four states in 2001. Full implementation
    is expected in 2002. NEMA would be pleased to keep this Committee
    apprised of the progress being made in this area and we ask for your
    strong support as state and local governments continue to seek
    innovative ways to rise to the growing challenges of emergency
    management.

                                    CLOSING
        On behalf of NEMA, I would like to express my deep respect and
    appreciation for FEMA Director James Lee Witt and the incredible job he
    has done at FEMA over the past seven years. The nation's emergency
    management system is better for his having been the FEMA Director and
    our citizens are the direct beneficiaries of his commitment to disaster
    mitigation. He has certainly set the standard for the future. And we as
    states and emergency management directors need and want to
    institutionalize many of the changes he's made at FEMA. We need your
    help to do that.
        Thank you for the opportunity to present testimony before this
    Committee. We appreciate the serious consideration that you will give
    to providing $10 million in additional funding for the Emergency
    Management Performance Grant in the FEMA budget.
        NEMA stands ready to serve as a resource to you and the Committee
    on all emergency management related issues.
                                     ______

      Prepared Statement of the Association of State Floodplain Managers,
                                      Inc.

        The Association of State Floodplain Managers, Inc. (ASFPM) is
    pleased to share comments on five specific aspects of the fiscal year
    2001 budget request for the Federal Emergency Management Agency:
      --Continued funding for pre-disaster mitigation partnership
            initiatives;
      --Additional funds to support verification and modernization of flood
            maps;
      --Augment NFIP policyholder funds to address the problem of
            repetitive losses; and
      --Funding for the National Damage Safety Program; and
      --Support request for additional staff positions.
        The Association of State Floodplain Managers, Inc. and its chapters
    represent over 3,500 state and local officials as well as other
    professionals who are engaged in all aspects of floodplain management
    and hazard mitigation. All are concerned with reducing our Nation's
    flood-related losses.
        Our state and local members are partners with the federal
    government to implement programs to reduce long-term losses from
    floods. This partnership is supported by the Community Assistance
    Program (CAP) through which the National Flood Insurance Program cost-
    shares state activities with assist communities. States provide
    technical assistance and coordination of the NFIP with local
    jurisdictions and property owners. The Association's state members are
    concerned that the funding level for this program has been held
    constant for six years despite increased State involvement in new
    initiatives designed to reduce flood losses. The funds for CAP are
    collected from policy holders as part of the policy surcharge of $30/
    policy.

                      PRE-DISASTER MITIGATION PARTNERSHIPS
        FEMA's focus on pre-disaster mitigation partnerships, referred to
    as Project Impact, fosters cooperative efforts at all levels, including
    businesses and non-profit entities. The objective is to focus attention
    on what everyone--not just government--can do to prepare for and to
    reduce the losses associated with disasters. The National Flood
    Insurance Program, under which local jurisdictions regulate development
    activities within mapped flood hazard areas, is a fundamental pre-
    disaster mitigation program that requires compliance with minimum
    standards in order to reduce long-term exposure to flood damage.
      --ASFPM supports the Administration's request for $30 million to
            continue expansion of the pre-disaster mitigation work.

                          FLOOD MAP FUNDING AND NEEDS
        Flood maps serve many purposes beyond the immediate needs of the
    National Flood Insurance Program, and good maps have a direct bearing
    on the magnitude and costs of flood events. FEMA estimates that local
    regulation of flood hazard areas, predicated on the flood maps, avoids
    property losses of over $700 million, which are savings that accrue to
    property owners and taxpayers. More difficult to count are the benefits
    associated with using the maps to guide development to less hazard-
    prone areas. Flood maps yield benefits at all levels of government,
    including reducing the needs for federal disaster assistance when
    people build elsewhere or build to minimize damage.
        ASFPM appreciates FEMA's extensive efforts to develop a mechanism
    to add funds to the mapping budget. However, the most equitable method
    is to recognize the full benefits of good maps by adding general funds.
    Prior to 1988, the maps were funded by general funds; since then, the
    costs have been borne almost entirely by fewer than 4 million
    policyholders.
      --AFPM endorses the Administration's request to augment the existing
            budget with funds from the Disaster Relief Fund for the
            specific purpose of verifying and updating maps in communities
            where flooding has occurred. Not only will this approach result
            in better maps, but it will lead to better decisions during the
            rebuilding phase of recovery.
      --ASFPM respectfully requests consideration of adding general funds
            to support FEMA's map modernization initiative. Flood maps are
            used to develop evacuation plans, to manage growth, to design
            resistant public works, and to plan parks and greenways.
            Because of the broad benefits of good flood maps, it is
            appropriate to add general funds to FEMA's budget for mapping.

                           REPETITIVE LOSS INITIATIVE
        The National Flood Insurance Program is self-supporting. Because
    the NFIP cannot build large reserves for the catastrophic loss years in
    the same manner that private insurance companies do, it does exercise
    the Treasury borrowing authority when losses exceed the anticipate
    average annual losses. And because borrowing is paid back from income
    received from just over 4 million policyholders, and because those same
    policyholders provide the funding to staff, manage, and administer the
    NFIP in addition to pay claims, the NFIP is not taxpayer supported.
    There is substantial evidence that the NFIP has reduced the burden of
    flood losses on the general taxpayer.
        When the NFIP is faced with rising costs, it typically takes a
    simple course of action: it raises the rates and everybody who buys a
    policy is impacted. What the NFIP does not have is a ready mechanism to
    contain costs. Because the nature and frequency of flooding can't be
    changed, other avenues of containing costs to achieve fiscal soundness
    must be made available to FEMA.
        To efficiently contain costs, the NFIP requires a well-funded
    initiative to offer financial assistance to communities and property
    owners to implement mitigation of properties that have received
    multiple flood insurance claims. Although focused on properties that
    have received multiple flood insurance claim payments, the benefits of
    this initiative will also accrue to the federal government to
    communities and to individual property owners.
        Mitigation measures to be implemented under a Repetitive Loss
    Initiative must not be limited to ``buyouts'' as suggested in the
    budget narrative, but must include the full range of feasible and cost
    effective measures, including buyouts, elevation-in-place, retrofit
    floodproofing, and relocation. An effective cost-containment initiative
    will target only those properties that have received multiple claims
    that appear to be in excess of building value, and then only if it is
    determined that there is a cost-effective and feasible mitigation
    measure.
      --ASFPM supports the Administration's budget request for a Repetitive
            Loss Initiative, which includes a starting investment of $50
            million from the Disaster Relief Fund, with the clarification
            that the funds are to be used to support mitigation measures
            that are cost effective, technically feasible, and appropriate
            to the location (i.e., not solely for buyouts).

                          NATIONAL DAM SAFETY PROGRAM
        The National Dam Safety Program provides funding to states to
    inspect dams, to train staff, and to otherwise supplement state
    programs. It is an investment in public safety and an investment that
    reduces future disasters and disaster assistance. A good inspection
    program leads to better dam maintenance which in turn reduces the
    probability of damage or dam failure.
      --ASFPM supports the Administration's request for $5.9 million for
            dam safety.

                          ADDITIONAL STAFF POSITIONS.
        FEMA is a small agency with a large mission. When staff resources
    are taxed, especially when multiple disasters draw staff away from
    their normal office locations, support for States and local
    jurisdictions is diminished. The growth in program support needed to
    implement mitigation programs in both the pre-disaster and post-
    disaster periods is welcomed. But without additional staff, basic
    functions may suffer.
      --ASFPM supports the Administration's request for additional
            positions and funds for staff.
        For information about ASFPM (www.floods.org) and this testimony,
    contact Larry Larson, Executive Director, at (608) 274-0123,
    larry@flood.org
                                     ______

           Prepared Statement of The United Negro College Fund (UNCF)

        Mr. Chairman and Members of the Subcommittee. My name is William H.
    Gray, III and I am President and Chief Executive Officer of the United
    Negro College Fund (UNCF). I thank you for the opportunity to bring
    UNCF's fiscal year 2001 recommendations for higher education programs
    at several departments and agencies before you.
        UNCF is America's oldest and most successful black higher education
    assistance organization, representing 39 private, four-year
    historically black colleges and universities with either independent or
    religious affiliations. UNCF has been committed to increasing and
    improving access to college for African Americans since 1944. The
    organization remains steadfast in its commitment to enroll, nurture,
    and graduate students who often do not have the social and educational
    advantages of other college bound populations.
        Since its inception, the fundamental mission of UNCF has been to
    raise critical operating funds for member institutions and their
    students, faculty, and staff. Mr. Chairman, I am proud to say that over
    the years, this mission has broadened to include over 450 successful
    scholarship programs, internships, research and study abroad
    opportunities for all historically black colleges and universities
    (HBCUs), Hispanic-serving institutions (HSIs), Tribally-controlled
    Colleges, and majority institutions. We also provide technical
    assistance to our trustee programs such as the fiscal and strategic
    technical assistance program (FASTAP) and faculty training, for
    institutions both domestic and abroad.
        UNCF is committed to educating tomorrow's workforce. America's
    markets are growing more diverse, and demographic trends indicate that
    early in the 21st Century, African Americans and other racial and
    ethnic minority groups will constitute a major part of the workforce.
        The more than 55,000 students enrolled at UNCF institutions are
    from diverse backgrounds. Our schools mirror the mosaic that is
    America; we are African American, White, Hispanic, Asian, and Native
    American. While our student body consists of varied economic
    backgrounds, approximately 34 percent of all UNCF students come from
    families with incomes below $25,000 (compared with 17 percent of
    students attending four years colleges nationwide). Approximately 90
    percent of UNCF students require some form of financial assistance.
    Forty percent are the first in their families to attend college.
        In spite of these challenges, UNCF students and members
    institutions have accomplished much. They are noted for their
    consistent standards of excellence and outstanding achievements. HBCUs
    are the major source of African American college graduates and black
    professionals in America. In fact, 16 Members of Congress can be
    counted as alumni of HBCUs. HBCUs contribute significantly to the
    production of African American baccalaureate degree holders in the
    sciences. HBCUs also graduate the most African American doctoral degree
    recipients. In addition, more than 50 percent of the nation's African
    American public school teachers and 70 percent of African American
    dentists and physicians earned degrees at HBCUs. These are but some of
    the extraordinary roles HBCUs have played in educating minority
    Americans.
        Despite these remarkable contributions to preparing blacks and
    other minorities for professional careers--especially the noteworthy
    production of scientists, mathematicians and engineers--HBCUs receive
    negligible levels of federal assistance from federally supported
    science, mathematics, engineering, and technology (SMET) programs.
    Initiatives that encourage and nurture the professional development of
    students in these fields, while demonstrably successful, receive
    limited funding and have not grown in any meaningful way in the last
    decade. Many of these efforts are small so that the lack of fiscal and
    other support impedes their ability to expand and succeed.
        Similarly, HBCU institutions have inadequate amounts of science and
    engineering research space compared to other research-performing
    institutions. Existing research space in many instances requires either
    major renovation or replacement. These deficits limit the opportunities
    for faculty to conduct cutting-edge research and remain competitive
    within their respective disciplines. Lack of adequate support and a
    national commitment supporting these institutions threatens the
    viability of HBCUs as the leading producer of African American
    scientists. Furthermore, the nation is jeopardizing a longstanding and
    evermore essential pipeline of science, mathematics, engineering, and
    technology professionals.
        Mr. Chairman and Members of the Subcommittee, the impressive
    achievements that I noted earlier have an even greater significance at
    UNCF institutions in that all but three of our member institutions are
    baccalaureate degree-granting institutions. Unfortunately, the majority
    of federal dollars allocated to these areas are targeted to majority
    research-performing institutions. Consequently, our schools are
    hampered early on in their ability to qualify and compete for funds--
    even though we contribute so much.
        This is borne out by the following facts--thirteen or one-third of
    UNCF member institutions had active NSF awards that were ongoing or
    began in fiscal year 1999. While this figure seems fairly positive in
    terms of overall participation, when you look closely at the actual
    award levels for individual institutions, the grants are often very
    small, given that they are multiple year awards. There are one or two
    UNCF schools that fare better in the NSF awards process but again these
    institutions are the few that grant terminal degrees. The situation is
    similar at NASA, where in fiscal year 1999, awards to HBCUs by that
    agency totaled only 7 percent of the total awards to all institutions
    of higher education--a figure of $52 million compared to $772.6
    million.
        For these reasons, UNCF strongly recommends that programs at NSF
    and NASA, targeting broadened participation for underrepresented
    minority SMET students and making resources available to upgrade the
    research and education capabilities of HBCUs, be increased
    dramatically. This includes the Louis Stokes Alliance for Minority
    Participation program ($31 million); the HBCU Undergraduate Program
    ($20 million), the Alliance for Graduate Education ($17.5 million); and
    the Centers for Excellence in Science and Technology (CREST) Program at
    NSF ($10 million). At NASA, we support increased funding for the
    Minority University Research and Education Program ($82 million). All
    of these initiatives have remained level funded for the most part over
    the last five years. While we have specified these particular programs,
    we hope that the subcommittee would focus throughout these agencies to
    identify other avenues for expanding opportunities for collaborations
    with HBCUs to participate in the federal SMET enterprise.
        UNCF member institutions also benefit from programs at the
    Department of Housing and Urban Development, specifically the HBCU
    Community Development Grant program administered by the Office of
    Community Planning and Development. Because of our historic mission,
    UNCF schools are geographically located in some of the most underserved
    and economically disadvantaged neighborhoods. Our campuses, in fact,
    may be the greatest assets in the area. As such, by tapping into our
    skills, programs like the HBCU Community Development Grant allow
    institutions of higher education to work in partnership with our
    neighbors and local entities to revitalize neighborhoods near our
    campuses.
        Take for example the program at Oakwood College in Huntsville,
    Alabama, which Dr. Delbert Baker, president, testified about before the
    House VA-HUD and Independent Agencies Appropriations Subcommittee. The
    fiscal year 2000 grant from HUD allows Oakwood to assist in the
    elimination of blighted homes in target areas in two communities
    surrounding the school. In addition to rehabilitating substandard
    owner-occupied homes in partnership with a local community development
    corporation, the college is expanding adult education opportunities by
    creating a second center for adult learning, and continuing and
    expanding an after school tutorial program for school aged children in
    the target area. Oakwood's community development grant is just one such
    example of how HBCUs play an essential role in revitalization of
    distressed neighborhoods near our campuses.
        The relationship between UNCF/HBCU institutions and their
    surrounding communities has long been a prototype for developing
    stronger communities and bettering lives for residents. We have been
    able to facilitate collaborations and spin-offs with other institutions
    and agencies because of these federal funds--all to the benefit of the
    community. While some of our schools have been fortunate to receive
    funding in this and previous fiscal years, many others have not
    benefited, due to insufficient funding. In fact, this program has
    received level funding for the past two years; in its ten-year history
    it has increased from $4.5 million in fiscal year 1991 to $10 million
    this year, after remaining stagnant for most of those years. With many
    HBCUs located in HUD empowerment or enterprise zones, imagine how much
    more could be done if funding was increased by $2 million to $12
    million as UNCF is recommending to award more than the current 20
    grants! We urge the committee to increase the fiscal year 2001 funding
    for this initiative.
        Mr. Chairman, it is clear that UNCF member institutions leverage
    federal dollars to the maximum potential. Even though we have smaller
    endowments and a greater percentage of students needing financial aid,
    UNCF institutions capitalize on our federal partnerships in
    extraordinary ways to address national concerns. Currently, like the
    rest of the nation, UNCF is facing the digital divide challenge, a
    problem that is greater in higher education than it is among the
    nation's households. All of the programs I have mentioned today help us
    address this challenge--even the HUD program at Oakwood which teaches
    computer literacy. For this reason, it is imperative that Congress show
    leadership by funding those proven programs that are designed to not
    only increase access and opportunity for African American students and
    the HBCUs they attend, but also those programs that have demonstrated a
    capacity to have considerable impact on this nation's future.
        Mr. Chairman, on behalf of the United Negro College Fund member
    institutions, I thank you for the opportunity to share these
    recommendations and look forward to working with you to ensure strong
    alliances between our schools and the Federal Government.
                                     ______

                          NATIONAL SCIENCE FOUNDATION

          Prepared Statement of the National Corn Growers Association

        The National Corn Growers Association (NCGA), representing 30,000
    corn growers in 48 states, appreciates the opportunity to discuss the
    importance of the National Science Foundation's Plant Genome
    Initiative. We are deeply indebted to the Chairman and the members of
    this Subcommittee for the leadership and vision that you have shown in
    championing the NSF Plant Genome Initiative.
        We, strongly, urge you to provide not less than $80 million for the
    NSF Plant Genome Initiative (PGI) and $25.5 million for the ``2010
    Project'', the functional genomics project for Arabidopsis thaliana.
        While many Federal programs are important to the nation's corn
    growers, we believe that the Plant Genome Initiative is the single most
    important appropriations issue for agriculture. As you know, funding
    for plant genomics has been the number one appropriations issue for the
    NCGA since 1996. In February of this year, the Corn Congress, comprised
    of growers from all over the country, reaffirmed this position.
        We believe that the future of the corn industry is written in
    corn's genetic code and that plant genomics will give us the
    fundamental information necessary to revolutionize American
    agriculture. Plant genomic research offers us the greatest potential to
    increase the value and demand for U.S. corn, thereby increasing grower
    income and reducing grower reliance on Federal farm programs.
        The Plant Genome Initiative (PGI) supports research that furthers
    our understanding of the structure, organization, and function of plant
    genomes, and accelerates utilization of new knowledge and innovative
    technologies toward a more complete understanding of basic biological
    processes in plants. This initiative will help scientists, geneticists,
    and plant breeders identify and use genes (from corn and other plants)
    that control important traits, such as nutritional value, stress
    tolerance, and resistance to pests.
        Advances in basic plant science that result from a vigorous plant
    genomics program will allow us to create new hybrids and varieties that
    will
      --Improve human and animal health;
      --Reduce medical costs due to more nutritious, healthier, food for
            individuals;
      --Reduce worldwide malnutrition through higher yielding and more
            nutritious crops;
      --Reduce environmental problems for crop and livestock growers;
      --Expand plant-based renewable resources for raw materials,
            industrial feedstocks, chemicals, and energy; and
      --Enable growers to get more income from the market, thereby reducing
            grower reliance on Federal farm programs.
        Already, plant research has been revolutionized and the plant
    research community has been rejuvenated by the PGI, even though it has
    been in existence for only a couple of years. The results from funded
    research are contributing to advances in biology beyond the world of
    plants, to biomedical research. One group of PGI awardees made an
    important scientific discovery about fundamental chromosomal
    organization and function.
        The sequencing of Arabidopsis thaliana will be completed before the
    end of this year, four years ahead of schedule due to the PGI. Once the
    sequencing is completed, a solid foundation will be available for the
    ``2010 Project'', the new systematic project to determine the functions
    of all the genes in Arabidopsis thaliana. The NCGA supports work in
    Arabidopsis thaliana as it will facilitate efforts to locate, and
    understand the function of, genes in all plants, including maize.
        The PGI has helped, also, to ensure that all public and private
    scientists and plant breeders have access to basic genetic information
    about plants. Approximately 450,000 Expressed Sequence Tags (ESTs) have
    been deposited into the public EST database for corn, tomato, soybean,
    and cotton by PGI projects. The projects have created massive plant
    genomics databases, tools, and resources that are available to the
    scientific community at large.
        A major breakthrough in plant genomics occurred on April 4, 2000,
    when Monsanto announced that it had completed a ``working draft''
    sequence of rice and that it would make the entire sequence available
    to the International Rice Genome Sequencing Project. As you know, with
    funding provided in the first year of the PGI, the NSF was directed to
    participate in the International rice sequencing effort. By providing
    significant funding for plant genomics research, the PGI spurred the
    rice effort. Without the PGI and the International rice effort, there
    would be no opportunity for public-private collaboration in plant
    genomics.
        The NCGA applauds the action of Monsanto to ensure that
    fundamental, genetic information about rice will be in the public
    domain and will be accessible to all scientists. The ``working draft''
    of rice provides a good base for significant advances in plant genomics
    research for all plants. The PGI, funded at a robust level, will
    encourage other public-private collaborations and increase the amount
    of fundamental genomic information in the public domain.
        While much has been accomplished by the NSF Plant Genome
    Initiative, much more remains to be done in the next few years. In a
    recently published report, the Interagency Working Group on Plant
    Genomes (IWG), estimated that $500 million, over three years (fiscal
    year 2000-2002) was needed for the National PGI. Funding must be
    increased substantially to meet this minimum need.
        We support the Administration's request for $25.5 million in
    funding for the ``2010 Project'' and the request for increased funding
    for Biocomplexity in the Environment. While the ``2010 Project'' may be
    considered a plant genome project, we believe that it is critical to
    increase funding for the base plant genome initiative, the PGI that is
    targeted to economically significant crops, such as corn.
        The NCGA was extremely disappointed that the Administration's
    budget proposed keeping the core plant genomics program, the NSF PGI,
    at the fiscal year 2000 level of $60 million. It is unfortunate that
    the Administration failed to follow the recommendations of its own
    Interagency Working Group and request funding for the NSF Plant Genome
    Initiative at a level that would allow us to achieve the IWG's $500
    million funding goal. We believe that a minimum of $80 million for the
    PGI in fiscal year 2001 is necessary for us to begin to address the
    research needs for plant genomics.
        The PGI is, critically, important to the nation's growers and
    consumers. While world population continues to expand and protein
    demand increases exponentially, there is an expectation of higher
    quality, safer, and more nutritious food. These accelerating demand
    pressures mean that existing resources of land, water, and nutrients
    must be used more effectively if the supply of food, feed, and fiber is
    to remain in balance with world needs. Plant genomics holds the key to
    our ability to meet these demands.
        We, strongly, urge you to provide, at least, $80 million for the
    NSF Plant Genome Initiative and $25.5 million for the ``2010 Project''.
    Funding for plant genomics is, truly, the most important appropriations
    issue for our nation's corn growers. Thank you for the opportunity to
    present our views.
                                     ______

              Prepared Statement of the American Chemical Society

                    FEDERAL RESEARCH AND THE BUDGET SURPLUS
        No investment the government makes generates a higher rate of
    return for the economy than research and development (R&D). In fact,
    economic experts maintain that today's unprecedented economic growth
    would not have been realized but for the substantial research
    investments by the public and private sectors over the past few
    decades. Looking ahead, the American Chemical Society (ACS) is
    concerned that constant dollar declines in federal support for basic
    research over the past decade, particularly in the physical sciences,
    have weakened the roots of innovation in all fields and put future
    economic growth at risk. In order to sustain our technological
    leadership and living standards, increased funding for basic research
    should be a top priority for use of the non-Social Security budget
    surpluses. As a framework for increasing R&D funding, ACS supports
    doubling federal spending on research within a decade, as well as
    balanced funding among different areas of science.

                           NSF BUDGET RECOMMENDATIONS
        ACS strongly supports the fiscal year 2001 budget request of $4.6
    billion for the National Science Foundation (NSF), which would be a 17
    percent ($675 million) increase over last year's appropriation. As the
    lead source of federal funding for basic research at colleges and
    universities (excluding medical research), NSF supports research and
    education programs that are crucial to technological advances in the
    private sector and for training the next generation of scientists and
    engineers. The requested funding would allow NSF to increase its impact
    on science and mathematics education, more fully meet the enormous
    opportunities in core disciplinary research areas, and enhance
    multidisciplinary research in areas identified as national needs (e.g.
    nanotechnology and biocomplexity research).

                           CORE DISCIPLINARY RESEARCH
        ACS strongly supports the 19-percent increase requested for NSF
    research activities and wholeheartedly endorses the administration's
    proposal to dedicate most of the increase to core research. In fact, a
    strong increase for NSF should form the basis of a bipartisan effort to
    revitalize the critical federal investment in basic research that
    extends the frontiers of science. Although long-term research in the
    core science disciplines has been the mainstay of our research
    enterprise for decades, higher profile, initiative-based R&D has
    overshadowed its importance in recent years. Unless basic knowledge in
    chemistry, physics, mathematics and other core areas--the roots of
    technological innovation--is advanced, complex multidisciplinary R&D in
    areas like information technology and biocomplexity will suffer. As the
    only agency charged with maintaining progress in science and
    engineering across all disciplines, NSF is in the best position to
    invigorate this critical research.

                              FOCUSED INITIATIVES
        Nanoscale Science and Engineering.--The Society believes that the
    $216 million NSF has requested for nanoscale science and engineering is
    an important and timely investment. Nanotechnology is a cutting-edge
    field that holds enormous potential for improving the understanding and
    control of individual atoms and molecules. This interdisciplinary
    research, which involves some of the most modem chemistry being
    conducted at universities and national laboratories, could make
    possible the building of devices that are incomprehensibly small--on
    the scale of human cells, which could revolutionize areas ranging from
    manufacturing and advanced materials to medicine and the environment.
    NSF research will support biosystems at the nanoscale, novel phenomena
    and quantum control, and nanoscale processes in the environment.
    Emphasis should be placed on long-term research in this multiagency
    initiative and strong coordination among NSF, which plays the lead
    federal role, and other agencies should be encouraged.
        Biocomplexity in the Environment.--ACS applauds NSF's growing
    commitment to developing sound science for the environment as
    recommended by the National Science Board. The $136 million requested
    for the Biocomplexity in the Environment initiative represents an
    investment on a scale that can effectively begin to meet the needs in
    this area. Understanding the powerful interactions that occur within
    complex biological systems and between these systems and the Earth's
    environment will lead to a better understanding of natural processes
    and the effects of human behavior on the natural world. The Society is
    concerned, however, that too narrow a focus has been given thus far to
    the truly interdisciplinary challenge envisioned by NSF in this area.
    In addition to the clear contributions of the geological and biological
    sciences, ACS recommends that the focus of the program be expanded to
    fully capture the potential contributions of the physical sciences for
    identifying and crafting solutions to environmental challenges.

                            GRANT SIZE AND DURATION
        NSF traditionally receives high marks for efficiency--less than 4
    percent of the agency's budget is spent on administration and
    management. Also, NSF awards funds to researchers only after a rigorous
    merit-review process using expert peers. While NSF funds 20,000 awards
    each year, it is forced to turn away twice as many, including thousands
    from first-rate but less established scientists and engineers. Not only
    will increased funding allow NSF to fund more outstanding proposals, it
    will allow NSF to increase the size and duration of its grants--a
    longstanding goal of the Foundation--without limiting the number of new
    awards.
        For 50 years, NSF's balanced research portfolio has improved our
    economy, environment, and way of life. The Foundation's quality
    investments in research have spawned advances such as lasers,
    environmental technologies, polymers, and Doppler radar, as well as
    entire new industries such as biotechnology and the Internet. NSF is an
    investment in the true sense of the word.
                                     ______

                   Prepared Statement of New York University

        On behalf of New York University, I appreciate the opportunity to
    speak in support of public investment in basic research and, in
    particular, in support of the National Science Foundation, the only
    Federal agency whose primary mission is the support of fundamental
    research.
        NSF this year marks its fiftieth anniversary--an opportune time to
    assess the contribution of university-based research to the national
    welfare and to prepare for the scientific and technological challenges
    ahead. In that regard, I applaud the 17.3 percent increase in NSF's
    budget (to $4.57 billion in fiscal year 2001) proposed by the President
    and urge Congress and this Committee to support an increase of at least
    that amount.
        At New York University, NSF funding has supported leading-edge
    research across a range of areas from quantum dynamics to molecular
    evolution to developmental genetics to theoretical particle physics. I
    would like today to underscore one area of research that NSF has
    indicated will be a priority in the coming decade and one in which NYU
    is well-positioned to make major contributions, biomedical genomics.

                              ADVANCES IN GENOMICS
        The genome is the recipe or blueprint for life. During the last
    decade, the unraveling of the genetic code has opened up a vast range
    of new opportunities for evolutionary and developmental biologists,
    neurobiologists and chemists to understand what genes are, what they
    do, and how they do it. Genomics is revolutionizing biology and is
    dramatically changing the way we characterize and address biological
    questions. As a field which straddles biology, chemistry, and
    mathematics, genomics is growing extraordinarily rapidly and
    transforming these disciplines, as well as the social and behavioral
    sciences.
        In its first stage, the revolution in genomics was characterized by
    a period of intensive development of techniques to analyze DNA, first
    in simple models, like yeast, bacteria, the worm, and the fruitfly,
    then in the mouse, and now in humans. The structure and function of
    genes are similar in these models, making comparisons useful. The
    second phase was characterized by the use of these tools to address
    whatever biological question was most easily approached, given the
    state of technique development. It may be described as structural
    genomics--which comprises the mapping and sequencing of genomes and is
    mainly driven by technology. The scientific community is now poised to
    enter the third phase of the genomics revolution, in which
    investigators already established in other fields (immunology,
    genetics, neurobiology, etc.) pursue investigations that are driven by
    hypothesis rather than technique. The third phase is generally termed
    functional genomics and uses the map and sequence information already
    collected or to be collected to infer the function of genes. Functional
    genomics integrates basic and clinical science, with the ultimate goal
    of exploiting genomics approaches to address the relationship between
    the genes identified in model organisms and those responsible for human
    disease states.
        At New York University, we think that it is especially important to
    develop the field of comparative functional genomics. This comparative
    approach looks for the occurrence of the same genes in different
    species that share certain structures or functions, and provides a
    powerful method for understanding the function of particular genes.
    Comparative functional genomics uses two primary modes of analysis: (1)
    identifying what has been conserved over long evolutionary distances,
    and (2) determining crucial differences that distinguish two closely
    related species. This focus has particular relevance to molecular
    medicine as it provides the key to understanding the genetic basis of
    disease states that are dependent on numerous genes, and unraveling the
    complex regulatory networks for crucial biological functions.

                        STRENGTHS AT NEW YORK UNIVERSITY
        Studies in comparative functional genomics necessarily synergize
    medically related research programs, such as those at the NYU School of
    Medicine and its affiliated Mount Sinai School of Medicine, with basic
    science research programs such as those at NYU's Faculty of Arts and
    Science, and computational investigators, such as those at NYU's
    Courant Institute of Mathematical Sciences who are actively engaged in
    bioinformatics research.
        In the basic sciences, NYU has substantial strengths in areas
    important to genomics, including evolutionary biology, developmental
    biology, and neurobiology, and extends this expertise through active
    collaboration with premier metropolitan area institutions, including
    the New York Botanical Garden and the American Museum of Natural
    History. NYU Medical School has outstanding programs in Developmental
    Genetics, Molecular Neurobiology, Pathogenesis and Structural Biology.
    And Mount Sinai Medical School has an internationally acclaimed program
    in Human Genetics and has begun to use genomics approaches to identify
    the origins of human genetic disorders.
        New York University and other major research institutions are thus
    poised to make a distinctive contribution to the next phase of genomics
    research. NYU has established frameworks for interdisciplinary and
    interschool collaboration, strengths in biological, neurobiological,
    and computational sciences, and standing in the international
    scientific community. The nation's largest private university, with 13
    schools and over 49,000 students, NYU is a leading center of
    scholarship, teaching and research. It is one of 29 private
    institutions constituting the distinguished Association of American
    Universities, and is consistently among the top U.S. universities in
    funds received from foundations and federal sources.
        NYU encompasses a pre-eminent faculty and generates substantial
    external funding from federal and state agencies as well as the private
    sector. These investigations have attracted millions of federal dollars
    from the NIH, NSF, ONR, and EPA. In addition, NYU has received major
    funding from the most prestigious private foundations supporting the
    sciences, including the Howard Hughes Medical Institute, the W. M. Keck
    Foundation, the Alfred M. Sloan Foundation, and the Beatrice and Samuel
    A. Seaver Foundation. Faculty hmembers ave, as individuals, won
    prestigious awards, including HHMI Investigator, NSF Presidential
    Faculty Fellow, NIH Merit Awardee, McKnight Foundation Scholar in
    Neuroscience, and MacArthur ``Genius'' Fellow.

                  RESEARCH APPLICATIONS AND NATIONAL BENEFITS
        Concentrated studies in comparative functional genomics can be a
    major resource for the research and development activities of academic
    organizations and commercial firms; can provide a strong framework for
    direct and indirect economic development in vital, high-tech
    industries; and can offer benefits to our citizens from improved health
    care, and technology development.
    Economic development
        Commercial applications that strengthen existing industries and
    attract new ones.--In a familiar dynamic of university-centered
    economic growth, industry draws on the faculty's entrepreneurial
    energies, their expertise in training the personnel needed to staff
    high-technology firms, and the fundamental scientific research that can
    translate into practical applications. High-tech firms spring up near a
    research university and, in turn, attract or spin off additional high-
    tech firms in the same or related fields. The interaction of scientists
    across firms makes the spread of information quicker and the
    development of projects more rapid. Initial firms and newer firms share
    a growing pool of highly trained personnel. The expansion of the
    skilled labor pool makes hiring easier; the existence of the pool
    attracts still more firms. Once a core of high-tech industries locates
    in an area, venture capitalists identify that area as promising. The
    flow of capital--a key ingredient for high-technology growth--
    increases. Once the process of agglomeration begins, it can be expected
    to grow on itself and become self-reinforcing.
        R & D investment in genomics is already energizing bio-technology,
    pharmaceutical, biomedicine, agbiotech, computer software, and
    engineering enterprises. We expect that as the research base expands,
    we will see a generation of new commercializable technologies, some of
    which may lead to genome and pharmacological genome companies.
        Job growth as a spin-off from research and development funding for
    genomics.--Academic R&D, although itself not directed towards specific
    commercial application, does provide the focus for attracting industry
    and serving as a base for commercial spin-offs, as has been so
    successfully demonstrated in the San Francisco Bay and Boston areas. A
    conservative approximation that uses state employment multipliers
    maintained by the U. S. Commerce Department's Bureau of Economic
    Analysis points to immediate employment impacts of academic R&D. The
    BEA calculates that each $1 million in R&D grants supports roughly 34.5
    full and part time jobs \1\ directly within the university and
    indirectly outside the university as the university's expenditures
    ripple through the local and state economy.
    ---------------------------------------------------------------------------
        \1\ The multiplier is for 1995 and is based on 1987 benchmark
    input-output accounts for the U.S. economy and 1994 regional data,
    adjusted for 1995 inflation. See the latest (March 1997) edition of the
    BEA publication Regional Multipliers: A User Handbook for the Regional
    Input-Output Modeling System (RIMS II). These multipliers are
    frequently used in studies of the economic impacts of individual
    universities and colleges.
    ---------------------------------------------------------------------------
    Applications for environment issues
        Improved understanding of the human genome is a basic link in the
    chain leading from scientific discovery to a better understanding of
    human health to effective regulatory and management actions in the
    realm of environmental protection. Research into genetic development
    and function can help to explain how environmental factors alter or
    influence these processes.
    Advances in biomedical and other research fields
        Genomics is a field which is particularly fertile in that the
    understanding of the detailed structure of the human genome is central
    to a variety of applications: cell biology, embryology, developmental
    biology, study of cancers and many other heritable diseases,
    immunology, endocrinology, neurology, and population genetics. Further,
    genomics techniques can address many research problems that overlap
    with computer vision, robotics, and combinatorial problems; genomics
    propels cross--disciplinary approaches for merging the biological
    sciences with new technologies in informatics. In addition, it is
    enabling researchers in developmental biology and molecular genetics to
    investigate genetic diversity, evolution, and development. Indeed,
    genomics brings together laboratory scientists with formerly unrelated
    disciplines, and can stimulate expansion in key directions in
    informatics, genetics, physical chemistry, evolutionary studies,
    diagnostic tools, and machine vision. Investment in facilities where
    computer scientists, physical chemists, and geneticists can readily
    interact with each other is essential for the development of this
    field.
    Biomedical applications for national health needs
        An investment in genomics research will have a heavy payoff in the
    nation's well-being--economic and otherwise--by advancing the frontiers
    of knowledge, finding new cures and treatments for diseases, and
    helping to develop new diagnostic technologies. Clinical applications
    hold enormous promise to revolutionize medicine and our understanding
    of both normal development and disease. Genomics research may lead to
    lifesaving instruments or procedures for diagnosis, prevention, and
    cure of diseases and disorders such as diabetes, heart disease, cancer
    and infectious disease. In particular, genomics science has the
    potential to revolutionize the development of mass screening tests for
    genetic disorders, ultimately making it possible to identify the
    hereditary contribution to common diseases, predict individual
    responses to drug intervention, and design drugs that are customized
    for individual use.
        Investment in genomic science is a strategic and efficient vehicle
    for advancing fundamental studies in a wide variety of scientific
    fields, facilitating biomedical applications that can greatly enhance
    the public welfare; and energizing existing and new industries. The
    commitment of this committee to support the National Science Foundation
    and its genomic initiative is greatly appreciated.
                                     ______

            Prepared Statement of the American Psychological Society

        Mr. Chairman, Members of the Committee: Thank you for this
    opportunity to present the views of the American Psychological Society
    (APS) on the fiscal year 2001 appropriations of the National Science
    Foundation (NSF). I am Alan Kraut, Executive Director of APS. We are a
    15,000-member organization of scientists and academics located
    primarily in universities and colleges across the country. Many members
    of the American Psychological Society have been supported by NSF, and
    much basic research in our field simply could not exist without NSF
    funding.
        I want to begin by briefly describing the focus of basic research
    in psychological science. We know that human potential is a resource;
    understanding the human mind and behavior is crucial to maximizing
    human potential. In order to do that, we need to know in scientific
    terms how people interact with each other and with their environment--
    how we learn, remember, and express ourselves as individuals and in
    groups. We need to know the factors that influence and modify these
    behaviors. APS members include scientists who conduct basic research in
    brain-based processes such as learning and memory, and the mechanisms
    of visual and audio perception. Others study decision making and
    judgement; mathematical reasoning; language development; the
    developmental origins of behavior; and the impact of individual,
    environmental and social factors on behavior. This basic psychological
    research conducted by APS members has implications for a wide range of
    applications, from the design of airplane cockpit control panels, to
    how to teach math to children; to how humans can learn using
    technology; to the development of more effective hearing aids; to
    increasing workforce productivity; and to the amelioration of social
    problems such as prejudice or violence.
        In its budget request to you this year, NSF cited the achievements
    of two of APS's most distinguished members, psychologists William K.
    Estes and Roger N. Shepard, both of whom recently have won the National
    Medal of Honor, and both of whom have been longtime NSF grantees. In
    fact, a psychologist has been awarded our nation's highest scientific
    honor almost every year that it has been given. In highlighting the
    work of these two individuals--Estes for his fundamental theories of
    learning and mathematical modeling, and Shepard for his research into
    the nature of human mental processes--NSF is paying tribute to the
    entire field that these two individuals exemplify.
        Let me summarize our recommendations and requests for the fiscal
    year 2001 appropriations for the National Science Foundation.
        The American Psychological Society strongly urges the committee to:
      --Appropriate the $4.572 billion requested for the National Science
            Foundation in fiscal year 2001 and endorsed by the Coalition
            for National Science Funding.
      --Continue the Committee's history of support for behavioral and
            social science research at NSF by fully funding the requested
            $29 million increase for NSF's Social, Behavioral, and Economic
            Sciences Directorate in fiscal year 2001.
      --Preserve the $13.9 million increase requested for Behavioral and
            Cognitive Sciences Division.
      --Encourage the development of a small grants mechanism at NSF to
            support young investigators in the behavioral and social
            sciences.
      --Support NSF's efforts to increase the length and duration of NSF
            grants, and ensure that this policy is extended to all areas of
            science equally.
      --Encourage NSF's efforts to increase public awareness of science,
            and urge NSF to incorporate behavioral and social science in
            those efforts.
        In the remainder of my testimony, I will discuss these
    recommendations in greater detail.
        As a member of the Coalition for National Science Funding, we join
    our scientific colleagues in recommending full funding of the fiscal
    year 2001 budget request of $4.572 billion for NSF. This year marks the
    50th anniversary of the National Science Foundation. During that time,
    as the nation's premiere basic science agency, NSF produced the
    fundamental knowledge and discoveries that have fueled much of the
    scientific and technological advances of recent years and that has been
    partially responsible for the economic boon we are now in. In addition,
    NSF plays a crucial role in maintaining the human capital and
    scientific infrastructure necessary to ensure the continued
    productivity of our scientific enterprise. In the past several years,
    NSF's budget has been relatively flat, particularly compared to
    increases seen in other federal science programs. The increase proposed
    for fiscal year 2001 is a sizable first step in offsetting that
    relative neglect.
        The importance of basic science has been underscored by your
    colleagues in the House. It started with the House Budget Committee,
    which approved a significant increase in the general science budget
    category along with a very strongly worded statement in support of NSF.
    Citing NSF's central role in the nation's scientific and technological
    advances, and noting that basic research is a particular responsibility
    of the federal government, the committee (and later the full House)
    expressed a strong ``Sense of the Congress'' commitment to NSF:
        It is the sense of the Congress that the function 250 (Basic
    Science) levels assume an amount of funding which ensures that the
    National Science Foundation is a priority in the resolution;
    recognizing the National Science Foundation's critical role in funding
    basic research, which leads to the innovations that assure the Nation's
    economic future, and in cultivating America's intellectual
    infrastructure. [H. Con. Res. 290.RFS Sec. 23]
        This statement was retained in the bill passed by the full House
    and referred to the Senate in late March, plus the final bill increased
    the committee mark for the Function 250 category by $500 million
    expressly for basic research (bringing the total for that category to
    $20.3 billion, $1 billion over the previous year). Even within the
    constraints of the budget process, the House has demonstrated a clear
    appreciation of the importance of increasing basic science. We believe
    this appreciation is shared by the Senate, and we urge the Committee to
    implement this commitment in the fiscal year 2001 appropriations for
    NSF.
        Turning now to NSF's behavioral and social science research
    programs, we are extremely encouraged by the budget request for these
    areas. NSF's Social, Behavioral and Economic Sciences (SBE) Directorate
    is slated for a $29 million increase, which would bring the directorate
    to a total of $175 million.
        This Committee has a history of strong support for behavioral and
    social science research at NSF dating back several years. You were
    instrumental in the establishment of a separate directorate for these
    sciences at NSF, and later, in the establishment and funding of NSF's
    Human Capital Initiative, a cross-disciplinary research agenda linking
    research in the behavioral and social sciences to issues of broad
    national concern, such as literacy, productivity, aging, violence, and
    health. We ask that you continue this record of support in fiscal year
    2001. The SBE directorate is a primary source of federal support for
    fundamental research on social, cognitive, psychological and economic
    behavior as well as for research on the intellectual and social
    contexts that govern the development and use of science and technology.
    The fiscal year 2001 request would give a much-needed boost to basic
    behavioral and social science research in a number of exciting areas.
    The field is more than ready to absorb these increases.
        Within SBE, the Behavioral and Cognitive Sciences (BCS) Division
    would receive an increase of $13.9 million, which would bring BCS to
    $59.3 million. While not a large amount of money, the requested
    increase would allow NSF to support an important initiative in
    cognitive neuroscience. This initiative, which spans programs in human
    cognition, child development, social psychology, and linguistics,
    involves basic science aimed at understanding the human capacity for
    thought, language, and learning. Research in these areas will increase
    our understanding of learning and memory, and provide the underpinnings
    for applications as diverse as teaching children to read or developing
    a computer that can ``talk.'' Understanding how children and adults
    learn, how the social and physical environment interacts with learning,
    how motivation and personal experience guide the capacity to learn, and
    how best to prepare our nation's citizens for the future workplace
    requires a solid foundation of basic research in the behavioral and
    cognitive sciences.
        The fiscal year 2001 budget request also supports the role of
    behavioral and social science research in NSF's crosscutting
    initiatives, including initiatives in information technologies research
    and in research on the 21st century workforce. In the area of
    information technologies, $6 million of the SBE budget request will be
    used to harness the power of the Internet for research, by testing
    potential new Internet-based research techniques and using the Internet
    to expand science's capacities for data-sharing, simulation, and
    computation. In the workforce initiative, SBE will provide $3 million
    for fundamental research on science and math learning, human-computer
    interaction, and encouraging diversity in the workforce.
        Turning now to issues of training, we believe strongly that NSF's
    expansion of its behavioral and social science research programs must
    also include an increase in its support for young investigators in
    these areas. Ensuring an adequate future supply of investigators is
    essential to maintaining our momentum in the development of new
    knowledge. We ask that you encourage NSF to develop a program of small
    grants similar to the B/START \1\ mechanism in use at the National
    Institutes of Health which is successfully increasing the number of
    young behavioral scientists in many areas. These grants support young
    investigators at a critical juncture in their careers, and allows them
    to develop the pilot data they need to compete for grant awards.
    ---------------------------------------------------------------------------
        \1\ Behavioral Science Track Award for Rapid Transition.
    ---------------------------------------------------------------------------
        On a related matter, NSF has indicated that it is planning to
    increase the size and duration of its grant awards. This is especially
    important in the behavioral and social sciences, given their greater
    need for catching up in both size and duration compared with grants in
    other areas of science. We raised this issue with you and your House
    colleagues last year, and we again ask you to ensure that NSF extends
    this much-needed policy to all areas of science.
        Finally, NSF has made public understanding of science one of its
    science education priorities. We applaud NSF's leadership in this area,
    and we believe that the success of these efforts would be enhanced by
    focusing on examples from behavioral and social science research. These
    sciences have unique potential to increase science literacy because of
    their intrinsic relevance to daily life. That is, in addition to
    promoting understanding of questions in physics and math, NSF could
    also be promoting the scientific understanding of how memory takes
    place, or the value of certain organizational structures in industry.
    In a similar vein, I'm pleased to note that public understanding of
    psychological science is also a priority at the American Psychological
    Society. Next month we will publish the first issue of a new journal,
    Psychological Science in the Public Interest, which will present
    reports modeled after those generated by the National Research Council.
    Developed by panels of distinguished scientists, these reports focus on
    issues where psychological science can contribute to our understanding
    of topics of national importance. The first issue describes ways to
    improve diagnostic decision-making over a wide range of situations
    using techniques from psychological science. Scientists have developed
    rigorous statistical procedures that have enormous potential to
    increase the accuracy and usefulness of such diverse applications as
    detection of breast cancer; improving weather forecasts; analyzing
    structural flaws in airplanes; and possibly even the prediction of
    violence. Future issues of PSPI will address questions such as: Does
    classroom size matter? Do herbal remedies improve memory or
    intelligence? Does SAT coaching work? Do popular psychological tests
    such as the well-known Rorschach test or the MMPI really tell us
    anything? And to ensure that PSPI reports will reach the widest
    possible audience, we will be working with Scientific American to
    develop articles for the magazine that will be based on the studies
    first published in Psychological Science in the Public Interest.
        Mr. Chairman, as I noted earlier, this Committee has made an
    enormous difference in the vitality of the nation's basic behavioral
    and social science research activities through its support for NSF's
    programs in these areas. You and your colleagues in the House deserve
    much of the credit for enabling the explosion of new knowledge and
    discoveries in these areas. We are grateful for your continued support,
    and we ask that you fully fund NSF's budget request for fiscal year
    2001 in order to sustain this momentum.
        Thank you for the opportunity to submit this statement. I would be
    pleased to provide additional information on any of the issues raised.
                                     ______

       Prepared Statement of the American Chemical Society, the American
    Mathematical Society, the American Physical Society, and the Federation
                 of American Societies for Experimental Biology

        Mr. Chairman, Mr. Mollohan, members of the committee: Thank you for
    the opportunity to submit testimony to you during consideration of the
    fiscal year 2001 Appropriations budget for the National Science
    Foundation (NSF). To demonstrate the uniform support for this unique
    federal agency across the scientific community, the American Chemical
    Society, the American Mathematical Society, the American Physical
    Society and the Federation of American Societies for Experimental
    Biology offer a joint message in support of the valuable contributions
    made to the nation through NSF-supported science and the need to
    strengthen our investment in its programs to ensure continued economic
    returns and societal benefits.
        First, we greatly appreciate this subcommittee's work to increase
    funding for the National Science Foundation in recent years. We realize
    that this decision required the committee to make some hard choices. We
    are confident that they were wise ones.
        Investing in NSF produces high returns. We have seen first hand how
    NSF-sponsored research has helped spawn numerous technologies over its
    50-year history, including MRIs, lasers, and the Internet. Moreover,
    economists have concluded that today's unprecedented growth in the GDP
    with low unemployment and low inflation would have been impossible
    without the substantial investments in basic research made during the
    past decades.
        Yet, despite the high return on basic research investments--at
    least 30 percent by conservative economic estimates--industrial leaders
    tell us that our nation under-invests in fundamental science. These
    same leaders say that American industry, competing in the global market
    place, cannot make the necessary commitments to long-term research.
    That, they say, must be primarily a public responsibility. We concur.
    Without it, as former Presidential Science Advisor Dr. Allan Bromley
    noted in a Washington Post op-ed, the economy of tomorrow will falter
    and the projected federal surplus will cease to materialize.
        This year presents Congress with an extraordinary opportunity to
    address our under-investment in basic research. Our economy is strong,
    federal revenues remain high and we have begun to pay down the national
    debt. We believe the $4.6 billion request for NSF, a 17 percent
    increase over current levels, is long overdue. And we strongly urge the
    subcommittee to support such an increase. We also believe that this
    year's budget should be a down payment on a five-year growth plan that
    would double NSF funding by 2005.
        The basic research supported by the NSF generates new knowledge
    that underlies technological advances in the private sector. It helps
    train the next generation of scientists, engineers, and mathematicians,
    and it provides the foundation for R&D programs of key mission
    agencies, such as NIH, DOE, NASA and DOD. Finally, although the NSF
    accounts for only four percent of the total federal R&D budget, the
    Foundation is the prime source of funding for non-medical basic
    research at colleges and universities.
        This is a great time to be a scientist. New tools and technologies
    enable us to perform research more rapidly and more effectively than
    ever before. Startling and revolutionary discoveries greet us at an
    ever-accelerating rate. And electronic communications allow us to work
    directly with colleagues around the world as though they were just down
    the hall. Where would science and the new economy be today without the
    World-Wide-Web, a creation of physicists and engineers?
        That observation leads directly to one of our principal points--the
    interdependence of the sciences, one of the reasons why the four groups
    are presenting a single statement. Discoveries in physics affect
    biology; breakthroughs in materials research have a profound impact on
    medicine; new mathematical approaches enable all the sciences and
    engineering; and advances in biology propel chemistry and physics.
    Engineering and computer science provide critical tools upon which all
    of us depend in our research laboratories. We're all in this marvelous
    enterprise together.
        We all stand firmly behind the goal of funding a broad spectrum of
    disciplines. We strongly believe that we will only realize the
    tremendous potential for progress in biological and medical research if
    there is a steady flow of new insights from other scientific fields.
    While medicine has always drawn upon other fields, its reliance today
    on biology, physics, chemistry, computer science and engineering is
    greater than ever.
        Consider just one example--magnetic resonance imaging, or MRI, as
    it is often called. That diagnostic tool, one of the most important
    medical advances ever, came from physics, chemistry, computer science,
    and mathematics. Such non-invasive techniques have enabled physicians
    to make precise diagnoses of tumors and other disorders without
    performing costly, high-risk operations. Today, researchers are using
    even more powerful imaging tools to unlock the mysteries of the brain.
        NSF is the only federal agency whose sole mandate is to support
    basic research and science education across all disciplines. Its
    programmatic structure fosters interdisciplinary research, where much
    of the most exciting, cutting-edge science is occurring. These are two
    critical aspects to the past success and future potential of the
    Foundation.
        As we have stated, and as Federal Reserve Chairman Alan Greenspan
    has noted on several occasions recently, technology has been the prime
    driver of our nation's economy during its extraordinary growth in the
    1990's. Whether we will be able to sustain the momentum in the new
    millennium depends upon the wisdom we bring to our science investments
    today.
        In submitting his budget request to Congress in February, President
    Clinton highlighted the NSF's premier science research and education
    record with his call for an increase of nearly 20 percent in this 50th
    anniversary year. The President's request also calls for balancing the
    increase between focused research initiatives in nanoscience,
    information technology, biocomplexity and science education, on one
    hand, and the core research programs in the traditional disciplines, on
    the other. We urge you to adopt a similar approach in your subcommittee
    mark-up.
        Science has come a long way since 1950, when the NSF began its
    work. The boundaries between the traditional disciplines have become
    increasingly blurred, and the advances in the different disciplines
    have become increasingly interdependent. The scientific frontier no
    longer seems to fit conveniently into one discipline or another. For
    this reason we strongly support initiatives that cut across
    disciplines, such as those the President identified this year.
        There is little doubt that nanoscience--the thread upon which
    Moore's Law hangs--and information technology--the clear promoter of
    today's economy--will be at the cutting edge of research in the coming
    decades. So too, will our study of complex systems. And as our nation
    becomes ever more reliant on science and technology, we most hone our
    teaching methods in our schools and universities. Therefore, we
    strongly support the thrust of the initiatives identified in the
    presidential request.
        Still, we note that today's science frontier will be tomorrow's
    science establishment. There will always be a new frontier, but we do
    not know where it will be. Therefore, we strongly support the NSF's
    request for corresponding increases in the research programs in the
    core disciplines. Only by maintaining a wide base of scientific
    knowledge can we prepare ourselves to tackle the new frontiers,
    wherever they may appear.
        Balancing clearly identifiable near-term goals with less
    discernable, but no less important long-term needs, is a delicate task.
    Still, we believe that this committee has the ability to do just that.
    Mr. Chairman, we hope that our testimony today provides you and your
    committee members with some guidance and perspective from science
    practitioners who have joined together with a unified message.
        Mr. Chairman, as we have stressed, our nation benefits tremendously
    from research supported by the National Science Foundation. Fundamental
    knowledge gained from this research often forms the basis for the
    development of new technologies: in medicine, the environment,
    telecommunications, defense and agriculture, to name just a few areas.
    We will list a few specific examples.
        First, in medicine the NSF currently supports researchers who are
    developing software that will facilitate real-time magnetic resonance
    imaging (MRI) data processing so that three-dimensional brain images
    can be produced in minutes. Currently, because of the massive amounts
    of data generated from MRI brain scans, hours, even days, are needed to
    process the data.
        Another NSF-supported research group has developed a method to
    detect pre-cancerous cells. This method, applied in clinical trials,
    has demonstrated significantly improved efficacy in detection of early
    stage cervical cancer, as compared to existing technologies.
        In the environmental arena, discovering cheaper and more benign
    solvents to replace toxic volatile organic solvents for polymer
    synthesis is a critical problem. NSF-supported research has led to an
    environmentally benign method of polymer synthesis. Several chemical
    companies are supporting the development of products for commercial use
    based on this research.
        Furthermore, scientific discoveries often depend on complex
    mathematical modeling and computational algorithms. NSF supports
    research in mathematics that is related to many scientific problem
    areas. For example, to model combustion it is necessary to understand
    the detailed chemical mechanisms by which fuel and air react to form
    combustion products. Mathematicians and chemists have worked together
    on computational tools critical to the development of reaction
    mechanisms.
        These are just a few of the areas where NSF-supported research is
    making significant contributions to society. We conclude with just a
    few other observations about the nature of NSF's operation.
        The NSF is widely regarded as a sound steward of the taxpayer's
    investment. The NSF is one of the most efficient of all federal
    agencies, by almost any measure. It spends only about five percent of
    its budget on administration and management. Moreover, NSF awards funds
    to researchers only after a rigorous merit-review process using expert
    peers. Although NSF funds about 20,000 grants in any given year, it is
    forced to turn down approximately two-thirds of all new proposals each
    year.
        Not only will increased funding allow NSF to fund more outstanding
    proposals, it will allow NSF to increase the size and duration of its
    grants--a longstanding goal of the Foundation--without limiting the
    number of new awards. Reducing the time researchers spend writing
    proposals will free up more time for research and increase the overall
    return per dollar invested. Longer grants should also encourage more
    high-risk, and potentially high-payoff, research.
        Mr. Chairman, it's hard to overstate how central NSF is to basic
    scientific and engineering discoveries. NSF provides the cornerstone of
    new knowledge across scientific disciplines and, as such, plays a key
    role in maintaining the nation's scientific and economic leadership.
    Put most simply, NSF is a true investment in our nation's future. Thank
    you for your attention to this important opportunity within the federal
    investment to build toward the country's future.
                                     ______

        Prepared Statement of the National Council for Science and the
                                  Environment

                                    SUMMARY
        The National Council for Science and the Environment (formerly the
    Committee for the National Institute for the Environment) strongly
    supports the President's proposed 17.1 percent increase for the
    National Science Foundation (NSF) in 2001. We encourage the Committee
    to provide at least this level of funding, with a goal of a Foundation
    budget of $10 billion in 5 years.
        We emphasize the request for ``biocomplexity in the environment''
    and encourage the Committee to strongly support full and effective
    implementation of the National Science Board report, ``Environmental
    Science and Engineering for the 21st Century: The Role of the National
    Science Foundation,'' approved on February 2, 2000.

                                   TESTIMONY
        The National Council for Science and the Environment (NCSE) thanks
    the Committee for the opportunity to provide testimony on the National
    Science Foundation (NSF) and its proposed budget for fiscal year 2001.
        NCSE is a nonprofit, nonpartisan organization dedicated to
    improving the scientific basis of environmental decisionmaking. The
    work of NCSE is endorsed by more than 475 organizations ranging from
    the U.S. Chamber of Commerce to the Sierra Club, and including the
    National Association of Attorneys General, National Association of
    Counties and other governmental associations, more than 285 colleges
    and universities, and more than 80 scientific and professional
    societies. The President's budget and a new report from the National
    Science Board provide the first real opportunity for the significant
    expansion of NSF's activities to help to improve environmental
    decisionmaking.

                             OVERALL BUDGET REQUEST
        The science, engineering, education and related activities
    supported by NSF are essential to the future well-being and prosperity
    of the nation and deserve the highest priority by Congress. The long-
    term prosperity of the nation depends on a steady and growing
    commitment of this Committee to providing support for science.
        NCSE strongly encourages the Committee to support and fully fund,
    at a minimum, the President's proposed 17.1 percent increase for the
    National Science Foundation in 2001. We hope that this will be part of
    a bipartisan commitment to increase the total funding level of the NSF
    to $10 billion over the next 5 years--the goal of the Coalition for
    National Science Funding, of which NCSE is a member.

                        BIOCOMPLEXITY IN THE ENVIRONMENT
        NCSE is particularly supportive of the $136 million proposed for
    NSF's biocomplexity and the environment initiative. The time is indeed
    overdue for NSF to take a lead at providing a comprehensive scientific
    understanding of the environment.
        NSF is already the leading federal sponsor of peer-reviewed
    research regarding the environment, with a portfolio exceeding $600
    million. However, most of this is directed at scientific advances
    within particular disciplines. In contrast, an inter-disciplinary
    approach is needed to really understand the environment. The
    biocomplexity and the environment initiative is the first step towards
    a comprehensive understanding.
        The resolution of many important environmental and societal
    problems is lagging because there is an insufficient scientific basis.
    In most cases, because the problems are cross-disciplinary, an
    expansion of the biocomplexity approach at NSF could lead to
    significant progress in understanding. We highlight three such areas:
        Economics and ecology.--In the April 2000 issue of Bioscience (the
    journal of the American Institute of Biological Sciences) which
    highlights the integration of ecology and economics, Almo Farina
    writes,
        ``It now appears clear that the maintenance of a healthy society
    requires not only a healthy economy, but also a well-conserved natural
    system. Conversely, negative feedbacks will ultimately affect economic
    processes when this natural system is damaged.''
        Economists and ecologists are only now beginning to learn how to
    talk with one another. Significant methodological barriers inhibit
    collaboration. To date, NSF has no research program in ecological
    economics, but will be holding a preliminary workshop in June.
        Ecological effects of genetically modified organisms.--Despite
    tremendous advances in genetics and biotechnology, public concerns
    about ecological effects of genetically modified organisms are limiting
    commercial applications of biotechnology in agriculture. The alleged
    effects are the same ones that were raised when biotechnology began 15
    years ago. Yet, the research to address these claims has not been
    undertaken. A Natural Academy of Sciences report, released last week,
    called for additional research to examine ecological concerns related
    to agricultural biotechnology (Genetically Modified Pest-Protected
    Plants: Science and Regulation, April, 2000). A joint research program
    involving NSF, USDA, and EPA could do much to help decisionmakers and
    the public to understand what risks, if any, are posed by genetically
    modified organisms in an agricultural environment.
        Environmental causes of infectious diseases.--In the past decades,
    infectious diseases have made a comeback in the U.S. and other parts of
    the world. These include diseases once thought to be largely under
    control, such as malaria, and new diseases or diseases that have sprung
    up in new places including AIDS, hanta virus, dengue fever, and most
    recently West Nile virus. In most cases, environmental change has been
    implicated as a causative agent. In fiscal year 2000, NSF and the
    National Institutes of Health (NIH) are cooperating for the first time
    to solicit research proposals on ``ecology of infectious disease''.
    This program could be expanded greatly with benefits for all humanity.
        The present biocomplexity initiative (beginning with the $50
    million appropriated in fiscal year 2000) is an important beginning
    that can lead to investigations such as outlined above. The scientific
    community is ready to take advantage of such multi-disciplinary funding
    opportunities--NSF received more than 350 research proposals and more
    than 150 proposals for ``incubator grants'' in response to their fiscal
    year 2000 special competition on biocomplexity in the environment. This
    demonstrates the readiness of the scientific community to embrace this
    overdue new perspective on behalf of NSF. We strongly urge the
    Committee to be supportive of the biocomplexity in the environment
    initiative and provide the requested funding.
     national science board report on environmental science and engineering
        The National Council for Science and the Environment is the primary
    proponent of the effort to expand, improve and enhance the relevancy of
    the scientific efforts of the National Science Foundation regarding the
    environment. We believe that NSF as an independent, non-regulatory
    science funding agency can be the ideal source for credible scientific
    information about the environment.
        We greatly appreciate the past support of the Appropriations
    Committee for this effort, particularly language included in the fiscal
    year 1998 House-Senate Conference Report (105-297) which stated,
        ``Finally, the conferees encourage the National Science Foundation
    to study how it would establish and operate a National Institute for
    the Environment.''
        Ultimately, the National Science Board (NSB) responded by
    unanimously approving a report, ``Environmental Science and Engineering
    for the 21st Century: The Role of the National Science Foundation,'' in
    final form on February 2, 2000.
        The NSB report sets out a bold, ambitious set of recommendations
    that could transform NSF's role in support of science to improve
    environmental decisionmaking. The recommendations, if implemented
    effectively, have the potential to accomplish most of the objectives
    that NCSE and its supporters have worked for over the past decade.
        With respect to the NSB report, we would like to highlight the
    following points:
      --The NSB recommends that ``environmental research, education and
            scientific assessment should be one of the highest priorities
            for NSF'' with a significant increase of funding from the
            present $600 million to $1.6 billion annually, over 5 years.
      --The NSB recommends the development of ``an effective organizational
            approach that meets all the criteria required to ensure a well-
            integrated, high priority, high visibility, cohesive and
            sustained environmental portfolio within NSF''.
      --The NSB makes 10 recommendations in the areas of research,
            education, scientific assessments, infrastructure, information,
            and partnerships.
      --The NSB recommendations are consistent with the direction advocated
            by the Appropriations Committee and represent an expanded role
            and portfolio for NSF in environmental research, education,
            scientific assessments and information distribution. The
            recommendations of this report will need the support of
            Congress to become reality.
      --Because of this report and its adoption by the NSB, we have
            suspended our call for a National Institute for the Environment
            (NIE) in favor of the full and effective implementation of this
            report. To ensure that there is no misinterpretation of our
            support for NSF's proposed activities, we have changed our name
            from the Committee for the National Institute for the
            Environment to National Council for Science and the
            Environment.
      --These recommendations have strong support. Attached to our
            testimony is a copy of a letter to the Director of the Office
            and Management budget signed by the heads of nearly 180
            scientific, academic, business, government and environmental
            organizations including the U.S. Chamber of Commerce and the
            Sierra Club.
      --We respectfully request that this committee ensure that the
            recommendations become reality, beginning with supportive
            report language in the fiscal year 2001 appropriations bill, as
            well as full funding for the currently proposed activities.

                                   OVERSIGHT
        There will be the need for oversight, as well as funding from this
    committee, in order that the goals of the report be accomplished.
    Historically, not enough of NSF's science support has been directed
    towards preventing environmental problems. Additionally, the
    disciplinary structure of NSF is a barrier to accomplishment of the
    multi-disciplinary and interdisciplinary approach to science necessary
    to understand, prevent, and solve environmental problems. Also, NSF
    traditionally does little to ensure that its research results are
    transmitted to the members of the public who need scientific
    information such as state and local government representatives,
    businesses and community groups nor does it seek their advice in
    developing its environmental portfolio. The recommendations of this
    report, particularly both keystone recommendations, have the potential
    to overcome these drawbacks and lead to the credible science needed for
    informed decisions on environmental issues.
        With sufficient Congressional oversight and funding, the NSF effort
    can institutionalize the principles of sound science for the
    environment.
        We again encourage you to use the NSF appropriation bill as a way
    to express the Committee's support for the recommendations of the NSB.
        Thank you very much for your support of science to improve
    environmental decisionmaking.

     LETTER TO WHITE HOUSE OFFICE OF MANAGEMENT AND BUDGET URGES INCREASED
                   RESOURCES FOR NATIONAL SCIENCE FOUNDATION
                                                     November 17, 1999.
    Jacob Lew,
    Director, Office of Management and Budget,
    Executive Office of the President, Washington, DC.
        Dear Mr. Lew: As you prepare the President's budget submission for
    fiscal year 2001, we encourage you to provide a substantial increase
    for the National Science Foundation (NSF). This is necessary for many
    reasons, such as implementing the expanded portfolio of environmental
    science and engineering activities recommended by National Science
    Board in the recently approved interim report, ``Environmental Science
    and Engineering in the 21st Century: the role of the National Science
    Foundation.''
        The NSF is the nation's premier science funding agency that
    supports fundamental science and engineering. As such, it is
    responsible for much of the science that underlies the advances in
    knowledge and technology that have driven the economic growth of the
    past five decades and that allow the high standard of living that most
    Americans enjoy.
        Our quality of life depends upon our continued ability to use our
    natural resources to foster economic opportunity in an environmentally
    compatible and sustainable way. Scientific knowledge underpins this
    difficult balancing equation of economic and environmental progress.
    The NSF, as the nation's leading funder of peer-reviewed extramural
    science and engineering related to the environment (estimated by NSF at
    $600 million annually), is essential to the continued generation and
    use of this knowledge.
        The National Science Board (NSB) has identified environmental
    research, education, and assessment to be one of the highest priorities
    of NSF and called for a tripling of the NSF investment in this area
    (Keystone Recommendation (1) We hope that the President's budget for
    fiscal year 2001 will affirm this priority and provide a significant
    down payment on the funds needed.
        The NSB also recommends that NSF management ``develop an effective
    organizational approach that meets all of the criteria required to
    ensure a well-integrated, high priority, high visibility, cohesive and
    sustained environmental portfolio'' (Keystone Recommendation (2) We
    encourage you, in your management role to ensure that such an effective
    organizational approach is implemented at NSF. Among the criteria
    listed for an effective organizational approach was ``budgetary
    authority for enabling integration across research, education, and
    scientific assessment, and across all areas of inquiry.'' It would seem
    that this would require, at a minimum, a specific line in the NSF
    budget identified as an ``integrated environment initiative.'' A budget
    proposal that simply calls for new funds to be distributed to existing
    directorates would seem to us to fall well short of what is needed and
    what is called for by the NSB.
        The proposed increase in NSF funding for environmental activities
    must not come at the expense of other worthy NSF programs. Instead, it
    should be part of an ambitious plan to double the nation's investment
    in science and education that has been proposed by this and previous
    administrations and has recently been endorsed in legislation passed by
    the Senate.
        If the Administration proposes a significant budget increase for
    NSF, featuring a new budget line for implementing the new environmental
    report from the NSB, then we, a diverse coalition of organizations that
    generate and use science for environmental decision making, will help
    make the case to the Congress and the American public as to why this
    budget proposal is necessary.
                Sincerely,
                        Peter D. Saundry, Ph.D., Executive Director,
                                Committee for the National Institute for
                                the Environment; Timothy Fortier, Vice
                                President, Business and Industry
                                Association of New Hampshire; Joan
                                Verplanck, President, New Jersey Chamber of
                                Commerce; Richard C. Bartlett, Vice
                                Chairman, Mary Kay, Inc.; Randy Johnson,
                                Chair, Hennepin County Board of
                                Commissioners; Bill Kovacs, Vice President
                                for Environment, U.S. Chamber of Commerce;
                                Patricia D. Parr, President, Association of
                                Southeastern Biologists; Brian M. Boom,
                                President, Association of Systematics
                                Collections; Kimberly A. Gray, Past
                                President, Association of Env. Engineering
                                and Science Professors; Lewis S. W.
                                Crampton, President, Chicago Academy of
                                Sciences; Peter J. Barry, Chair, Council on
                                Food, Agricultural, and Resource Economics;
                                Martin E. Feder, President, Society for
                                Integrative and Comparative Biology.
                        William Wayt Thomas, Executive Director,
                                Organization for Flora Neotropica; Assad I.
                                Panah, President, Pennsylvania Academy of
                                Science; Edna S. Kaneshiro, President,
                                Society of Protozoologists; John C.
                                Topping, Jr., President, Climate Institute;
                                James D. Lazell, President, The
                                Conservation Agency; Peter H. Bachman,
                                Executive Director, Minnesota Center for
                                Environmental Advocacy; Sarah G. Bishop,
                                President, Partners in Parks; Roger Walker,
                                President, Regulatory Environmental Group
                                for Missouri; Curt Spalding, Executive
                                Director, Save The Bay, Inc.; Carl Pope,
                                Executive Director, Sierra Club; John G.
                                Robinson, Ph.D., Senior Vice President,
                                Wildlife Conservation Society; Val Richard
                                Beasley, DVM, Ph.D, President, American
                                Academy of Veterinary and Comparative
                                Toxicology, Bruce W. Little, DVM, Executive
                                Vice President, American Veterinary Medical
                                Association.
                        Robert H. Poppenga, DVM, Ph.D., Secretary/
                                Treasurer, American Board of Veterinary
                                Toxicology; Diana B. Stein, President,
                                American Fern Society; G. N. Rassam, Ph.D.,
                                Executive Director, American Fisheries
                                Society; James B. Gloer, President,
                                American Society of Pharmacognosy; Kristin
                                L. Vehrs, Deputy Director, American Zoo and
                                Aquarium Association; Paul A. Hanle,
                                President and CEO, Academy of Natural
                                Sciences; Gary P. Garrett, Ph.D., Chairman,
                                Desert Fishes Council; Joseph C. Mitchell,
                                President, The Herpetologists' League; T.
                                Nejat Veziroglu, President, International
                                Association for Hydrogen Energy; Bruce
                                Hasbrouck, President Elect, National
                                Association of Environmental Professionals;
                                Gregory R. Long, President and CEO, New
                                York Botanical Garden; Olin M. Ivey, Ph.D.,
                                Executive Director, Georgia Environmental
                                Organization; Walter F. Bell, Executive
                                Director, Louisville Resource Conservation
                                Council.
                        Elliott A. Norse, President, Marine Conservation
                                Biology Institute; John J. Clarke, Director
                                of Advocacy, Massachusetts Audubon Society;
                                David Dempsey, Policy Advisor, Michigan
                                Environmental Council; Peter R. Grant,
                                President, American Society of Naturalists;
                                Gerald Meral, Executive Director, Planning
                                and Conservation League; Rodger
                                Schlickeisen, President, Defenders of
                                Wildlife; David Blockstein, Ph.D.,
                                Chairman, The Ornithological Council; Susan
                                J. Mazer, Executive Vice President, Society
                                for the Study of Evolution.
       Business, Scientific Societies, and Environmental Organizations.
                        John T. Gibson, President, Alabama A&M University;
                                William H. Harris, President, Alabama State
                                University; Robert K. Bitting, Asst. VP for
                                Research, Alfred University; Richard J.
                                Cook, President, Allegheny College; Robert
                                H. Devine, President, Antioch College;
                                Theodore Veerkamp, Acting President,
                                Bayamon Central University; Joanne Fox-
                                Przeworski, Director, Center for
                                Environmental Policy, Bard College; Jon
                                Westling, President, Boston University;
                                Richard P. Traina, President, Clark
                                University; Claire Van Ummersen, President,
                                Cleveland State University; James Phifer,
                                President, Coe College; Steven K. Katona,
                                President, College of the Atlantic; Phyllis
                                O. Bonanno, President, Columbia College;
                                Jane L. Jervis, President, Evergreen State
                                College; Anthony James Catanese, President,
                                Florida Atlantic University; Catherine R.
                                Gira, President, Frostburg State
                                University; Eugene M. Tobin, President,
                                Hamilton College; Thomas R. Tritton,
                                President, Haverford College.
                        Michael Mooney, President, Lewis & Clark College;
                                Vivian A. Bull, President, Linfield
                                College; Constance Woo, Dean of the
                                Library, Long Island University; James C.
                                Garland, President, Miami University;
                                Joseph A. Caputo, President, Millersville
                                University; James C. Votruba, President,
                                Northern Kentucky University; Robert
                                Glidden, President, Ohio University;
                                Patricia O. Ewers, President, Pace
                                University; Shirley A.R. Lewis, President,
                                Paine College; Graham Spanier, President,
                                Pennsylvania State University; Joan M.
                                Lescinski, CSJ, President, Saint Mary-of-
                                the-Woods College; Richard Yanikoski,
                                President, Saint Xavier University; N.
                                Susan Bakaitis, President, Salem-Teikyo
                                University; Robert A. Corrigan, President,
                                San Francisco State University; Paul L.
                                Locatelli, S.J., President, Santa Clara
                                University; Peter Likins, President,
                                University of Arizona; Daniel D. Bennett,
                                Interim Vice Chancellor for Academic
                                Affairs, University of Arkansas; Richard L.
                                Byyny, Chancellor, University of Colorado
                                at Boulder.
                        Georgia E. Lesh-Laurie, Chancellor, University of
                                Colorado at Denver; Walter Harrison,
                                President, University of Hartford; Robert
                                A. Hoover, President, University of Idaho;
                                William O. McCoy, Interim Chancellor,
                                University of North Carolina at Chapel
                                Hill; J. H. Woodward, Chancellor,
                                University of North Carolina at Charlotte;
                                Patricia A. Sullivan, Chancellor,
                                University of North Carolina at Greensboro;
                                Susan R. Pierce, President, University of
                                Puget Sound; William E. Cooper, President,
                                University of Richmond; Mark L. Perkins,
                                Chancellor, University of Wisconsin at
                                Green Bay; Thomas F. George, Chancellor and
                                Professor of Chemistry and Physics,
                                University of Wisconsin at Stevens Point;
                                Philip L. DuBois, President, University of
                                Wyoming; Judith T. Levy, Dean of the
                                College and Vice President for Academic
                                Affairs, Ursinus College; Alan Harre,
                                President, Valparaiso University; Frances
                                D. Fergusson, President, Vassar College;
                                Oswald P. Bronson, Sr., President, Bethune-
                                Cookman College.
                        William M. Chace, President, Emory University;
                                Joseph A. O'Hare, S.J., President, Fordham
                                University; Richard R. Rush, President,
                                Minnesota State University at Mankato;
                                Richard M. Freeland, President,
                                Northeastern University; Kenneth P.
                                Mortimer, Chancellor, University of Hawaii
                                at Manoa; Larry Shinn, President, Berea
                                College; Carl V. Patton, President, Georgia
                                State University; Roger W. Bowen,
                                President, SUNY--New Paltz; George Rupp,
                                President, Columbia University; Edward R.
                                Jackson, Chancellor, Southern University
                                and A&M College at Baton Rouge; David H.
                                Swinton, President and CEO, Benedict
                                College; Frank G. Pogue, President,
                                Edinboro University of Pennsylvania; Samuel
                                H. Smith, President, Washington State
                                University; Carl W. Vogt, President,
                                Williams College; William Adams, President,
                                Bucknell University; James E. Lyons, Sr.,
                                President, California State University at
                                Dominguez Hills; John D. Welty, President,
                                California State University at Fresno.
                        Donald R. Gerth, President, California State
                                University at Sacramento; Marianne E.
                                Inman, President, Central Methodist
                                College; Matthew Goldstein, Chancellor, The
                                City University of New York; William J.
                                Cibes, Jr., Chancellor, Connecticut State
                                University System; Robert F. Vagt,
                                President, Davidson College; Thomas C.
                                Learner, President, Delaware Valley
                                College; John E. Murray, Jr., President,
                                Duquesne University; Richard R. Eakin,
                                Chancellor, East Carolina University; David
                                R. Black, President, Eastern College; Steve
                                A. Favors, President, Grambling State
                                University; Kathleen A. Ross, SNJM,
                                President, Heritage College; Roberto
                                Marrero-Corletto, Chancellor, Humacao
                                College, University of Puerto Rico; Myles
                                Brand, President, Indiana University;
                                Lawrence K. Pettit, President, Indiana
                                University of Pennsylvania; Bettye Ward
                                Fletcher, Interim President, Jackson State
                                University; Carol Cartwright, President,
                                Kent State University; Ernest L. Holloway,
                                President, Langston University, Susan A.
                                Cole, President, Montclair State
                                University; Ronald G. Eaglin, President,
                                Morehead State University; Joanne V.
                                Creighton, President, Mount Holyoke
                                College.
                        Harold M. Kolenbrander, President, Mount Union
                                College; Jerry C. Lee, President, National
                                University; Charles A. Hines, President,
                                Prairie View A&M University; A. Neal
                                Mangham, President, Prescott College;
                                Robert A. Scott, President, Ramapo College
                                of New Jersey; Paul B. Ranslow, President,
                                Ripon College; David L. Beckley, President,
                                Rust College; Daniel F. Sullivan,
                                President, St. Lawrence University; John H.
                                Keiser, President, Southwest Missouri State
                                University; Audrey F. Manley, President,
                                Spelman College; Richard B. Flynn,
                                President, Springfield College; Paul Yu,
                                President, SUNY--Brockport; Horace A.
                                Judson, President, SUNY--Plattsburgh; Hoke
                                L. Smith, President, Towson University;
                                James J. Stukel, President, University of
                                Illinois at Urbana-Champagne; John W.
                                Shumaker, President, University of
                                Louisville, Nancy Martin, VP for Research,
                                University of Louisville; Peter S. Hoff,
                                President, University of Maine; D. N.
                                Langenberg, Chancellor, University of
                                Maryland System.
                        Mark G. Yudof, President, University of Minnesota;
                                Richard L. Wallace, Chancellor, University
                                of Missouri--Columbia; Marjorie Smelstor,
                                Interim Provost and Vice Chancellor for
                                Academic Affairs, University of Missouri--
                                Kansas City; Blanche M. Touhill,
                                Chancellor, University of Missouri--St.
                                Louis; George M. Dennison, President, The
                                University of Montana; Robert E. Alexander,
                                Chancellor, University of South Carolina at
                                Aiken; Thomas J. Tighe, Acting President,
                                University of South Florida; Barbara J.
                                Byrne, Vice President for Academic Affairs,
                                University of the Sciences in Philadelphia;
                                Robert W. Lawless, President, The
                                University of Tulsa; Geoffrey Gamble,
                                Provost, University of Vermont; Gary A.
                                Ransdell, President, Western Kentucky
                                University; M. Lee Pelton, President,
                                Willamette University; Perry Moore,
                                Provost, Wright State University; Robert B.
                                Sloan, Jr., President, Baylor University;
                                Kathryn Mohrman, President, Colorado
                                College; Delbert W. Baker, President,
                                Oakwood College; Sally Mahoney, President,
                                Our Lady of the Lake University; Karen W.
                                Morse, President, Western Washington
                                University; Warren J. Baker, President,
                                California Polytechnic University; Alfred
                                F. Hurley, Chancellor and President,
                                University of North Texas; Ben E. Johnson,
                                President, Peru State College; Charles E.
                                Kupchella, President, University of North
                                Dakota; Joseph N. Crowley, President,
                                University of Nevada--Reno.
                                          College and University Heads.
                                     ______

              Prepared Statement of the American Chemical Society

        The American Chemical Society (ACS) would like to thank Chairman
    Christopher Bond and Senator Barbara Mikulski for the opportunity to
    submit testimony for the record on the Departments of Veterans Affairs
    and Housing & Urban Development, and Independent Agencies
    Appropriations bill for fiscal year 2001.
        As you may know, ACS is a non-profit scientific and educational
    organization, chartered by Congress, representing 161,000 individual
    chemical scientists and engineers. The world's largest scientific
    society, ACS advances the chemical enterprise, increases public
    understanding of chemistry, and brings its expertise to bear on state
    and national matters. ACS firmly believes that no investment the
    government makes generates a higher rate of return for the economy than
    research and development (R&D). In fact, economic experts maintain that
    today's unprecedented economic growth would not have been realized but
    for the substantial research investments by the public and private
    sectors over the past few decades. Looking ahead, the American Chemical
    Society (ACS) is concerned that constant dollar declines in federal
    support for basic research over the past decade, particularly in the
    physical sciences, have weakened the roots of innovation in all fields
    and put future economic growth at risk. In order to sustain our
    technological leadership and living standards, increased funding for
    basic research should be a top priority for use of the non-Social
    Security budget surpluses. As a framework for increasing R&D funding,
    ACS supports doubling federal spending on research within a decade, as
    well as balanced funding among different areas of science.

               NATIONAL SCIENCE FOUNDATION BUDGET RECOMMENDATIONS
        ACS strongly supports the fiscal year 2001 budget request of $4.6
    billion for the National Science Foundation (NSF), which would be a 17
    percent ($675 million) increase over last year's appropriation. As the
    lead source of federal funding for basic research at colleges and
    universities (excluding medical research), NSF supports research and
    education programs that are crucial to technological advances in the
    private sector and for training the next generation of scientists and
    engineers. The requested funding would allow NSF to increase its impact
    on science and mathematics education, more fully meet the enormous
    opportunities in core disciplinary research areas, and enhance
    multidisciplinary research in areas identified as national needs (e.g.
    nanotechnology and biocomplexity research).

                           CORE DISCIPLINARY RESEARCH
        ACS strongly supports the 19-percent increase requested for NSF
    research activities and wholeheartedly endorses the administration's
    proposal to dedicate most of the increase to core research. In fact, a
    strong increase for NSF should form the basis of a bipartisan effort to
    revitalize the critical federal investment in basic research that
    extends the frontiers of science. Although long-term research in the
    core science disciplines has been the mainstay of our research
    enterprise for decades, higher profile, initiative-based R&D has
    overshadowed its importance in recent years. Unless basic knowledge in
    chemistry, physics, mathematics and other core areas--the roots of
    technological innovation--is advanced, complex multidisciplinary R&D in
    areas like information technology and biocomplexity will suffer. As the
    only agency charged with maintaining progress in science and
    engineering across all disciplines, NSF is in the best position to
    invigorate this critical research.

                              FOCUSED INITIATIVES
        Nanoscale Science and Engineering.--The Society believes that the
    $216 million NSF has requested for nanoscale science and engineering is
    an important and timely investment. Nanotechnology is a cutting-edge
    field that holds enormous potential for improving the understanding and
    control of individual atoms and molecules. This interdisciplinary
    research, which involves some of the most modern chemistry being
    conducted at universities and national laboratories, could make
    possible the building of devices that are incomprehensibly small--on
    the scale of human cells, which could revolutionize areas ranging from
    manufacturing and advanced materials to medicine and the environment.
    NSF research will support biosystems at the nanoscale, novel phenomena
    and quantum control, and nanoscale processes in the environment.
    Emphasis should be placed on long-term research in this multiagency
    initiative and strong coordination among NSF, which plays the lead
    federal role, and other agencies should be encouraged.
        Biocomplexity in the Environment.--ACS applauds NSF's growing
    commitment to developing sound science for the environment as
    recommended by the National Science Board. The $136 million requested
    for the Biocomplexity in the Environment initiative represents an
    investment on a scale that can effectively begin to meet the needs in
    this area. Understanding the powerful interactions that occur within
    complex biological systems and between these systems and the Earth's
    environment will lead to a better understanding of natural processes
    and the effects of human behavior on the natural world. The Society is
    concerned, however, that too narrow a focus has been given thus far to
    the truly interdisciplinary challenge envisioned by NSF in this area.
    In addition to the clear contributions of the geological and biological
    sciences, ACS recommends that the focus of the program be expanded to
    fully capture the potential contributions of the physical sciences for
    identifying and crafting solutions to environmental challenges.

                            GRANT SIZE AND DURATION
        NSF traditionally receives high marks for efficiency--less than 4
    percent of the agency's budget is spent on administration and
    management. Also, NSF awards funds to researchers only after a rigorous
    merit-review process using expert peers. While NSF funds 20,000 awards
    each year, it is forced to turn away twice as many, including thousands
    from first-rate but less established scientists and engineers. Not only
    will increased funding allow NSF to fund more outstanding proposals, it
    will allow NSF to increase the size and duration of its grants--a
    longstanding goal of the Foundation--without limiting the number of new
    awards.
        For 50 years, NSF's balanced research portfolio has improved our
    economy, environment, and way of life. The Foundation's quality
    investments in research have spawned advances such as lasers,
    environmental technologies, polymers, and Doppler radar, as well as
    entire new industries such as biotechnology and the Internet. NSF is an
    investment in the true sense of the word.
                                     ______

       Prepared Statement of the American Society of Mechanical Engineers

        The National Science Foundation (NSF) Task Force of the Council on
    Education of the American Society of Mechanical Engineers (ASME
    International) is pleased to provide comments on the NSF fiscal year
    2001 budget request.
        ASME International is a worldwide engineering society focused on
    technical, educational and research issues. It conducts one of the
    world's largest technical publishing operations, holds some 30
    technical conferences and 200 professional development courses each
    year, and sets many industrial and manufacturing standards. This
    testimony represents the considered judgment of the NSF Task Force of
    the Council on Education and is not necessarily a position of ASME
    International as a whole.

                  NSF FISCAL YEAR 2001 BUDGET REQUEST OVERVIEW
        The National Science Foundation plays a critical leadership role in
    support of the nation's scientific and engineering research. Through
    thoughtful and visionary planning, NSF has greatly contributed to the
    technological leadership that the United States enjoys today. ASME
    International shares NSF's broad-based, cross-cutting vision for basic
    engineering and scientific research. As such, the Society strongly
    endorses the Foundation and its efforts to continually improve and
    expand the ``innovative ideas, outstanding people, and cutting-edge
    tools'' that comprise the nation's technological and scientific
    infrastructure.
        There is an increased awareness of the importance of science and
    technology in modern society and also a recognition of the quality of
    leadership NSF has demonstrated in support of the nation's research and
    education at American colleges and universities. The fiscal year 2001
    NSF Budget Request reflects a substantial increase ($675M or 17.3
    percent) over fiscal year 2000 spending estimates, a very positive
    trend that the Task Force supports. In the context of engineering
    related research, the increase is about 20 percent.
        Unlike the fiscal year 2000 budget request, where the lion's share
    of funding increases supported the Information Technology Initiative,
    requested funding increases for fiscal year 2001 are distributed across
    Foundation initiatives as well as the core programs. This would
    indicate a renewed awareness within NSF of the importance of its core
    programs, an awareness applauded by the Task Force. After all, many of
    the initiatives of today are fruits of research conducted using core
    program funding in the past.
        The breadth of NSF's commitment and vision is evident from, but
    certainly not limited to, the Foundation's four major initiatives for
    fiscal year 2001. These are:
      --Information Technology Research (ITR);
      --Nanoscale Science and Engineering (NNI)
      --Biocomplexity in the Environment (BE); and,
      --21st Century Workforce (Workforce).
        Three of the four initiatives, ITR, BE and Workforce, are
    continuations of initiatives from fiscal year 2000. Work on
    nanotechnology has been a focal point of previous and ongoing NSF
    support. However, it has been identified as a major initiative in the
    fiscal year 2001 Budget Request. This reflects the Clinton
    Administration's emphasis on its National Nanotechnology Initiative
    (NNI).

                         THE NSF TASK FORCE POSITION
    Affirmation and endorsement
        The NSF Task Force strongly supports the principles and priorities
    outlined in the NSF fiscal year 2001 Budget Request (Addendum). The
    expanded support for far reaching research within the core programs,
    especially that associated with the four priority investment areas
    (ITR, NNI, BE, and Workforce), address major national needs for the
    21st century. The initiatives are of vital importance and are being
    implemented at a critical juncture in the nation's technological
    development. At the same time, visionary investment in core programs
    ensures that the nation will have the scientific expertise combined
    with technological agility to respond to both opportunities and
    impediments well into the future.
        The Engineering Directorate (ENG) has identified five major
    emphasis areas for the coming year, including: biotechnology;
    engineering education; nanotechnology; service sector engineering; and,
    wireless. Of these five, nanotechnology has perhaps the greatest
    emphasis in ENG, reflecting the national priority embodied in the
    National Nanotechnology Initiative.
        Through NNI funding, exciting new and highly successful existing
    programs will be carried out with the goal of revolutionizing
    technology in the early 21st Century. The rapid shrinking of materials
    and devices in the nanoscale regime will help develop technology and
    engineering microsystems that will strongly influence the fields of
    biotechnology and information technology. ENG continue to explore the
    potential impact of a number of NNI related areas by new program
    initiatives and workshops in the areas of ``Molecular
    Nanoelectronics'', ``Biosystems at the Nanoscale'', and the ``XYZ on a
    Chip'', etc. This is creating a revolutionary environment for large-
    scale implementation of NNI through nano-miniaturized devices and
    technology.
        The continued focus on education is also particularly laudable. As
    society evolves and technology advances, the amount of scientific and
    technological information that a student must absorb and process is
    ever increasing. The scope of technological problems becomes ever
    increasingly complex and multidisciplinary. In addition, the manner in
    which students learn is an evolutionary process requiring constant
    updating of teaching tools and curricula. In this context, it is
    essential that science and engineering education remain a top priority
    for the nation; NSF, and specifically ENG, continues to recognize and
    support this vitally important mission.
    Questions and Concerns
        While the Task Force strongly supports NSF and the need for a
    balanced vision in the nation's science and engineering research
    portfolio, there are three issues regarding the matter of balance to be
    raised. These are:
      --insufficient support for graduate students in engineering;
      --insufficient support for PreK-12 science, math and technology
            education; and,
      --the potential for unbalanced focus within initiatives, particularly
            in ITR, i.e., the need for better mechanisms for funding
            complex multidisciplinary initiatives.
        The need for sustained graduate student support across all
    disciplines in science and engineering arises, perhaps counter-
    intuitively, because of the booming economy driven by the information
    technology sector. While this boom has tremendous benefits to the
    nation, there are long-term implications that are not being addressed.
    Specifically, because of the high demand for engineers in the labor
    force, there are fewer U.S. students enrolling in advanced engineering
    degree programs. This is particularly problematic because the sustained
    growth of IT and all other areas of technology need highly trained
    leaders and innovators.
        From an IT perspective, the reduction in graduate enrollments is
    somewhat offset by a shift in the graduate population toward IT-related
    disciplines. However, this exacerbates the ``brain drain'' from fields
    not perceived to have any connection to IT. Graduate (and
    undergraduate) student enrollments in Mechanical Engineering, for
    example, have been steadily declining over the duration of the current
    economic boom. The long-term threat this presents to the overall
    vitality of science and engineering in the United States cannot be
    neglected.
        In spite of this, NSF continues to place a relatively low emphasis
    on graduate education in its budget request. In the fiscal year 2001
    budget request, the increase in funding for graduate education (+14.4
    percent) lags behind the overall NSF increase (+17.3 percent). The
    differential is principally due to reductions in funding for the
    Graduate Research Fellowship (GRF) program (-1 percent) to $51.75M.
    Given a planned increase in GRF stipends, even flat funding would mean
    fewer awards made in fiscal year 2001 and beyond.
        NSF has an excellent record of identifying and supporting the best
    and brightest graduate students in the nation. The recipients of NSF
    Graduate Fellowships go on to leadership roles in academia, government,
    and industry. NSF is rightfully proud in highlighting the achievements
    and awards of past recipients. In a word, Graduate Research Fellows
    become the educators and technology policy makers of the nation. It is
    inconsistent with the goals of the Workforce initiative to reduce the
    funding for developing future leaders in the 21st century.
        It appears that the decrease in Graduate Research Fellowships is
    nominally offset by a requested $15.57M increase to $24.75M for the
    Graduate Teaching Fellows in K-12 Education program (GK-12). This
    represents an almost tripling of the program from its inception last
    year. The GK-12 program supports the use of graduate and advanced
    undergraduate students as ``content resources'' for K-12 teachers. The
    expressed intent is to link the ``acknowledged excellence of U.S.
    graduate education with the critical needs of the K-12 sector''.
        Increased emphasis on PreK-12 science and math education is a
    laudable goal that the Task Force strongly supports. In fact, ASME is
    playing a leadership role in advancing this agenda. It is not clear,
    however, that the GK-12 program, in and of itself, is an effective tool
    for either graduate or K-12 education.
        With regard to higher education, linking universities and primary-
    secondary education requires a cultural change in graduate education at
    the highest levels. University leadership (particularly graduate
    research advisors) must first recognize the need for integrated
    science, engineering and math education from early child development
    through the Ph.D., and then make curricular changes to implement this
    integration. Until this happens, it is not clear that a large expansion
    of the GK-12 program would be appropriate. Given the already stringent
    demands placed on graduate students today, it is not clear that either
    graduate education or primary-secondary education will be well served
    without support from the university faculties and administrations.
    Perhaps linking the CAREER program with K-12 education and encouraging
    universities to include educational integration in tenure and promotion
    criteria may better serve this goal.
        From the K-12 perspective, there should be clear evidence that the
    GK-12 program has a lasting impact in K-12 science and math education.
    Have K-12 science and math teachers and their curricula been
    significantly enriched by Graduate Teaching Fellows in the classroom?
    Are Fellows motivated to pursue K-12 teaching careers? Without strong
    affirmative answers to these questions, one can hardly justify such a
    dramatic increase in the GK-12 program.
        The unbalanced focus within the Workforce initiative highlights an
    important issue for funding within all initiatives. Mechanisms need to
    be put into place through which multidisciplinary initiatives are
    funded in a truly multidisciplinary way. In fiscal year 2001, some
    funding for ITR will be provided by the Engineering Directorate.
    However, in both current and upcoming fiscal years, all new monies for
    IRT have been or will be placed in the Computer Information Science and
    Engineering (CISE). ENG's contribution appears to be coming from its
    existing core programs. While we applaud the move toward ENG
    participation in Foundation initiatives, ENG should receive new funding
    to do so. Some of the greatest ``show stoppers'' in the advance of IT
    are multidisciplinary and are not at all CISE problems. Examples
    include heat removal from chips and the failure of electronic leads:
    these are heat transfer/fluid mechanics and material science/solid
    mechanics problems, respectively. Other major IT issues which do not
    fall within the traditional purview of CISE are manufacturing and
    material processing. It is not at all clear that CISE will recognize
    and fund research projects to address these critical issues. In
    general, placing all of the funding for an initiative within a single
    directorate jeopardizes the formulation of truly multidisciplinary
    solutions to complex problems.

                                   CONCLUSION
        The ASME NSF Task Force strongly supports the balanced priorities
    articulated by National Science Foundation in the fiscal year 2001
    Budget Request. Major, cross cutting initiatives have been identified
    addressing pivotal technological issues facing the nation. At the same
    time, the balance includes additional support for research and
    development in the core programs. There is wisdom in recognizing that
    core programs are the incubators for tomorrow's initiatives. In the
    context of engineering, budget planning within ENG clearly reflects the
    integrated, multidisciplinary vision of the total NSF budget plan.
        There is, however, concern about details of the budget request.
    There appears to be a trend toward reduced emphasis on graduate
    education in spite of the ever-increasing need for highly trained
    scientists and engineers in all disciplines. Contrary to its stated
    mission, there also appears to be reduced funding to support K-12
    science, math, and engineering education. There is also a need to
    distribute funding for the cross cutting, multidisciplinary initiatives
    across all directorates in a focused and coordinated fashion. In
    summary, the distribution of funding does not always reflect the
    visionary intent of the programs.
        ASME's NSF Task Force appreciates the opportunity to present its
    views to the Appropriations Subcommittee on VA, HUD and Independent
    Agencies.
                                    ADDENDUM
        The fiscal year 2001 budget request for the Engineering Directorate
    (ENG) is $0.46B, an increase of 19.6 percent over the current year.
    This increase is on par with much of NSF and is slightly ahead of the
    overall Foundation increase. Engineering remains the sixth largest
    directorate at NSF behind Mathematical and Physical Sciences ($0.88B),
    Education and Human Resources ($0.76B), Geosciences ($0.58B), CISE
    ($0.53B) and Biological Sciences ($0.51B). Funding for mechanical
    engineering related research within Engineering would rise 18.8 percent
    to 0.24B. Details of the mechanical engineering component of the NSF
    budget appear in Table I. It should be noted that, given the
    multidisciplinary nature of modern engineering research, funding for
    mechanical engineering related research may be obtained from programs
    outside of the selected group and outside of Engineering overall.

     TABLE I.--DETAIL OF SELECTED MECHANICAL ENGINEERING RELATED PROGRAMS IN
                           THE FISCAL YEAR 2001 BUDGET
                            [In millions of dollars]
    ------------------------------------------------------------------------
                                                   Fiscal year--
                                      --------------------------------------
                                                        2000         2001
                                       1999 budget    estimate     request
    ------------------------------------------------------------------------
    NSF Engineering Directorate:
        Chemical and Transport                41.9         44.3         54.4
         Systems.....................
        Design, Manufacture, and              45.3         47.3         58.7
         Industrial Innovation
         (excluding SBIR)............
        Engineering Education and               62           65           74
         Centers (includes ERC and I/
         UCRC programs)..............
        Civil and Mechanical Systems.         48.1         48.2         56.2
    ------------------------------------------------------------------------

                                     ______

                 NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

      Prepared Statement of the California Science Center, Los Angeles, CA

        Mr. Chairman, thank you for the opportunity to submit this
    testimony for the record. I am pleased to share with you details about
    the Environmental Science Learning Center at the California Science
    Center, for which the Science Center is seeking federal support in
    fiscal year 2001. The Science Center will be a national a model for
    innovative and interactive science education programs that will excite
    people of all ages about science learning and make the educational
    experience dynamic, involving and fun. This program is unique in its
    programmatic and participant make-up and is aimed at improving
    ecological and environmental science learning opportunities for all of
    America's children and families.
        The mission of the California Science Center is an important part
    of the State of California science education infrastructure, which
    supports and complements the efforts of schools throughout the state
    and provides an important science education model for schools
    throughout the nation. The programs offered through the Environmental
    Science Learning Center will be consistent with the National Science
    Standards for grades K-12 as well as with the American Association for
    the Advancement of Science Benchmarks for science literacy, which
    underscore the importance of multidisciplinary teaching and learning
    opportunities.
        Importantly, the Environmental Science Learning Center's program
    efforts will be consistent with the mission and goals of several
    federal government agencies in particular, the National Aeronautics and
    Space Administration's (NASA) Earth Sciences program. A primary focus
    for NASA's earth sciences program is the support and implementation of
    science education programs that:
      --Contribute to K-12 science and technology education by promoting
            the involvement of various community sectors
      --Enhance the participation of schools and organizations serving a
            significant number of underrepresented groups
      --Leverage the resources of external groups
      --Continue to educate and train educators as research evolves and
            capabilities change
      --Raise awareness of policymakers and citizens to enable prudent
            policy determination regarding global change
      --Improve science and mathematics literacy
      --Strengthen the interface between educators and scientists and
            secure greater support by scientists for broad education
            efforts.
        The California Science Center is committed to developing a model
    Environmental Science Learning Center which will seek to fulfill to the
    greatest extent possible, NASA's science education mission and,
    specifically, its ``earth sciences'' education mission.
        In order to establish the new Environmental Science Learning
    Center, the California Science Center is seeking $27.5 million in
    federal funding over three years and $10 million in fiscal year 2001
    for the creation of the Environmental Science Learning Center. This
    initiative is a $110 million capital program, inclusive of planning,
    design, construction, and construction management. The remaining $83.5
    million for this program will be raised from private sources and other
    state and local governmental agencies. The State of California is
    expected to commit $27.5 million that will permit the design of the new
    Center to proceed. The State's investment will encourage private donors
    and other governmental agencies to support this program. The proposed
    federal share will help leverage the remaining private match.
        The Environmental Science Learning Center is the second of three
    key phases included in the Science Center's institutional development
    plan. Phase I of the California Science Center Master Plan is now
    complete--and the results are ``wow.'' On February 7, 1998, 245,000
    square-feet of scientific wonders and possibilities opened to the
    enthusiastic acclaim of guests, educators, students, scientists, the
    community and the media.
        Phase I highlights include Science Plaza, a state-of-the-art IMAX
    3D Theater, World of Life and Creative World exhibition galleries, the
    Weingart Special Exhibits Gallery, the ExploraStore gift shop and
    dining facilities
        In its first year, the California Science Center became an
    educational destination for 2.1 million visitors--free admission
    assuring everyone can access the learning and fun. The general audience
    is composed mainly of families with children between the ages of four
    and fourteen:
      --More than 300,000 students and teachers visit each year
      --Underrepresented communities make up the majority of visitors:
        But without Phases II and III, the Science Center presents only a
    portion of the scientific picture envisioned in the Master Plan. It
    falls short of its educational goals and fails to meet significant
    portions of the national and state science content standards.
        At a time when California students still rank well below the
    national average in science scores--at a time when science has become
    an integral part of our daily lives--failure to complete this unique
    scientific and educational vision would deprive millions of families,
    teachers and students of vital scientific knowledge they need to
    succeed in our increasingly technological world.

                              MEETING OUR MISSION
        The mission of the California Science Center is to stimulate and
    nurture interest in science, math and technology, to take an
    interdisciplinary approach that places them in a social and cultural
    context, and to provide leadership within the science education
    community. We believe the growth of every person depends on knowing
    scientific principles, processes and applications.
        Organized around four scientific concepts, an elementary school and
    a teacher professional development facility, the Master Plan was
    developed to meet this mission by presenting a holistic view of the
    scientific world that is unique in the science center field.
        As the Master Plan unfolds and the building expands to accommodate
    new guest experiences, the dynamic interrelationships between these
    worlds will educate and astound--encouraging critical and conceptual
    thinking and make science come alive for millions.

                                THE MASTER PLAN
        In 1988 the leadership of the former California Museum of Science
    and Industry envisioned transformation of the 45-year-old institution
    into integrated facilities encompassing over 600,000 square-feet, to be
    developed in three phases. This became the Master Plan for the
    California Science Center. Construction began in 1994, with Phase I
    completed in February 1998.
        Viewed together, the four thematic ``worlds'' of the Science Center
    provide a compelling and totally integrated presentation of scientific
    disciplines. In each of these exhibition galleries visitors engage in
    hands-on activities and can participate in facilitated programs. It is
    all tied together here from the smallest, single-celled organism to the
    vastness of the galaxies:
        World of Life (Phase I)--the life processes common to all living
    things
        Creative World (Phase I)--the environment we create and build
        World of Ecology (Phase II)--an ecosystems view of the earth on
    which we live, and
        Worlds Beyond (Phase III)--the universe in which we live.
        As each phase is completed, it meshes with the others--fitting like
    the pieces of a puzzle--to form a more complete scientific picture of
    the world and the universe. The subjects each world examines are
    timeless. The overall picture they present is vital to understanding
    the world in which we live and our impact on it.

                       MAKING CONNECTION TO THE CLASSROOM
        The exhibits in the four thematic ``worlds'' support State and
    National Science Content Standards for grades K-12, as well as American
    Association for the Advancement of Science Benchmarks for Science
    Literacy. In both its formal and informal educational capacities, the
    California Science Center is an important part of the state's science
    education infrastructure, supporting and complementing the efforts of
    schools. It is the only facility in the country combining a major
    science center, an adjacent science-focused neighborhood elementary
    school, and teacher professional development center in one location. In
    addition, the importance of multi-disciplinary learning opportunities,
    such as those presented at the Science Center, has been underscored by
    both the State Board of Education and the American Association for the
    Advancement of Science.
        Mr. Chairman, Southern California can be viewed as a microcosm of
    the nation. With its demographic and geographic base ranging from urban
    to rural, affluent to economically disadvantaged, and a diverse ethnic
    population, Southern California is unlike any other location in the
    country. It is also recognized to have many ecological uniqueness that
    exist in very few places in the country. These unique factors combined
    the California Science Centers national recognition as a leader in
    science education programs, make the Center a perfect location for this
    Environmental Science Learning Center.

                           PHASE II: WORLD OF ECOLOGY
        Alive with learning opportunities, World of Ecology will present
    the ecological concepts around which the Earth is organized--from the
    smallest individual organisms to the entire planet. Combining living
    organisms and interactive technologies, it will allow visitors to
    examine the fundamental and often delicate connections between living
    things and the physical world that shape life on earth.
        World of Ecology will illustrate air, land and water environmental
    relationships. As conceived, the exhibition gallery will allow visitors
    to explore:
      --Living organisms, both aquatic and terrestrial
      --Living habitats, both aquatic and terrestrial
      --Freshwater, saltwater and land environments
      --Physical and life sciences
      --Mathematics
      --Technology
      --Industrial applications, and
      --Economic and social sciences.
      --And it will provide insights into how human beings influence and
            are influenced by ecosystems around us.
        A strong emphasis will be placed on technology to help visitors
    understand Earth's ecosystems through various media, such as:
      --Hands-on/minds-on exhibits
      --Multimedia experiences
      --Computer-based models that allow guests to manipulate environmental
            factors and see the results
      --Distance learning technology
      --Examinations of the ways technology is used to monitor the Earth's
            ecosystems, such as tracking of various species, and
      --Real-time links to various environments.
        To maximize the creativity and brainpower brought to bear on the
    project a unique design concept is being employed. We have brought
    together experts who might normally be competitors, including two firms
    specializing in the design of living habitats for zoos and aquariums,
    two firms specializing in the design of interactive exhibitry, and two
    architectural firms. We are excited about the potential of this unique
    collaborative approach.
        The World of Ecology and accompanying expansion will continue the
    fulfillment of the Master Plan by seamlessly adding 170,000 square-feet
    to the west side of the Phase I Building. This will more than double
    the size of the Science Center's existing public exhibition space.
        The preliminary budget for Phase II is $110 million, anticipated
    from a combination of public and private sources. Public and private
    contributions to Phase I of the Master Plan resulted in an investment
    of over $200 million for the California Science Center and surrounding
    Exposition Park.
        The Environmental Science Learning Center will create a national
    model for innovative and interactive science education programs that
    will excite people about science learning and make the educational
    experience dynamic, involving and fun. This program is unique in its
    programmatic and participant make-up and is aimed at improving
    ecological and environmental science learning opportunities for all of
    America's children and families.
        Again, thank you for the opportunity to submit testimony for the
    record on behalf of this very important science learning initiative at
    the California Science Center. I look forward to working with you to
    make the Environmental Science Learning Center a reality in fiscal year
    2001.
        Thank you.
                                     ______

       Prepared Statement of the University Corporation for Atmospheric
                                Research [UCAR]

        On behalf of the University Corporation for Atmospheric Research
    (UCAR) and the university community involved in weather and climate
    research and related education, training and support activities, I
    submit this written testimony for the record of the U.S. Senate
    Committee on Appropriations, Subcommittee on VA, HUD and Independent
    Agencies.
        This year UCAR, a university membership consortium composed of 63
    North American institutions that grant the Ph.D. in atmospheric,
    oceanic, and related sciences, celebrates its fortieth anniversary due
    in large part to founding and continued support provided though the
    National Science Foundation (NSF). The UCAR mission is to support,
    enhance, and extend the capabilities of the university community,
    nationally and internationally; to understand the behavior of the
    atmosphere and related systems and the global environment; and to
    foster the transfer of knowledge and technology for the betterment of
    life on earth.
        UCAR is a non-profit, Colorado-based corporation that manages and
    operates the National Center for Atmospheric Research (NCAR) and the
    UCAR Office of Programs (UOP). In addition to the NSF, UCAR is
    supported by federal agencies including the National Oceanic and
    Atmospheric Administration (NOAA), the National Aeronautics and Space
    Administration (NASA), the Department of Energy (DOE), the
    Environmental Protection Agency (EPA), the Department of Defense (DOD),
    and the Federal Aviation Administration (FAA). In addition to its
    member universities, UCAR has formal relationships with approximately
    100 additional undergraduate and graduate schools including several
    historically black and minority-serving institutions and 38
    international universities and laboratories.
        We appreciate the opportunity to submit written testimony and urge
    the Committee to support the President's request of $4.57 billion for
    the National Science Foundation (NSF) for fiscal year 2001, a 17.3
    percent (or $675 million) increase over fiscal year 2000. Scientific
    advances and educational programs funded by NSF for 50 years have
    played an instrumental role in fueling the vibrant economy that makes
    the U.S. the strongest country in the world. In this time of great
    prosperity, it is fitting that the country invest in NSF programs with
    the largest budget increase ever proposed in the agency's history. This
    new funding will strengthen core research programs after many years of
    relatively flat or decreased funding, in addition to giving impetus to
    major new and ongoing initiatives that will pave the way for tomorrow's
    scientific discoveries and technological progress.
        Within the NSF, we would like to provide testimony on the following
    specific programs:

                     RESEARCH AND RELATED ACTIVITIES (R&RA)
        We urge the Committee to support the President's request of $3.54
    billion in fiscal year 2001 for Research and Related Activities. This
    is a 19.7 percent increase over the fiscal year 2000 budget of $2.95
    billion. The research community clearly has the capacity to support
    this level of research. Currently, NSF funds only about one third of
    research proposals received. Many that have not been awarded because of
    insufficient funds are rated good to excellent through a competitive,
    merit review process. The fiscal year 2001 increase will ensure that
    more excellent proposals are funded. Approximately half of the R&RA
    increase represents a long-awaited investment in the core research
    funded through NSF's scientific directorates. R&RA supports a broad
    range of scientific inquiry that is critical to the long-term vitality
    of this country. The proposed R&RA budget reflects NSF's commitment to
    the strategic goals of investing in Ideas, People and Tools, the three
    cornerstones of scientific research achievement, education and
    opportunity for all citizens, and technological advancement.
    Geosciences (GEO) directorate
        We urge the Committee to support the President's fiscal year 2001
    budget request of $583.00 million for NSF's Geosciences Directorate.
    This is a 19.5 percent increase over the fiscal year 2000 budget of
    $487.79 million. GEO is the principal source of funding for university-
    based research in the atmospheric, earth and ocean sciences. Its
    activities address the nation's ability to understand, predict and
    respond to environmental events and changes. Through involvement in
    such interagency programs as the U.S. Weather Research Program (USWRP),
    the National Space Weather Program, and the U.S. Global Change Research
    Program (USGCRP), GEO research advances our ability to predict natural
    phenomena such as severe storms, solar variability, and climate
    patterns that impact society.
    Atmospheric sciences (ATM)
        We urge the Committee to support the President's fiscal year 2001
    budget of $118.26 million for Atmospheric Sciences Research Support
    within the overall Atmospheric Sciences program of the Geosciences
    Directorate. This is a 23.2 percent increase over the fiscal year 2000
    amount of $95.96 million. This ATM activity funds university research
    that advances our understanding of the Earth's atmosphere and its
    interactions with the Sun. As our ability has increased to do more
    complex research on solar-terrestrial interactions and the interactions
    of the earth's systems, so has the cost of necessary research tools
    such as computation time and instrumentation. For several years, the
    ATM Research Support allocation has been essentially flat. The fiscal
    year 2001 increase will make up for some of the ground lost to
    inflation and escalating costs, support ongoing research programs,
    allow development of new models to improve predictions of atmospheric
    and Earth system processes, and will enable researchers to further
    examine biogeochemical cycles as well as human impacts on weather and
    climate.
    National center for atmospheric research (NCAR)
        Within ATM, we urge the Committee to support the proposed fiscal
    year 2001 budget of $75.75 million for the National Center for
    Atmospheric Research. This is a 10.0 percent increase over the fiscal
    year 2000 budget of $68.85 million. This world-class center for
    atmospheric research supports the entire atmospheric sciences community
    and part of the ocean sciences community through observational and
    computer facilities, instrumented research aircraft, and an extensive
    visiting scientist program. In fiscal year 2000, more than 1,500
    researchers and students will use the NCAR facilities and approximately
    150 visiting scientists will stay for extended periods. In fiscal year
    2001, NCAR will continue the badly needed refurbishment of the NCAR
    Mesa Laboratory building at a level of up to $4.0 million. This $12
    million, multi-year refurbishment was begun in fiscal year 1999 and
    will ensure that NCAR's primary building will continue to serve the
    scientific community at the highest level.
        Also within the GEO budget, we appreciate the funding being
    allocated for Education and Training, including the digital libraries
    initiative and the augmentation for undergraduate and K-12 activities.
    We would also like to point out the UCAR program, Significant
    Opportunities in Atmospheric Research and Science (SOARS). SOARS,
    funded directly by ATM within GEO, is having a positive impact on the
    number of ethnically diverse atmospheric sciences graduate students
    through its model mentoring approach and research orientation. It is an
    excellent example of NSF's implementation of the cross-cutting
    initiative, the 21st Century Workforce.
        While it is not delineated in the President's budget, we would like
    to call the attention of the Committee to the great potential for ATM
    contributions to the National Space Weather Program, specifically
    through the ATM Upper Atmosphere Research section. The interagency
    National Space Weather Program is pursuing research that can help us to
    understand and mitigate the sometimes negative societal effects of
    solar variability. A future enhanced role for the Upper Atmosphere
    Research program has the potential to make great advances in areas such
    as enhanced understanding of the Sun's magnetic activity (the source of
    space weather) and of the impacts of solar activity on the terrestrial
    atmosphere and the near-earth environment. We look forward to the
    continued excellent contributions of this NSF program to this national
    effort.
    Computer and information science and engineering (CISE)
        We urge the Committee to support the President's request of $529.10
    million for NSF's Computer and Information Science and Engineering
    program. This request includes $190.0 million as part of NSF's
    Information Technology initiative and is a 36.2 percent increase over
    the fiscal year 2000 budget of $388.42 million. CISE computer science
    research has contributed to advances in computers, software, and
    computer use that have benefited almost every academic discipline and
    revolutionized the manner in which much research is conducted. CISE
    also provides advanced computing and networking capabilities needed by
    academic researchers for leading research in all science and
    engineering fields. In the field of the atmospheric sciences, weather
    and climate research require extremely complex information technology
    tools. By focusing on these areas as an interdisciplinary ``grand
    challenge,'' the nation could advance information technology tools
    while helping to better understand and predict the impact of weather
    and climate on society. We recommend such a focus to the CISE effort.

                    MAJOR RESEARCH EQUIPMENT (MRE) PROGRAMS
    Earthscope
        Within the Major Research Equipment account, we urge the Committee
    to support the President's request of $17.44 million to begin
    construction of Earthscope. This geophysical instrument array will
    allow scientists to make major advances in our knowledge and
    understanding of the North American continent. The initial Earthscope
    activity, deployment of high-capability seismometers throughout the
    United States, will improve our resolution of the subsurface structure
    and lead to advances in understanding fault conditions and the rupture
    processes of earthquakes.
    Terascale Computing Systems
        As part of the Information Technology Research Initiative included
    within the MRE account, we urge the Committee to support the
    President's request of $45.0 million for Terascale Computing Systems
    that will enable U.S. researchers to gain access to leading edge
    computing capabilities. Our nation lags behind other developed nations
    in high-end computing, a situation that has already adversely affected
    the atmospheric science community's ability to run the complex models
    necessary to understand and predict regional and global climate change.
    As the atmospheric sciences community strives to learn more about the
    effects of solar variability on the earth's atmosphere, space weather
    that impacts satellite communications, climate variability and weather
    patterns, the need for computational power exceeds capacity. Any
    advance in computing capacity will return significant scientific
    advancements in many fields. In the atmospheric sciences, ITR promises
    advances in atmospheric modeling that will enable us to effectively
    address many of our nation's weather and climate policy issues. As was
    mentioned above, weather and climate is an excellent ``grand
    challenge'' area for this effort.
    High-performance instrumented airborne platform for environmental
            research (HIAPER)
        While we support the great advances in science and technology that
    all of the MRE funded programs represent, we were disappointed as a
    community to learn that the High-performance Instrumented Airborne
    Platform for Environmental Research was not included in the fiscal year
    2001 budget request. Funding for this modern research aircraft was
    begun by Congress in fiscal year 2000 following approval of the program
    by the National Science Board. Since at least one other aircraft
    currently in service at NSF will end its useful lifetime in the next
    four years, we sincerely hope that funding for this project is
    continued. We look forward to its completion in the next four years and
    to its vital contribution to our understanding of how severe weather
    and other climate phenomena develop and impact the nation and the
    globe.
    Education and human resources (EHR)
        We urge the Committee to support the President's request of $729.01
    million in fiscal year 2001 for Education and Human Resources. This is
    a 5.5 percent increase over the fiscal year 2000 amount of $690.87
    million. NSF's EHR activities are playing a critical role in creating
    science, mathematics and engineering education opportunities for this
    country's K-12 youth and teachers, undergraduates and faculty members,
    graduates and post-doctorates, and the general public. EHR is also
    assuming a leadership role in NSF's 21st Century Workforce efforts to
    produce a diverse, internationally competitive workforce to meet the
    challenges of this new century.
        We urge the Committee to support the President's request of $27.0
    million for the National SMETE Digital Library (NSDL) within the EHR.
    This is an 80 percent increase over the fiscal year 2000 budget of $15
    million. The NSDL long-term goal is to produce a digital library of
    high-quality, reviewed educational materials at all levels in science,
    mathematics, engineering and technological education (SMETE). This
    research, teaching and learning resource is being developed in response
    to needs articulated by the academic community and corporate leaders.
    NSDL presents a tremendous opportunity to improve access to superior
    instructional materials and advanced classroom technologies.

                      U.S. GLOBAL CHANGE RESEARCH PROGRAM
        We urge the Committee to support the fiscal year 2000 proposed
    budget of $187 million for the U.S. Global Change Research Program
    (USGCRP) within NSF. This is level with the fiscal year 2000 budgeted
    amount. The USGCRP is an interagency program that addresses
    interactions among physical, biological, ecological, and human systems
    at various scales. Working with national and international research
    institutions, this program allows the atmospheric sciences community to
    improve prediction capabilities for climate fluctuations between
    excessively wet and dry periods, and for long-term climate change. This
    research is a critical investment for the future of this nation, its
    economy, and the health and safety of its citizens.

                              SPECIAL INITIATIVES
    Information Technology Research (ITR)
        We urge the Committee to support the President's request of $326.91
    million for Information Technology Research and support the NSF in its
    role as leader of this multi-agency initiative. This investment will
    produce tools and capabilities that should benefit all scientific
    fields and much of society in the next several years. ITR promises
    innovations that will provide efficiencies in the way university
    researchers process and access data, communicate with collaborators,
    and share research results. Given the enormous earth systems and solar-
    terrestrial data sets that are critical to atmospheric sciences
    research, it is likely that the ITR effort will advance our field of
    science through innovative processing, archiving, and networking
    methods which we have not yet imagined. Our nation can advance both
    information technology and improvements in weather and climate
    prediction by focusing on the atmospheric sciences as a ``grand
    challenge'' for this effort. Advancing computation tools for weather
    and climate will serve the nation through improved prediction
    capabilities and result in significant advances in information
    technology.
    Biocomplexity in the environment (BE)
        We urge the Committee to support the President's request of $136.31
    million for Biocomplexity in the Environment. This interdisciplinary
    initiative will advance our ability to understand the complex systems
    that are structured or influenced by living organisms and the
    interactions within biological systems and physical processes. We hope
    that BE efforts will lead eventually to enhanced predictability of
    environmental systems, including climate, that will assist
    environmental decision makers.
    Nanoscale science and engineering
        We urge the Committee to support the President's request of $216.65
    million for Nanoscale Science and Engineering. Nanotechnology promises
    to revolutionize our control of matter in areas such as information
    technology and to change the way in which most products are made. We
    look forward to the manner in which it promises to advance research in
    the field of the atmospheric sciences, particularly through possible
    major breakthroughs in the development of new capabilities involving
    technologies such as computers, radars, and satellites.
    21st Century Workforce
        We urge the Committee to support the President's request of $157.05
    million for the 21st Century Workforce. In order to remain a global
    leader in most scientific fields and competitive in all areas, we must
    offer the opportunity for all of our citizens to increase their
    understanding of science, mathematics, and technology and to meet the
    challenges of the dramatic global transition to a technology-literate
    workforce. The SOARS program mentioned above is a good example of a
    highly successful effort to broaden involvement in the sciences. The
    21st Century Workforce is an important focus that could help to enhance
    effective programs such as SOARS.
    Conclusion
        The proposed budget meets the challenges of a new millennium by
    enabling NSF to invest appropriately in this country's research
    infrastructure, support both experienced and promising investigators,
    provide opportunities for our nations' diverse student population,
    advance the technological capacity that drives much of our economy, and
    inform our citizens of our scientific accomplishments and related
    global issues. We are pleased and proud that an agency that provides
    such critical services for the nation may begin its second fifty years
    with the endorsement of appropriately increased funding.
        On behalf of the UCAR community, I want to thank the Committee for
    the important work you do for U.S. scientific research, education, and
    training. We appreciate your attention to the recommendations of our
    community concerning the fiscal year 2001 budget of the National
    Science Foundation.
                                     ______

       Prepared Statement of the University Corporation for Atmospheric
                                Research (UCAR)

        On behalf of the University Corporation for Atmospheric Research
    (UCAR) and the university community involved in weather and climate
    research and related education, training and support activities, I
    submit this written testimony for the record of the U.S. Senate
    Committee on Appropriations, Subcommittee on VA, HUD and Independent
    Agencies.
        This year UCAR, a university membership consortium composed of 63
    North American institutions that grant the Ph.D. in atmospheric,
    oceanic, and related sciences, celebrates its fortieth anniversary of
    scientific discovery and university partnerships. The UCAR mission is
    to support, enhance, and extend the capabilities of the university
    community, nationally and internationally; to understand the behavior
    of the atmosphere and related systems and the global environment; and
    to foster the transfer of knowledge and technology for the betterment
    of life on earth.
        UCAR is a non-profit, Colorado-based corporation that manages and
    operates the National Center for Atmospheric Research (NCAR) and the
    UCAR Office of Programs (UOP). It is supported by the National Science
    Foundation (NSF) and other federal agencies including the National
    Aeronautics and Space Administration (NASA), the National Oceanic and
    Atmospheric Administration (NOAA), the Department of Energy (DOE), the
    Environmental Protection Agency (EPA), the Department of Defense (DOD),
    and the Federal Aviation Administration (FAA). In addition to its
    member universities, UCAR has formal relationships with approximately
    100 additional undergraduate and graduate schools including several
    historically black and minority-serving institutions and 38
    international universities and laboratories.
        We appreciate the opportunity to submit the following written
    testimony on the proposed fiscal year 2001 budgets for the National
    Aeronautics and Space Administration (NASA):

                            SPACE SCIENCE ENTERPRISE
        We urge the Committee to support the fiscal year 2001 President's
    request of $2.398 billion for NASA's Space Science Enterprise. This is
    a much needed nine percent increase over the fiscal year 2000 funding
    level. The extraordinary mission of the Office of Space Science, to
    solve mysteries of the Universe, explore the Solar System, discover
    planets around other stars, understand the behavior of the Sun, and
    search for life beyond Earth, is of great interest to the public as
    well as the academic community. These challenges will form the basis of
    the country's space science program over the next several decades.
    Astronomical search for origins
        We urge you to support or exceed the President's fiscal year 2001
    request of $133.2 million for Astronomical Search for Origins, a
    program that resides in Supporting Research and Technology within the
    Space Science Enterprise. The proposed amount reflects an increase of
    only 1.5 percent over the fiscal year 2000 funding level. Astronomical
    Search for Origins funds Origins of Solar Systems, a grant program that
    supports university and laboratory researchers pursuing scientific
    investigations related to understanding the formation and early
    evolution of planetary systems. Over the past five years, interest in
    this area of research has exploded with excellent proposals far
    exceeding the funds available. Examples of key research questions to be
    addressed include: What is the frequency of the occurrence of planetary
    systems? What are the conditions of star formation? What determined the
    masses of giant planets? An example of the potential of the Origins
    program is the recent discovery by funded principal investigators of
    several planets orbiting a Sun-like star. This was the first time a
    multi-planetary system was found outside our own solar system. There
    are innumerable such discoveries still to be made.
    Sun-Earth connections (SEC)
        Within the program titled Supporting Research and Technology in the
    Space Science Enterprise, we urge the Committee to support the fiscal
    year 2001 President's request of $78.0 million for the Focused Program,
    Sun-Earth Connections. This is an increase of $51.4 million over the
    fiscal year 2000 funding level. SEC's goal is to understand the
    changing Sun and its effects on the Solar System, life and society. The
    domain of study includes solar processes and the interaction of solar
    plasma and radiation with Earth and other planets. The technology
    developed within this program is of extreme importance in protecting
    communication satellites and the lives of astronauts working in space.
        Planning and technology activities of the Sun-Earth Connections
    mission include the following programs of importance to our
    understanding of the influences of the Sun on earth and humanity:
    Living with a star (LWS)
        We urge the Committee to support the fiscal year 2001 President's
    request of $20 million to begin the new, cross-cutting initiative,
    Living With a Star. This new program will undertake the most
    comprehensive study to date of the Sun and its interactions with the
    Earth. Deployment of a new network of spacecraft and enhancements to
    current solar variability programs will help us to understand the Sun's
    impacts on the Earth and the space environment. Data gathered will be
    of particular interest to solar physicists working on issues of solar
    variability and in the relatively new field of space weather, and to
    climate scientists working to understand the complexity of the Earth's
    climate system. We support NASA's concerted effort to make LWS a multi-
    agency program. Given the tremendous importance of understanding and
    predicting solar variability and its impacts on the terrestrial
    climate, communications, humans in high-altitude aircraft, GPS signals,
    electric power grids, human space flight, etc., agencies with related
    interests should be involved.
    Thermosphere, ionosphere, mesosphere energetics and dynamics (TIMED)
        TIMED is a small, remote sensing and imaging spacecraft that is the
    first science mission in the planned programs of Solar Terrestrial
    Probes (STP). TIMED instruments are being developed for NASA by several
    U.S. research universities. The overall scientific goals of the mission
    are to perform the first focused exploration of the upper atmosphere
    between 50 and 200 kilometers above Earth in order to gather and
    analyze data concerning the energy and dynamics of this very important
    solar-terrestrial transition region. Through the mission we will gain a
    more detailed understanding of the role of the region in the transport
    of chemicals that influence climate change as well as a better
    understanding of space weather variables that impact spacecraft,
    astronauts in space, and communications.
        TIMED was scheduled to be launched this May aboard a Delta II
    launch vehicle with JASON, a French satellite that is unable to meet
    the launch date. Launch will be delayed by up to one year presenting a
    very serious funding issue for the fully developed American satellite.
    We hope that the Committee will work to help NASA resolve this fiscal
    year 2001 funding problem.
    Solar-B
        Within the Solar Terrestrial Probes (STP) area of the Sun-Earth
    Connections program, we urge the Committee to support the fiscal year
    2001 President's request of $19.5 million for the Solar-B program. This
    is $9.9 million above the funding level for fiscal year 2000 and
    represents increased activity in preparation for the Solar-B launch in
    fiscal year 2004. Solar-B is a joint mission with the Japanese to carry
    out highly focused studies of the Sun and its many influences on the
    Earth and other planets. The mission consists of instrumentation that
    will advance knowledge of the interaction between the Sun's magnetic
    field and its high-temperature, outer atmosphere. The data gathered
    should help us understand events such as solar mass ejections that can
    endanger astronauts in orbit and hit Earth's atmosphere with enough
    force to cause expensive communications disruptions.

                         EARTH SCIENCE ENTERPRISE (ESE)
        We urge the Committee to support the fiscal year 2001 President's
    request of $1.406 billion for NASA's Earth Science Program. This amount
    is a reduction of $37.6 million from the fiscal year 2000 actual
    funding level. While restructuring within the ESE budget makes it
    difficult for us to analyze, we understand that some of the reduction
    can be attributed to the Earth Observing System (EOS) having reached
    its peak of development. While this is understandable, we want to
    emphasize the importance of ESE, the goal of which is to understand the
    total Earth system and the effects of humans on the global environment.
    The observations, research and technology provided through ESE help us
    to discover patterns in terrestrial climate which enable us to predict
    environmental events such as floods and severe winters. Scientific
    results achieved using NASA's vantage point of space include reduced
    uncertainty in measuring rainfall over the tropics, determination of
    thickening and thinning rates for the Greenland ice sheet, and enhanced
    understanding of the role of vegetation in removing carbon dioxide from
    the atmosphere. This work is critical to our development of sound
    science and sound global environmental policy.
        Within the Earth Science Enterprise, we would like to comment on
    the following programs:
    Earth observing system (EOS)
        We urge the Committee to support the fiscal year 2001 President's
    request of $447.1 million for the Earth Observing System, the
    centerpiece of the Earth Science Enterprise. This amount represents a
    newly structured budget so is difficult to compare with fiscal year
    2000 figures. EOS is a program of multiple spacecraft, technology, and
    interdisciplinary scientific investigations that provide data critical
    to our understanding of global climate change. The request will allow
    NASA to proceed with the launching of the Aqua satellite, which will
    provide highly accurate atmospheric temperature and humidity
    measurements necessary for improved climate change research. Other EOS
    satellites will provide for improved measurements of ice sheet
    topography, and of ocean wind velocity.
    EOS chemistry mission (CHEM)
        We urge the Committee to support the proposed fiscal year 2001
    President's request of $110.3 million for the EOS Chemistry Mission
    within NASA's Earth Science Enterprise. This appears to be a decrease
    in funds from the fiscal year 2000 amount of $124.7 million for this
    mission that focuses on the impact of greenhouse gases on the global
    climate. As CHEM nears launch, the testing and calibration of
    instruments is crucial to ensure a successful mission. Therefore, we do
    not fully understand the proposed decrease in funding and are concerned
    given the stage of mission development and CHEM's importance to
    scientific, social, and policy issues.
        The CHEM objective is to study the chemistry and dynamics of the
    Earth's atmosphere from the ground through the mesosphere for the
    purpose of answering critical questions such as: Is the Earth's upper
    atmosphere ozone layer recovering? Is air quality in the Earth's lower
    atmosphere deteriorating? How is the Earth's climate changing? The
    processing and assimilation of the data that hold the answers to these
    questions reside with the EOS Data Information Systems (EOSDIS). As
    stated below, to make the CHEM mission yield all possible scientific
    results, the EOSDIS budget must be able to support making the CHEM data
    available and useful to researchers.
    EOS data information systems (EOSDIS)
        We urge the Committee to support the fiscal year 2001 President's
    request of $252.0 million for the EOS Data Information System. This
    number appears to be almost $10 million below fiscal year 2000. Again,
    we have questions concerning the efficacy of a reduction in budget
    given the importance of the EOSDIS work. EOSDIS ensures that data from
    Earth Science missions are captured, processed into useful information,
    broadly distributed, and archived for future use. These data are
    critical to our understanding of global climate change and are of great
    importance to the atmospheric sciences community of researchers. Cuts
    in the EOSDIS program that could jeopardize the processing of data
    concern us because they put at risk mission research results. For
    example, if EOSDIS lacks sufficient funding to process data from CHEM
    instrument programs (see above), then the use of data for research
    analysis will be delayed rendering the mission of far less immediate
    value than intended originally. The country has made a wise, major
    investment in gathering these data. Access to them should not be
    minimized or compromised by cutting budget corners.
    EOS follow-on
        We urge the Committee to support the fiscal year 2001 President's
    request of $120.6 million for EOS Follow-On. This is a $96.2 million
    increase from the fiscal year 2000 amount of $24.4 million. The EOS
    Follow-On account provides funding for initiation of the science
    implementation plan (now under development) that will drive the
    selection of future EOS missions. EOS Follow-On will support the
    development and testing of new technologies that will support future
    missions and help reach the objectives of the implementation plan.
    While the Earth Science Enterprise is launching several missions over
    the next three years, work will need to proceed in fiscal year 2001 to
    define post-fiscal year 2002 efforts that will ensure future readiness
    for the next series of launches. Planned effectively, this next series
    will complement and enhance the results of the first series and
    contribute to the achievement of the long range goals of the science
    implementation plan. The future of EOS and Earth Science Enterprise
    missions resides with this Follow-On work.

                        AERO-SPACE TECHNOLOGY ENTERPRISE
    Aviation safety program
        We urge the Committee to support the fiscal year 2001 President's
    request of $70.0 million for the Aviation Safety Program (AvSP) that
    resides within NASA's Aero-Space Technology Enterprise. This is an
    increase of $5.6 million over the fiscal year 2000 amount of $64.4
    million. The world-wide demand for air travel is expected to more than
    double in less than two decades. If the current accident rate remains
    stable, the increased traffic volume could result in approximately one
    major accident per week. This issue is addressed by AvSP the goal of
    which is to develop and demonstrate technologies that contribute to a
    reduction in aviation accident and fatality rates by a factor of five
    by the year 2007.
        According to the National Transportation Safety Board,
    approximately 35 percent of aviation fatalities occur in weather-
    related accidents. The AvSP program, Weather Accident Prevention
    (WxAP), develops and supports the implementation of technologies to
    reduce fatal aviation accidents caused by weather hazards. NCAR's
    Research Applications Program is supported through WxAP in its efforts
    to disseminate weather information directly to pilots as they fly; and
    in its computer modeling research to detect, characterize, and forecast
    turbulence, and to mitigate the damaging and sometimes fatal effects of
    severe turbulence. We urge the Committee to support full funding for
    Weather Accident Prevention within NASA's Aviation Safety Program.
        On behalf of the UCAR community, I want to thank the Committee for
    the important work you do for U.S. scientific research, education, and
    training. We appreciate your attention to the recommendations of our
    community concerning the fiscal year 2001 budget for NASA.
                                     ______

                Prepared Statement of the University of Maryland

        Thank you for the opportunity to address the House VA, HUD, and
    Independent Agencies Appropriations Subcommittee. I represent the Space
    Science Working Group (SSWG) of the Association of American
    Universities, whose members include several hundred space scientists at
    approximately fifty universities nationwide. SSWG scientists work in
    all three NASA science areas (Office of Space Sciences, OSS; Earth
    Science Enterprise, ESE; Office of Life and Microgravity Sciences and
    Applications, OLMSA), building instruments for NASA missions, carrying
    out experimental and theoretical investigations, and bringing hands-on
    experience of exciting NASA science to graduate and undergraduate
    students.
        This past year saw the successful initiation of a number of
    missions, spanning the range from the Chandra and Terra observatories
    to middle and small size missions such as IMAGE, FUSE, SWAS, and
    QuikSCAT. More important for the science community and public has been
    the harvest of new views of our universe, from the striking Chandra X-
    ray pictures of gigantic stellar explosions, to the seismic probing of
    our Sun's interior by SOHO, and, most recently, the near-science
    fiction close-up pictures of an asteroid being orbited by the NEAR deep
    space probe.
        Along with these successes has been a string of painful mission
    failures, especially in the Mars program. Difficult as these have been
    for NASA as an agency, we point out also the tremendous loss these
    failures impart on scientists who have spent years on their space
    experiments only to have the payoff of knowledge denied. NASA is
    unflinchingly studying these failures, has commissioned excellent
    groups (the Young, Stephenson, and Spear panels) to study both the
    hardware and management issues involved, and is already taking
    specific, and sensible actions get the program back on track. Overall,
    the approach being taken is to fine-tune the system, rather than embark
    on a totally new approach. We believe this is the right strategy.
        After a number of years of flat or declining budgets, the fiscal
    year 2001 budget proposal shows significant growth for NASA, which is
    continued in the 5-year projected plan. We believe that this signal of
    support is appropriate for the NASA science offices that are carrying
    out world-class science programs with missions costing a fraction of
    the estimates of a decade ago. We support this proposed budget and urge
    you to approve it. Of special importance in the proposed budget are:
      --several new science initiatives, particularly ``Living with a
            Star'', along with some smaller, but especially important
            programs,
      --orderly implementation of missions already underway, and
      --shoring up of the Mars program with additional resources.
        Areas of concern to us include:
      --continuing erosion of the Research & Analysis and Data Analysis
            funds, and
      --International Traffic in Arms Regulations (ITAR).
                         office of space science (oss)
    Strategic planning and peer review
        The fiscal year 2001 OSS budget shows approximately 10 percent
    growth over the prior year, with a plan for further increases in the 5-
    year plan. The tremendous scientific successes in the Office of Space
    Science have been the result of a strategic planning process that
    extracts the best ideas from the nation's space scientists, and
    coordinates them into a compelling program that seeks to understand the
    universe, and our place in it. Large amounts of media coverage show
    that the public, as well as the scientist, share the interest and
    excitement of this research. OSS selects the best peer-reviewed
    proposals to carry out its plan. This past year OSS completed its
    triennial update of its strategic plan, adjusting it to take account of
    recent discoveries. The new plan is excellent, and we strongly support
    its implementation.
    New initiatives
        The major initiative in the fiscal year 2001 budget is the ``Living
    with a Star'' program, a multi-year effort to carry out research to
    understand solar activity and its impact on Earth. In recent years the
    SOHO observatory has peered into the Sun's interior using seismic
    waves, giving previously unimaginable insights into the complex
    subsurface motions of the plasma. These subsurface motions stress huge
    magnetic loops that poke far above the Sun's surface; the stresses
    occasionally cause the loops to rupture, releasing enormous amounts of
    energy and pushing solar material into space at one to two million
    miles per hour. A fleet of other spacecraft has observed these ejecta,
    tracked them as they move outwards, and measured the effects of the
    ones that collide with the Earth's magnetic shield causing electrical
    disruptions on spacecraft and ground systems. While we can describe
    this sequence of events, we don't understand the science. Living with a
    Star addresses this issue by observing the Sun from all directions and
    globally monitoring the effect of solar explosions on the Earth, which,
    coupled with a vigorous theoretical program will make it possible to
    piece the puzzle together. This will set the stage for longer term
    warnings of solar variability and explosive events that can affect
    terrestrial power and communication systems, as well as civilian and
    military space assets.
        Another new initiative of special interest and impact in the
    university community is the Discovery Micromissions, smaller versions
    of the highly successful Discovery series patterned on the Small
    Explorer program. Launched by piggy-back rides, this innovative line
    promises to encourage new ways to explore the solar system in an
    especially cost-effective manner.
    Research and analysis
        We wish to underscore the role of the Research and Analysis (R&A)
    and Suborbital program lines of the NASA budget in seeding the
    scientific vitality of the agency. Largely in the form of small grants
    to academic institutions, these efforts build upon the results of
    completed missions, and lay the groundwork for future mission concepts.
    They are also the sole means by which young researchers can enter space
    science research. Including laboratory studies, theory, and ground-
    based observations, this work allows the agency to strengthen the
    science framework around which missions are designed.
        Indeed key technologies for space missions are routinely pioneered
    in the R&A and suborbital program where high risk ventures are
    possible. Key detector elements in the Chandra and SOHO observatories,
    for example, were incubated in the suborbital program. While not
    explicitly connected with individual missions, this work helps us
    creatively conceptualize new missions. In this way, the R&A effort
    works towards long range goals in the agency strategic plans.
        A notable strength of the NASA R&A effort is that the individual
    pieces are small and flexible enough that they can be less schedule-
    driven than major missions, and more accommodating toward science
    goals. They also provide opportunity for student involvement and
    ownership in pursuits that lead to future missions. Peer reviews,
    fierce competition, and short grant duration all combine to guarantee
    that the selected programs are regularly ``scrubbed'' for content, and
    efficiently executed.
        In recent years, the R&A line has suffered significant erosion,
    sapping the strength of the future program. We urge an increase in the
    R&A line to offset past losses, followed by inflationary increases in
    future years.
    Failure of CSOC to achieve savings in mission operations
        In the early and mid 1990s, NASA management began a vigorous effort
    to cut the costs of operating its flying missions, both to achieve
    greater efficiency, and to allow handling of the anticipated much
    larger number of small missions in its new mode of research. Very
    significant savings were achieved. In January 1999 the agency
    implemented the Consolidated Space Operations Contract (CSOC) in an
    attempt to further reduce operations costs. While missions have been
    flown safely under CSOC, the cost savings have not materialized, and
    indeed all indications are that costs will in fact increase under CSOC.
    This is a grave issue for the science community, since these increased
    costs are expected to impact the support available for analysis of data
    from the missions, thereby directly reducing the science payoff from
    our program.

                         EARTH SCIENCE ENTERPRISE (ESE)
        The ESE budget proposal for fiscal year 2001 is essentially level
    due to normal rampdown of hardware development projects that are
    complete, or are nearing completion. This past year, the launch of
    Landsat 7 and the flagship Terra mission together with the
    implementation of EOSDIS has placed us on the threshold of a new era in
    the Earth studies. There were also a number of smaller missions
    launched, notably the rapidly-developed QuikSCAT to measure winds over
    the ocean. The program in the fiscal year 2001 budget includes launch
    of the 2nd EOS flagship mission, Aqua, later this year, and provides
    for continued orderly implementation of the EOS program with the Chem
    mission (2002 launch), and a number of smaller missions.
        We especially applaud the $120.4 million Earth Probe series; this
    is a line of small, rapid development missions that can provide crucial
    flexibility and quick-response studies that cannot be accommodated on
    the flagship missions.
        As is the case in the Office of Space Science, inadequate funding
    of the R& A components of the Earth Science program continue. In
    addition, this already strained program is serving as a source of
    revenue to solve some other budgetary problems in the ESE. We urge that
    ESE R&A program be strengthened, and shielded from undermining by
    damaging budgetary raids.
             life and microgravity science and applications (olmsa)
        The fiscal year 2001 proposal for OLMSA shows a 10 percent increase
    over fiscal year 2000, which should help provide relief for a seriously
    beleaguered science program. In recent years the OLMSA science program
    has been decimated by slips in the Space Station schedule that have
    opened an ever-widening gap between the last planned OLMSA Shuttle
    missions and the initiation of research on the Space Station. With no
    planned missions in this gap, the OLMSA science community was grounded
    at the very time its flight research program should have been
    strengthened in preparation for Space Station. The program has
    nevertheless achieved some commendable goals, for example, in the
    efforts to transfer space-based human support technology program
    developments to the commercial agricultural and environmental business.
        Additionally, we are heartened by the agency proposal to add an
    OLMSA research mission in early fiscal year 2002, and to increase mid-
    deck locker opportunities for this community. We appreciate
    Congressional support in this area. Only by strengthening the OLMSA
    community do we keep alive our prospects of reaping much of the promise
    of Space Station research. We commend plans in the proposed budget for
    initiating limited research on the Space Station, and urge that this
    effort be initiated at the earliest possible time, sustained, and
    broadened as construction of the Space Station allows.

                                 GENERAL ISSUES
    Space grant colleges
        The SSWG has often pointed out the important outreach role space
    science research plays. A glance at news media, educational TV, or the
    crowds at the Air and Space Museum makes it clear that this high
    technology adventure engages young and old alike. Probably more than
    any other area of modern research, space science has the capacity to
    interest young people in the hard questions of research, and to focus
    their interests into pursuing technical studies in school that prepare
    them for workplace of tomorrow. The Space Grant College system has
    played an important and successful role in this outreach to elementary
    and secondary school students, but its budget has lagged in recent
    years. We point out that matching funds result in excellent leverage in
    this program, and we applaud the agency's proposal for a $5.6 million
    increase in Space Grant.
    International traffic in arms regulations (ITAR)
        A major issue that has recently surfaced in space science research
    is the impact of the ITAR. These regulations have been subject to
    increasingly tight interpretation in the past months, with probably
    unintended yet nevertheless dire implications for space science
    research. Science is an international activity in general, and space
    science in particular has long thrived through collaboration with
    foreign-born colleagues. Under current interpretations of ITAR,
    however, foreign colleagues are being barred from discussions of plans
    for missions on which they are flying experiments, and university
    researchers with foreign collaborators are scrambling to get advice
    from their Deans regarding rules for licenses and registration of their
    universities as Munitions Manufacturers.
        These restrictions on scientists carrying out unclassified research
    on civilian spacecraft do not serve any useful national security
    purpose. Carrying out spaceflight missions is a difficult task for
    researchers in and of itself; carrying out this activity in a thicket
    of legal restrictions with threats of huge personal fines is
    impossible. It will shut off collaboration with our foreign colleagues,
    causing U.S. researchers to ``go it alone'' in space research, to
    everyone's loss. We understand that the Space Studies Board at the
    National Academy of Sciences has expressed concern about this issue,
    and is considering convening a government and university forum on the
    topic. While recognizing that ITAR is not a budget issue, we
    nevertheless ask for your support in clarifying that these ITAR
    restricitons are not applicable to civilian, unclassified, fundamental
    space science research. Thank you for your attention to these matters.
                                     ______

                    DEPARTMENT OF HEALTH AND HUMAN SERVICES

                Agency for Toxic Substance and Disease Registry

     Prepared Statement of the Association of Minority Health Professions
                                    Schools

        Mr. Chairman, thank you for the opportunity to express the views of
    the Association of Minority Health Professions Schools (AMHPS).
        I am Ronny B. Lancaster, M.B.A., J.D., Senior Vice President for
    Management and Policy at the Morehouse School of Medicine, and
    President of the Association of Minority Health Professions Schools.
    AMHPS is an organization which represents twelve (12) historically
    black health professions schools in the country. Combined, our
    institutions have graduated 60 percent of the nation's African-American
    pharmacists, 50 percent of the African-American physicians and
    dentists, and 75 percent of the African-American veterinarians, indeed
    a significant number of minority health professionals in this country.
        The AMHPS institutions have also educated a disproportionate share
    of the small number of African-Americans receiving doctorates in the
    biomedical and other sciences. According to the Department of
    Education, of the 4,645 PhDs awarded in the biological and life
    sciences in the 1994-1995 school year, only 87 PhDs were granted to
    African-Americans; and in the health professions and related sciences
    among the total 2,069 degrees conferred, only 90 were awarded to
    African-Americans. The majority of these degrees were granted by
    Historically Black Colleges and Universities. In 1989 over 23 percent
    of the doctoral degrees awarded to African-Americans were by Meharry
    Medical College. Since 1975, over 10 percent of all doctorates in the
    biomedical sciences awarded to African-Americans have been awarded by
    Meharry's School of Graduate Studies. In 1995, Meharry Medical College
    graduated 6 PhDs in pharmacology and 1 PhD in medicinal chemistry. The
    numbers may seem small, but they are a significant representation of
    the contributions made by our institutions to the education of African-
    Americans at the graduate level in the biomedical sciences.
        AMHPS has two major goals (1) to improve the health status of all
    Americans, especially African-Americans and other minorities; and (2)
    to improve the representation of African-Americans and other minorities
    in the health professions. We are working toward achieving this goal by
    seeking to strengthen our institutions and fortify other programs
    throughout the nation that will improve the role of minorities in the
    provision of health care and research.

              THE AGENCY FOR TOXIC SUBSTANCES AND DISEASE REGISTRY
        Congress created ATSDR to implement the health-related sections of
    law that protect the public from hazardous wastes and environmental
    spills of hazardous substances. The mission of ATSDR is to prevent
    exposure and adverse human health effects and diminished quality of
    life associated with exposure to hazardous substances from waste sites,
    unplanned releases, and other sources of pollution present in the
    environment.
        In June 1985, ATSDR was formally organized to begin, in conjunction
    with the Environmental Protection Agency (EPA), the Centers for Disease
    Control (CDC), (now the Centers for Disease Control and Prevention),
    and the National Institute of Environmental Health Sciences (NIEHS),
    addressing the mandates of CERCLA, one of the most challenging and
    innovative environmental laws relating to public health.
        Following the 1986 reauthorization of Superfund under the Superfund
    Amendments and Reauthorization Act (SARA), the Agency received major
    new mandates. SARA directed that ATSDR, in cooperation with the EPA,
    prepare a list of the substances most commonly found at waste sites on
    the National Priorities List. ATSDR was also directed to prepare
    toxicological profiles for each of the substances on that list, and to
    examine, summarize, and interpret the human health significance of the
    scientific data available for these substances. In cooperation with the
    National Toxicology Program (NTP) and EPA, ATSDR was also required to
    initiate research to fill key data needs identified in the substance-
    specific toxicological profiles. This research was primarily to improve
    the information base needed to assess the health concerns of people
    exposed to hazardous substances. SARA also broadened ATSDR's
    responsibilities in the areas of public health assessments,
    establishment and maintenance of toxicologic databases, information
    dissemination, and medical education.
        In 1992, ATSDR identified 117 priority data needs for 38 hazardous
    substances. A significant portion of these key data needs have been
    referred to EPA to be filled under the Toxic Substances Control Act
    authorities. Some data gaps will be filled voluntarily by private
    industry through agreements with ATSDR, and some key human health
    research needs will be filled by research mandated by the Great Lakes
    Critical Programs Act.
        Key data gaps are also being filled with funding from ATSDR through
    the research cooperative agreement with the Minority Health Professions
    Foundation (MHPF). As directed by Congress, these resources support
    research conducted by academic institutions in the Association of
    Minority Health Professions Schools (AMHPS). The substance-specific
    investigations being conducted by AMHPS institutions will improve the
    knowledge base necessary to understand the linkage between exposure to
    hazardous substances and human health as well as reduce the
    uncertainties of public health assessments.
        Mr. Chairman, the administration's budget proposal for fiscal year
    2001 of $64 million would severely cripple ATSDR's ability to carry out
    its important activities. AMHPS recommends an appropriation of at least
    $70 million for ATSDR in fiscal year 2001, which is the current funding
    level.

       THE ATSDR/AMHPS COOPERATIVE AGREEMENT ON ENVIRONMENTAL HEALTH AND
                              TOXICOLOGY RESEARCH
        AMHPS is recommending a fiscal year 2001 funding level of $4
    million for the ATSDR/MHPF Cooperative Agreement on Environmental
    Health and Toxicology Research. The important work being conducted
    through this cooperative agreement has real life implications that
    urgently need to be addressed. For example, the National Health and
    Nutrition Examination Survey data indicates that lead poisoning impacts
    poor children at eight times the rate of non-poor children, and that
    African-American children living in pre-1946 constructed housing suffer
    a lead poisoning rate of nearly 22 percent.
        In partnership with ATSDR, the Minority Health Professions
    Foundation is engaged in numerous public health research activities
    designed to improve the health status of our nation's minority and
    medically underserved communities. These activities include:
      --improving the scientific knowledge base for substance-specific risk
            assessments.
      --improving the knowledge base for ATSDR public health assessments.
      --addressing community health concerns in medically underserved
            communities.
      --promoting community education and outreach in these areas.
      --advancing state-of-the-art science at minority institutions.
        In addition to the specific issues outlined above, this cooperative
    agreement is serving as a national model for collaboration between a
    federal agency and institutions with varying degrees of expertise at
    diverse locations. We have indeed been able to direct the cooperative
    agreement's limited resources to the institution with the greatest
    ability to study a problem and offer a potential intervention strategy.
    Collectively, we are much stronger than our individual institutions and
    together MHPF and ATSDR have consistently shown an ability to apply our
    varying degrees of expertise in the most efficient manner.
        Mr. Chairman, we are very proud of the accomplishments of this
    program and encourage the subcommittee to support both ATSDR overall
    and the ATSDR/MHPF cooperative agreement at the recommended levels.
    Thank you very much for the opportunity to submit testimony.

                                 SUMMARY POINTS
        The Agency for Toxic Substances and Disease Registry (ATSDR) is
    performing critical work in the field of environmental and
    toxicological studies that has a profound impact on public health. In
    order to carry out the level of activity that is called for in its
    mission statement, AMHPS recommends an appropriations of at least $70
    million for ATSDR in fiscal year 2001, which is the current funding
    level.
        The cooperative agreement that exists between the Minority Health
    Professions Foundation and ATSDR to address the consequences of
    exposure to hazardous substances among at-risk population groups in
    medically underserved communities is a public health and toxicology
    success story that deserves continued support by this subcommittee at a
    level of $4 million in fiscal year 2001.
                                     ______

                 CORPORATION FOR NATIONAL AND COMMUNITY SERVICE

       Prepared Statement of the American Association of Retired Persons

        AARP appreciates this opportunity to comment on funding next year
    for programs which affect the lives of low-income older Americans. We
    would also like to express our appreciation for the Subcommittee's past
    efforts in this regard. Given that poverty in old age is likely to be
    permanent, continued support of such programs--notably Section 202
    Supportive Housing for the Elderly--remains essential. This support is
    needed now more than ever, in light of limitations on spending.
        Our recommendations can be summarized as follows:
        Secs. 202 and 811.--provide Administration's recommended increases
    for Section 202 Low Income Elderly Housing (from $710 million to $779
    million) and Section 811 Housing for Disabled Persons (from $201
    million to $210 million);
        Alternatives for younger persons with disabilities.--make available
    to public housing authorities the resources necessary to develop and
    adapt alternatives to elderly housing for younger individuals with
    disabilities. Set aside at least 5,000 vouchers for persons with
    disabilities and target them to housing authorities most affected by
    ``mixed population'';
        Housing Counseling.--provide Administration's recommended increase
    for Housing Counseling (from $15 million to $24 million), a program
    mandated to provide counseling to reverse mortgage consumers;
        Supportive Services.--at a minimum, preserve $55 million earmark
    for public housing supportive services which funds Congregate Housing
    Services Program and service coordinators; and
        Corporation for National and Community Service.--provide sufficient
    funds for the Corporation for National and Community Service.

                        GROWING NEED FOR ELDERLY HOUSING
        The seismic growth in the nation's older population expected over
    the next fifty years presents formidable challenges to policymakers. By
    2050, as many as one in five Americans will be elderly, with the
    population aged 65 and over having risen to a staggering 80 million.
    Households headed by those age 75 and over--the ``oldest old''--
    represent the fastest growing segment of the older population. By 2010
    they will account for nearly half of the growth of older Americans.
        These demographic changes are significant to planning for the
    future housing needs of low-income older Americans, particularly
    regarding supportive services for the frail elderly. These individuals
    are much more likely to be living alone on meager incomes and to suffer
    from multiple chronic diseases. Meeting the challenge calls for reform
    of existing federal housing programs and collaboration with other
    agencies such as the Department of Health and Human Services.
        The declining private market for affordable housing has increased
    the importance of federally subsidized housing for older renters with
    low incomes. According to analyses of American Housing Survey data,
    roughly one-fourth of the 5.2 million households receiving federal
    housing assistance are headed by older persons who occupy more than 1.4
    million rental units. Most of this assistance comes through the
    Department of Housing and Urban Development. Despite the substantial
    portion of housing occupied by older persons, the Department has no
    office or personnel dedicated to developing a comprehensive housing
    policy for this population.
        Two critical factors differentiate the housing needs of older
    persons from those who are younger. The first difference relates to
    physical environment. A program like HUD's Section 202 Supportive
    Housing for the Elderly is tailor made in this regard. Features include
    nonskid flooring, safety grab bars and wider doorways to accommodate
    wheelchairs.
        The second difference is age-related in that older persons tend to
    remain longer in their homes. Many now in elderly housing are longtime
    residents who have simply ``aged in place'' with their communities.
    These older and frailer residents require increasingly intensive levels
    of personal assistance to remain independent. HUD reports that the
    average age of Section 202 Housing residents is 80 and will continue to
    rise. Further, the agency notes that fifteen percent of elderly
    residents in public housing are headed by someone over age 85, compared
    with about nine percent of elderly households nationwide.
        Formulating a comprehensive elderly housing policy must include
    collaboration with the private sector. It is critical that relevant
    parties sit at the table and join in the national discussion. In this
    regard, AARP is greatly encouraged by the two housing commissions
    authorized last year in Public Law 106-74, the fiscal year 2000 VA-HUD
    Appropriations Act.

                 SECTION 202 SUPPORTIVE HOUSING FOR THE ELDERLY
        The Administration proposes an overall increase of $69 million for
    Section 202 Elderly Housing (from $710 million to $779 million). Of the
    recommended increase, $19 million would be used to augment new
    construction under the core program (from $610 million to $629
    million). The remaining $50 million would be used to implement the
    Administration's proposed initiative to construct new assisted living
    units under Section 202. All other Section 202 activities would be
    maintained at current funding levels next year. These are: $50 million
    for service coordinators/congregate services and $50 million for
    conversion of existing Section 202 projects to assisted living
    facilities.
        Section 202 Supportive Housing for the Elderly was created in 1959
    and is the only federal housing program specifically designed to
    address the physical needs of older persons. Funds are used to build
    user-friendly apartments at affordable rents with features such as
    nonskid floors and grab bars--features that prevent serious injuries
    from falls. Some Section 202 projects also provide supportive services
    such as meals and light housekeeping.
        Housing affordability remains a serious problem for millions of
    vulnerable American families, despite the nation's robust economy. For
    low-income older persons the problem is worse because poverty tends to
    be irreversible at old age. Demand for such housing regularly exceeds
    supply. More than eight applicants are waiting for every Section 202
    vacancy that occurs. Two years ago, the average vacancy rate was a low
    1.5 percent. AARP strongly urges adoption of the Administration's
    proposed $19 million increase in Section 202's core construction
    program (from $610 million to $629 million).
        Included in Section 202's proposed budget is appropriations bill
    language designed to build upon the program's new assisted living
    component. This component was enacted last year and authorizes the
    conversion of existing projects to assisted living. The
    Administration's proposal now pending before the Appropriations
    Committee authorizes new construction of assisted living facilities. To
    fund this provision, an additional $50 million is recommended in
    Section 202's budget and is earmarked accordingly in the appropriations
    bill.
        Assuming positive action regarding Section 202's proposed
    initiative, funds would be provided next year to build new assisted
    living units in addition to the construction of regular Section 202
    housing units. The Administration is to be commended for its efforts to
    make assisted living facilities available to more low-income elderly
    Americans. However, we are concerned about the impact this new proposal
    will have on Section 202's core construction program, particularly with
    respect to the availability of future resources. The need for assisted
    living facilities in no way diminishes the acute housing problems faced
    by other low income older persons. Given the enormous size of
    tomorrow's elderly population, there will be a continuing strong demand
    for both types of housing.
        Funds for service coordinators and congregate services under
    Section 202 are level funded for next year at a total of $50 million.
    Service coordinators play a crucial role in meeting the needs of
    elderly persons. Many older individuals are capable of living
    independently in their own homes but have greater needs for services. A
    coordinator links residents with relevant supportive services provided
    by community agencies. Congregate housing services help prevent the
    premature institutionalization of elderly and disabled residents.
    Approximately 4,000 tenants are currently served in thirteen projects.
        AARP recommends that a minimum of 5,000 vouchers be designated to
    fund the tenant-based assistance program for younger persons with
    disabilities authorized in the Housing and Community Development Act of
    1992. We further recommend that these vouchers be targeted to public
    housing authorities (PHAs) which have been most affected by problems
    that have occurred as the result of housing the younger disabled with
    the elderly. PHAs need these resources along with additional
    development and modernization funds in order to meet the challenge of
    providing real housing alternatives and choices to younger persons with
    disabilities.

               PROMOTING THE INDEPENDENCE OF FRAIL OLDER PERSONS
        At a minimum, AARP recommends preserving the $55 million funding
    level earmarked for public housing supportive services. These funds
    support congregate housing services and also service coordinators which
    are invaluable to those in elderly projects.
        Service coordinators have proven their value as part of the
    management team in elderly housing. The need for such staff is
    especially acute in public housing projects for the elderly, which
    often include large numbers of residents with mental and physical
    disabilities. AARP believes these and congregate housing costs should
    be an integral part of a project's operating budget.
        AARP urges adoption of the Administration's recommended increase
    for the Housing Counseling Assistance Program (from $15 million to $24
    million). This program requires independent counseling for those
    elderly homeowners who seek FHA-insured reverse mortgages. These
    mortgages allow older homeowners who are ``house rich but cash poor''
    to tap into the equity in their homes to pay for meeting basic needs.

                 CORPORATION FOR NATIONAL AND COMMUNITY SERVICE
        AARP recommends that sufficient resources be made available for
    programs administered by the Corporation for National and Community
    Service. Older Americans are not only participants in programs like
    AmeriCorps, but recipients of its community-based services as well. For
    example, persons participate in programs as mentors and tutors to
    youngsters in schools across the nation. These valuable activities
    foster civic responsibility and strengthen the ties that bind us as a
    people.
        Thank you again for this opportunity to comment on some of the
    Administration's budget proposals for fiscal year 2001.
                                     ______

                  COMMUNITY DEVELOPMENT FINANCIAL INSTITUTION

        Prepared Statement of the National Community Capital Association

        On behalf of National Community Capital Association, I am writing
    to urge you to support the full $125 million appropriation for the
    Community Development Financial Institutions (CDFI) Fund for fiscal
    year 2001. My name is Mark Pinsky and I am the President and Chief
    Executive Officer of National Community Capital Association
    headquartered in Philadelphia, Pennsylvania.
        National Community Capital Association is a national financial
    intermediary comprised of 52 member community development financial
    institutions that lend and invest in many of the nation's poorest
    urban, rural, and reservation-based communities. National Community
    Capital also represents more than 215 Associates-organizations and
    individuals that support our mission to act as a catalyst for lasting
    social, economic, and political justice by helping institutions and
    individuals provide capital that increases resources and opportunities
    for economically disadvantaged people and communities.
        For the past five years, the CDFI Fund has been critical to the
    boom in the community development finance industry. The CDFI Fund has
    primed the pump for CDFIs to leverage, loan, and invest nearly $4
    billion in our nation's poorest communities. These CDFIs have financed
    small businesses, childcare facilities and charter schools-creating
    jobs and supporting microentrepreneurs-and developed affordable housing
    and community facilities.
        The CDFI Fund bolsters economic development by investing in and
    assisting CDFIs-financial intermediaries that have community
    development as their primary mission. With capital from primarily
    private-sector sources, CDFIs serve as bridge institutions that bring
    unconventional borrowers and consumers to conventional financial
    services and excel in using sound business practices to leverage
    conventional, private financing into poor communities. At a time when
    government's commitment and ability to serve low-income and low-wealth
    people is rapidly declining, CDFIs represent an important and unmatched
    combination of entrepreneurial innovation and public-purpose finance.
        The CDFI Fund has been productive and successful in issuing awards
    and has built a balanced national portfolio of urban and rural and
    large and small CDFIs with geographic diversity. The Fund has certified
    382 organizations in 47 states and made awards in 43 states, Puerto
    Rico, and the District of Columbia. Increasingly, demand for the Fund's
    resources is great-in the past five rounds of funding, applicants to
    the Fund's Core Component have requested more than five times the
    available funding.
        For a decade, National Community Capital has surveyed its member
    CDFIs on capitalization, impact, trends, and growth \1\. Based on our
    longitudinal data, two things are clear-the CDFI industry is growing
    stronger and expanding at an unprecedented pace and the CDFI Fund has
    played a major role in this growth of the industry.
    ---------------------------------------------------------------------------
        \1\ National Community Capital's Charting CDFI Progress, September
    1999.
    ---------------------------------------------------------------------------
        The most significant contribution of this increase in net assets
    over the last two years has been the CDFI Fund. Through 1998, the fund
    awarded $110 million in equity to CDFIs, of which $38 million went to
    CDFIs in our sample. The fund requires that every dollar granted must
    be matched from another source, meaning it has helped leverage an
    additional $110 million in equity to the industry. The influx of equity
    capital from the Fund and other sources has been a significant trend in
    the industry for several years, contributing to the overall increase in
    equity capital for the Member CDFIs as a percentage of total capital
    from 12 percent in 1990 to 37 percent in 1998.
        Why is equity capital important? Equity capital is the engine
    driving institutional strength and permanence for CDFIs by:
      --Enabling CDFIs to leverage more debt and thus increasing the amount
            of loan capital several-fold, which in turn fuels growth in
            lending and investment into distressed communities;
      --Promoting higher self-sufficiency through lower cost of funds and
            higher earned income;
      --Allowing CDFIs to take more risks, which helps them to serve their
            markets better with more flexible products.
        The CDFI Fund is a model program that has been innovative,
    investment-oriented, and business-like in its funding. Rooted in the
    bipartisan principles of building private markets, creating
    partnerships, and providing the tools to enable poor individuals and
    communities to become self-sufficient stakeholders in their own future,
    the Fund invests in building sustainable institutions, not just
    building projects. With the Fund's critical capital and support, CDFIs
    can better respond to their markets by increasing their ability to
    manage risk, to enhance capacity, and to be flexible in their
    financing.

                                RECOMMENDATIONS
        National Community Capital sees two important ways to further
    strengthen the CDFI Fund's work.
    Raise the funding cap
        National Community Capital fully understands the CDFI Fund's need
    and desire to get funding to the maximum number of economically
    disadvantaged people and communities. For all the good work that the
    CDFI industry has done, however, many communities still have no access
    to community development financing. The success of the Fund ought to be
    measured by considering the number of poor people served rather than
    the number of organizations.
        As the CDFI industry grows, performance-driven CDFIs continue to be
    the most effective at serving economically disadvantaged people and
    communities. When effective CDFIs are forced to sit out a CDFI Funding
    round because they've reached the $5 million over 3 year funding cap-
    essentially penalizing the CDFI for their excellent performance,
    economically distressed communities and poor people suffer needlessly.
    As a way to increase the much-needed flow of the Fund's capital into
    communities-without sacrificing quality, National Community Capital
    strongly recommends that the Fund raise the funding cap.
        An increase in the funding cap from $5 million over three years to
    $10 million over three years would allow the growing number of CDFIs
    that could effectively use additional capital from the Fund to serve
    more economically disadvantaged people to do so. Currently, National
    Community Capital and ten of its Members are at or near the cap. These
    high-performing CDFIs have the capacity and reach into down markets but
    are constrained by the cap from meeting the growing demand for their
    financing and development services.
        National Community Capital believes the cap should be raised for
    CDFIs that: (1) are in compliance with their performance measures, and
    (2) have demonstrated that at least 75 percent of their funds, on a 12
    month average, are invested in the communities they seek to serve.
    Adopt the small and emerging CDFI access program (SECAP)
        We applaud the Fund's efforts to meet the growing demand for its
    programs and its plans to better serve small, emerging and rural CDFIs
    at all stages of organizational development, of all asset sizes, in all
    areas of the nation, and serving all types of populations (i.e., rural
    and urban). We echo the sense of the Congress in the fiscal year 2000
    Appropriations Conference Report and encourage the Fund to
    institutionalize a Small and Emerging CDFI Access Program (SECAP) to
    nurture this blend of CDFIs.
        Since 1996, thirty-seven National Community Capital Members have
    been awarded more than $76 million by the CDFI Fund Program. National
    Community Capital Members are performance-driven CDFIs that, as of
    December 31, 1998, have provided more than $1.3 billion in financing
    that has helped to create more than 66,000 jobs and more than 86,000
    units of affordable housing in low-income communities. Since 1986,
    National Community Capital Members have leveraged more than $4 billion
    in public and private investment into some of the nation's poorest
    communities, with a loan loss rate of only 1.7 percent.
        On behalf of National Community Capital, its Board and its
    membership, I urge you to vote in favor of a $125 million appropriation
    for the CDFI Fund. We appreciate the opportunity to comment.
                                     ______

    Prepared Statement of the Coalition of Community Development Financial
                                  Institutions

        Chairman Bond, Senator Mikulski, and distinguished members of the
    Subcommittee, thank you for the opportunity to submit testimony on the
    President's budget request for the Community Development Financial
    Institutions (CDFI) Fund. The President has requested $125 million for
    the CDFI Fund in fiscal year 2001. The CDFI Coalition, representing
    more than 465 CDFIs working in all 50 states, urges you to support the
    President's full request. This appropriation will enable the CDFI Fund
    to support institutions across the country engaged in valuable
    activities to benefit underserved Americans.
        We urge your support of the full appropriation for three key
    reasons:
      --The CDFI Fund has responded to key market needs identified by the
            CDFI industry( financial and human capital.
      --The organizations the CDFI Fund supports have made significant
            contributions to foster economic opportunity in distressed
            communities.
      --Demand for the Fund's resources has been oversubscribed since the
            inception of the program. This demand will only increase due to
            the rapid growth of the industry and the CDFI Fund's outreach
            to rural, Native American and other fledgling CDFIs.
        The CDFI Coalition formed in 1992 to respond to initiatives by the
    Administration and Congress to support CDFIs. We served as a primary
    resource in drafting the legislation that created the CDFI Fund. Since
    that time we have devoted our efforts to building public and financial
    support for the CDFI industry through advocacy, public education,
    knowledge building, and outreach.
        The CDFI Coalition represents community development loan funds,
    community development banks, community development credit unions,
    microenterprise lenders, and community development venture capital
    funds. Together our members have loaned and invested some $5 billion in
    our nation's most distressed communities.

                                WHAT ARE CDFIS?
        CDFIs bring private sector capital to bear on problems that have
    historically required public sector solutions. CDFIs emerged in
    response to the credit and capital-related assistance needs of our
    nation's most economically and socially distressed and disinvested
    rural, urban, and tribal communities. Their purpose is to create
    permanent solutions in these communities. They are bridge institutions
    that link unconventional borrowers and conventional financial
    institutions. They all have community development as their primary
    mission and carry out that mission by financing businesses and
    community facilities, job creation and development, and affordable
    housing in low and moderate-income communities.
        The government did not create CDFIs. Some CDFIs have histories
    stretching back five decades. These organizations are the responses of
    hundreds of local communities to fill market niches that large banks
    and other conventional financial institutions could not. They are based
    on bipartisan principles of building private markets, creating
    partnerships, and providing the tools to enable poor individuals and
    communities to become self-sufficient and stakeholders in their own
    future.
        CDFIs provide technical assistance to assist ``unbankable''
    customers, demonstrate that poor urban and rural areas can be
    profitable markets, help banks target their community reinvestment
    funding, and can bring innovative and trailblazing products and
    services to disinvested areas. CDFIs attract private investment, they
    don't substitute for it. They rely on capital-led strategies to address
    economic and social problems, and seek to establish capital
    relationships within their markets that seed sustainability.
        The effect that CDFIs have on their communities cannot be
    underestimated. Not only do local organizations make the decisions
    about how to best meet community needs, the ripple effects of CDFI
    activity bring responsible homeowners, locally-owned businesses,
    neighborhood facilities, first-time savers, and other positive benefits
    to communities that reach far beyond the financial.

                        WHY IS THE CDFI FUND IMPORTANT?
        The CDFI Fund is a unique government effort created to help
    capitalize financial institutions committed to serving and improving
    low-income and low-wealth communities. The Fund bolsters economic
    development by investing in and assisting CDFIs. By investing in
    institutions, not just projects, the Fund helps CDFIs better respond to
    their markets by increasing their ability to manage risk, to enhance
    capacity, and to be flexible in their financing. With capital from
    primarily private sector sources, CDFIs excel in using sound business
    practices to leverage conventional, private financing into poor
    communities.
        Support of these organizations through the CDFI Fund makes the most
    effective use of limited federal resources. It uses relatively small
    amounts of federal money to leverage significant amounts of private and
    non-federal dollars, promotes private entrepreneurship, and encourages
    self-help and self-sufficiency.

                      WHAT HAS THE CDFI FUND ACCOMPLISHED?
        The CDFI Fund has been innovative, investment-oriented, and
    business-like in approaching its funding. Through its rigorous review
    process, the Fund has made awards that have provided opportunity and
    insisted on institutional viability. Recognizing that there are diverse
    organizational levels, the Fund has established different windows for
    participants. In addition to the ``Core CDFI Program,'' the Fund has
    implemented an ``Intermediary Program'' through which organizations in
    need of assistance can participate through CDFI intermediaries, and a
    ``Technical Assistance Program'' which offers financial support to
    CDFIs working to build their organizational capacity.
        The CDFI Fund has been productive and successful in issuing its
    first four rounds of awards. So far, the Fund has awarded $200 million
    to 198 CDFIs through its Core Program Component, $7 million to 158
    CDFIs with its Technical Assistance Program, and has reached more than
    200 CDFIs through its $15 million invested in CDFI Intermediaries. The
    Fund has also awarded $89 million to more than 270 banks and thrifts
    through the Bank Enterprise Awards Program, resulting in more than $700
    million in direct financing services in distressed communities as well
    as $271 million invested in CDFIs.
        Through these awards the Fund has built a balanced national
    portfolio of urban and rural and large and small CDFIs with geographic
    diversity. The Fund has increased its outreach into rural communities
    and to rural CDFIs, and has made significant progress on its Native
    American Lending Study and Action Plan to identify barriers to
    investment in Native American communities.

                     WHY CONTINUE TO SUPPORT THE CDFI FUND?
        CDFIs, their borrowers, and the communities in which they work need
    the capital that the CDFI Fund offers. Support for the CDFI Fund is
    essential to their vital work. Increased support will enable CDFIs to
    continue to rebuild and revitalize our nation's communities. From its
    survey of its First Round Core Program awardees, the Fund's initial
    findings illustrate the significant impact of the Fund's assistance on
    CDFIs. Collectively, this group of 30 CDFIs has taken a $34 million
    investment and turned it into $565 million in loans and investments to
    help create or expand 1,148 businesses and 1,895 microenterprises;
    create or retain more than 12,000 jobs; and develop more than 8,600
    affordable housing units and 285 community facilities.
        The CDFI Fund offers the combination of increased access to capital
    and the institutional capacity building that is vital to CDFIs and,
    through them, to our nation's distressed communities. CDFI Fund's
    programs are consistently oversubscribed. In the midst of its growth
    the CDFI industry is experiencing substantial demand. In the first five
    rounds of Core Component awards, more than 875 CDFIs have requested
    more than $1.1 billion. The Fund has awarded a total of $200 million,
    less than one-fifth of the funds requested.
        An appropriation to the CDFI Fund generates substantial private
    dollars to distressed communities. In analysis of its 1996 Core Program
    awardees, the Fund found that its First Round investment resulted in
    CDFI asset growth of 122 percent, increasing from $473 million to $1.05
    billion by 1998. CDFIs are very successful at leveraging private
    dollars. They build bridges between conventional financial services and
    unconventional borrowers and often work where banks do not. The dollar
    for dollar match required by the CDFI Fund represents only a fraction
    of the long term leveraging potential of this program. Every dollar of
    CDFI equity investment can leverage up to $50-$100 into low-income
    communities.
        CDFIs will continue to benefit from the CDFI Fund's Training and
    Technical Assistance Initiatives. A key part of the Fund's institution-
    building mandate is its training and technical assistance initiative.
    No issue is more critical to the viability of this much-needed industry
    than building its human capacity. The CDFI Coalition, with a Ford
    Foundation grant, conducted an extensive study of the human capacity
    needs of the CDFI industry. Our findings stressed the need for training
    and proposed efficient and economical approaches to enhance the
    industry's performance.

                   WHY SUPPORT A $125 MILLION APPROPRIATION?
        With increased support the CDFI Fund can broaden its reach and
    impact, enabling CDFIs to better reach poor communities. The effect the
    CDFI Fund has had on the CDFI industry is clear: the CDFI industry is
    growing stronger and expanding at an unprecedented pace. According to
    figures from Coalition members, the CDFI industry has nearly doubled
    its capital available for lending and investing since 1995.
        Last year, the conference appropriations report developed by your
    committee contained language urging the Fund to develop a Small and
    Emerging CDFI Access Program (SECAP). The Fund has announced intent to
    incorporate elements of the SECAP proposal into its fiscal year 2001
    programs. By providing access to limited capital assistance with a
    streamlined business plan, flexible matching requirements and training
    and technical assistance funding, SECAP will greatly expand the Fund's
    potential customer base. Expansion of the customer base, though, will
    only increase demand for the Fund's resources.
        In addition to SECAP, the CDFI Fund has announced plans to assist
    CDFIs to break barriers to capital access in rural and Native American
    communities. CDFIs in these communities, which face unique barriers in
    their access to capital and credit, are another source of demand for
    the Fund's resources which has not been fully tapped. These CDFIs
    provide valuable lending, asset-building, and technical assistance
    services that help build poor communities, but have been unable to
    access the Fund's resources to augment their efforts.
        Without additional resources, the Fund's commendable efforts to
    increase outreach to underserved communities and the younger, smaller
    CDFIs that may be working in those communities as well as in urban
    areas may go unrewarded. We urge you to provide the Fund with the
    ability to serve the broad CDFI field, and, in turn, to serve low-
    wealth and underserved Americans.
        Given the demand and success we have described above it is
    appropriate for the Congress to continue to invest in this program. We
    are strongly urging you to provide increased support by appropriating
    the full $125 million requested by the President. In this era of scarce
    resources it is incumbent upon the government to use those resources
    strategically and effectively and to maximize their impact. The CDFI
    Fund can use its support to enable organizations with proven track
    records to expand and diversify their services, grow responsibly, and
    sustain themselves over time.
                                     ______

                                 MISCELLANEOUS

     Prepared Statement of the American Indian Higher Education Consortium

                                  INTRODUCTION
        Mr. Chairman and Members of the Subcommittee, on behalf of this
    nation's 32 American Indian Tribal Colleges and Universities, which
    comprise the American Indian Higher Education Consortium (AIHEC), thank
    you for the opportunity to express our views and concerns to the
    Subcommittee. Our statement concentrates on four program areas under
    the jurisdiction of this Subcommittee: National Science Foundation
    (NSF); National Aeronautics and Space Administration (NASA); and the
    Departments of Veterans' Affairs and Housing and Urban Development.
        National Science Foundation.--Within the National Science
    Foundation (NSF), two programs under the Division of Educational System
    Reform (ESR) have supported a number of Tribal Colleges: the Tribal
    College--Rural Systemic Initiative and the Louis Stokes Alliances for
    Minority Participation program. The President's fiscal year 2001 budget
    proposes a new $10 million Tribal College Initiative to help bridge the
    Digital Divide by encouraging American Indians to pursue information
    technology and other science and technology fields as areas of study as
    well as to increase the capacity of Tribal Colleges to offer courses in
    these areas. We urge Congress to support the $10 million Tribal College
    initiative proposed in this year's budget and the ESR Division's budget
    request of $110 million at the highest level possible. We also seek
    report language that will ensure the Tribal Colleges' input in the
    program design and regulations.
        National Aeronautics and Space Administration (NASA).--For the past
    several years, Tribal Colleges and Universities have been awarded at
    least $3 million through a number of NASA's competitive grant programs.
    These programs seek to strengthen minority-serving institutions'
    capacity in math, science, engineering, and technology (MSET) research
    and course delivery, and to increase opportunities for MSET
    partnerships. We urge Congress to support NASA's important education
    and outreach activities and include report language that would ensure
    Tribal Colleges' participation in higher education and minority-serving
    programs.
        Department of Housing and Urban Development.--The President's
    fiscal year 2001 budget proposes a $5 million Tribal College program
    within the Community Development Block Grant program to help the Tribal
    College expand their housing and community development projects. We
    strongly urge the Subcommittee to fund this important program at the $5
    million recommended in the fiscal year 2001 budget request.
        Department of Veterans' Affairs.--The Tribal Colleges support
    continued funding for a pilot program within the Center for Minority
    Veterans that provides health services for American Indian veterans
    through the local Indian Health Service Clinic. We hope this program
    can be expanded to include partnerships with Tribal Colleges and
    Universities that would permit our institutions to serve American
    Indian veterans in our isolated communities and seek report language
    encouraging Tribal College partnerships.

                         BACKGROUND ON TRIBAL COLLEGES
        The dismal statistics concerning the American Indian experience in
    education brought tribal leaders to the realization that only through
    local, culturally-based education could many American Indians succeed
    in higher education and help bring desperately needed economic
    development to the reservations. The Tribal College movement began more
    than 30 years ago as a sound and well thought-out solution to this
    problem. In the late 1960s and early 1970s, the first Tribal Colleges
    were chartered on remote reservations by their respective tribal
    governments, to be governed by boards of local tribal people. These
    first colleges were started, with little money or support, in abandoned
    and even condemned government buildings and old trailers, often using
    three-legged desks, wood crates for shelves and typewriters with
    missing keys. In 1972, the first six tribally-controlled institutions
    came together to form the American Indian Higher Education Consortium.
    Today, AIHEC is a cooperatively sponsored effort and integral support
    network for 32 member institutions in the United States and one in
    Canada, and has become the premier national voice on American Indian
    higher education.
        Located in 12 states, Tribal Colleges and Universities now serve
    more than 25,000 students from more than 250 federally recognized
    tribes. Tribal Colleges offer primarily two-year degrees, with some
    colleges offering four-year and graduate degrees. Together, the
    colleges represent the most significant development in American Indian
    education history, promoting achievement among students who would
    otherwise never know educational success. All of the Tribal Colleges,
    with the exception of four institutions that are accreditation
    candidates, are fully accredited by mainstream regional accreditation
    associations.
        Funding for our basic operations, which is authorized under the
    Tribally-Controlled College or University Assistance Act and funded
    through the Department of Interior appropriations bill, remains grossly
    inadequate. Despite an increase of $4 million in fiscal year 2000, the
    Tribal Colleges' appropriation of $3,433 per Indian full-time student
    (ISC) is dramatically less than the average per student revenue of
    mainstream two-year institutions and falls far short of the authorized
    level of funding of $6,000 per ISC. In addition, due to the location of
    the majority of Tribal Colleges on federal trust territory, states have
    no obligation and in most cases, do not fund the Tribal Colleges. In
    fact, most states do not even fund the institutions for the non-Indian
    students who attend our colleges despite the fact that non-Indian
    enrollment at the Tribal Colleges is approximately 20 percent.
        Tribal Colleges serve as a vehicle to accomplish what centuries of
    paternalism and outside experimentation have failed to do--allow
    American Indians to regain self-sufficiency. Paramount to achieving
    this goal is not only the innovative teaching philosophies of the
    Tribal Colleges, but also the fact that their graduates have a desire
    to stay on their reservations, contribute to the community and serve as
    role models and leaders. This ``ripple effect'' can be seen in
    increased community pride, the increased importance of succeeding in
    elementary and secondary education and in Tribal College graduates
    implementing creative and effective solutions for their communities'
    problems.
        Today, approximately one in five American Indians live on a
    reservation. Past federal policies of relocation and neglect of these
    trust territories have left once proud Indian communities in abject
    poverty. The logical alternative to this lose-lose situation is
    demonstrated by the Tribal Colleges. A minimal investment in education
    and infrastructure and the knowledge that those best qualified to
    coordinate growth are the American Indians themselves have served as
    the keystones for the Tribal College movement. Indian communities can
    be effectively developed, with residents being taken off the welfare
    rolls and gainfully employed, lowering taxes for all Americans and
    providing crucial services and production. We must continue to support
    and invest in the lost human potential within these rural communities
    and gain new avenues to social and economic change.

                                 JUSTIFICATIONS
        In an effort to promote Tribal College access to programs
    throughout the Federal Government, Congress took the lead in urging the
    President to sign an Executive Order on Tribal Colleges and
    Universities. In 1996 Executive Order No. 13021 was signed. We greatly
    appreciate Congress' long-standing bipartisan support of this effort.
    Consistent with Congress' intent, the Order's primary purpose is to
    promote the Tribal Colleges' participation in programs throughout the
    Federal Government and bring more attention to our accomplishments as
    accredited higher education institutions. It will greatly assist the
    colleges in our struggle to promote high quality education and self-
    sufficiency. However, progress of the Executive Order's implementation
    has been slow. Congress must provide oversight on how the federal
    departments are adhering to its mandates. Before we can even begin to
    realize the opportunities of the Executive Order, certain issues must
    be addressed. We seek appropriations report language, promoting the
    Tribal Colleges' participation in Federal initiatives and higher
    education programs throughout the Federal Government.
        National Science Foundation programs.--The President's fiscal year
    2001 budget proposes a $10 million initiative for Tribal Colleges that
    will encourage Native Americans to pursue information technology and
    other science and technology fields of study as well as increase the
    capability of Tribal Colleges to offer relevant courses and enhance K-
    12 education in feeder school systems. This exciting new program will
    help the Tribal Colleges to address the considerable challenges of
    access to advanced technology for their isolated reservation
    communities. We strongly urge Congress to appropriate $10 million for
    this exciting initiative that will help the Tribal Colleges to turn the
    Digital Divide into Digital Opportunity for the rural communities they
    serve. We strongly urge the Subcommittee to fund this important program
    at the $10 million recommended in the fiscal year 2001 budget request
    and request report language that will ensure the Tribal Colleges' input
    in the program design and regulations.
        In fiscal year 1999, NSF expanded its commitment to the ``High
    Plains Rural Systemic Initiative (HP-RSI),'' a collaborative effort to
    promote K-12 science, math, engineering, and technology using 18 Tribal
    Colleges as spring boards for addressing systemic change in these
    subject areas. Each participating Tribal College is responsible for
    providing leadership to the K-12 school systems located on their
    respective reservations. All aspects of the school system are
    considered in addressing systemic reform from community and parental
    participation, providing professional development activities, building
    a broad-based support including the business community, promoting the
    convergence of resources to support the initiative and instituting
    aligned student assessment systems. All of these activities are
    organized and implemented with careful consideration of the cultural
    academic needs of the respective tribe and students being served. We
    strongly urge Congress to support the requested $110 million for the
    ESR division in fiscal year 2001, to ensure the expansion of the Tribal
    College--Rural Systemic Initiative to all Tribal Colleges and
    Universities and greater access to other NSF programs.
        In addition, 25 Tribal Colleges are supported under an award from
    the Louis Stokes Alliances for Minority Participation (AMP) program.
    The grant under this program, known as the All Nations Alliance for
    Minority Participation, which is based at Salish Kootenai College in
    Pablo, Montana, brings together 25 Tribal Colleges and 32 state
    colleges and universities in nine states and is designed to increase
    substantially the quantity and quality of minority students receiving
    baccalaureate degrees in science, mathematics, engineering, and
    technology (SMET). Subsequently, AMP aims to increase the number of
    these students entering graduate schools to attain the doctorate in
    SMET fields normally supported by NSF. The AMP program encourages the
    formation of coalitions among leaders throughout academia, government,
    industry, and other organizations. The AMP program supports
    undergraduate systemic reform in this alliance with partners from both
    two and four year higher education institutions, businesses and
    industries, national research laboratories, local, state, and federal
    agencies. The program will maximize the potential for making a
    significant positive impact on maintaining the nation's leadership role
    in science and technology. We strongly urge the Congress to support all
    ESR projects at the highest funding level.
        National Aeronautics and Space Administration (NASA).--For the past
    several years Tribal Colleges and Universities have been awarded a
    minimum of $3 million through a number of NASA's competitive grant
    programs. These programs seek to strengthen minority-serving
    institutions' capacity in math, science, engineering, and technology
    research and course delivery and to increase opportunities for math,
    science, engineering, and technology (MSET) partnerships. In October
    1998, NASA recognized the importance of Tribal Colleges by hosted its
    eighth Annual Users' Conference at Southwestern Indian Polytechnic
    Institute, a Tribal College in Albuquerque, New Mexico. However, many
    Tribal Colleges are still shut out of a large number of NASA programs
    because they are two-year institutions. Tribal Colleges should be
    participating at much higher levels. We ask this Subcommittee to issue
    report language that would encourage stronger Tribal College
    participation in NASA's competitive grant programs.
        Despite our successes, Tribal Colleges remain the most poorly
    funded group of higher education institutions in this country, and
    although conditions at some have improved substantially, many of the
    colleges still operate in trailers, cast-off buildings, and facilities
    with crumbling foundations, faulty wiring and leaking roofs. In
    response to a recent query from the Senate Indian Affairs Committee,
    AIHEC surveyed the Tribal Colleges to determine the status of
    technology infrastructure at the nation's 32 Tribal Colleges. The
    results revealed that the 21 responding colleges estimated a cost of
    $4,650,000 to be given basic technology access and capabilities.
    Expanding this average indicates that the 32 colleges in the United
    States would require a minimum of $8,000,000 to be brought safely into
    the first phase of the new technology era. However, it will require
    several more millions of dollars to afford the Tribal Colleges and
    their communities to expand beyond basic technology and participate
    fully in cutting edge opportunities, therefore bridging the digital
    divide. We respectfully request appropriations report language to
    encourage further expansion of existing programs as well as new
    initiatives at the National Science Foundation and NASA to bridge the
    tremendous technology infrastructure needs at the Tribal Colleges and
    Universities.
        Department of Housing and Urban Development.--We are very excited
    about the $5 million initiative proposed in the President's fiscal year
    2001 budget for a Tribal College Community Development Block Grant
    program. This grant program, patterned after the current and highly
    successful Historically Black Colleges and Universities (HBCUs)
    program, will enable our colleges to expand their roles and
    effectiveness in addressing community development/neighborhood
    revitalization needs in their communities. Some areas to be supported
    include housing rehabilitation, business development, pre-employment
    counseling, job training, and job creation. We strongly urge Congress
    to support this Tribal College program at the $5 million level
    recommended in the President's fiscal year 2001 budget.
        Department of Veterans' Affairs.--Tribal Colleges support continued
    funding of a pilot program within the Center for Minority Veterans that
    provides health services for Indian veterans through the local Indian
    Health Services Clinic. This pilot program, run by the Oneida Tribe in
    Wisconsin, serves Indian veterans locally who would otherwise be forced
    to travel great distances to receive services from a VA hospital or
    clinic. Some of the Tribal Colleges currently offer well-respected
    nursing and healthcare programs. We hope the Oneida pilot program can
    be expanded to Tribal Colleges and Universities and would allow our
    institutions to strengthen and expand upon Wellness Centers. These
    centers serve the many Indian veterans who are isolated from VA medical
    services. Such partnerships could also provide the remote Indian
    reservations served by the Tribal Colleges with expanded access to
    telemedicine services. We ask that Congress agree to report language
    that would encourage greater participation by Tribal Colleges and
    ultimately improve the delivery of vital healthcare services to the
    proud veterans of their rural reservation communities.

                                   CONCLUSION
        In light of the justifications presented in this statement and the
    overwhelming evidence that without an insurgence of educational and
    technology centered opportunity the Digital Divide will widen in rural
    America, we urge the Subcommittee to increase funding for Tribal
    Colleges to help bring economic development to Indian Country.
    Fulfillment of AIHEC's fiscal year 2001 request will strengthen the
    mission of our colleges and the enormous, positive impact our
    institutions have on our communities and will help ensure that we are
    able to properly educate and prepare thousands of American Indians for
    the workforce of the 21st century. Tribal Colleges have been extremely
    responsible with the federal support they have received in the last 19
    years. It is important that the Federal Government now capitalize on
    its investment. As the 1997 Carnegie Report on Tribal Colleges stated,
    ``Now, as strongly as ever, we repeat our conviction that Tribal
    Colleges deserve continued support. Their value has been proven, but
    their vision is not yet fulfilled'' (Native American Colleges: Progress
    and Prospects, Carnegie Foundation for the Advancement of Teaching,
    1997). Our institutions have proven themselves to be a sound federal
    investment, and we ask for your continued support.
        Thank you.
                                     ______

         Prepared Statement of the American Society of Civil Engineers

        Mr. Chairman and Members of the Subcommittee: The American Society
    of Civil Engineers (ASCE) is pleased to offer this statement for the
    record on the proposed budgets for the Environmental Protection Agency
    (EPA), the Department of Housing and Urban Development (HUD) the
    Federal Emergency Management Agency (FEMA), and the National Science
    Foundation (NSF) for fiscal year 2001.
        ASCE was founded in 1852 and is the country's oldest national civil
    engineering organization. It represents more than 125,000 civil
    engineers in private practice, government, industry and academia who
    are dedicated to the advancement of the science and profession of civil
    engineering. ASCE is a 501(c)(3) non-profit educational and
    professional society.

                   THE ENVIRONMENTAL PROTECTION AGENCY (EPA)
        The Administration has proposed a budget for the EPA of $7.3
    billion in fiscal year 2001. In general, ASCE believes that the
    Agency's budget proposal establishes the proper environmental
    priorities for 2001. We remain concerned, however, over the direction
    of some of the Agency's programs, and we encourage the Congress to
    adjust the budget accordingly.
        As an initial matter, we note that proposed funding for all Clean
    Water Act programs has been reduced from $480 million in fiscal year
    2000 to $411 million in fiscal year 2001. This is a very disturbing
    trend, and we wish to focus our comments on two aspects of this
    proposed reduction in the hope that the Congress will see fit to
    restore these critically needed programs to an effective funding level
    for fiscal year 2001.
    The Clean Water Act State Revolving Loan Fund (SRF) Program
        Waste discharges from municipal sewage treatment plants are a
    significant source of water-quality problems throughout the country.
    States report that municipal discharges are the second leading source
    of water-quality impairment in all of the nation's waters (rivers and
    streams, lakes, and estuaries and coastal waters).
        The Clean Water Act (CWA) prescribes performance levels to be
    attained by municipal sewage treatment plants in order to prevent the
    discharge of harmful quantities of waste into surface waters and to
    ensure that residual sewage sludge meets environmental quality
    standards. It requires secondary treatment of sewage (equivalent to
    removing 85 percent of raw wastes), or treatment more stringent than
    secondary where needed to achieve water quality standards and desired
    use of a river, stream, or lake. Since 1972, Congress has appropriated
    $69.5 billion to assist cities in complying with the Act.
        Amendments enacted in 1987 established a new grants program to
    support State Water Pollution Control Revolving Funds (SRFs). The SRF
    program, which had total authorizations of $8.4 billion between 1987
    and 1994, has leveraged more than $30 billion in financial assistance
    to local communities since 1987. Federal contributions to SRFs were
    intended to assist in making a transition to full state and local
    financing by fiscal year 1995; SRFs were to be sustained through
    repayment of loans made from the fund after that date.
        But the tremendous national need for wastewater treatment plant
    funding requires continued federal assistance. We understand that the
    Office of Water is preparing a new assessment of national wastewater
    financing needs that is expected to put the total bill at more than
    $300 billion over the next 20 years.
        Incredibly, despite the staggering need and the EPA's
    acknowledgement in its fiscal year 2001 budget justification that the
    SRF ``is a significant financial tool for achieving clean and safe
    water,'' the Agency actually has proposed to cut funding for the SRF
    program budget by $550 million in fiscal year 2001.
        ASCE urgently recommends that the Congress restore the $550 million
    to bring the Clean Water SRF program to its fiscal year 2000 level of
    $1.35 billion.
    The Total Maximum Daily Load (TMDL) Program
        Section 303(d) of the Clean Water Act requires states to identify
    pollution-impaired water segments and develop ``total maximum daily
    loads'' (TMDLs) that set the maximum amount of pollution that a water
    body can receive without violating water-quality standards.
        For waters impaired by nonpoint source runoff, the primary
    implementation measures will be state-run nonpoint source management
    programs coupled with state, local, and federal land-management
    programs. Farmers and ranchers may be asked to use alternative methods
    in their operations to prevent fertilizers and pesticides from reaching
    rivers. Cities may be required to control and treat runoff from their
    streets.
        The EPA issued proposed revisions to the water quality planning and
    management regulations in August 1999 to strengthen the TIVIDL program,
    which has been chronically underfunded by the Agency and the states.
        The President's budget proposes increased funding of $45 million
    for grants to states to address polluted water bodies under section
    303(d). This funding, when matched by states, is supposed to result in
    an increase of $75 million annually for development of TMDLs. The
    fiscal year 2001 budget also includes an additional $50 million in
    funding for section 319 grants to states to implement projects to
    reduce pollution from diffuse or ``nonpoint'' sources.
        ASCE supports the regulatory effort to strengthen the TMDL program
    and applauds the proposed funding increases for TMDLs and nonpoint
    source controls. But we believe that the Agency simply has robbed Peter
    without paying Paul by shifting SRF program funds into the TMDL and
    nonpoint source programs, to the detriment of each program and at no
    gain to the environment.
        Each program is worthy of increased funding in fiscal year 2001.
    Congress should tap the projected surplus in fiscal year 2001 to ensure
    that none of these essential programs suffers from a lack of resources
    due to the EPA's misplaced priorities for the SRF program.

             THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD)
        As the Congress considers two bills that would significantly amend
    the National Manufactured Housing Construction and Safety Standards Act
    of 1974, 42 U.S.C. 5401 note et seq., ASCE is deeply concerned with
    provisions in the legislation that would change the federal standard-
    setting process for manufactured housing (mobile homes and modular
    housing).
        S. 1452, as reported by the Senate Committee on Banking, Housing
    and Urban Affairs on March 8, and title XI of H.R. 1776, as reported by
    the House Committee on Banking and Financial Services on March 15,
    would unconstitutionally privatize the writing of federal regulations
    establishing national construction and safety standards for
    manufactured housing. Specifically, the bills would empower a
    ``consensus committee'' of private citizens appointed by a private
    standard-setting organization to write, and review the enforcement of,
    federal regulations establishing construction and safety standards for
    manufactured housing.
        It is axiomatic that the Congress may not constitutionally grant to
    a committee of private citizens the authority to write legally binding
    prescriptions governing the application of federal authority for the
    benefit of themselves or others. This type of delegation has never been
    upheld by the Supreme Court.\1\
    ---------------------------------------------------------------------------
        \1\ See Schechter v. U.S., 295 U.S. 495, 55 S.Ct. 837 (1935)
    (striking down a federal code delegating the regulation of poultry
    slaughterhouses to private citizens).
    ---------------------------------------------------------------------------
        S. 1452 and H.R. 1776 are misguided. They grew out of frustration
    over a lack of aggressive congressional oversight of HUD's regulation
    of manufactured housing since 1974 and the Department's inability to
    adequately finance the regulatory program for manufactured housing. The
    President's budget proposal for fiscal year 2001 continues this
    deplorable situation.
        Specifically, the President's budget calls for spending $17 million
    exclusively for the inspection and monitoring of manufactured housing.
    Virtually all of this money will come from a $24 fee paid by the
    industry on the production of each of approximately 700,000
    ``transportable sections'' in 2001.
        No new money has been requested from the Congress to allow the
    Department to upgrade the existing construction and safety standards
    that were adopted in 1976. We urge the Committee to appropriate
    $350,000 in fiscal year 2001 to support an increase in the HUD staff so
    that it may begin rewriting the 1976 standards.
                 the federal emergency management agency (fema)
    Flood Hazard Mapping Program
        The fiscal year 2000 budget request would provide $134.4 million
    for FEMA to begin modernizing its Flood Hazard Mapping program. ASCE
    strongly supports this funding request.
        FEMA's Flood Hazard Mapping modernization plan will improve:
      --map accuracy and completeness;
      --map utility;
      --map production; and
      --public awareness and customer service.
        It will also reduce the burden on taxpayers for disaster relief and
    maintain the maps as one of the most valuable national resources for
    flood hazard mitigation.
        These maps are currently used by numerous constituencies for a
    variety of applications. The maps are most frequently used by insurance
    companies and agents, lenders, property owners, flood map determination
    firms and real estate professionals as part of the mortgage transaction
    process. Each of the 15 million mortgages transacted each year and
    every building permit issued by a community requires the use of flood
    hazard maps.
        However, the flood hazard maps are also used by floodplain
    managers, community planners, surveyors, engineers and disaster and
    emergency response officials for mitigation, risk assessment, disaster
    preparedness, and response and recovery activities. The timely
    production and distribution of these maps is critical to making sound
    decisions regarding the purchase or development of the nation's land.
        Unfortunately, these maps are aging. Approximately 45 percent of
    the maps are 10 years old, and 70 percent are 5 years or older. The
    effect of aging is that many of the maps are inaccurate. They reflect
    engineering analyses that are out of date as a result of subsequent
    development or because newer data and/or improved methods are now
    available. In addition, many maps show flood-prone areas that were
    analyzed using only approximate methods that are not accurate for sound
    floodplain management. There also remain flood-prone communities and
    flooding sources nationwide that have not been analyzed.
        FEMA's Flood Hazard Mapping Program is at a critical juncture. To
    fulfill the ultimate mission of accurately identifying all the nation's
    significant flood hazards and also of educating and alerting the public
    to the risks of flooding, challenges must be met. Technology offers a
    powerful tool to meet these challenges.
        For these reasons, ASCE strongly urges this subcommittee to provide
    the necessary funding for FEMA to update its Flood Hazard Mapping
    program. The benefits of implementing the Map Modernization Plan will
    accrue to the citizens of the United States. A conservative benefit/
    cost analysis shows that this plan will result in more than $2 of
    reduced flood losses for every $1 invested in accurate, up-to-date,
    digital flood maps. Implementation will result in improved public
    safety and welfare. Better flood data and mapping also can assist
    states and communities in taking preventive actions, such as improving
    floodplain management, land-use planning, and building design, as well
    as in planning for pre-disaster mitigation, emergency response, and
    disaster recovery.
    National Dam Safety Program Act
        The administration's fiscal year 2001 budget request would provide
    $5.9 million for FEMA's National Dam Safety Program Act (NDSPA). ASCE
    strongly supports the funding request for the dam safety program. This
    modest, yet vital, funding will enable the states to improve their
    fledgling dam safety programs which, in turn, will translate into
    reduced risks to life and property. Dam failures are extremely
    expensive from all points of view, and we should give special attention
    to the old adage that ``an ounce of prevention is worth a pound of
    cure.''
        Reports show that an alarming number of dams across the country are
    showing signs of age and lack proper maintenance. Downstream
    development is increasing. Most older dams were built without adequate
    spillways to release water in heavy rains, which causes water to run
    over the top. Inadequate spillway capacities are the most common
    deficiency and a major cause of dam failures. Dam safety officials
    estimate that thousands of dams are at risk of failing or are disasters
    waiting to happen. One-fourth of all U.S. dams are more than 50 years
    old, and by the year 2020, that figure is expected to increase to 85
    percent. ASCE estimates that it would cost over $1 billion annually
    over the next twenty years to rehabilitate all the documented unsafe
    dams in the United States.
        From this perspective, we believe that the fiscal year 2001 budget
    request of $5.9 million offers a solid starting point for states to
    begin improving their dam safety programs. However, dam safety is an
    ongoing effort and much more work needs to be done to ensure that the
    nation's 93,000 dams continue to work effectively and safety.

                        THE NATIONAL SCIENCE FOUNDATION
        The National Science Foundation (NSF) funds research and education
    in science and engineering. It does this through grants, contracts, and
    cooperative agreements to more than 2,000 colleges, universities, and
    other research institutions. The NSF accounts for about 20 percent of
    federal support to academic institutions for basic research.
        The Administration is proposing to increase the budget of, the NSF
    from $2.9 billion to $3.5 billion, an expansion of more than 20
    percent. We believe this increase is appropriate, given the critical
    nature of the NSF's mission, and we strongly urge the Committee to
    approve the requested budget estimate for the NSF.
        In particular, we are pleased with the Administration's proposal to
    increase the engineering research budget at NSF. The proposed increase
    would support efforts to boost U.S. engineering capabilities.
        Mr. Chairman, that concludes our prepared statement. Thank you for
    your attention to our concerns.
                                     ______

               Prepared Statement of the City of Gainesville, FL

        Mr. Chairman: On behalf of the City of Gainesville, Florida, I
    appreciate the opportunity to present this written testimony to you
    today. The City of Gainesville is seeking federal funds in the fiscal
    year 2001 HUD Appropriations bill to assist with the following three
    innovative projects the City is undertaking:
      --The East Side Community Recreational Facility for recreational and
            other programs and services to serve at-risk youth and their
            families as well as a substantial population of low income
            citizens in the surrounding area,
      --The Depot Avenue Project to enable economic redevelopment in a
            downtown setting including also improving stormwater treatment,
            developing park facilities, enhancing alternative
            transportation and restoring an urban wetland, and
      --The Sweetwater Branch Project to protect the Florida Aquifer from
            stormwater runoff which starts out in Gainesville's Sweetwater
            Branch Basin.

                 EAST SIDE COMMUNITY RECREATION CENTER PROJECT
        The City of Gainesville is seeking a funding strategy for a multi-
    purpose community-based recreational facility on the east side of our
    city. The site for this project is in one of our highest poverty and
    minority-populated areas. Once completed, the center will provide a
    wide range of programs and opportunities to at-risk youth and their
    families. It will also provide needed facilities and services for the
    substantial population of low-income elderly in this area of our
    community, as well as to all our community.
        The demographics of the surrounding service area include the
    following statistics: (a) Population of approximately 12,000 residents
    living in 4,000 households, with a median family income of $14,708; (b)
    41.1 percent of the families have household incomes below the poverty
    level; (c) 25.3 percent requiring public assistance of some type, and
    (d) 84.2 percent of the citizens are African-American.
        This is a public/private initiative estimated to cost $2.5 million.
    Funding has been received or pledged in the amount of $1.5 million. The
    initiative is being led by a grassroots partnership of business
    leaders, community leaders, professionals and interested/concerned
    citizens who have organized themselves as the East Gainesville Park
    Development Group.
        The public agencies involved in this effort include the City of
    Gainesville, Alachua County, the School Board of Alachua County, and
    the University of Florida. So far, the project has received
    considerable financial support or pledges from the City, the County,
    and private individuals. The University of Florida has pledged to
    provide coaches and mentors. Additionally, the School Board of Alachua
    County has expressed an interest in this facility to help meet its own
    recreational facility shortfalls.
        The plan for this project is based on the need to provide
    recreational facilities for families and on the desire to provide our
    youth with such advantages as leadership skills, team participation
    skills, and computer skills as well as opportunities to participate in
    physical and mental exercise, arts and crafts, and social activities,
    and to receive mentoring and after school tutoring. The educational
    component will include after school tutoring sessions, computer, anger
    management, life skills, and teen parenting and pregnancy prevention
    classes. Parental involvement will be encouraged for all activities.
        The facility will be sited on a 36-acre parcel of land zoned for
    park use. The site amenities will include a multipurpose building
    (estimated at 6,500 square footage in area), serving as a learning
    resource center and community center. The facility will house the
    computer lab with computers promised by IBM, and rooms for after school
    homework and tutoring. Accommodations for indoor recreational and
    cultural programs will also be provided. The active outdoor amenities
    will include an interactive water fountain play area, playground and
    tot lot, picnic areas, two softball fields, two soccer/football fields,
    three basketball courts, \1/4\ mile track, --mile jogging/fitness
    trail, \1/4\ mile interpretive nature boardwalk and a concession
    facility. The City of Gainesville will own and operate the park and
    improvements.

                              DEPOT AVENUE PROJECT
        The Depot Avenue Project is intended to enable economic
    redevelopment in a downtown setting, to extend park facilities, to
    support alternative transportation, to improve stormwater treatment,
    and to restore a small urban wetland in Gainesville. Funding for this
    project are being pursued on several fronts. Gainesville is working in
    partnership with the U.S. Environmental Protection Agency through the
    Brownfield Pilot Program and the Sustainable Communities Program; the
    U.S. Housing and Urban Development Agency through the EDI Program; the
    Florida Department of Environmental Protection through the Brownfield
    Pilot Program; the Florida Communities Trust through the Preservation
    2000 Program; the Florida Department of Transportation through the
    Transportation Enhancement Program; the St. Johns River Water
    Management District for technical support; the City of Gainesville's
    Regional Utilities contamination cleanup program; and the City of
    Gainesville's Stormwater Management Utility Program.
        The project includes components, as follow:
    Depot Avenue
        This element will consist of the reconstruction of approximately
    two (2) miles of Depot Avenue from SR 331 to U.S. 441. The project is
    intended to address current safety and capacity issues and includes the
    construction of two travel lanes, turn lanes, curbs, sidewalks and
    landscaped medians. Depot Avenue is located adjacent to the existing
    Depot Avenue Rail-Trail, which is an 8' wide asphalt trail. It
    alternately connects residential areas, commercial areas, and
    industrial land uses along its length. The redesign of the road will
    address these varying conditions and will also provide for the
    involvement of the neighborhood residents it serves.
        Depot Avenue traverses Gainesville from west to east, approximately
    \1/2\ mile south of, and parallel to, SR 26 (University Avenue). Its
    western terminus is at the eastern edge of the campus of the University
    of Florida and its associated student housing development, and its
    eastern terminus is at SR 331 in Southeast Gainesville. It skirts the
    southern edge of downtown Gainesville at its mid-point, and its
    intersection with SR 329 (Main Street) is considered to be the southern
    ``gateway'' to Downtown. (Estimated cost is $4 million.)
    Transportation center
        The City of Gainesville's RTS Transportation Center is located on
    the north side of Depot Avenue directly south of the core of Downtown
    Gainesville. The Transportation Center is a multi-modal transportation
    hub for the Regional Transit System, Greyhound, Amtrak and the Bicycle
    Commuter Facility. (Estimated cost is $3 million. Partial funding, $1.2
    million has been provided by the Federal Transit Agency. Therefore, the
    City is seeking $1.8 million to complete this project.)
    Historic depot
        On the south side of Depot Avenue across from the Transportation
    Center is the Old Gainesville Depot, which has been recently acquired
    by the City for restoration. The Old Gainesville Depot was built in
    1907, and was placed on the National Register of Historic Places in
    1996. The City of Gainesville was founded as a rail hub linking
    Fernandina Beach on the east coast of Florida to Cedar Key on the west
    coast in the mid-1800's and uses a train symbol as its official seal.
    (Fully funded through state and local sources.)
    Stormwater park
        The City's proposed 22-acre Stormwater Park will serve as the
    stormwater management facility for the Depot Avenue Project as well as
    a large portion of the central downtown area. This facility will remove
    existing contamination, provide for full treatment of stormwater to the
    property owners in the service area and eliminate the need for future
    redevelopment in the central area to provide on-site stormwater
    treatment facilities. Additionally, the stormwater basin is envisioned
    to provide treatment for some of the underground petroleum plumes that
    exist in the area. (Total estimated cost is $10 million for
    construction. Land acquisition is being jointly funded by the Florida
    Communities Trust and the City of Gainesville. Design services are
    jointly funded by the U.S. EPA, Florida DEP and the City of
    Gainesville. Partial funding is available from the City's stormwater
    utility and the Florida Department of Transportation.)
    Sweetwater branch project
        The City of Gainesville is seeking $1.5 million in funding
    assistance for a $2 million stormwater management project intended to
    remove 90 percent or more of the sediment and debris from the
    Sweetwater Branch creek flow preventing those undesirable materials
    from entering the Paynes Prairie Preserve, thereby helping to insure
    and protect the Florida Aquifer as the major source of drinking water
    for the State of Florida.
        The Sweetwater Branch basin contains approximately 1,710 acres, and
    is located mainly in the southeast central portion of the City of
    Gainesville. The outfall from this basin discharges into Paynes
    Prairie, a State-owned preserve and park system, where the creek flow
    is directed into the Alachua Sink. The Alachua Sink is a natural
    sinkhole that drains directly into the Florida aquifer.
        The Florida Aquifer provides the majority of drinking water to
    Florida's residents and has a direct impact on the Florida Everglades.
    In addition, many domestic water wells are used to obtain water from
    surficial and intermediate aquifers in the Gainesville area.
        The Sweetwater Branch drainage basin contains urban, commercial,
    industrial, and residential area stormwater runoff. Because the
    Sweetwater Branch runs through some of the oldest portions of
    Gainesville, most stormwater runoff is directly discharged into the
    Branch with very little flooding attenuation or pollution loading
    reduction. In addition, there is insufficient undeveloped land
    available to accommodate stormwater management facilities except for
    the area very near the Paynes Prairie outfall.
        Pollution reduction of the Sweetwater Branch surface waters before
    entering the Paynes Prairie Preserve will assist in the re-
    establishment of the Preserve's natural aesthetics and re-establishment
    of the natural ecological systems of the Preserve, in addition to
    providing protection for a major source of drinking water. The runoff
    also has the potential to negatively impact threatened and endangered
    wildlife such as the American Bald Eagle, the Woodstork, the Florida
    Sandhill Crane and the Southeastern American Kestral. In summary, the
    situation has created a concern amongst environmentalists, business
    leaders, and concerned citizens throughout the region that Paynes
    Prairie and the Florida Aquifer are being compromised.
        With this in mind, the City of Gainesville, Alachua County, the
    Florida Department of Environmental Protection, the St. Johns River
    Water Management District, and local citizens are all seeking a
    comprehensive ecosystem management solution to the problem of
    stormwater runoff from downtown entering Sweetwater Branch, Paynes
    Prairie and the Alachua Sink.
        The project devised by these groups would reduce or eliminate the
    sediment, debris, nutrients and general pollutants currently being
    discharged into Paynes Prairie and eventually the Florida aquifer from
    the Sweetwater Branch Creek.
        Current projections are that the project would consist of the
    following three components:
      --the purchase of undeveloped property in the vicinity of State Road
            331 and Sweetwater Branch;
      --the construction of maintainable sediment and debris removal
            systems; and
      --the construction of maintainable nutrient removal systems.
        Removing all pollutants at the discharge end of Sweetwater Branch
    would cost at least $14-$20 million. Smaller projects upstream of the
    Prairie have been initiated at the local level. Expenditures of about
    $2 million are identified for three such smaller projects: (1) the Duck
    Pond, (2) the Baffle Box, and (3) the Downtown (a Brownfield Area)
    Stormwater Facility. These smaller projects are designed to deal with
    specific subbasins and water quality issues. The current projects now
    planned utilizing local resources will only clean up parts of the
    basin. Considerable flow and accompanying pollution still will go
    through to the Prairie. An additional facility is needed to clean up
    the rest of the flow.
        An in-depth engineering analysis of the creek system, property
    topography, associated wetlands, and other pertinent factors would be
    accomplished to determine the optimum and appropriate scope of property
    purchase and facilities construction. The City is prepared to pay some
    of the cost for this analysis, and has received a $500,000 grant from
    the U.S. Environmental Protection Agency, but we are simply unable to
    bear the entire burden. As a result, we request that the Subcommittee
    appropriate $1.5 million to assist our efforts.
        The requested federal funds, if awarded, will be used by the City
    to secure the necessary property rights and to construct the facility.
    Once the project construction is complete, Gainesville's Stormwater
    Management Utility, a public utility, would provide the required annual
    operating and maintenance funding, and no further federal maintenance
    funds would be needed.
        In closing, federal support is critical for each of these
    initiatives. As a result, we respectfully request that the Subcommittee
    give our requests every consideration throughout the fiscal year 2001
    appropriations process.
                                     ______

                 Prepared Statement of Alachua County, Florida

        Mr. Chairman: Thank you for allowing the Alachua County Board of
    Commissioners to submit testimony before your Subcommittee regarding
    three critical projects: (1) Partners for a Productive Community
    Enhancement Initiative (2) the Greenway Farmland Preservation (Emerald
    Necklace) and (3) the Regional Air Quality Monitoring Demonstration
    Initiative.
           partners for a productive community enhancement initiative
        Alachua County is seeking federal funds to assist with expanding
    its collaborative neighborhood revitalization program into the rural
    community of Archer. This collaborative program includes the Alachua
    County Community Services Department, Office of Code Enforcement,
    Alachua County Sheriff and Alachua County School Board. The Alachua
    County Commission requests $2.3 million in federal funding to expand
    this successful revitalization model to other neighborhoods. The
    process would include additional community needs assessments, increased
    educational, training and job readiness opportunities, mobilization of
    community resources and community empowerment for sustainability of
    neighborhoods throughout Alachua County. The funding will also support
    additional Sheriff's deputies at a level needed to provide adequate and
    intensive law enforcement, and community policing activities to the
    expanded Partners' areas. Following is a background on this initiative.
        In 1993, the Sheriff's Office made a request to the Board of County
    Commissioners for assistance due to the spiraling crime rate in
    southwest Alachua County. The Sheriff's Office reported that 57 percent
    of its 911 calls came from an area that had only 3.2 percent of the
    population. This area was identified as consisting of the five
    following neighborhoods: Clayton Estates, Majestic Oaks, Tower Oaks,
    Cedar Ridge and Sugarfoot. In addition to the disproportionately high
    crime rate, it was determined that there were inadequate community
    services, a high percentage of absentee landlords, a lack of concern by
    most residents, in concert with the physical appearance of the
    neighborhoods steadily deteriorating.
        In fiscal year 1994, the Alachua County Commission provided funding
    for a Program Manager to staff the Partner's for a Productive Community
    (PPC) Program. The PPC was launched as a strategic planning effort
    based on three goals: to establish neighborhood-based services, to
    develop public/private partnerships and to focus on prevention. The
    success of this project depended upon the coordinated efforts of the
    Sheriff's Office, the Courts and the Department of Community Services.
    The objectives of the Sheriff's Office were to reduce the number of
    calls from the area and to develop trusting relationships with the
    residents interested in improving their community. The objectives of
    the Courts were to help with the swift prosecution of cases brought
    forth and to increase personnel in key areas. The objectives of the
    Department of Community Services through a Program Manager were to
    develop and implement a needs' assessment, to assess social services
    needs in accordance with the results of the assessment, to develop a
    community council comprising owners, tenants and property managers.
    This project would be a multi-agency strategy to stabilize, revitalize
    and sustain these five (5) neighborhoods.
    Community improvements
        Since fiscal year 1995 accomplishments include: free community day
    care for 75 children, 30 community day care slots, eight (8) in-home
    day care slots, establishment of a medical clinic provided by the
    Alachua County Health Department, the creation of 30 new jobs by the
    Early Progress Center, reduction in 911 calls from 57 percent to 14
    percent of total calls, the overall increases in property values for
    four (4) of the five (5) neighborhoods. The provision of seasonal
    recreation programs for children in the targeted communities by the
    Y.M.C.A. In 1996 the PPC received the National Association of Counties'
    Achievement Award in recognition for distinguished and innovative
    contributions to improving and promoting county government.
    Additionally, an award was received from the League of Women Voters for
    outstanding community service.
        New activities include community forums on landlord and tenant
    issues, welfare reform and subjects determined to be germane in the
    effort to educate and revitalize this community. Steps have been taken
    to establish 4-H Clubs in the communities to provide positive learning
    and character building experiences for youth. It is also being proposed
    to implement adult literacy classes, computer training, General
    Education Diploma preparatory training and a One Stop Program to
    provide employment opportunities. A community health fair was conducted
    with numerous agencies involved in providing immunizations for area
    children as well as the dissemination of information on health and
    safety issues. Three major and three mini neighborhood cleanups were
    completed. Through diligent efforts of the Office of Codes Enforcement,
    Alachua County government has reduced the number of abandoned and
    vandalized buildings from five to two.
        The sustaining factor within this community is the formally
    organized Partner's for a Productive Community Council. The Council is
    the guiding force that deals with issues and determines unmet needs. It
    has become incorporated and has received a donation of space (estimated
    to be worth $5,000.00 per year) which will house the organization as
    well as the Center for Community Services.
        Finally, in December 1999, Alachua County received Official
    Recognition (OR) from the Executive Office of Weed and Seed for two of
    the neighborhoods being served by the Partners for Productive
    Communities Program. There is no funding associated with this
    recognition. This OR will further strengthen the long-term efforts to
    improve the quality of life in these neighborhoods.
    Rural component
        The County seeks federal funds to expand the partners initiative
    into the rural community of Archer, located approximately 17 miles
    south of downtown Gainesville. Archer has a population of 6,348 of
    which 16 percent fall below the poverty level and 2,452 of its citizens
    live within the city limits, the remainder live in the rural
    surrounding area of Archer.
        The city has a mayor and city council, one elementary school, fire,
    emergency rescue and police are contracted from Gainesville/Alachua
    County. There are two public housing communities. They have a small
    dated community center used as a senior citizen meal site. An unmanned
    sheriff's substation, several businesses employing between 30 and 50
    persons each. Farming is still a major business in this area. Many of
    the citizens travel into Gainesville for employment.
        There is no doctor or medical facility, no public transportation,
    recreation for teens is very limited and no social service outreach.
        Crime is high for a community it's size. In 1999 the Alachua County
    Sheriff's Office (ACSO) answered 2,665 calls for service, 352 general
    incidents' reports were written, 99 citations issued and 26 arrest
    warrants executed. In the drug eradication effort, one search warrant
    and a two undercover operation were conducted, resulting in 16 arrests
    and three sworn complaints. The net effect of ACSO's narcotic
    enforcement in the Archer area resulted in the seizure of 276 cannabis
    pants, 18,8564 gr. of commercial cannabis, 16.3 gr of crack cocaine and
    25.5 gr. and of powder cocaine with a total street value of $428,744.
        Of the dispatched calls, 30 were assault and battery and five were
    sexual batteries of which half involved minor children, one-armed
    robbery and one robbery. The largest number of dispatched calls was for
    theft, totaling 558.
        This community has very few resources and an extremely high crime
    rate resulting in this community being considered as a community at
    risk. With federal funding, this community could provide community
    health care, minimum public transportation to and from Gainesville,
    social service outreach, after school tutoring and recreation for its
    youth, along with education employment opportunities, using the
    partnership concept as a model developing existing resources from the
    Gainesville/Alacua County into the Archer Community.

          GREENWAY FARMLAND PRESERVATION INITIATIVE (EMERALD NECKLACE)
        Alachua County has embarked on a local land conservation program,
    which the County Commission has selected as one of its highest program
    priorities for 2000. A separate citizen-initiated referendum called
    Alachua County Forever is anticipated to raise $17 million from ad
    valorem property taxes to match federal and state land acquisition
    funds. The County's Land Conservation Advisory Committee (appointed in
    November, 1999) is finalizing a system to prioritize which local lands
    should be conserved, and is creating the tools to accomplish these
    goals. Eastern Alachua County has been included in the St. John's River
    American Heritage River designation, with three suggested projects. A
    number of eco-tourism and recreational opportunities are being pursued
    to capitalize on the County's protection of its natural areas. The
    County, in cooperation with the City of Gainesville, is actively
    seeking federal and state partnerships to achieve its land conservation
    goal of an emerald necklace comprising gems of conserved natural areas
    throughout this part of ``the Real Florida.''
        Land acquisition priorities.--Alachua County has five large-scale
    projects (5000+ acres) on Florida's Conservation and Recreation Lands
    (CARL) acquisition list. These include:
      --Paynes Prairie additions (a large freshwater wetland and watershed,
            operated as a state preserve)
      --San Felasco Hammock additions (a mature hammock and sandhill
            forest, with ravines)
      --Watermelon Pond (an upland sandhill and scrub forest with important
            ephemeral wetlands)
      --Newnans Lake (a diverse flatwoods forest surrounding a lake with
            declining water quality)
      --Lochloosa Forest (a flatwoods forest, largely in commercial
            production surrounding two large lakes)
        Each of these CARL projects has outstanding land acquisition needs,
    with state matching money available from Florida Forever (formerly
    Preservation 2000). The lack of a local source of matching funds has
    hurt the ability of Alachua County's projects to compete favorably with
    other local governments which have local land conservation programs, so
    Federal matching funds (either grants or loans) would greatly assist in
    finishing the acquisition of these lands before development further
    fragment them. If the Alachua County Forever referendum passes in
    November 2000, the County will have a source of matching funds. Federal
    agencies could help by ``challenging'' the County with the promise of
    matching funds for projects of national significance, such as Paynes
    Prairie.
        For this initiative, the City of Gainesville and Alachua County
    have identified three project areas. The first is Newnan's Lake, a
    large lake in a semi-wild setting with mysteriously increasing
    eutrophication, yet spectacular recreational and scenic resources.
    Specific projects requiring funding assistance include: investigations
    into water quality issues, remedying muck build-up (possibly through a
    draw-down or mechanical removal), land acquisition (including less-
    than-fee opportunities with large forestry companies), a multi-user
    trail system circling the lake and connecting two existing rail-trails,
    and the designation and enhancement of an informal, but exceptional
    canoe trail connecting Newnan's and Orange Lake down Prairie Creek and
    the River Styx. The St Johns River Water Management District is a
    willing partner, having made substantial commitments in the past and
    with expressed interest in continuing to conserve the lands and waters
    of this area, while enhancing public access.
        The second project is to clean-up and mitigate Sweetwater Branch,
    and its impacts on Paynes Prairie (a National Natural Landmark) as well
    as the Floridan Aquifer. As one of the major watersheds flowing through
    eastern Gainesville, this creek has all the problems of urban
    stormwater and wastewater outfall into natural areas. While substantial
    funds have been received from federal sources for the Depot Stormwater
    Park, the cost of cleaning up this brownfield area is considerably more
    than the local governments can handle.
        The third project is to clean-up and mitigate impacts to Hogtown
    Creek, the major watershed in western Gainesville. The City and State
    have acquired over $3 million of property comprising the Hogtown Creek
    Greenway, however funds are needed for development of recreational
    trails, and for sedimentation control. We are seeking $10 million in
    federal support.

            REGIONAL AIR QUALITY MONITORING DEMONSTRATION INITIATIVE
        The Board of County Commissioners has made protecting the County's
    air quality a priority and has implemented various initiatives to
    examine the state of the County's air quality and to determine pro-
    active measures to reduce air pollution.
        Many of the BoCC's air quality initiatives are contained within the
    Alachua County Air Quality Work Plan. Approved in November, 1998 and
    subsequently modified, the plan is a comprehensive blue print for
    examining, protecting and improving the air quality in the County.
        The February 18, 1999 Alachua County Air Quality Summit formally
    introduced the Air Quality Work Plan to the public. The event, attended
    by over 120 people, addressed public concerns over air quality and
    explored strategies to ensure clean air in the future. The summit also
    introduced the public to Quality Commission (AQC), which was newly
    appointed in December 1998.
        The AQC (the focal point of the work plan) is a nine member blue
    ribbon panel of scientists, engineers and medical professionals and is
    charged with reviewing scientific material and offering recommendations
    to the BoCC regarding the protection of air quality and human health.
    These recommendations, due in September, 1999, will assist the County
    in setting priorities and will serve as the foundation for future air
    quality protection efforts.
        The plan also directed the County's Environmental Protection
    Department (ACEPD) conduct a PM2.5 study utilizing portable monitors to
    better define distribution and concentrations in Alachua County. Since
    being approved in March, 1999, the study's scope has expanded to
    include the analysis of PM10 and pollutant gases (ozone,
    SO2, NOX). The expansion was due in part to the
    generosity of the EPA, FDEP, the University of Florida, City of
    Gainesville, and a local environmental engineering firm donating
    equipment and their expertise for a combined value of over $100,000.
    ACEPD continues to seek partners and has had preliminary discussions
    with a local middle school to assist in the public education component
    of the study.
        Apart from traditional educational tools, such as brochures,
    presentations, and newspaper articles, ACEPD in conjunction with the
    University of Florida is developing an innovative educational website
    for the study that will display ambient air monitoring data in ``real-
    time.'' The website, which will be continually updated, will feature
    the data from two sets of monitors that will sample continuously for
    NOx, SO2, and ozone. This pollution data along with meteorological data
    will be displayed in an easy to understand graphical format known as a
    pollution rose. The pollution rose will not only graphically show the concentration of pollutant, but also the direction from which it came.
    Pollution roses will be displayed for the total operating period, the
    previous 24 hour period, and selected occurrences.
        Yet another component of the work plan is Alachua County's
    participation in the Cities for Climate Protection Campaign (CCP). The
    CCP aims to reduce emissions from two primary greenhouse gases, CO2 and
    methane, which are linked to global warming. To participate, the CCP
    requires counties or municipalities to undertake the following tasks:
    1) a base year emission analysis of the sources and quantity of
    greenhouse gas emissions; 2) a forecast of emissions growth to the year
    2005 or 2010; 3) adoption of an emission reduction target; 4) an action
    plan outlining activities that will achieve reduction targets; and 5)
    implementation of the action plan. Alachua County is currently in the
    process of developing a greenhouse inventory and emission reduction
    strategies.
        Also of interest, ACEPD has been awarded an environmental justice
    grant to perform a multi-faceted study for the Depot area located in
    downtown Gainesville. One component of the proposed study will focus on
    outdoor air quality. Specifically, ACEPD proposes to set-up portable
    particulate matter monitors in the area to measure the impact from area
    industry. The Depot area is home to an EPA brownfield site, 2 concrete
    batch plants, one recycling facility, and an electric power plant. All
    of these facilities are within a \1/4\ mile of the area and produce
    large amounts of dust and/or emissions. The study will measure the
    community's exposure and propose mitigation measures.
        Still in the preliminary planning stages is a proposed initiative
    to examine environmental risks surrounding the County's schools. Along
    with examining risks posed by contaminated soil and water, the
    initiative will focus on identifying industries near schools that have
    discharges into the environment or have the potential to have major
    accidental releases. Once these facilities are identified, an action
    plan will be developed between the County, facility, school, and fire
    and police departments. The action plan will seek to educate these
    entities about the environmental risks that the schools face as well as
    what to do in an emergency.
        Also in the planning stages, is an initiative to combat the
    problems due to urban sprawl. In conjunction with the Planning
    Department, ACEPD is investigating various approaches whereby air
    quality improvements can result from innovative local land use
    decisions and transportation activities. Thus promoting clean air and
    economic vitality.
        Finally, the anticipated outcome of all these efforts is a better
    understanding of the surrounding air quality and the development of a
    local capacity to improve air quality. To that end, the County is in
    the initial stages of developing a pro-active air program and seeks $1
    million in federal assistance.
        We hope you will find these critically important initiatives worthy
    of your support. Thank you for your consideration.
                                     ______

           Prepared Statement the American Museum of Natural History

        Mr. Chairman and Members of the Subcommittee. My name is Ellen
    Futter, and I am president of the American Museum of Natural History. I
    very much appreciate the opportunity to submit testimony in support of
    the National Aeronautics and Atmospheric Administration [NASA] and the
    National Science Foundation [NSF], and to present a summary of our
    recent accomplishments and our planned fiscal year 2001 initiatives and
    objectives. Most of all, I want to thank this Subcommittee for all the
    contributions it has made to scientific research and education in this
    nation and at the American Museum.
        This Subcommittee, with a purview that includes the NSF and NASA,
    plays a pivotal role in our nation's science and education enterprises.
    The future of our research and development; our science, math,
    engineering, and technology education; and our 21st century workforce
    in many respects rests here.
        The National Science Foundation under skilled leadership is
    pursuing key initiatives that include information technology research,
    biocomplexity, research on learning, and the 21st Century Workforce.
    These initiatives, as well the core research and education programs,
    require funding at the increased levels recommended in the budget
    proposal.
        NASA, under its bold leadership, captures the national imagination
    and invigorates the thirst for exploration into unknown realms. Every
    day at the Museum we see evidence of NASA's power to ignite the
    public's imagination. To continue to expand understanding of our
    planet, our solar system, and our universe, investment in NASA is vital
    to remaining strong. We urge the Subcommittee to fund NASA at the level
    needed for it to pursue its goals in cutting-edge R&D, breakthrough
    technologies, interagency partnerships, and educational excellence.
        Let me now review for you our accomplishments and plans at the
    American Museum.

                  ABOUT THE AMERICAN MUSEUM OF NATURAL HISTORY
        Founded in 1869, the American Museum of Natural History [AMNH] is
    one of the nation's preeminent institutions for scientific research and
    public education. Throughout its history, the Museum has pursued its
    joint missions of science and education, of examining critical
    scientific issues and educating the public about them. Its audience of
    nearly 4 million total visitors a year--approximately half of them
    children--is one of the largest and most diverse of any museum in the
    country. It is renowned for its exhibitions and collections, which
    serve as a field guide to the entire planet and present a panorama of
    the world's cultures. Museum collections of some 32 million natural
    specimens and cultural artifacts provide an irreplaceable record of
    life on earth. Museum explorers and scientists have pioneered
    discoveries and offered us new ways of looking at nature and human
    civilization. The Museum's power to interpret wide-ranging scientific
    discoveries and convey them imaginatively has inspired generations of
    visitors to its grand exhibition halls and educated them about the
    natural world and the vitality of human culture.

                                NASA PARTNERSHIP
        In 1997 the American Museum embarked on a groundbreaking new
    initiative when, under the leadership of Congress, it joined in
    partnership with NASA to advance our shared goal of fostering
    scientific literacy nationwide. This partnership has been
    extraordinarily fruitful, and it has helped to create a unique national
    resource built with private funding catalyzed by the federal
    contribution. Together the American Museum and NASA are exploring the
    frontiers of science and reaching millions of Americans with our
    science literacy and education efforts. We have established the
    National Center for Science Literacy, Education, and Technology and
    partnered in life and microgravity, space, and earth sciences research.
    Together, we are asserting national leadership in science education,
    spotlighting the excitement and awe of research and exploration for the
    millions of Museum visitors, and we are now poised to reach millions
    more.
    Rose center for earth and space
        For dramatic testimony to the benefits and power of the AMNH-NASA
    partnership, I invite you to visit, on site or online, the American
    Museum's new Rose Center for Earth and Space. In February 2000 the
    Museum began one of the most exciting chapters in its long and
    distinguished history of advancing science and education with the
    opening of the Rose Center. Greeted with popular and critical acclaim
    and attendance figures exceeding all projections, this spectacular new
    Center brings the most up-to-date astrophysics and earth science
    information to the public. It includes a newly rebuilt and updated
    Hayden Planetarium, where visitors journey among the stars and planets
    in our own and in other galaxies; and the Lewis B. and Dorothy Cullman
    Hall of the Universe, where interactive technology and participatory
    displays elucidate important astronomy and astrophysics principles.
        The centerpiece of the Rose Center is an 87-foot-diameter sphere
    housed in a giant glass cube. The top half of the sphere contains the
    Hayden Planetarium's state-of-the-art Digital Dome, the world's most
    technologically advanced sky theatre and largest venue for displaying
    astrophysical data. It showcases the NASA-supported Digital Galaxy
    Mapping Project--a scientifically accurate three-dimensional map of the
    universe created by the National Center team working in concert with
    NASA scientists and engineers. With its one of-a-kind Zeiss Mark IX
    Star Projector and display system, it takes visitors on scientifically
    accurate virtual journeys through our solar system and out among stars,
    visualizing data from NASA, including the Hubble Space Telescope, and
    from other collaborators. In the bottom half of the sphere, the Big
    Bang offers a multisensory, multimedia presentation of this phenomenon.
        Adjoining the Rose Center is the new Gottesman Hall of Planet Earth
    [HoPE], which opened in June 1999 and focuses on how the Earth works
    and its geologic history. Built around rock samples and models gathered
    from around the world, the hall explores such questions as how the
    Earth has changed though time; why ocean basins, continents, and
    mountains exist; and what causes climate change. The Hall of Planet
    Earth in turn leads to the recently opened Hall of Biodiversity.
    Together the new Planetarium and halls provide visitors a seamless
    educational journey from the outer edges of the universe to the
    processes that shape the Earth, to the diversity of our planet's life
    and cultures.
        Throughout this trio of new halls and Planetarium, innovative
    exhibits attest to the accomplishments of the Museum-NASA partnership.
    For example, displayed in the Hall of Planet Earth are the ``black
    smokers,'' or sulfide chimneys retrieved from the deep ocean floor by
    Museum scientists and educators in an expedition with the University of
    Washington.
        A highlight in the halls are the National Center's electronic
    Science Bulletins. As companion to the BioBulletin in the Hall of
    Biodiversity, this year the National Center launched the HoPE's
    GeoBulletin and the AstroBulletin in the Hall of the Universe. These
    video reports feature breaking global and space news in high definition
    wall displays. The Earth Event Wall broadcasts news on earth events
    such as earthquakes, floods, and atmospheric conditions as they occur.
    The dramatic 13.5-foot-long Universe Wall showcases NASA news and data,
    displaying up-to-date images and events in space, including a log of
    current NASA missions. Nearby touch-screen computer kiosks enable
    visitors to delve more deeply into the stories. All Science Bulletins
    are also accessible to visitors worldwide on the Museum's web site.
    National center science bulletins and families of products
        The exhibit halls, however spectacular, do not tell the entire
    story of the benefits of our NASA partnership. Since its inception the
    National Center has created 70 different web sites; CD-ROMS; books;
    magazines for students, teachers, parents, and families; exhibition
    guides, and more. Fueled by our NASA collaborations, we have been able
    to forge partnerships with Time For Kids, Discovery, Classroom Connect,
    Tom Snyder Productions, and others.
        These educational products are reaching millions. For example,
    through our partnership with Classroom Connect, a million middle
    schoolers have followed expeditions to Africa, the Galapagos, Asia, and
    now the Southwest. More than 750,000 adults have traveled in online
    expeditions through our partnership with Discovery Channel Online. Two
    million students nationwide receive science magazines through our
    partner, Time For Kids.
        One of the National Center's most exciting initiatives targets
    teachers--our new online courses, Seminars on Science, offered for the
    first time this spring in partnership with Connected University, will
    provide teachers with unprecedented access to authentic science
    investigations. The National Center also has been creating inquiry-
    based science curricula, aligned with the national standards, that take
    place in class, in the field, and online. For instance, Biodiversity
    Counts sends kids into their own backyards and neighborhoods to collect
    data and share it online. It has already been piloted in 115 schools in
    40 states. And our award winning Science Seekers, created in
    partnership with Tom Snyder Productions, combines multimedia,
    cooperative learning, and hands-on activities to teach core science
    content and technology tools.
    Science partnership
        Scientific research is also part of the full story of the Museum's
    partnership with NASA, as we are working together to advance our shared
    goal of discovering ways to understand the earth, its biodiversity, and
    the history of life in the universe. At the Museum, as at NASA, much of
    our scientific effort now takes the form of interdisciplinary research
    and exploration. Following last year's appropriation, our partnership
    with NASA has expanded into four key areas: incorporation of satellite
    technology into biodiversity conservation; DNA sequencing for
    conservation; improved collections that include super-cold tissue
    storage for microbial and molecular biology; and digital imaging for
    improved perception of specimens and dissemination.
        Our Museum researchers are progressing on a number of scientific
    frontiers. Our Center for Biodiversity and Conservation is adapting GIS
    [Geographic Information System], remote sensing, and land-cover
    processing methodology for conservation and training in Madagascar and
    other biodiversity ``hot spots.'' Our systematic biologists are drawing
    national attention with the powerful parallel computing facility they
    built from scratch; and our molecular systematists are working at the
    forefront of the analysis of DNA sequences for evolutionary research.
    We are also building the database of and protocols for our unique
    frozen tissue collection, and digitizing and databasing our world
    renowned paleontology collections.
        Concurrent with the Rose Center, the Museum has also launched a
    vigorous research program in astronomy and astrophysics that now
    includes eight scientists. The Planetarium's Digital Dome provides them
    an assemblage of the most powerful and sophisticated astronomy
    visualization tools ever designed and full-dome, three-dimensional
    views of massive datasets. At an upcoming international conference,
    Museum astrophysicists will introduce the international scientific
    community to the Rose Center and the Hayden Space Theater's capacity
    for three-dimensional ``mining'' and display of astrophysical data.
    Fiscal year 2001 agenda
        We now seek to broaden and deepen our educational and scientific
    partnerships with NASA and to fully realize the power and reach of the
    new Rose Center. In our agenda for the coming year, we propose to
    expand our shared investments in interdisciplinary research in emerging
    areas, particularly astronomy and astrophysics projects that fully
    explore the Rose Center's visualization and modeling capacities. We
    plan an aggressive computational and observational astrophysics
    program. We also seek through the National Center to expand our NASA
    collaborations to capitalize on the Digital Dome's unique display
    system to create new presentations, and to enhance the agency's public
    outreach by featuring NASA news and discoveries. We propose to develop
    interactive educational modules for the Hall of the Universe; as well,
    we plan to expand the distribution system for the Digital Galaxy's
    astounding compilation of information to an even broader audience of
    informal science education institutions, teachers, students, and the
    general public.
        A critical ingredient to the success of the Museum's research and
    education programs is access to ultra-high speed communications
    networks and new technologies. Our current uses of these technologies
    range from computational astrophysics to the production of high
    definition, real time displays in the exhibition halls. We seek to
    deepen our NASA collaborations and data exchange by upgrading our
    access to high speed networks and advanced research and education
    applications.
        Through the National Center we plan to develop, evaluate, and
    distribute additional innovative inquiry-based curricular products. We
    will also continue to focus on professional development, creating
    enhanced online science courses and technology learning tools targeted
    to teachers. In addition, we propose to move into advanced development
    phases for the Science Bulletins launched under prior NASA agreements
    and to expand systematic distribution to partner institutions
    throughout the country. In the BioBulletin, GeoBulletin and now the
    AstroBulletin, we propose to add content, improve data structure, and
    import large datasets even more rapidly so as to present the most
    current science developments and NASA data.
        As we seek to realize the full potential of the Rose Center, let me
    illustrate its power and reach. The American Museum's audience includes
    nearly 4 million total visitors each year, approximately half of them
    children. With the opening of the Rose Center, we project up to one
    million more annual visitors. Now, add our virtual visitors to the
    National Center and AMNH web sites. Last year the web sites had more
    than 31 million hits and several million visitors; we project
    significant increases ahead. The Museum-NASA partnership therefore
    seems poised in the years ahead to reach a combined on site and online
    audience that could reasonably approach 10 million children, adults,
    families, teachers, and communities. This is a national and
    international museum audience like none other.
        This is the moment to maximize the shared investments in the
    American Museum and the Rose Center. We now seek $7 million to broaden
    and deepen our educational and scientific partnerships with NASA, and
    to fully realize the Rose Center's potential. The federal participation
    to date has fueled our successful fundraising efforts, enabling the
    Museum to more than match the federal investment with contributions
    from private donors, foundations, and corporations. We are confident
    that with continued congressional leadership, we will be able to
    continue to leverage federal investment so favorably.
        The American Museum is deeply appreciative this Subcommittee's
    support. Thank you again, Mr. Chairman and Members of the Subcommittee,
    for the opportunity to submit this testimony to you.
                                     ______

                 Prepared Statement of Florida State University

        Mr. Chairman, I would like to thank you and the Members of the
    Subcommittee for the opportunity to submit testimony before this
    Committee. I would like to take a moment to briefly acquaint you with
    Florida State University.
        Florida State University is a comprehensive Research I university
    with a liberal arts base. The University's primary role is to serve as
    a center for advanced graduate and professional studies while
    emphasizing research and providing excellence in undergraduate
    programs. Faculty at FSU have been selected for their commitment to
    excellence in teaching, for their ability to perform research and
    creative activities, and for their commitment to public service. Among
    the faculty are numerous recipients of national and international
    honors, including four Nobel laureates and eight members of the
    National Academy of Sciences. Our scientists and engineers do excellent
    research, and they often work closely with industry to commercialize
    their results. Florida State ranks third this year among all U.S.
    universities in revenues generated from its patents and licenses,
    trailing only Columbia University and the entire University of
    California system. Having been designated as a Carnegie Research I
    University several years ago, Florida State University currently
    exceeds $100 million per year in research expenditures. With no
    agricultural or medical school, few institutions can match our success.
        Florida State attracts students from every county in Florida, every
    state in the nation, and more than 100 foreign countries. The
    University is committed to high admission standards that ensure quality
    in its student body, which currently includes some 192 National Merit
    and National Achievement scholars, as well as students with superior
    creative talent. We consistently rank in the top 25 among U. S.
    colleges and universities in attracting National Merit Scholars. At
    Florida State University, we are very proud of our successes as well as
    our emerging reputation as one of the nation s top public universities.
    Support for the budget of the National Science Foundation

           SUPPORT FOR THE BUDGET OF THE NATIONAL SCIENCE FOUNDATION
        I want to discuss briefly with you the fiscal year 2001 budget
    request of the National Science Foundation pending before you today. I
    am certain that you know the many reasons why this small agency is so
    vitally important to our Nation. It provides the foundation in all the
    natural and physical sciences and engineering research that feeds the
    breakthroughs at NIH and DOD. An eloquent advocate of NSF s important
    role was Harold Varmus, who felt strongly that NIH could not thrive
    without a healthy and vigorous NSF. Many of the instruments developed
    in scientific arenas find themselves into the laboratories of those
    doing medical research. The levels of NSF support in universities for
    the physical sciences and engineering are comparable to support
    provided to DOD in its 6.1 and 6.2 accounts. DOD activities are heavily
    dependent on this type of support from NSF.
        NSF is seeking a 17 percent increase this year, the largest
    increased proposed for the agency in my memory and certainly larger
    than the increased that I supported when at the NSF. Were this NIH, few
    would have any concern about endorsing such a budget. However, NSF does
    not have the medical hook that NIH has to garner its support. But what
    the NSF does is so important to our universities and to moving this
    Nation forward--whether in areas like telecommunications and
    information technologies, in genetic and biological research, in
    developing new composite material and substances, or a wide range of
    scientific applications that lead to new industries, new jobs, and
    additional taxes that repay this federal investment many times over.
    Many economists have concluded that R&D is the best investment we can
    make as a Nation. NSF is clearly one of the best places to put those
    dollars.
        There's another reason and a somewhat parochial one that I am
    asking for such special consideration and treatment for the NSF budget.
    FSU ranks 14th among American public universities in support from NSF.
    Most significantly, however, our National High Magnetic Field
    Laboratory (NHMFL) which is located at FSU and has additional sites in
    Gainesville, FL and in Los Alamos, NM, has recently submitted its
    second five-year renewal proposal to NSF. As you may remember, NSF to
    move the facility from MIT in Cambridge, Massachusetts, to Tallahassee
    in the very late 1980s relocated the NHMFL to Florida by a bold
    decision. That decision, which this Subcommittee and the NSF have
    strongly supported, has turned out to be an excellent decision, as we
    have seen the Laboratory grow to clearly the best in the world. The
    Laboratory has grown dramatically over the past ten years in
    facilities, unique instrumentation, and the number of users who come to
    Tallahassee from around the Nation and the world to gain access to the
    incredible resources of the facility.
        Our renewal proposal that has been submitted to NSF asks for $173.6
    million over the next five years with the new funding beginning in
    fiscal year 2001.
        We do not wish any specific earmarking in the NSF budget even for
    this very important national resource but because NSF has many such
    opportunities in which to invest their resources, I do request that you
    give serious consideration to the full increase requested by the NSF in
    their fiscal year 2001 budget pending before your Committee.
        Mr. Chairman, let me briefly share some additional information
    about our efforts and achievements at our Magnet Laboratory and also
    about a project we are pursuing through NASA. National High Magnetic
    Field Laboratory

                    NATIONAL HIGH MAGNETIC FIELD LABORATORY
        The National High Magnetic Field Laboratory at Florida State
    University was established in 1991, and has quickly become the
    preeminent laboratory of its kind in the world and the only such
    research facility in the Western Hemisphere. The state-of-the-art
    facilities provide the highest magnetic fields available anywhere and
    supports magnet related research in all areas of science and
    engineering, including biology, biomedical, chemistry, geochemistry,
    bio-engineering, materials science, and physics. The National High
    Magnetic Field Laboratory also represents a unique federal/state
    partnership between the National Science Foundation and the State of
    Florida through funds largely to FSU.
        The laboratory is a dedicated national users facility and open to
    all qualified researchers under a peer-review process that allocates
    research time on the unique array of magnets and instrumentation. User
    activity across all disciplines has grown 60 percent during the past
    five years. The breath of the National High Magnetic Field Laboratory s
    programs is not duplicated at any of the other laboratories in Europe
    and Asia. Recently, the laboratory commissioned the world s highest
    field and most powerful magnet, nearly one million times the earth s
    magnetic field, which promises to open new science frontiers. The
    innovative magnet technology used to fabricate this complex magnet
    system was developed in Tallahassee in cooperation with the private
    sector.

                  NATURAL HAZARDS MITIGATION CENTER CONSORTIUM
        This project is a joint initiative with several academic
    institutions including the University of in Alabama, Georgia Tech,
    Louisiana State University and Mississippi State University. This
    initiative will allow the above universities to work together to
    conduct research as well as provide professional and public education
    to citizens, state governments and Federal agencies in natural hazard
    issues. Examples of research will include risk assessment for natural
    hazard threats as well as providing forecasts to farmers and
    agricultural interests relative to planting and irrigation decisions;
    updating land-use and building codes; taking into account disaster risk
    in investment decisions; estimating the true economic costs of natural
    disasters; and undertaking cost/benefit analysis of disaster mitigation
    policies. It recognizes the impact of the information technology
    revolution on the United States and creates a virtual center to study
    the aspects of all types of natural disasters including hurricanes,
    tornadoes, forest fires, harmful algal blooms, floods, droughts, and
    other unexpected natural disturbances. Coordination of research
    activities across the various sites will be done via the Internet. The
    combined resources and visibility of the proposed partnership will
    provide the opportunity for shared resources, technology and expertise
    to obtain successful results.
        We are requesting $2 million to develop and implement this
    initiative. There will be increasing involvement with state agencies
    and private businesses as research progresses.
        Mr. Chairman, these are just a couple of the exciting activities
    going on at Florida State University that will make important
    contributions to solving some key problems and concerns our Nation
    faces today. Your support would be appreciated, and, again, thank you
    for an opportunity to submit these views for your consideration.
                                     ______

     Prepared Statement of the American Lung Association and the American
                                Thoracic Society

                           MAGNITUDE OF LUNG DISEASES
        Lung disease is the third leading cause of death in the U.S.,
    responsible for one in every seven deaths. More than 30 million
    Americans suffer from a chronic lung disease. Lung diseases cost the
    U.S. economy an estimated $89.1 billion annually. Lung diseases
    represent a spectrum of chronic and acute conditions that interfere
    with the lung's ability to extract oxygen from the atmosphere, protect
    against environmental of biological challenges and regulate a number of
    metabolic processes. Lung diseases include: emphysema, chronic
    bronchitis, lung cancer, tuberculosis, pneumonia, influenza, sleep
    disordered breathing, pediatric lung diseases, occupational lung
    diseases, sarcoidosis and asthma. Nearly all of these lung diseases are
    severely impacted by air pollution.
        The lungs are in constant contact with the outside world
    interfacing with 8,000 to 9,000 liters of air as we breathe each day.
    How well or how poorly our lungs perform is contingent on the quality
    of air around us, making the impact of air pollution inescapable. Air
    pollution remains a primary contributor to a high prevalence of
    respiratory diseases.
        For the past 30 years, the American Lung Association and the
    American Thoracic Society have conducted scientific, public health and
    educational programs to fight air pollution and to improve the quality
    of air we breathe. We remain strong supporters of the Clean Air Act and
    its amendments. We can attest to the significant impact the Clean Air
    Act has had upon cleaning our nation's air and allowing us all to
    breathe a little easier.
        While the nation has made great strides in improving air quality,
    many areas across the nation experience unhealthy levels of air
    pollution many days each year. The EPA recently reported that in 1997,
    approximately 59 million American lived in counties that did not meet
    the current federal air pollution standards. The number of people
    living in non-attainment counties jumps to 107 million when the revised
    air quality standards are used. Tens of thousands of Americans still
    die prematurely each year from complications associated with air
    pollution exposure.

                    OPPOSE CLEAN AIR ACT LEGISLATIVE RIDERS
        The American Lung Association and the American Thoracic Society are
    greatly concerned that the VA-HUD appropriations bill has become a
    target for substantive legislative riders seeking to change laws that
    protect the public health and our environment. Often these riders seek
    to delay the implementation of clean air standards that protect our
    clean air or reduce the level of protection to our environment.
        In particular, the Clean Air Act has become the target of narrow
    changes attached to EPA's appropriation. Actions taken by the EPA to
    improve air quality enjoy broad public support. A recent poll conducted
    by the American Lung Association found that a majority of Americans
    support cleaner burning fuels and cleaner burning cars. In the same
    poll, 60 percent of respondents felt that the air quality was worse
    than it was ten years ago. Clearly, Americans are aware and concerned
    about air quality issues. We strongly urge this committee to respect
    the concerns of the American people by keeping the bill free of riders
    that would harm EPA's efforts to continue progress toward to achieving
    cleaner air.

                                 THE EPA BUDGET
        While we are encouraged that the President's budget proposes an
    overall increase in funding for Clean Air Programs, we are nonetheless
    concerned that the Administration's budget also cuts the EPA budget
    $136 million from fiscal year 2000. We are also concerned with the
    reduced funding for EPA's Clean Water Programs. The American Lung
    Association and the American Thoracic Society see important
    interactions between EPA's Clean Air, Water and Land programs.
        We are also concerned that the Administration has recommended a
    12.8 percent cut in EPA's Science and Technology programs. We are
    particularly concerned that the President's budget proposes a 16.4
    percent cut in Clean Air Activities and a 14.8 percent cut in Sound
    Science activities in the Science and Technology portion of the EPA
    budget. Recent studies supported by EPA grants are adding new
    understanding to the role outdoor and indoor air have on the initiation
    and progress of respiratory diseases. Now is clearly not the time to
    reduce EPA's commitment to research.

                              EPA AND STATE GRANTS
        Much of the work in implementing, monitoring and enforcing the
    Clean Air Act is conducted at the state and regional level. While much
    of the key leadership is provided by EPA, a good share of the work is
    done by states. The President's budget proposes a 26.7 percent increase
    in Clean Air activities in the State and Tribal Assistance Grants
    portion of the EPA budget. The proposed increase is appreciated.
    However, given the work load remaining, meeting the existing new ozone
    and particulate standards, the preparation needed for new standards and
    ongoing work in other clean air activities like air toxics, other
    criteria pollutants attainment programs, and permits--additional
    support for state clear air activities is needed.

                  EPA: NIEHS SUPERFUND BASIC RESEARCH PROJECT
        This program focuses on the health effects of toxic chemical
    exposure at Superfund hazardous waste sites, and devises methods for
    minimizing the relative health risks of exposure for clean up site
    employees. The ALA/ATS believes the EPA has made an excellent
    investment in the future of human protection and worker safety by
    supporting this research and training program. We recommend $45 million
    for transfer to the National Institute of Environmental Health Sciences
    (NIEHS) for toxicology research and an additional $23 million for
    Superfund worker training. The NIEHS Superfund research program is
    conducting exiting research to develop biomarkers for measuring the
    actual burden of environmental toxics in humans.

               EPA OZONE AND PARTICULATE MATTER NAAQS ATTAINMENT
        As the subcommittee is no doubt aware, EPA has recently revised the
    Clean Air Act's National Ambient Air Quality Standard (NAAQS) for ozone
    and particulate matter (PM). The ALA/ATS strongly support these new
    standards. While much work needs to be done to monitor and implement
    the new ozone and PM standards, there is still much unfinished business
    to attain the old standard. Many areas in the U.S. have yet to comply
    with existing standards. To attain air quality standard and to
    appropriately plan and implement the new standards will require
    significantly more resources than requested in the Administration's
    budget.

                                 EPA AIR TOXICS
        The Air Toxics Program has significant work before it that will
    require additional funding. The ALA/ATS is concerned that without
    additional resources, the Air Toxics Program will not be able to
    complete its current work agenda. We are especially concerned that if
    the establishment of the MACT rules is to proceed, new resources at EPA
    will be required.

                  EPA OTHER CRITERIA POLLUTANTS NAAQS PROGRAM
        EPA needs to provide more technical assistance to states for
    developing control programs for all the other criteria pollutants. For
    example, there is a critical need in the SO2 peak exposure
    control plans. While EPA is currently advocating that health threats
    posed by exposure to peak levels of SO2 be addressed at the state
    level, the EPA is not providing the states with the resources to
    accomplish this goal. The EPA needs to provide the state the resources
    to address this important clean air problem.

                           EPA ENVIRONMENTAL JUSTICE
        All Americans are impacted by air pollution. However, poor and
    ethnic Americans face a disproportionate share of exposure to
    environmental health threats. This is especially true in air pollution.
    A 1990 EPA report states that ``racial minorities and low-income
    populations experience higher than average exposures to selected air
    pollutants, hazardous waste, contaminated fish and agricultural
    pesticides in the workplace.''
        Industrial and electricity generating facilities, for example, are
    major sources of harmful air pollution. Studies have shown that theses
    facilities are disproportionately concentrated in counties where high
    percentage of minorities live. Of all U.S. counties considered urban,
    only 12 percent had minority populations greater than 31 percent.
    However, these areas contain 21 percent of the 3,000 major air
    polluting facilities in our nation.
        We support EPA's effort to ensure the benefit of clean air and
    other environmental protections are shared by everyone. We encourage
    the subcommittee to support EPA's efforts.

                          HUD SUBSIDE OF TOBACCO SALES
        The American Lung Association and the American Thoracic Society are
    pleased with recent Congressional efforts to end the U.S. taxpayer
    subsidy of cigarette sales through smoke shops. The recent
    Congressional report highlighting this issue was most helpful in ending
    this practice. Attached is copy of a statement of the American Lung
    Association regarding this issue.

                              VA RESEARCH PROGRAM
        The VA Research Program has a significant impact on lung disease.
    The VA Research Program is an intramural research program for
    physicians and scientist who work in the VA's medical system. The VA
    Research Program provides research grants to VA physicians to study
    diseases and conditions that place a unique burden on the VA
    population.
        The American Lung Association and the American Thoracic Society are
    extremely disappointed that the Administration has flat funded the
    program in fiscal year 2001 budget request.
        Lung diseases take a heavy toll on veterans. Lung disease
    represents the leading medical reason for hospital admissions among
    veterans. Lung cancer, chronic obstructive pulmonary diseases, and
    pulmonary infection are major causes of illness for VA beneficiaries.
    Because of the disproportionate impact of lung disease had on veterans,
    the VA Research Program has historically been a strong supporter of
    pulmonary disease research. The ALA/ATS strongly support the VA
    Research Programs and encourage this subcommittee to provide $386
    million for the program.
        Our recommend of $386 million represents a $65 million over current
    funding. These funds are needed to accomplish the following goals:
      --Maintain Current Services-the VA research program will require $11
            million just to maintain current services.
      --Expand Research Programs--the VA research program needs $43 million
            to expand the research program. In 1988 the VA Research program
            funded 2,432 grants. Today, in an era of vast scientific
            opportunity, the VA program funds only 2,072 grants--360 fewer
            than in 1988. An increase of $43 million is needed to help
            restore the VA Research program to prior level of activity and
            to capture the research potential that will have a direct
            impact on VA patient care.
      --Research Career Training Programs--the VA has made a significant
            commitment to training clinician and non-clinician
            investigators. The VA has also initiated career development
            training programs for rehabilitation medicine and health
            systems research to insure a cadre of investigators trained in
            areas of direct relevance to veterans.
      --Research Oversight--the ATS/ALA recommend Congress provide $1
            million for research oversight. Recent cases of lapses in the
            clinical research oversight in trials supported with public
            funds--including VA and other Federal granting agency sponsored
            research-have lead to an aggressive VA quality oversight
            program. The VA will lead the nation in establishing an
            accreditation process for research programs to ensure a
            research integrity and protection of patients enrolled in
            clinical trials.
        In addition to providing adequate funds for the VA Research
    Program, the ALA/ATS requests that the subcommittee urge the VA to
    continue implementation and testing of recently approved policy
    directing the administration of VERA research support funding to
    medical centers. VA funded investigators often are caught between the
    time pressure demands of research and providing patient care. In 1999
    the VA approved a plan to provide VA researchers with adequate time to
    conduct research. We hope the subcommittee will encourage VA to
    continue implementation of VERA research support funding policy.
        This subcommittee plays an important role in protecting the lung
    health of all Americans. With strong bipartisan support for clean air
    programs at EPA and the research program at the VA, this subcommittee
    can take major strides in protecting and improving the health of our
    nation.
                                     ______

        Prepared Statement of the National Congress of American Indians

                                  INTRODUCTION
        Good morning Chairman Bond, Senator Milkulski and distinguished
    members of the Senate Appropriations Subcommittee on Veteran Affairs,
    HUD, and Related Agencies. My name is Susan Masten, I am President of
    the National Congress of American Indians (NCAI) and Chair of the Yurok
    Tribe of Northern California. On behalf of NCAI, I would like to thank
    you for the opportunity to present testimony regarding the President's
    fiscal year 2001 Budget Request for Indian programs and services.
        NCAI is extremely encouraged by this year's budget request. For the
    first time in a generation, the President has proposed a significant
    increase in the budget for programs that assist Indian people and
    Indian tribes. If preserved through the appropriations process, an
    additional $1.2 billion over last year's level will be provided to
    Indian Country. The last time the federal government enacted an
    increase of a similar scope to the President's fiscal year 2001 budget
    proposal, was in the mid-1970's, as a part of President Nixon's Tribal
    Self-Determination policy. The President's fiscal year 2001 budget
    request represents a commitment to Indian programs and will better
    serve Indian communities. It also exemplifies a meaningful step toward
    honoring the federal government's treaty and trust obligations to
    Indian nations. As Congress begins the appropriations process for
    fiscal year 2001, NCAI seeks support from this Subcommittee to fully
    fund the Indian programs in the Departments of Housing and Urban
    Development (HUD) and Veterans Affairs.

                  DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
        The Presidents's fiscal year 2001 budget request of $650 million
    for the Indian Housing Block Grant program reflects a $30 million
    increase over fiscal year 2000. This request falls short of the $985
    million in base funding determined by the National American Indian
    Housing Council (NAIHC) as a minimum to begin addressing the housing
    shortage in American Indian communities. NCAI urges the Subcommittee to
    address the real housing need in Indian Country by appropriating $985
    million in fiscal year 2001 for the Indian Housing Block Grant program.
    Adequate Indian housing funding is critical since 40 percent of Indian
    reservation housing currently is considered substandard; this is in
    stark contrast to the national substandard housing rate of 5.9 percent.
    This disparity translates to an inadequate housing ratio of over 6:1.
        HUD has a variety of other initiatives which will benefit tribes
    greatly. The Indian Housing Block Grant program will allow tribes or
    tribally-designated housing entities to provide housing or housing
    assistance for qualified law enforcement officers. Indian families are
    also eligible for the 10,000 new rental housing vouchers to help low-
    income working families through the Administration's proposed $690
    million initiative. Additionally, the budget proposes to set aside $5
    million of the Community Development Block Grant program for
    competitive grants to tribal colleges to assist their communities with
    neighborhood revitalization, housing, and economic development. A
    proposed $2 million will allow HUD to establish a Native American
    Economic Development Access Center, which will link all 12 agencies
    through a toll-free number that Native American callers can use to
    receive information about federal programs for economic development.
    Additionally, the budget proposes a $5 million set aside within the
    Indian Housing Block Grant to create a non-profit homeownership
    intermediary. This homeownership intermediary will serve as a catalyst
    for the creation of private homeownership in Indian Country and will
    support the ``one-stop mortgage centers''. Finally, HUD programs will
    also benefit tribal governments through the proposed expansion of the
    Empowerment Zone initiatives. NCAI strongly supports the funding of
    these much-needed programs and believes that they will help in
    addressing the housing shortage in Indian Country.
        Recently, Senator Christopher Bond, Chairman of the HUD
    Appropriations Subcommittee, has threatened to block government funding
    of American Indian smoke shops in an effort to curb teen smoking. NCAI
    is extremely alarmed by this threat and would request that this
    Subcommittee support the continuation of HUD funding for smoke shops
    under the Indian Community Development Block Grant program.

                         DEPARTMENT OF VETERANS AFFAIRS
        Mr. Chairman, adequate funding for Veterans programs is another
    critical concern of Indian Country. Native American veterans have
    served the United States with honor and distinction since this nation
    was founded. As a result, Indian people have the highest percentage of
    veterans of any population within the United States. According to the
    Veterans Administration, over 160,000 American Indians have served in
    the Armed Forces. Native people also carry the proud distinction of
    being the most decorated group in this country's history. Today, Native
    veterans have many pressing needs such as housing, health care,
    benefits, and other concerns that include issues unique to Indian
    Country.
        NCAI is very pleased by the Administration's continued support for
    the Native American Veterans Housing Loan Program. For fiscal year
    2001, the Administration has provided a $12,000 increase, resulting in
    a total request of $532,000. While only a small program, the Native
    American Veterans Housing Loan Program is vital since it provides
    direct loans to veterans living on trust land. Many times these
    veterans are unable to secure such loans through local banks or credit
    unions. These loans are available to purchase, construct or improve
    homes. The principle amount of loans under this authority is generally
    limited to $80,000, except in areas where housing costs are
    significantly higher than costs nationwide. This pilot program began in
    1993 and is authorized through December 31, 2001. Mr. Chairman, to
    date, this program has been very successful and critical in providing
    home ownership opportunities to our nation's Native veterans. NCAI
    calls on this Subcommittee to support the President's budget and
    consider the establishment of a permanent and expanded program in order
    to continually serve the important needs of Native veterans.

                                   CONCLUSION
        Mr. Chairman, we urge the Congress to fulfill its fiduciary duty to
    American Indians and Alaska Native people and to uphold the trust
    responsibility as well as preserve the Government-to-Government
    relationship. This responsibility should never be compromised or
    diminished because of any Congressional agenda or party platform.
    Tribes throughout the nation relinquished their lands, as well as their
    rights to liberty and property in exchange for this trust
    responsibility. The President's fiscal year 2001 budget request
    acknowledges the fiduciary duty owed to tribes. We ask that the
    Congress maintain the federal trust responsibility to Indian Country
    and continue to aid tribes on our journey toward self-sufficiency. This
    concludes my statement. Thank you for allowing me to present for the
    record the National Congress of American Indians' comments regarding
    the President's fiscal year 2001 proposed budget for Veteran Affairs,
    HUD, and Related Agencies.
                                     ______

            Prepared Statement of the Nuclear Energy Institute [NEI]

    EPA DUAL REGULATION OF NRC LICENSED SITES--FEMA RADIOLOGICAL EMERGENCY
                              PREPAREDNESS PROGRAM
        Mr. Chairman and members of the subcommittee, my name is Joe
    Colvin. I am President and Chief Executive Officer of the Nuclear
    Energy Institute. The Institute coordinates public policy for the U.S.
    nuclear industry. We represent 275 member companies with a broad
    spectrum of interests, including every U.S. utility that operates a
    nuclear power plant, their suppliers, fuel fabrication facilities,
    architectural and engineering firms, labor unions and law firms,
    radiopharmaceutical companies, research laboratories, universities and
    international nuclear organizations.
        Today I would like to discuss two matters of great importance to
    America's nuclear industry: (1) the continuing situation of EPA dual
    regulation of Nuclear Regulatory Commission (NRC) licensees, and (2)
    reforming the Federal Emergency Management Agency (FEMA) Radiological
    Emergency Preparedness Program.
        Allow me to begin by expressing our industry's appreciation for
    your commitment to careful oversight of the Environmental Protection
    Agency (EPA), and, in particular, to the agency's administration of the
    National Priorities List. The nuclear industry is very appreciative of
    this subcommittee's recognition of the need for continued congressional
    oversight of federal regulatory funds. We join you in embracing the
    tenets of the White House regulatory reform effort that discourages the
    allocation of funding to agencies whose regulation has proven
    inconsistent or incompatible.
        In 1998, the House Appropriations Committee adopted language in its
    report that specifically prohibited the EPA from spending funds to
    place Nuclear Regulatory Commission (NRC) licensees undergoing
    decommissioning and license termination on the EPA's National
    Priorities List, better known as the ``Superfund List.'' However, the
    EPA simply continues to disregard that clear congressional directive to
    stop intruding in NRC activities. They do so, in spite of the
    subcommittee's expression of complete satisfaction with the high level
    of protection afforded to public health and safety by the NRC's site
    remediation regulations. Unfortunately, the EPA continues to waste
    public funds to challenge the NRC's authority to regulate its own
    licensees in the establishment of radiation protection limits at
    decommissioned nuclear sites.
        The EPA's duplicative regulatory role regarding the radiological
    aspects of nuclear site decommissioning diverts industry time and
    resources away from the NRC's clear, consistent site cleanup standards
    which focus on protecting public health and safety. The EPA's refusal
    to accept the NRC's decommissioning standards for remediated sites
    makes industry compliance quite confusing and far more expensive
    without a significant increase in public health and safety. NRC
    regulations require plant licensees to collectively accrue $45 billion
    in funds to decommission nuclear plant sites. It would be financially
    imprudent for these licensees to spend accrued funds to pursue cleanup
    under a threat of being revisited by another federal agency on the same
    issues.
        One thing is clear. If the EPA continues to intervene in the
    remediation of NRC-licensed sites, the agency's activities could
    inhibit the effective implementation of the time-tested NRC site
    remediation program and ultimately could hinder the safe, efficient
    cleanup of nuclear sites. We urge you to do all that you can to prevent
    dual regulation of the nuclear facilities.

                                   BACKGROUND
        The Atomic Energy Act of 1954 gives the NRC responsibility to
    regulate the civilian uses of nuclear materials. Under this authority,
    the commission has successfully remediated more than 70 nuclear sites
    to a level that fully protects public health and safety. By comparison,
    CERCLA assigns the EPA primary responsibility to administer the
    remediation of contaminated sites included on the Superfund list. For
    years, this potentially confusing legislative language was
    inconsequential because EPA's policy was to defer to the NRC regarding
    NRC licensed facilities. Only under the direction of EPA Administrator
    Carol Browner has the less than clear delineation of responsibility
    resulted in the EPA pursuing duplicative and inconsistent regulatory
    policies regarding NRC licensees. Nuclear power plants are not alone in
    this duplicative regulatory environment. They are joined by medical
    facilities, universities with nuclear research programs, and
    radiopharmaceutical companies.
        In 1992, the EPA agreed to defer remediation of NRC-licensed sites
    to the nuclear regulator. That interagency accord was consistent with
    NRC's mission under the Atomic Energy Act of 1954, to act as the
    exclusive regulator and standard-setter of certain radioactive
    materials. Based on the interagency agreement, the NRC alone
    established policy and guidelines to successfully regulate the site
    remediation and license termination for the more than 70 sites
    previously mentioned, on a case-by-case basis.
        In 1997, the NRC formalized its approach by issuing a final rule
    that included a generic environmental impact statement. In addition to
    providing a clear regulatory approach, the final rule articulated
    specific radiation safety standards for remediation and license
    termination. The NRC stated that ``the final rule will result in more
    efficient and consistent licensing actions related to the numerous and
    complex site decommissioning activities anticipated in the future.''
        The NRC adopted this rule after four years of extensive scientific
    study and public comment, during which NRC held more than a dozen major
    workshops and meetings on residual radiation standards and provided
    three separate requests for public comments. This broad level of
    public-participation produced more than 7,000 comments from a wide
    range of interests--including scientific and professional
    organizations--EPA and other federal agencies, state and local
    governments; Native Americans, NRC licensees, academic bodies, and
    civic and environmental organizations. The EPA actively participated in
    this process and was consulted by the NRC throughout its rulemaking.
        NRC's four-year rulemaking process, and related scientific studies,
    led the agency to conclude that public health and safety is best
    protected by a regulation that sets a maximum limit on potential
    exposure to members of the public. The exposure limit from residual
    radiation at remediated sites is for all possible ``dose pathways,''
    such as air, soil, surface and ground water, and food products grown at
    the remediated site. The regulation also requires that a site-specific,
    cost-benefit analysis be performed by the licensee to identify actions
    to be taken to further remediate the site and reduce potential levels
    of exposure below the maximum limit.
        The approach taken by NRC including a maximum radiation dose limit
    and a requirement to further reduce potential exposure to levels that
    are ``as low as reasonably achievable (ALARA),'' incorporates the
    recommendations of respected national and international scientific
    organizations \1\ and is consistent with regulatory standards adopted
    in other countries. However, this approach differs from that taken
    previously by the EPA. The EPA approach includes a maximum radiation
    dose limit, but does not include a requirement to further reduce
    exposure levels. EPA also supports a separate groundwater requirement
    that utilizes the maximum contaminant levels (MCLs) established by EPA
    under the Safe Drinking Water Act (SDWA).
    ---------------------------------------------------------------------------
        \1\ Such organizations include the National Council on Radiation
    Protection and Measurements, the International Commission on
    Radiological Protection, and the International Atomic Energy Agency.
    ---------------------------------------------------------------------------
        Based primarily on the lack of a separate radiation standard for
    groundwater in the NRC rule, EPA Administrator Carol Browner in 1997
    informed NRC Chairman Shirley Jackson that EPA ``would be forced to
    reconsider its policy of exempting NRC sites'' unless EPA's approach
    was incorporated into NRC's final rule.\2\
    ---------------------------------------------------------------------------
        \2\ Letter from EPA Administrator Carol M. Browner to NRC Chairman
    Shirley Ann Jackson, Feb. 7, 1997.
    ---------------------------------------------------------------------------
        Shortly before that correspondence, EPA pursued its rule for site
    cleanup standards that would have been generally applicable to all
    federal agencies, including the NRC. However, the EPA rule was rejected
    during an interagency review process, involving primarily EPA, NRC and
    the Energy Department, facilitated by the Office of Management and
    Budget. The EPA formally withdrew its proposed rulemaking in December
    1996.
        After substantial interaction with EPA--and despite continuing
    disagreement between the agencies on the regulatory approach to site
    remediation--the NRC issued its final rule in July 1997. NRC's rule has
    been applied to license termination decisions for its licensees.
        For over two years, the EPA has continued to challenge NRC's
    regulatory program. In August 1997, the EPA issued a guidance
    memorandum to its regional offices that rejects the general acceptance
    of NRC's criteria under CERCLA, although the memorandum notes: ``We
    expect that NRC's implementation of the [NRC] rule for license
    termination will result in cleanups within the Superfund risk range at
    the vast majority of NRC sites.'' \3\ EPA also has interacted with
    public interest groups and the media on the decommissioning of NRC-
    licensed facilities, expressing concerns about the NRC standard and
    regulatory approach. Most recently, the EPA has formally criticized
    NRC's regulatory process as part of a NRC licensing review and has
    requested technical information from a NRC licensee regarding its site
    remediation plans.
    ---------------------------------------------------------------------------
        \3\ Establishment of Cleanup Levels for CERCLA Sites with
    Radioactive Contamination, Aug. 22, 1997, OSWER No. 9200.4-18.
    ---------------------------------------------------------------------------
        Through its duplicative actions, the EPA is diverting attention
    away from the NRC's clear, consistent site cleanup standards to protect
    public health and safety. Rather, the focus has shifted to EPA's
    refusal to accept the NRC's decommissioning standards for remediated
    sites. In the case of nuclear power plants, NRC regulations require
    plant licensees to collectively accrue $45 billion in funds to
    decommission these sites. It would be financially imprudent for these
    licensees to spend accrued funds to pursue cleanup under a threat of
    being revisited by another federal agency on the same issues.
        Such EPA interactions have taken place despite congressional
    direction that the NRC site remediation rule fully protects public
    health and safety: ``It has come to the [House Appropriations]
    Committee's attention that the [EPA] has recently proposed the reversal
    of its long-standing policy of deferring to the--NRC for cleanup of
    NRC-licensed sites. In the past, EPA has not placed sites that have
    been successfully remediated under the NRC on the National Priority
    List. The Committee is satisfied that the NRC has and will continue to
    remediate sites to a level that fully protects public health and
    safety, and believes that reversing this policy is unwarranted and not
    a good use of public or private funds. EPA is therefore directed to
    continue its long-standing policy on this matter with the NRC and spend
    no funds to place NRC-remediated sites on the NPL.'' \4\
    ---------------------------------------------------------------------------
        \4\ House Rpt. 105-610: Departments of Veterans Affairs and Housing
    and Urban Development and Independent Agencies Appropriations Bill for
    1999 (accompanies H.R. 4194 Public Law 105-276)
    ---------------------------------------------------------------------------

    EPA'S INTERACTION IN REMEDIATION OF NRC-LICENSED SITES IS DUPLICATIVE,
                                  INCONSISTENT
        EPA's continuing interactions in NRC's regulatory process reflect
    an inconsistent and duplicative regulatory approach and demonstrate a
    threat to list remediated sites on the National Priorities List even
    after an NRC has terminated a license and relinquished jurisdiction.
        To that end, EPA's intervention has raised serious stakeholder
    concerns regarding the authority and finality of NRC licensing
    decisions; the potential of parties associated with affected sites for
    future liability; and the looming uncertainty regarding a site
    remediation's ultimate duration and costs. More importantly, EPA's
    involvement erodes stakeholder confidence in the integrity of federal
    regulatory review and oversight, which runs counter to the objectives
    of the administration for ``reforming and making more efficient the
    regulatory process.''
        The EPA's resources should be devoted to high-priority cleanup
    activities under the Comprehensive Environmental Response, Compensation
    and Liability Act of 1980 (CERCLA). Yet, the agency continues to dilute
    its resources by extending CERCLA authority to nuclear sites already
    regulated effectively by the NRC. This defies the dictates of both
    common sense and sound public management.
        Last year, the House Committee amplified its displeasure with EPA
    by pointing out that ``any reversal of the long-standing policy of the
    EPA to defer to the NRC for cleanup of NRC-licensed sites is not in the
    public interest and is not a good use of public or private funds.'' \5\
    The committee recognized that attempts at dual regulation by the EPA
    have created legitimate stakeholder concerns regarding the authority
    and finality of NRC licensing decisions, the duration and cost of site
    cleanup, and the potential future liability of parties associated with
    affected sites.
    ---------------------------------------------------------------------------
        \5\ U.S. House of Representatives, Report 106-286 to accompany H.R.
    2684.
    ---------------------------------------------------------------------------
        To resolve this ongoing problem, the committee encouraged the EPA
    and NRC to enter into a memorandum of understanding (MOU), which
    clarifies the circumstances for EPA's involvement at NRC sites when
    requested by the Commission. The agencies were directed to report back
    to the committee by May 1, 2000, on the MOU status.
        Mr. Chairman, I regret to report to you today that the EPA is still
    involved in the decommissioning and cleanup of NRC-licensed sites,
    contrary to the guidance that the Congress has provided over the past
    three years. There has not been any substantive progress in developing
    this MOU, as requested by the House Committee more than six months ago.
        Since the House Committee's advice that the EPA should defer to the
    NRC for cleanup of NRC-licensed sites, there have been a number of
    examples of ongoing involvement by the EPA at these facilities.
    Recently, the EPA has intervened in public meetings on decommissioning
    held at nuclear power stations, in meetings between reactor licensees
    and their state regulators and directly with the state legislature in
    one instance. They have also continued their direct involvement with
    NRC reactor licensees through meetings and requests for technical
    information of a radiological nature.
        Earlier this year, the EPA issued a guidance memorandum to regional
    Superfund managers clarifying EPA's role under CERCLA at NRC-licensed
    facilities.\6\ In our view, the memorandum is simply a blueprint for
    continued dual regulation by the EPA.
    ---------------------------------------------------------------------------
        \6\ OSWER No. 9272.0-15P, ``Interim Final Guidance on Evaluation of
    Facilities Currently or Previously Licensed by NRC under CERCLA,''
    dated February 17, 2000.
    ---------------------------------------------------------------------------
        As characterized by the EPA, the memorandum is intended to
    accomplish several goals:
      --provide assurances to the public that NRC licenses are
            decommissioned in a manner that is protective of human health
            and the environment,
      --describe EPA's national policy, and
      --provide guidance to the EPA staff, and to the public and the
            regulated community.
        Since a joint MOU has not been concluded between the agency and
    NRC, EPA said the memorandum should be used by the EPA regions as
    guidance for actions regarding the decommissioning of NRC-licensed
    sites. It appears that the EPA is blatantly and intentionally
    disregarding this Congress' repeated instructions.
        The guidance sets out a roadmap for EPA staff to conduct
    ``protectiveness evaluations of NRC decommissionings'' and ``evaluate
    the need for CERCLA response actions at NRC-licensed sites.'' EPA would
    undertake such actions when requested by any stakeholder, where ``the
    decision as to whether such an evaluation is appropriate will generally
    be determined by the EPA region in which the facility is located.''
        The guidance includes step-by-step procedures for possible actions
    to be taken by EPA with regard to an NRC-licensed site. How EPA should
    conduct an analysis of NRC's proposed cleanup levels; how EPA should
    suggest practices that NRC licensees should follow; and how EPA should
    consider listing sites on the NPL after the completion of NRC
    decommissioning and termination of the license are examples of proposed
    actions.
        What is not in the EPA guidance memorandum is acknowledgement that
    NRC is the lead agency for its licensees, constraint on EPA involvement
    at NRC sites when not requested by NRC, or any reference to EPA
    consulting or coordinating with the NRC. With such glaring omissions,
    this document, now serving as EPA policy on the agency's role regarding
    NRC-licensed sites, stands in direct conflict with the guidance
    provided by this House Appropriations Committee to the EPA.
        The EPA and NRC have only recently attempted to resurrect a
    dialogue on a MOU to help resolve the issue of dual regulation. On
    February 17, the EPA sent NRC a letter to ``address the Committee's
    direction that our two agencies work together on an MOU.'' The letter
    conveys a copy of the recently issued guidance memorandum, which
    reflects the same regulatory approaches proposed by EPA in a draft MOU
    rejected by the NRC in 1998. In parallel, the NRC sent a letter to EPA
    on February 23 that reportedly conveyed a proposed draft MOU similar to
    that rejected by EPA in 1997.
        Mr. Chairman, more than two years after the first round of
    unsuccessful interaction, and six months after instruction from the
    House Appropriations Committee to proceed with reaching an MOU, there
    has been little progress by the two agencies toward resolving this
    issue.
        Based on the record outlined in this testimony, we are skeptical
    that an MOU, even if concluded in the future between the EPA and NRC,
    will provide a lasting resolution to the issue of dual regulation. We
    note that the agencies entered into a similar MOU in 1992 \7\, and the
    EPA has previously deferred to NRC as a matter of policy under CERCLA.
    But in fact, it is the breach of such agreements between the two
    agencies that forms the backdrop to the situation that exists today--
    inefficient and duplicative regulation.
    ---------------------------------------------------------------------------
        \7\ Memorandum of Understanding between Ivan Selin, Chairman,
    USNRC, and William K. Reilly, Administrator, USEPA, on Guiding
    Principles for EPA/NRC Cooperation and Decisionmaking, dated March 16,
    1992.
    ---------------------------------------------------------------------------
        In our view, an MOU cannot address the root cause of the issue.
    Provisions in CERCLA set the stage for conflicting and overlapping
    authority between the NRC and EPA, which inhibits the remediation of
    NRC-licensed sites in a safe, timely and economical manner. The
    industry believes that the ultimate resolution of this issue requires
    legislative action. However, we recognize that this committee is
    involved in the appropriation and oversight of expenditures of public
    funds, not in the authorization of statutory responsibilities of
    federal agencies. In that light, we respectfully offer several
    suggestions for consideration by the committee that may avoid costly
    duplication in site cleanup until such time as a legislative solution
    can be affected:
      --The committee should reconsider its previous report language
            regarding an MOU and provide more definitive direction and
            guidance as to what the MOU should address and when the MOU
            should be concluded.
      --The committee should consider initiating an independent
            investigation of EPA actions and expenditures of resources with
            regard to the previous direction of the committee.
      --The committee should continue the prohibition on EPA for using
            appropriated funds for dual regulation of NRC-licensed
            facilities.

         REFORMING THE FEMA RADIOLOGICAL EMERGENCY PREPAREDNESS PROGRAM
        I would now like to address a separate topic affecting the nuclear
    energy industry that also falls under the jurisdiction of this
    subcommittee--the FEMA Radiological Emergency Preparedness (REP)
    Program.
        There have been developments over the past several years affecting
    the REP program that should provide opportunities for enhancing program
    efficiencies and making fiscal improvements. However, associated
    reductions in program budgets and expenditures have not occurred.
        Since 1998, Congress has authorized FEMA to asses and collect user
    fees directly from NRC licensees to fully fund the REP program, based
    on the costs incurred or obligated for both site-specific and generic
    services performed by FEMA staff or contractors. In 1996, FEMA
    initiated a strategic review of the REP program that was expected to
    optimize use of federal resources and enhance response capabilities of
    state and local jurisdictions. During this same period, the number of
    nuclear power plant sites that are covered by the REP program has
    decreased from 69 to 63 sites due to the shutdown and decommissioning
    of six sites. More recently, FEMA has undertaken the transition from
    use of National Laboratories resources to obtaining services from an
    outside source for evaluating emergency exercises at nuclear power
    plant sites.
        These developments should reduce the need for funding and other
    resources to implement the REP program in an effective, efficient
    manner. Yet the budgets for fiscal year 1999 through 2001 have
    increased from $12.9 million to $14.9 million, an annual increase of 6
    percent per year. The number of FEMA staff assigned to the REP program
    has remained essentially unchanged during this period, at about 90
    full-time equivalent (FTE) staff. Since the number of nuclear power
    plant sites was reduced by 9 percent, one could reasonably expect a
    similar drop in the number of personnel needed to perform the job. This
    did not occur.
        Mr. Chairman, we suggest that this year would be an appropriate
    time for the committee to make inquiries of FEMA regarding the
    reduction in the number of sites requiring agency activities and the
    REP program budget and staffing trends. We also suggest, in light of
    the transition to direct assessment and collection of user fees granted
    to FEMA by Congress, that the committee seek assurances that the fees
    are being properly and exclusively applied to the REP program budget.
        Thank you Mr. Chairman for the opportunity to express NEI's
    positions with regard to these important issues.
                                     ______

               Prepared Statement of the Society for Neuroscience

        Mr. Chairman my name is Dennis Choi. I am the President of the
    Society for Neuroscience and the Jones Professor and Head of Neurology
    at Washington University in St. Louis, as well as Neurologist-in-Chief
    at Barnes-Jewish Hospital. I am testifying on behalf of the Society for
    Neuroscience, the largest scientific organization in the world
    dedicated to the study of the brain and nervous system. Neuroscience
    forms the fundamental basis of the medical specialties of psychiatry,
    neurology, neurosurgery, and an important portion of many other medical
    specialties including anesthesia, endocrinology, geriatrics, internal
    medicine, ophthalmology, otolaryngology, pediatrics, and rehabilitation
    medicine. The Society for Neuroscience numbers among its members more
    than 28,000 basic and clinical researchers affiliated with
    universities, hospitals and scientific institutions throughout North
    America and in other countries. A large majority of Society members are
    United States citizens.
        Mr. Chairman, the Society is grateful for this opportunity to give
    testimony, and I would like to express our gratitude to this
    Subcommittee for the priority that has been placed on funding
    biomedical research at the National Science Foundation (NSF) and the
    Veterans Administration (VA).
        The Society for Neuroscience requests increased research funding
    for the National Science Foundation and for the Department of Veterans
    Affairs to facilitate the progress of research already being conducted
    at these institutions, and to aid in the funding of future projects and
    grants.

                          NATIONAL SCIENCE FOUNDATION
        The NSF is celebrating its 50th anniversary this year. It has made
    great contributions to scientific knowledge, benefiting mankind in
    numerous ways. Over 100 Nobel prizes have been awarded to researchers
    who have been supported by NSF grants. The President's fiscal year 2001
    budget for the National Science Foundation requests $4.57 billion, a
    17.3 percent increase over fiscal year 2000. For Research and Related
    Activities, the President's budget requests $3.54 billion, a 19.7
    percent increase. This is the largest budget request in NSF's history,
    demonstrating the high priority the President and his scientific
    advisors have placed on research at the NSF. The Society for
    Neuroscience strongly supports the President's request.
        Basic neuroscience research is key to understanding neurological
    and mental disorders, and helping the millions of Americans with these
    disorders today. Moreover, understanding the brain is itself an
    essential scientific mission. We seek knowledge in many areas, but the
    most fundamental of quests is the quest to understand our nature as
    human beings. I believe that understanding of our physical universe
    depends on assumptions about ourselves, and that to accomplish the
    former, we must gain knowledge about how our brains perceive,
    calculate, ponder, feel, and remember. Observations are most meaningful
    when the observer is defined. The NSF funds hundreds of studies in the
    area of basic neuroscience, and these studies have contributed much to
    what we know today about the brain.
        Some of the most exciting and challenging scientific research
    opportunities extant today address the mapping of function onto the
    structure of the brain. NSF plays the pivotal role in the development
    and support of this multidisciplinary research area through activities
    that provide unique opportunities for neuroscientists to collaborate
    with investigators in mathematical, computer and information sciences
    and engineering. Teaming modern brain scientists employing molecular
    biology, neurogenetic, neurophysiological, psychological and
    computational techniques with investigators in these other scientific
    disciplines provides a broad and powerful scientific infrastructure.
    The potential for such an infrastructure to catalyze insights and
    discoveries is huge. One can count on the identification of solutions
    to problems in neuroscience research; furthermore, experience has
    demonstrated repeatedly the ability of ``blue sky'' research to achieve
    breakthroughs, often in unexpected areas, that lead to practical
    benefits for mankind.
        A few examples of the important neuroscience research supported by
    NSF:
      --NSF-sponsored research programs have led the way in developmental
            neurobiology, a field dedicated to how the brain evolves,
            develops and changes.
      --NSF-sponsored research programs have played a pivotal role in the
            development of cognitive neuroscience, which combines the study
            of behavior, cognition and artificial intelligence systems with
            basic neurobiological studies.
      --NSF-sponsored research studies the physiological and psychological
            processes involved in the production and perception of speech
            and on the biological basis of language in the central nervous
            system.
        Advances in science and engineering have opened new frontiers for
    discovery and innovation in many areas, and this most emphatically
    includes neurosciences. We can now visualize microstructures within
    living neurons, tap the power of genetic information to identify the
    molecules used signaling, and begin to observe the functional
    ``circuitry'' of the human brain.
        Nanotechnology.--The President requested $497 million in fiscal
    year 2001 for the National Nanotechnology Initiative (NNI). The
    National Science Foundation, as the lead agency for this Initiative,
    would receive a $217 million increase for the NNI this year. This is an
    area of far-sighted research with tremendous promise. The Society for
    Neuroscience supports this request.
        Social, Behavioral and Economic Sciences (SBE).--The President is
    requesting $175.14 million for SBE, a 19.8 percent increase over last
    year. The Society for Neuroscience believes that this is money well
    spent, and that this Directorate will ultimately bring benefits to
    millions of citizens in our country by enhancing our understanding of
    vital social systems and organizations, and promoting research in the
    areas of human cognition, language, and social behavior.

                         DEPARTMENT OF VETERANS AFFAIRS
        In contrast to the Administration's NSF budget request, its
    recommendation for VA Medical and Prosthetic Research is inadequate. We
    ask that this Subcommittee do more, and continue the recent trend of
    rebuilding important VA medical research programs.
        The Society for Neuroscience strongly supports the recommendations
    of the Friends of the VA Medical Care and Health Research (FOVA)
    coalition and the Independent Budget for the Veteran's Administration,
    organizations supported by more than 50 groups dedicated to research
    funding at VA. Both organizations have recommended an increase of $65
    million for the VA's Medical and Prosthetic Research Program.
        One of the greatest aspects of VA-sponsored research is that it not
    only aids our nation's veterans, it also integrates clinical and basic
    research, and promotes the rapid transfer of new knowledge from bench
    to bedside. A few examples of the important research conducted at the
    VA:
      --VA scientists in Seattle identified a gene mutation that causes a
            form of dementia in middle-aged people. The mutated gene, which
            produces tangles of protein filaments identical to those found
            in the brains of patients with Alzheimer's disease, may offer a
            new target for Alzheimer's disease treatments. Four million
            older Americans suffer from Alzheimer's disease at a cost of
            $100 billion each year. Alzheimer's disease is the fourth
            leading cause of death among adults, taking more than 100,000
            lives each year.
      --Using wire implants and electrical impulses--functional electrical
            stimulation (FES)--to replace non-functioning nerves, VA
            researchers in Cleveland have developed methods to permit
            people with spinal cord injuries to regain some useful control
            of a paralyzed hand.
      --A major VA study established that the medication clozapine is more
            effective and has fewer side effects than the standard drug
            haloperidol for treating schizophrenia in patients who don't
            respond to customary first-line therapy. In another study, VA
            investigators in Denver discovered a gene that appears to
            increase risk for schizophrenia, a finding that may eventually
            provide a new target for drug or genetic therapies. Three
            million Americans suffer from schizophrenia, the most chronic
            and disabling of mental illnesses. The cost for treatment is
            over $30 billion annually.
      --Researchers at the Buffalo VA Medical Center identified a brain
            region responsible for tinnitus, the ringing in the ears
            suffered by millions of Americans. Their discovery may point
            the way to needed treatments.
        Every day, these programs are developing new methods to understand,
    diagnose and treat devastating disorders.
        Last year, the Department of Veterans Affairs announced a new study
    on spinal cord injury care, comparing VA spinal cord injury care with
    that provided in the private sector. Over 250,000 people are spinal
    cord injured, with 11,000 new cases reported each year. The health care
    costs from this injury exceed $10 billion annually. This study's
    results will allow the VA to determine the best modes of care for
    paralyzed veterans.
        The VA medical system provides veterans with access to highly
    skilled medical care through various affiliation arrangements, and
    provides researchers with an opportunity to conduct large, pivotal
    clinical trials benefiting all Americans. However, inadequate funding
    has inhibited the VA's ability to recruit high-quality researchers as
    it has done in the past. As a result, the VA has had to reduce its
    staff, consolidate hospitals and clinics, and lower a number of
    existing services at medical centers. This is tragic for the millions
    of veterans in our nation, as America's veterans lose access to needed
    medical care, and valuable research opportunities are lost.

                                    SUMMARY
        In summary, the Society for Neuroscience asks that this
    subcommittee support the Administration's request of 17.3 percent
    increase in NSF's overall budget and a 19.7 percent increase in the
    Research and Related Activities account. The Society for Neuroscience
    recommends $386 million for the VA Medical and Prosthetic Research
    program in fiscal year 2001, an increase of $65 million over fiscal
    year 2000. We strongly believe that the research programs we advocate
    are a worthy investment in our country's future, and we urge you to
    place NSF and VA research among the Subcommittee's highest priorities.
        Thank you for the consideration of our request.
                                     ______

      Prepared Statement of Norman E. D'Amours, Chairman, National Credit
                              Union Administration

        I am pleased to submit the National Credit Union Administration's
    request for the NCUA Central Liquidity Facility (CLF) and Community
    Development Credit Union Revolving Loan Fund (CDRLF).
        The CLF, established in 1979, serves as a liquidity source for
    credit unions. The CLF borrowing authority is not used to build up
    credit union loan volumes because the Federal Credit Union Act
    prohibits using proceeds from CLF loans to expand credit union
    portfolios. Rather, the funds are advanced strictly to support the
    purposes stated in the Federal Credit Union Act--liquidity needs of
    credit unions. The CLF sustains confidence in the credit union system,
    as credit unions know that during periods of temporary liquidity
    shortages, back-up funds are available to meet abnormal deposit
    outflow.
        The CLF is owned by its member credit unions, which contribute all
    of the CLF's capital by the purchase of stock. When a CLF member has a
    liquidity need due to abnormal cash outflows, it may seek a loan from
    the CLF. The CLF can finance a limited amount of lending activity from
    its assets, but it also has the authority to borrow to meet liquidity
    demands. Currently, the CLF utilizes the Federal Financing Bank as its
    exclusive source for borrowing funds.
        Until fiscal year 2000, the limit on CLF borrowing for new loans to
    credit unions included in the appropriations bills was $600 million;
    the fiscal year 2001 budget submitted by the Office of Management and
    Budget seeks to reimpose a $600 million limit on borrowing. OMB also
    requests a $296,303 limit on administrative expenditures for fiscal
    year 2001. We believe that the cap on the CLF's borrowing authority
    should be omitted from the Appropriations bill, as it was for fiscal
    year 2000 in the supplemental appropriations law, Public Law 106-31.
    Keeping the borrowing limit at the fiscal year 2000 level has no
    budgetary or scoring impact.
        A borrowing cap imposed in the appropriations process is
    unnecessary because CLF borrowing is limited by the Federal Credit
    Union Act. Under the Act, the CLF's borrowing is limited to 12 times
    its subscribed stock and surplus, currently about $21 billion. When
    Congress first imposed the $600 million limit in 1980, $600 million
    exceeded 12 times the subscribed stock and surplus of the CLF by more
    than $200 million. Despite the dramatic growth in credit unions and
    increase in the CLF's subscribed stock since 1980, the appropriations
    limit was never adjusted until your legislation last year. While the
    $600 million appropriations limit has, in the past, been adequate to
    address isolated liquidity needs in credit unions, this amount
    represents less than 2.9 percent of the amount that the CLF would be
    permitted to borrow under its enabling legislation.
        In anticipation of potential liquidity demands due to the Year 2000
    date change, Congress removed the cap on CLF borrowing in last year's
    supplemental Appropriations measure. The CLF was an active liquidity
    lender during the last months of 1999 as members with existing
    liquidity deficits prepared to meet additional potential withdrawals
    forecast in response to the Y2K event. During the latter part of 1999,
    the CLF, through its agent members, made a total of 157 short-term
    loans to 39 member, natural person credit unions. The majority of these
    loans were overnight. The aggregate amount of these loans, including
    renewals, was $666.2 million. As of March 2nd of this year, all loans
    were repaid and no loans are presently outstanding.
        Although we are all pleased that Y2K-related withdrawals did not
    materialize in the exaggerated amounts we prepared for, we should not
    conclude from this experience that a higher borrowing cap is
    unnecessary. The fact that the timing of the Y2K event was widely
    anticipated and generally foreseeable makes it a poor example for
    gauging the likely magnitude of an actual liquidity emergency.
    Typically, liquidity emergencies occur with little or no warning and
    may result from any variety of adverse economic or financial events.
    The severity and duration of such a liquidity emergency are also
    impossible to forecast.
        Rather, we have concluded from the Y2K experience that the CLF's
    unhindered capacity to borrow and lend is importantly tied to the
    public's perception of the health of credit unions. The confidence
    generated by an adequate liquidity resource strengthens the stability
    of the system and may actually obviate or mitigate the need for a
    costly liquidity build up on the part of credit unions. The knowledge
    that the CLF was available as a back-stop, and that funds for liquidity
    would be forthcoming, was also an important factor in lessening actual
    liquidity demand at year's end. Credit unions knew that, if needed, the
    CLF could borrow adequate funds to meet liquidity demand, and they
    communicated this confidence to members. This, in turn, reduced
    members' perceived needs for accumulating additional cash. Thus, the
    CLF has an important psychological effect, even without lending
    activity.
        The imposition of an inadequate borrowing cap on the CLF, however,
    could prevent it from fulfilling its statutory mission to promote
    credit union stability by providing liquidity and could potentially
    destabilize member confidence during an abrupt, unanticipated emergency
    situation. The $600 million borrowing cap severely restricts the CLF
    and would most likely prevent it from functioning as intended in the
    event of even a moderate liquidity strain. A limit of $600 million will
    not go very far to support a $400 billion credit union industry in any
    unusual deposit outflow. In the event of an unusual liquidity drain,
    the proposed cap could render the CLF unable to perform the function
    for which Congress created it.
        Mr. Chairman, we respectfully request that you support our request
    and keep the borrowing cap at the fiscal year 2000 level in order to
    continue the NCUA's and CLF's ability to timely and effectively respond
    to any adverse liquidity situations.
        NCUA supports the Administration's request regarding our fiscal
    year 2001 operating expenses. Our fiscal year 1999 operating expenses
    for the CLF were $136,000--significantly below our budget limitation of
    $176,000. Fiscal year 2000 and 2001 operating expenses will be higher--
    $257,000 in 2000 and $296,303 in 2001--because of the addition of a
    staff member. These administrative expenses do not come from
    appropriated funds, but are paid from the CLF's income.
        Turning to another subject, I would like to thank this Subcommittee
    for its efforts in providing an additional $1 million for the Community
    Development Revolving Loan Fund in fiscal year 2000. As you know, the
    Fund makes loans to low-income credit unions. Since 1987, when the NCUA
    began administering the Fund, we have revolved our $11 million
    appropriation ($6 million initially, $1 million added in fiscal years
    1997, 1998 and 2000, and $2 million added in fiscal year 1999) into 151
    loans totaling $21.0 million. In 1999 alone, we approved nine loans to
    nine credit unions for a total of $1.9 million. As of February 29,
    2000, our pending applications total $2.7 million. We greatly
    appreciate the Subcommittee's support of our efforts to provide
    assistance to low-income credit unions.
        Another important function of the CDRLF is in providing technical
    assistance to low-income credit unions. The President's budget for
    fiscal year 2001 includes a request for an additional $1 million to be
    used for technical assistance, and NCUA strongly supports this request.
    Under the Federal Credit Union Act, earnings on the Fund are used to
    provide technical assistance grants to low-income credit unions.
    However, because CDRLF loans are low interest--the current interest
    rate is two percent--the earnings generated are insufficient to meet
    all the technical assistance requests. For example, in 1999, while we
    granted $380,002 in technical assistance to 132 credit unions, we
    denied $107,795 of such requests--not because the applications lacked
    merit, but because we lacked the funds. The denied requests are
    probably only the tip of the iceberg. We hear reports from the field
    that many low-income credit unions do not apply for needed technical
    assistance because they assume that funds will not be available. The
    NCUA Board constantly struggles with the tension between the need to
    keep loan interest rates low and the need to generate interest income
    in order to be able to provide additional technical assistance. The
    additional funds for technical assistance proposed in the
    Administration's budget will greatly assist our efforts to provide
    technical assistance to low-income credit unions.
        Finally, I would like to note that the credit union system
    continues to be in robust health. Credit unions had another banner year
    in 1999--assets and capital are at record levels, while the number of
    problem credit unions remains low. During 1999, total assets of
    federally-insured credit unions increased by 5.8 percent, from $388.7
    billion to $411.4 billion. Despite the increase in assets, credit
    unions' overall capital to asset ratio increased to 11.6 percent, on
    average. Problem credit unions (those rated code 4 or 5) represent less
    than 1 percent of total shares. These figures demonstrate the continued
    overall safety and soundness of the credit union system.
        The credit union insurance fund also remains strong. For the fifth
    consecutive year, and the sixth time in its history, the National
    Credit Union Share Insurance Fund returned a dividend to credit unions
    on their deposits in the fund. The dividend this year totaled $88.3
    million, or 2.875 percent. In October, before the dividend payout, the
    equity level of the Share Insurance fund reached 1.32 percent. Even
    after the dividend, the Insurance Fund returned to 1.30 percent of
    insured deposits by December 31, 1999.
        In summary, the credit union industry remains in excellent
    condition, with a strong insurance fund. While demand still outstrips
    supply, low-income credit unions are receiving more assistance than
    ever before, thanks to this Subcommittee's efforts and efforts made by
    NCUA over the past seven years. We respectfully request that this
    Subcommittee follow the Administration's recommendation to provide
    additional funds for technical assistance. As for the CLF, we
    respectfully request that the Subcommittee approve the OMB's request
    for a $296,303 limit on the CLF's administrative expenses and keep the
    CLF borrowing limit at the fiscal year 2000 level. This will assure
    that the CLF will be well-positioned to meet any unusual liquidity
    needs and may indeed minimize the risk such a liquidity need will
    occur.
        Thank you for considering these requests.

           LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS

                                  ----------
                                                                       Page
    Air Force Sergeants Association, prepared statement..............   964
    Alachua County, Florida, prepared statement......................  1146
    American Association of Homes and Services for the Aging,
      prepared statement.............................................  1077
    American Association of Nurse Anesthetists, prepared statement...   980
    American Association of Retired Persons, prepared statement......  1130
    American Chemical Society, prepared statements.........1095, 1102, 1110
    American Federation of Government Employees, AFL-CIO, prepared
      statement......................................................   962
    American Heart Association, prepared statement...................   957
    American Indian Higher Education Consortium, prepared statement..  1136
    American Legion, prepared statement..............................   975
    American Lung Association, prepared statement....................  1155
    American Mathematical Society, prepared statement................  1102
    American Physical Society, prepared statement....................  1102
    American Thoracic Society, prepared statement....................  1155
    American Museum of Natural History, prepared statement...........  1150
    American Psychological Society, prepared statement...............  1099
    American Public Power Association, prepared statement............  1007
    American Rivers, prepared statement..............................  1006
    American Society for Microbiology, prepared statement............  1014
    American Society of Civil Engineers, prepared statement..........  1140
    American Society of Mechanical Engineers, prepared statement.....  1039
    Anderson, George, Executive Vice President, Government National
      Mortgage Association, Department of Housing and Urban
      Development....................................................   243
    Apgar, William P., Assistant Secretary for Housing--Federal
      Housing Commissioner, Department of Housing and Urban
      Development....................................................   243
    Arc of the United States, prepared statement.....................  1051
    Asrar, Ghassem, Associate Administrator for Earth Science,
      National Aeronautics and Space Administration..................   761
    Association of Local Air Pollution Control Officials, prepared
      statement......................................................   986
    Association of Minority Health Professions Schools, prepared
      statement......................................................  1128
    Association of State Drinking Water Administrators, prepared
      statement......................................................   989
    Association of State Floodplain Managers, Inc., prepared
      statement......................................................  1090

    Babyland Family Services, Inc., prepared statement...............  1075
    Bond, Hon. Christopher S., U.S. Senator from Missouri:
        Opening statements...................1, 41, 244, 589, 663, 761, 873
        Prepared statement...........................................   246
        Questions submitted by..................25, 110, 298, 631, 710, 825
    Brown, Ann, Chairman, U.S. Consumer Product Safety Commission,
      prepared statement.............................................   950
    Browner, Hon. Carol, Administrator, Environmental Protection
      Agency.........................................................    41
        Prepared statement...........................................    60
        Statement of.................................................    57
    Burns, Hon. Conrad, U.S. Senator from Montana, statement of......   600
    Byrd, Hon. Robert C., U.S. Senator from West Virginia, questions
      submitted by...................................................   238

    California Industry and Government Central California Ozone Study
      (CCOS) Coalition, prepared statement...........................  1010
    California Science Center, Los Angeles, CA, prepared statement...  1115
    Catlett, D. Mark, Deputy Assistant Secretary for Budget,
      Departmental Administration, Department of Veterans Affairs....   589
    Central Piedmont Community College, prepared statement...........  1059
    Chatham Area Transit (CAT), Savannah, Georgia, prepared statement  1064
    City of Dayton, Ohio, prepared statement.........................  1073
    City of Gainesville, FL, prepared statement......................  1143
    City of Miami Beach, FL, prepared statement......................  1070
    City of Newark, New Jersey, prepared statement...................  1067
    Coalition of Community Development Financial Institutions,
      prepared statement.............................................  1134
    Colorado State University, prepared statement....................  1037
    Colwell, Dr. Rita, Director, National Science Foundation.........   873
        Prepared statement...........................................   893
        Statement of.................................................   884
    Consortium for Citizens with Disabilities Housing Task Force,
      prepared statement.............................................  1056
    Cooper, Cardell, Assistant Secretary for Community Planning and
      Development, Department of Housing and Urban Development.......   243
    Coronado, Gil, Director, Selective Service System, prepared
      statement......................................................   931
    County Sanitation Districts of Los Angeles County, prepared
      statement......................................................   984
    Craig, Hon. Larry, U.S. Senator from Idaho, questions submitted
      by......................................................203, 574, 653
    Cuomo, Andrew, Secretary, Department of Housing and Urban
      Develop-
      ment...........................................................   243
        Prepared statement...........................................   258
        Statement of.................................................   253

    D'Amours, Norman E., Chairman, National Credit Union
      Administration, prepared statement.............................  1166
    DeCell, Hall, Assistant Secretary for Congressional and
      Intergovernmental Relations, Department of Housing and Urban
      Development....................................................   243

    Elmira College, Elmira, NY, prepared statement...................  1044
    Environmental Institute of Western Michigan University, prepared
      statement......................................................  1017
    Environmental Science and Engineering Center, Marietta College,
      prepared statement.............................................  1011

    Fairfield University, prepared statement.........................  1047
    Falk, Dr. Henry, Assistant Administrator, prepared statement.....   923
    Federation of American Societies for Experimental Biology,
      prepared statement.............................................  1102
    Fleet Reserve Association, prepared statement....................   968
    Florida State University, prepared statement.....................  1153
    Frampton, George T., Chair, prepared statement...................   936

    Gaffney, Susan, Inspector General, Department of Housing and
      Urban Development..............................................   244
    Gall, Mary Sheila, Vice Chairman, prepared statement.............   949
    Garthwaite, Thomas L., M.D., Deputy Under Secretary for Health,
      Veterans Health Administration, Department of Veterans Affairs.   589
    Garver, Lori A., Associate Administrator for Policy & Plans,
      National Aeronautics and Space Administration..................   761
    Gibbons, David, Acting Chief Financial Officer, Department of
      Housing and Urban Development..................................   243
    Glickman, Rhoda, Deputy Chief of Staff, Department of Housing and
      Urban Development..............................................   243
    Goldin, Daniel S., Administrator, National Aeronautics and Space
      Administration.................................................   761
        Prepared statement...........................................   775
        Statement of daniel..........................................   772
    Gross, Roberta L., Inspector General, National Aeronautics and
      Space Administration...........................................   761

    Heffernan, Edward, Associate Administrator for Legislative
      Affairs, National Aeronautics and Space Administration.........   761
    Hill, Dr. Paul L., Jr., Board Member, Chemical Safety and Hazard
      Investigation Board............................................   715
    Holcomb, Lee B., Chief Information Officer, National Aeronautics
      and Space Administration.......................................   761
    Holz, Arnold G., Chief Finanacial Officer, National Aeronautics
      and Space Administration.......................................   761

    International Center for Clubhouse Development, prepared
      statement......................................................  1065

    Jacobs, David, Director, Office of Lead Hazard Control,
      Department of Housing and Urban Development....................   243
    Johnson, Gary, Chief Financial Officer, Federal Emergency
      Management Agency..............................................     1
    Johnson, Jackie, Deputy Assistant Secretary for Native American
      Programs, Department of Housing and Urban Development..........   243
    Jones, Maurice, Deputy Director for Policy and Programs,
      Community Development Financial Institution, Department of the
      Treasury.......................................................   745
    Jones, Tom, Director, Washington Office, Habitat for Humanity,
      statement of...................................................   683
    Jordan, Luise S., Inspector General, Corporation for National and
      Community Service..............................................   663
        Prepared statement...........................................   700
        Statement of.................................................   699
    Joslin Diabetes Center, prepared statement.......................   982

    Kelly, Dr. Eamon, Chairman, National Science Board...............   873
        Biographical sketch..........................................   883
        Prepared statement...........................................   881
        Statement of.................................................   879
    Knight, George, Executive Director, prepared statement...........   944
    Kraus, Edward, Director, Enforcement Center, Department of
      Housing and Urban Development..................................   243
    Kyl, Hon. Jon, U.S. Senator from Arizona, questions submitted b231, 579

    Lane, Neal, Director, Office of Science and Technology Policy....   873
        Prepared statement...........................................   898
        Statement of.................................................   896
    Laster, Gail, General Counsel, Department of Housing and Urban
      Development....................................................   243
    Lautenberg, Hon. Frank R., U.S. Senator from New Jersey,
      statements of.................................................. 6, 55
    LaVoy, Donald J., Director, Real Estate Assessment Center,
      Department of Housing and Urban Development....................   243
    Lawing, Jacquie, Deputy Chief of Staff for Policy and Programs,
      Department of Housing and Urban Development....................   243
    Lazar, Ellen W., Director, Community Development Financial
      Institution, Department of The Treasury........................   745
        Prepared statement...........................................   749
        Statement of.................................................   746
    Leahy, Hon. Patrick J., U.S. Senator from Vermont:
        Questions submitted by.....................................234, 655
        Statements of..........................................54, 251, 618
    Lovelace Respiratory Research Institute, prepared statement......  1023
    Lucas, Harold, Assistant Secretary for Public and Indian Housing,
      Department of Housing and Urban Development....................   243

    McCabe, W. Michael, Acting Deputy Administrator, Environmental
      Protection Agency..............................................    41
    Metropolitan Water District of Southern California, prepared
      statement......................................................   991
    Metropolitan Water Reclamation District of Greater Chicago,
      prepared statement.............................................  1008
    Mickey Leland National Urban Air Toxics Research Center, prepared
      statement......................................................  1003
    Mikulski, Hon. Barbara A., U.S. Senator from Maryland:
        Opening statement............................................   764
        Questions submitted by.....................................233, 655
        Statements of............................41, 51, 249, 599, 665, 877
    Molnar, Karyn L., Partner, KPMG, Corporation for National and
      Community Service,.............................................   663
        Prepared statement...........................................   704
        Statement of.................................................   703
    Moore, Thomas H., Commissioner, U.S. Consumer Product Safety
      Commission, prepared statement.................................   949
    Musick, Tony, Chief Financial Officer, Corporation for National
      and Community Service..........................................   663

    Nasif, Teresa, Director, General Services Administration,
      prepared statement.............................................   930
    National Association of Conservation Districts, prepared
      statement......................................................  1038
    National Association of Housing and Redevelopment Officials,
      prepared statement.............................................  1081
    National Community Capital Association, prepared statement.......  1132
    National Congress of American Indians, prepared statement........  1158
    National Corn Growers Association, prepared statement............  1094
    National Council for Science and the Environment, prepared
      statement......................................................  1104
    National Emergency Management Association, prepared statement....  1087
    National Jewish Medical and Research Center, prepared statement..  1032
    National Treasury Employees Union, prepared statement............  1042
    National Utility Contractors Association, prepared statement.....  1030
    Nature Conservancy, prepared statement...........................   994
    Nebeker, Frank Q., Chief Judge, U.S. Court of Appeals for
      Veterans Claims, prepared statement............................   935
    New York University, prepared statement..........................  1097
    Nicogossian, Arnauld E., Associate Administrator for Life and
      Microgravity Sciences and Applications, National Aeronautics
      and Space Administra-
      tion...........................................................   761
    Northwest Indian Fisheries Commission, prepared statement........  1000
    Novak, Vicki A., Associate Administrator for Human Resources and
      Education, National Aeronautics and Space Administration.......   761
    Nuclear Energy Institute [NEI], prepared statement...............  1159

    Office of Native American Programs, prepared statement...........   548
    Ohio Department of Natural Resources, Division of Oil and Gas,
      prepared statement.............................................  1034

    Passaic Valley Sewerage Commissioners, prepared statement........  1018
    Peppercorn, Ira, Director, Office of Multifamily Housing
      Assistance Restructuring, Department of Housing and Urban
      Development....................................................   243
    Peterson, Malcolm L., Comptroller, National Aeronautics and Space
      Administration.................................................   761
    Plaza, Eva, Assistant Secretary for Fair Housing and Equal
      Opportunity, Department of Housing and Urban Development.......   243
    Poje, Dr. Gerald V., Board Member, Chemical Safety and Hazard
      Investigation Board............................................   715

    Ramirez, Saul, Deputy Secretary, Department of Housing and Urban
      Development....................................................   243
    Rosenstiel School of Marine and Atmospheric Science, prepared
      statement......................................................  1027
    Rosenthal, Dr. Isadore, Board Member, Chemical Safety and Hazard
      Investigation Board............................................   715
    Rothenberg, Joseph H., Associate Administrator for Space Flight,
      National Aeronautics and Space Administration..................   761
    Ryan, Michael W.S., Acting Chief Financial Officer, Environmental
      Protection Agency..............................................    41

    Santa Marta Hospital, Los Angeles, CA, prepared statement........  1084
    Santa Rosa Memorial Hospital, prepared statement.................   979
    Shelby, Hon. Richard C., U.S. Senator from Alabama, questions
      submitted by...................................................   196
    Shumacher, John D., Associate Administrator for External
      Relations, National Aeronautics and Space Administration.......   761
    Smith, Joe, Acting Assistant Secretary for Administration,
      Department of Housing and Urban Development....................   243
    Society for Neuroscience, prepared statement.....................  1164
    St. Joseph's Hospital Health Center, prepared statement..........  1062
    State and Territorial Air Pollution Program Administrators,
      prepared statement.............................................   986
    State Oil and Gas Board of Alabama, prepared statement...........  1036
    Stevens, Hon. Ted, U.S. Senator from Alaska:
        Questions submitted by.....................................232, 841
        Statements of............................................8, 52, 269
    Sutton, Jeffrey E., Associate Administrator for Management
      Systems and Facilities, National Aeronautics and Space
      Administration.................................................   761

    Taylor, Dr. Andrea Kidd, Dr.P.H., Member, Chemical Safety and
      Hazard Investigation Board.....................................   715
        Prepared statement...........................................   728
        Statement of.................................................   725
    Texas A&M University, prepared statement.........................  1005
    Thompson, Joseph, Under Secretary for Benefits, Veterans Benefits
      Administration, Department of Veterans Affairs.................   589

    U.S. Conference of Mayors, prepared statement....................  1049
    United Negro College Fund (UNCF), prepared statement.............  1092
    University Corporation for Atmospheric Research (UCAR), prepared
      statements.................................................1118, 1122
    University of Maryland, prepared statement.......................  1125
    University of Medicine and Dentistry of New Jersey, prepared
      statement......................................................  1071
    University of Tulsa, prepared statement..........................  1020
    Upper Mississippi River Basin Association, prepared statement....   997

    Venneri, Samuel L., Associate Administrator for Aerospace
      Technology, National Aeronautics and Space Administration......   761
    Village of Weedsport, prepared statement.........................  1035

    Walker, Michael, Acting Under Secretary for Memorial Affairs,
      National Cemetery Administration, Department of Veterans
      Affairs........................................................   589
    Washington Drama Society, Inc. T/A Arena Stage, prepared
      statement......................................................   998
    Weiler, Edward J., Associate Administrator for Space Science,
      National Aeronautics and Space Administration..................   761
    West, Hon. Togo D., Jr., Secretary, Department of Veterans
      Affairs........................................................   589
        Prepared statement...........................................   604
        Statement of.................................................   600
    Westphal, Dr. Joseph W., Assistant Secretary of the Army for
      Civil Works, Cemeterial Expenses, Department of the Army,
      Department of Defense--Civil, prepared statement...............   928
    Witt, Hon. James Lee, Director, Federal Emergency Management
      Agency.........................................................     1
        Prepared statement...........................................    11
        Statement of.................................................    10
    Woerner, Gen. Fred, USA (Retired), Chairman, American Battle
      Monuments Commission, prepared statement.......................   952
    Wofford, Harris, Chief Executive Officer, Corporation for
      National and Community Service.................................   663
        Prepared statement...........................................   669
        Statement of.................................................   667

    Zenker, Wendy, Chief Operating Officer, Corporation for National
      and Community Service..........................................   663

                                 SUBJECT INDEX

                                  ----------

                 CHEMICAL SAFETY AND HAZARD INVESTIGATION BOARD

                                                                       Page
    Accelerating report sought.......................................   743
    Behind schedule..................................................   742
    Board:
        Chemical safety achievements.................................   735
        Efforts to update and develop plans, policies, and
          procedures, status of......................................   722
        Growth and development.......................................   734
        Mission:
            Operations, status of....................................   720
            Organization, status of..................................   717
            Refining.................................................   728
            Supported................................................   729
    Chemical:
        Incident's costs.............................................   725
        Safety information on the internet...........................   737
    Chemical Safety Board:
        Contracts....................................................   723
        Realigned management faces serious challenges................   715
    Contact and acknowledgements.....................................   723
    Fiscal year, what the resources will achieve this................   732
    Fiscal year 2001:
        Annual performance plan......................................   731
        Appropriations request proposes slight increase..............   729
        Goals, potential constraints on achieving certain............   732
        Request......................................................   725
    Incidents:
        Human and financial costs of.................................   728
        Through scientific work, preventing..........................   729
    Internal management changes......................................   738
    Investigation:
        Backlog......................................................   737
        Priorities, careful selection of.............................   732
        Protocol and selection criteria, new.........................   733
    Investigations, emphasis on......................................   726
    Nitrogen and propane incidents...................................   736
    Observations.....................................................   722
    Open investigations, disposition of..............................   735
    Operation, first two years of....................................   734
    Original mission.................................................   741
    Recruiting staff.................................................   743
    Reports, reaction to.............................................   727
    Scope and methodology............................................   723
    Staff, loss of...................................................   739
    Strategic plan...................................................   726
    Y2K, special safety study initiative on..........................   737

                 CORPORATION FOR NATIONAL AND COMMUNITY SERVICE

    AmeriCorps.......................................................   668
        Demographics.................................................   693
        Education award..............................................   693
        Programs fiscal year 2001 budget requests....................   674
    Auditors, role of................................................   712
    Background.......................................................   711
    Budget request summary...........................................   671
    Corporation audit..............................................699, 703
    Corporation of National Service, origin of.......................   708
    Cost accounting..................................................   688
    Digital divide.................................................669, 697
    Evaluation.......................................................   681
    Financial management...........................................668, 687
    Fiscal year 1999 audit...........................................   668
    General ledger system..........................................703, 707
    Habitat, AmeriCorps Good Partners................................   684
    Impact of service-learning on students and communities...........   685
    Internal controls..............................................704, 707
    Learn and Serve America........................................668, 677
    Management systems improvement and the fiscal year 1999 audit....   672
    Martin Luther King, Jr. Day of Service...........................   681
    National & Community Service Coalition...........................   682
    National service demographics....................................   692
    Office of Inspector General......................................   699
        Clarification................................................   690
        Funding......................................................   710
    Preliminary results..............................................   711
    Program administration...........................................   688
    Special initiatives and programs.................................   678
    State Commission:
        Guidelines...................................................   709
        Program Administration.......................................   709
    State Commissions and the Corporation, responses by..............   712
    Status...........................................................   711
    Successful collaborations: the Points of Light Foundation and
      America's Promise..............................................   680
    Summit declaration...............................................   686

                  DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

    Advocacy groups, introduction of.................................   271
    Affordable housing:
        Crisis, addressing the.......................................   262
        Shortage of..................................................   586
    American private investment companies (APIC)...................277, 545
    Baltimore:
        FHA default rate.............................................   283
        Task force...................................................   272
    Budget request highlights........................................   257
    Civil right protections..........................................   580
    Communities, creating safe and livable...........................   264
    Consultant costs.................................................   571
    Credit watch system..............................................   284
    Cuomo's travel...................................................   274
    Department of Justice and the Department of Housing and Urban
      Development, joint statement of the............................   580
    Downpayment simplification.......................................   574
    Economic revitalization and investing new markets................   260
    Empowerment zones................................................   545
    Fair Housing Act and zoning......................................   581
    Federal Government...............................................   562
    FHA:
        Commissioner's responsibilities..............................   288
        Hybrid arm legislation.......................................   544
        Revenues.....................................................   544
        Single family foreclosure rates..............................   304
        Staff........................................................   305
    Fiscal year 2000, training and technical assistance goals and
      objectives for.................................................   553
    Fiscal year 2001 budget builds on success........................   259
    FNAM/Freddie Mac.................................................   286
        Proprietary Information......................................   290
    GAO high-risk list...............................................   280
    GNMA and FHA application of credit reform........................   543
    Group homes, local land use, and the Fair Housing Act............   580
    Gun control...............................................574, 579, 586
    Hatch Act........................................................   275
    Homeless Assistance Block Grant Program..........................   534
    HOPE VI..........................................................   534
    Housing:
        Agencies.....................................................   561
        For firefighters.............................................   296
        Fraud, IG efforts in.........................................   296
        NBC:
            Correction to report on..................................   294
            Report on..............................................265, 279
    HUD:
        Accomplishments..............................................   254
        As a Landlord................................................   266
        Income verification requirements for public and assisted
          housing....................................................   541
        Indian programs, background information on...................   549
        Owned housing, holding period for............................   303
        Policy to voucher out all HUD-owned and -held properties.....   542
        Staffing.....................................................   359
    Independent Accounting and Consulting Firms......................   562
    Indian programs, monitoring and oversight of.....................   554
    Intervention.....................................................   579
    InTown Management Group (ITMG)...................................   577
    Justice for all--enforcing fair housing laws.....................   264
    Lead-based paint hazard reduction................................   557
    Los Angeles Community Development Bank...........................   276
    Mark-to-market...................................................   293
    McKinney Homeless Assistance Programs............................   524
    Mortgage Partnership Program.....................................   574
    National/Regional PHA Associations...............................   562
    Native American Housing Block Grants Program.....................   548
    Newspaper advertising, discrimination in.........................   298
    Nonprofits and property flipping.................................   285
    Oak Hollow apartments............................................   267
    ONAP technology highlights.......................................   553
    One-time grants..................................................   578
    Optional entitlement cities and communities......................   546
    Pickwick Plaza apartments........................................   268
    Predatory lending................................................   255
    Preservation.....................................................   277
    Property:
        Disposition................................................256, 268
        Flipping.....................................................   271
    Public Housing Capital Fund......................................   555
    Public Interest Groups...........................................   561
    Reducing interest rates..........................................   578
    Section 8:
        Fair share vouchers..........................................   301
        Vouchers.....................................................   283
            For Alaska...............................................   270
    Section 202 elderly housing conversion to assisted living........   556
    Section 811 housing for persons with disabilities................   556
    Shelter plus care................................................   585
    Single family:
        Foreclosed property, increased HUD inventory of..............   302
        Foreclosures.................................................   294
    Small cities program.............................................   279
    Smith & Wesson/HUD agreement.....................................   281
    SouthEastern Idaho Community Action Agency.......................   577
    Synchronization..................................................   559
    Training and technical assistance successes......................   550
    U.S. Department of Housing and Urban Development.................   562
    Voucher success fund.............................................   547

                           DEPARTMENT OF THE TREASURY

                  Community Development Financial Institution

    Bank Enterprise Award Program....................................   753
    Community Development Financial Institution......................   745
        Fund:
            Initiatives..............................................   747
                Putting capital to work..............................   751
            Principles of operation..................................   749
        Certification................................................   751
        Program......................................................   751
    Fiscal year 2001 budget request..................................   748
    Microenterprise initiatives......................................   754
    Native American lending study/action plan........................   756
    Policy and research initiatives..................................   754
    Results, managing for..........................................746, 750
    Training program.................................................   753
    Year ahead: fiscal year 2001.....................................   756

                         DEPARTMENT OF VETERANS AFFAIRS

    Allegations......................................................   656
    Allocation of funds..............................................   631
    Buyouts..........................................................   640
    Capital asset realignment......................................630, 643
        Protocol.....................................................   591
    Claims:
        And appeal process...........................................   653
        Processing...................................................   655
    Collections......................................................   641
    Community Based Outpatient Clinics (CBOCs).......................   639
    Computer security................................................   642
    Correcting program deficiencies in St. Louis.....................   625
    Crohn's disease..................................................   654
    Discrimination allegations.......................................   615
    Emergency care...................................................   616
    Enrollment.......................................................   637
    Fort Howard VA Medical Center..................................615, 655
    GAO contact and staff acknowledgments............................   598
    Hepatitis C......................................................   635
        Funding......................................................   613
        Screening for................................................   620
    Homeless.........................................................   638
    Long-term care...................................................   642
    Management efficiencies........................................621, 637
    Medical care:
        Allocation of funds..........................................   611
        Collections..................................................   613
    Military retirees................................................   642
    Nursing home care................................................   621
    Outpatient clinics, community based..............................   654
    Patient safety...................................................   618
    Prescription:
        Drug benefit...............................................622, 623
        Policy.......................................................   616
    Reserve..........................................................   634
    Rural health, funding for........................................   616
    Travel reimbursement rates.......................................   653
    Tricare..........................................................   653
    Two-year funds...................................................   635
    VA:
        Budget, other concerns on....................................   598
        Is struggling to respond to asset realignment challenges.....   592
        Medical care program.........................................   590
        National formulary process: Lessons learned for a successful
          Medicare drug benefit......................................   623
        Nursing home.................................................   648
        Research Program.............................................   658
    VERA allocation in:
        New England..................................................   619
        Northeast....................................................   620
    Veterans Benefits Administration...............................598, 645
    VHA is struggling to design asset realignment process............   593
    VHA's:
        Delays create capital budgeting dilemmas.....................   596
        Proposed capital asset realignment process raises concerns...   594
        Senior managers lack proactive role..........................   594
        Stakeholders have decision-making role.......................   594
    Waiting times....................................................   632

                        ENVIRONMENTAL PROTECTION AGENCY

    Access to data:
        Critical studies data........................................   199
        Federally funded research agency access to data............196, 197
        Level of public access.......................................   196
        Peer review and public access................................   196
        Public access and Federal decisionmaking.....................   197
        Public interest in credibility and validity..................   196
    Acid rain: cap and trade approach................................   236
    Annual compliance assistance activity plan:
        Compliance assistance needs..................................   144
        Criteria.....................................................   144
        EPA organizations............................................   144
        Fiscal year 2001 annual compliance assistance activity plan
          resources..................................................   146
        Fiscal year 2001 plan......................................143, 145
        Future prioritization methods................................   145
        Future strategic actions.....................................   145
        Identification of future compliance assistance needs.........   145
        Level of funding for activities..............................   145
        Resource needs...............................................   145
        Resources....................................................   144
            To implement assigned strategy...........................   145
        Service delivery role........................................   146
        Steps in service providing chain.............................   146
        Strategic action.............................................   144
    Assessment of small business assistance services:
        Catalog......................................................   136
        Survey.......................................................   136
    Audit policy:
        Cases settled by correcting violations.......................   160
        Deterrent effect.............................................   161
        Fiscal year 1998:
            Administrative compliance order eligible for relief......   159
            Administrative penalty order and administrative
              compliance order eligible for relief...................   158
            Civil referrals to DOJ eligible for relief...............   158
            Disclosure of violations.................................   161
        Human health or environmental improvements...................   159
        Measure of unfair business advantage.........................   161
        Number of violations disclosed...............................   160
        Penalty changes and its effect on deterrent..................   162
        Penalty related changes......................................   160
        Qualitative measure of success...............................   160
        Voluntary nature vs goal of enforcement program..............   159
    B. cepacia: contained in bio-pesticide products..................   233
    Beach protection legislation.....................................    68
    Bevill wastes determination:
        Effect on recycling efforts..................................   202
        New information to justify regulatory decision...............   202
        Reason for change of position................................   202
    Bevill wastes: report to Congress................................   240
    Boise NAAQS/designation issue....................................   225
    Brownouts, enforcement action and potential......................   218
    Brownfields......................................................    66
    Burden reduction:
        Audit policy reductions......................................   130
        Compliance assistance centers contributions..................   129
        Discharge monitoring program.................................   127
            Actual reductions........................................   128
        Effect of:
            Audit policy.............................................   130
            Compliance assistance centers on burden..................   129
    Burkolderia cepacia: use.........................................   233
    CCTI tax credits:
        Cost to treasury in lost tax revenue.........................   217
        Voluntary program costs less than mandatory programs.........   217
    CALPUFF model, completeness of the...............................   223
    Carbon emissions trading, funding for studies of domestic or
      international..................................................   203
    CCTI: emission reductions........................................   117
    Chloroform rule: agency rationale................................   118
    Clean Air Act:
        Federal and State requirements...............................   231
        Federal land managers reduction of haze......................   231
        Flag standards...............................................   230
        Regional haze requirements...................................   230
        Stationary sources...........................................   230
    Clean air partnership fund:
        Authority for multi-year programs............................   213
        Authorization of funds.......................................   213
    Clean water: Gap analysis........................................    74
    Climate change:
        Health sector assessment.....................................   204
        IPCC:
            EPA participation........................................   208
            Peer review..............................................   210
            Support for participation................................   208
        Justifications of models.....................................   204
        Technology initiative........................................   116
        Transfer of information......................................   208
        U.S. national assessment:
            Participation............................................   205
            Peer review..............................................   206
            Public access to peer review information on..............   210
            Public review............................................   207
            Support for participation................................   205
        Use of models................................................   203
    Co2:
        Analysis of emissions reductions.............................   212
        Emissions: Status of petition to regulate emissions..........   216
        Legal authority for CAP and trade system.....................   212
    CO:
        NAAQS review.................................................   232
        Nonattainment areas: working with alaska.....................   232
    Coeur d'Alene: RIFs report and ROD...............................   224
    Compliance assistance:
        Clearinghouse:
            Stakeholder..............................................   137
            Status of effort.........................................   136
        Forum: agenda and participants...............................   135
        Funding: funding level dollars and FTEs......................   179
        Tools distribution:
            Agency compliance........................................   138
            Coordination.............................................   138
            Marketing................................................   139
            Mentoring efforts........................................   140
            Safe drinking water mentoring ``kits''...................   139
            Status of efforts........................................   138
        Tools for economically significant rules.....................   141
            Aiming for excellence:
                Identification of economic rules.....................   141
                Final................................................   141
            Draft fiscal year 2001 annual compliance assistance
              activity plan..........................................   141
            Planned future spending..................................   143
    Computer security................................................    71
    Confidential business information, report on.....................    63
    Contaminated sediments:
        Agency use of NAS findings...................................   126
        NAS workgroup progress.......................................   126
    Core budget items................................................    65
    DOD's appropriations bill: environmental violations..............    69
    Drinking water SRF:
        State match..................................................   116
        Unobligated balance by State.................................   116
    Effects of NSR ``reinterpretation''..............................   218
    Endocrine disruptor screening program:
        Procedural rule..............................................   124
        Schedule for validation and standardization..................   123
    Energy policy implications and the EPA's regulatory actions......   240
    Enforcement accomplishment:
        Administrative actions.......................................   156
        Civil referrals..............................................   156
        Complex cases................................................   154
        Efforts to measure deterrent effect..........................   154
        Enforcement actions vs. environmental impact.................   154
        Fiscal year 1998 decrease....................................   153
        Measure of environmental impact..............................   154
        Measure of resources by time, FTE and dollars................   153
        Percentage change for decrease/increase......................   153
    Enforcement performance goals and measures:
        Assistance and training activities...........................   168
        Environmental improvements from compliance incentives........   168
        Fiscal year 1998, fiscal year 2000 and expected fiscal year
          2001:
            Fiscal year 2000 baseline rate of compliance.............   165
            Improvements in use/handling of pollutants...............   165
            In physical compliance...................................   166
        Inspections:
            And output measures......................................   166
            Contributes to improved rates of compliance..............   166
            Improvements at facilities...............................   167
        Inspection/investigations:
            Changes in:
                Behavior.............................................   167
                Environmental and human health.......................   167
        Level of non-compliance......................................   165
        Number of entities voluntarily disclosing violations.........   168
        Number of quality management plans (QMS).....................   168
        Pollutant reductions.......................................164, 165
        QMS data systems completed in fiscal year 2001...............   168
        Regulated populations measuring compliance...................   165
        Risks factors to different pollutants........................   164
        Status of national performance measures strategy.............   171
        Status of Region II pilot project............................   167
        10 compliance assistance outcome measures projects...........   169
    Enforcement targeting............................................   192
        Compliance monitoring program funding level..................   194
        Data/information systems program funding levels..............   192
        Purpose and support target activities........................   192
    Environmental information:
        Burden reduction.............................................    64
        Data gaps....................................................    62
        Integration..................................................    70
        Integration Initiative.......................................    71
        Staffing status of FTEs......................................   150
    EPA:
        Does not now have a workforce planning strategy to assess its
          human capital requirements.................................    48
        Has begun to develop and implement a workforce planning
          strategy...................................................    49
        Relationship with States: achievements and improvements......   112
        Staffing needs...............................................   109
    Estimated costs, summary of......................................    78
    Existing chemicals:
        Fiscal year 1999--fiscal year 2000 resources.................   162
        Funding reductions...........................................   164
    Federally funded research: agency access and public access.......   199
    Field testing of compliance assistance software:
        Schedule.....................................................   147
        Tools:
            Appropriate regulations..................................   147
            Staff....................................................   147
    Field testing of draft regulations:
        Participation in field testing...............................   147
        Regulations to be used for testing...........................   148
        Results of draft rule........................................   148
        Trial application............................................   147
    Financial audit:
        IG opinion...................................................   113
        Timeline for IG recommendations..............................   113
    Financial statements...........................................186, 187
        Accounting and recordkeeping process.........................   187
    Flag:
        ``Adverse'' impact threshold for ozone.......................   229
        Compliance with statutes and the constitution................   229
        Denied participation since 1995..............................   228
        Environmental benefits.......................................   228
        Fires on Federal lands.......................................   229
        FLAG AQRV:
            Criteria.................................................   228
            Health-based or non-health based standards...............   228
        FLM's, EPA, and NOAA following rulemaking procedures.........   228
        Industrial and scientific community requirements.............   224
        Members delegating or requiring non-federal entities.........   229
        Scientists noted for studies of AQRVs........................   229
        Standards versus EPA modeling protocols......................   230
        Statutory cost/benefit analysis..............................   228
    Grants management................................................   175
        Assistance agreement audit fiscal year 2001 finding..........   174
        Bench and on-site reviews measurement........................   173
        Dollar amount of non-profit awards...........................   172
        Fiscal year 1999:
            Bench reviews by region..................................   173
            On-site reviews by region................................   174
        Non-profit recipients........................................   171
        Single audit reports.........................................   174
            Conducted by grantees....................................   174
        Top 20 non-profit grant recipients number of awards..........   172
    Greenhouse gases.................................................   219
    Guidance and policy documents....................................   199
    High production volume chemical testing..........................   117
        Communication................................................   117
    Human capital:
        Framework....................................................    51
        Observations on EPA's efforts to implement a workforce
          planning strategy..........................................    46
    Human health.....................................................   151
        Budget request...............................................   153
    Improved performance measures....................................   177
        National performance measures strategy.......................   179
    Information burden:
        Agency claims to:
            House Appropriations Committee...........................   127
            Small Business Committee.................................   126
        Business savings.............................................   127
        Effect of integrated information initiative (I-3)............   130
        Reinvention efforts vs.:
            Economic changes/industry activities.....................   128
            Natural maturation of programs...........................   128
            Reestimation.............................................   128
        Steps to ensure accuracy of estimates........................   130
    Information management activities................................    64
    Information products:
        Agenda of....................................................    64
        And error correction, procedures to engage the public in the
          development of.............................................    64
    Information security--firewall, training, and verification,
      ensuring.......................................................    64
    Integrated financial management system (IFMS) replacement........   114
    Internet security................................................    73
    Iris database:
        Accuracy of data.............................................   119
        Agency resources.............................................   119
    Kyoto protocol...................................................   203
        Clarification of procedures and mechanisms involving
          ``binding consequences'' under article 18..................   214
        Effect of proposal on predictions of costs for U.S. trading
          with Russia and Ukraine....................................   215
        Knollenberg:
            Funding restriction......................................   216
            Language.................................................    67
        Source and reason of U.S. payment of fines for violations....   216
        U.S. delegation proposal of Jan. 31st recognize adoption by
          parties to protocol........................................   215
    Lead risk reduction:
        Fiscal year 1999-fiscal year 2000 resources..................   175
        Funding reductions...........................................   177
    Mercury monitoring: funding for Underhill, Vermont site..........   234
    Mercury rule NRDC settlement.....................................   213
    Methodology--general procedures for developing the cost estimates    79
    Mexico border:
        Addressing greatest threats..................................   115
        Funded projects and:
            Needs....................................................   115
            Results..................................................   115
        Mexican contribution.........................................   115
        Border: NADBank..............................................   116
        Obligations and projected end of year balance................   115
    Monitoring Mercury: EPA's long-term plans........................   235
    MTBE studies: public access to information.......................   236
    NAAQs:
        Air enforcement division: application of new rules...........   219
        Research funding.............................................   199
    National air toxics assessments:
        Public involvement...........................................   124
        Review and comment...........................................   125
        To measure progress, using...................................   126
    NEPPs program....................................................   111
    New source review reform: enforcement action.....................   234
    Nitrogen oxide regulatory actions to address air quality.........   238
    NoX SIP call: compliance deadline revision............   239
    NPDES:
        Actions to reduce backlog....................................   185
        Expired permit backlog.......................................   185
        Funding level dollars and FTEs...............................   184
        Impact of funding reduction..................................   186
        State compliance to reduce backlog...........................   185
    NSR:
        Reform and relationship to utility enforcement initiative....   217
        Reform rulemaking, status of.................................   233
        ``Reinterpretation'', effects of.............................   218
    Office of Environmental Information:
        FTE ceiling..................................................   150
        Level at 3/1/2000............................................   150
        Participation in resource decisions..........................   151
        Staffing.....................................................   150
    OPPTS assistance providers--follow-up............................   135
    Ozone/pm/regional haze, timetable for implementation of..........   226
    Peer review......................................................   114
        And release of NATA results..................................   125
    Pesticides reregistration:
        Funding level dollars and FTEs...............................   182
        Impact of funding reduction..................................   182
    Phoenix's revised serious area PM10 nonattainment plan, review of   231
    Project XL:
        Examples.....................................................   120
        Progress in negotiating agreements...........................   119
    Public health....................................................    73
    Quality of lab data..............................................   184
        Agency reaction to news report on lab........................   184
        Chicago Central Regional Lab.................................   183
        Tests of contaminated materials..............................   183
        Process to identify non-analysis work performed..............   184
    Red dog mine permit: agency involvement..........................   232
    Regional haze rule:
        Cost in cash outlay..........................................   227
        Cost/benefit analysis........................................   227
        DOE participation in.........................................   227
        Legal authority for the flag AQRV ``policy''.................   227
        Scientifically projected reductions..........................   227
        Socio-economic costs.........................................   227
    Regional haze: implementation of rule............................   226
    Regulatory actions: impact on use of coal........................   241
    Reinventing environmental information.....................132, 134, 135
        Assessment and current efforts for data quality improvement..   131
        Explanation for reductions to funding........................   134
        Milestones...................................................   130
        National systems requiring reengineering.....................   131
        1999-2001 funding............................................   132
        Performance measures.........................................   134
        Quarterly reports............................................   132
    Risk management:
        Fiscal year 1999, fiscal year 2000 and fiscal year 2001
          funding levels.............................................   157
        Reductions in fiscal year 1999, fiscal year 2000 budget
          requests...................................................   157
    Root Cause Analysis Pilot Project:
        Compliance ``grace period''..................................   188
        Comprehensive vs. individual evaluation......................   190
        Coordination between EPA and:
            Facility.................................................   189
            States on regulatory requirements........................   190
        Development of inspection program............................   188
        Feasibility pilot-test program...............................   191
        Industry:
            EPA personnel exchange program...........................   187
            Sponsored training on ``how chemical plants work''.......   187
        Pilot test program...........................................   191
        Stakeholders focus groups....................................   191
        Technical assistance or mitigation...........................   189
    Safe Drinking Water Act..........................................    67
    Safe Drinking Water Information System...........................   140
    Sharing contents of final rule before promulgation...............   234
    SRF funding levels facilities....................................   225
    Status of NSR reform rulemaking..................................   233
    Strategic use of compliance assistance, incentives, monitoring
      and enforcement actions:
        Achievements.................................................   148
        Fiscal year 2000-2001 national enforcement priority..........   148
        Vertical selection...........................................   150
    Subcommittee recommendations and ESC IRM appeals.................   132
    Timetable for implementation of ozone/pm/regional haze...........   226
    TMDL.............................................................    76
        Authority to require states to develop reasonable assurance..   222
        ASWIPCA concerns.............................................   111
        Benefit-cost economic analysis of its proposal...............   223
        Effect NPDES backlog.........................................   110
        Forestry:
            Activities defined as non-point source...................   220
            Community:
                Improvement in water quality.........................   221
                View of forestry activities as nonpoint source.......   222
            Economic implications....................................   223
            Examples of EPA imposing land use........................   222
            Provision in the Clean Water Act.........................   222
        National pollutant discharge elimination system (NPDES)
          permits: forestry activities...............................   219
        Near a culvert--nonpoint source..............................   223
        Nonpoint source data.........................................   111
        Program Regulations, Analysis of the, Incremental Cost of
          Proposed Revisions to the..................................    77
        Proposal:
            NPS and Forestry.........................................   108
            Vs. NPDES permit backlog...............................108, 110
        Regulation: assistance to farmers and landowners.............   235
        Silvicultural operations:
            Impairment of water quality..............................   220
            Permit requirements......................................   219
            Point source discharge...................................   221
            Regulation...............................................   219
            Stormwater regulations...................................   220
    Vermont school environmental health initiative: agency assistance   238
        Work load and funding requirements...........................   110
    Wetlands/CWAP:
        Level of funding.............................................   171
        Reductions in fiscal year 1999 op and fiscal year 2000
          proposed op................................................   171

                      FEDERAL EMERGENCY MANAGEMENT AGENCY

    Buyouts..........................................................    25
        After hurricane fran.........................................    16
        Request for..................................................    15
    Counter-terrorism................................................    31
        FEMA's role in...............................................    24
    Damage rule, substantial.........................................    38
    Disaster cost data, accuracy of..................................    34
    Disaster Relief Fund:
        Estimates....................................................    33
        Problems with data timeliness in.............................    36
        Set-asides proposed..........................................    36
    FEMA:
        In the last seven years, reforms at..........................    19
        Integrated financial management information system, problems
          with.......................................................    35
    Field operations, streamlining disaster..........................    28
    Fire dangers, public awareness of................................    20
    Firefighter Grant Program........................................    32
    Flood:
        Insurance, properties with...................................    16
        Map modernization............................................    29
        Mapping:
            Licensing fee for........................................    24
            Working with NASA data for...............................    23
    Hazard mitigation proposals......................................    23
    Headquarters location, new.......................................    39
    Mitigation issues................................................    37
    National Fire Academy, reforms and priorities at the.............    18
    Public buildings insurance rule..................................    17
    Responsibilities:
        Mitigation...................................................    12
        Protection...................................................    12
        Resource.....................................................    14
        To emergency responders......................................    13
    Rulemaking improvements needed...................................    39
    S. 1691..........................................................    26
    Sprinkler systems in college facilities..........................    20

                 NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

    Advanced software................................................   822
    Advanced Technology Funding......................................   869
    Algorithm development............................................   850
    Appendix:
        A.--Scope and Methodology....................................   768
        B.--Acceptance and Payment Process for Deliverable Items.....   768
    Applications:
        Partnerships/projects........................................   863
        Research and analysis........................................   862
    ATD Competition................................................869, 870
    Biomedical research..............................................   819
    Biopreparat, verification of payments to.........................   766
    Boeing:
        Business jet.................................................   838
        Reorganization...............................................   826
    Chemical and biological warfare..................................   797
    Computer Hacking and Terrorism: NASA IG, Roberta Gross...........   838
    Cutting-edge technology, enabling................................   814
    DAACs............................................................   855
    DISS, new........................................................   857
    Earth probes.....................................................   858
    Earth Science:
        Budget.......................................................   798
        Program--science.............................................   860
    Enterprise and center taxes......................................   854
    EOS:
        Follow-on....................................................   851
        Science and Mission Science teams--research..................   860
    EOSDIS...........................................................   854
    Export Control Program...........................................   816
    Fiscal year 2001 budget:
        Overview.....................................................   777
        Request......................................................   772
    Goddard and Earth Science........................................   854
    GP-B.............................................................   830
    Hubble Space Telescope...........................................   775
        Servicing mission costs......................................   841
    Human life, relying on...........................................   823
    Independent validation and verification..........................   822
    Integrated Space Technology Program..............................   832
    International Space Station:
        Boeing cost overruns.........................................   825
        Costs of operation of the....................................   829
        Current costs of the.........................................   825
        Hardware and software, critical path.........................   827
        Partner, Russia's obligations as an..........................   809
        Research management of.......................................   829
        Video assembly of the........................................   794
    Iran Nonproliferation Act........................................   811
    Johnson Space Center, steps performed at the.....................   768
    Keck observatory on Mauna KEA, expansion of the..................   838
    Landsat 7........................................................   839
    Living With A Star...............................................   811
        Initiative...................................................   831
    Major development................................................   850
    Mars.............................................................   845
        98...........................................................   774
    McDonald report..................................................   796
    MIR..............................................................   835
    Multimedia projects..............................................   794
    NAS15-10110 biopreparat funding information exchange Moscow,
      February 7-February 11, 2000...................................   771
    NASA:
        Earth Science enterprise in the new decade, exploring our
          home planet................................................   799
        Enterprise detail............................................   781
        Mission......................................................   834
        Setbacks.....................................................   773
        Successes....................................................   773
    Next generation reusable launch vehicle..........................   815
    NPP..............................................................   853
    Peer reviewed analysis...........................................   799
    Procurement......................................................   836
    Proliferation--security..........................................   818
    Protocol.........................................................   771
    Remote sensing...................................................   835
    Rothenberg summary of top issues.................................   796
    Russian:
        Service Module...............................................   796
        Space Agency, steps performed at the.........................   768
    Science Investigator-led Processing Systems (SIPS)...............   856
    Shuttle safety and upgrades......................................   819
    Solar Spectroscopic Imager, high energy..........................   824
    Space
        Flight operations contract phase II cost benefit analysis....   830
        Liner 100 Program............................................   816
        Shuttle, oversight on the..................................820, 823
        Transportation:
            Mission (S-34), lack of strategic planning for the.......   833
            Vehicle..................................................   817
    Staffing needs...................................................   834
    Team members.....................................................   770
    Technology transfer..............................................   813
    Verification, results of.........................................   767
    Young report...................................................773, 774
        Addressing the...............................................   774

                             NATIONAL SCIENCE BOARD

    Basic research, outcomes of......................................   908
    Budget, a true investment........................................   881
    NSF budget priorities............................................   881
    Prospects........................................................   883
    Trends and opportunities.........................................   882

                          NATIONAL SCIENCE FOUNDATION

    Biotechnology....................................................   885
    EPSCoR and the Office of Innovation Partnerships, funding for....   918
    Genetic engineering, explanation of..............................   914
    K-12 education, graduate fellowships in..........................   909
    Nanotechnology...................................................   886
    NSF:
        Ability to fund nuclear-related research.....................   917
        Administration and management request........................   892
        Educational focus............................................   892
        Fiscal year 2001 initiatives.................................   884
        Investment in new tools......................................   892
        Response to the PITAC report.................................   916
        Role in education............................................   908
        The beginning of.............................................   885
        Vision, need for.............................................   906
    Small schools, facilities and equipment for......................   910
    Unfunded proposals...............................................   910

                    OFFICE OF SCIENCE AND TECHNOLOGY POLICY

    Basic research, need to support..................................   908
    Biotechnology:
        Agricultural.................................................   913
        Public misunderstanding of...................................   911
    EPSCoR and the Office of Innovation Partnerships, funding for....   918
    Interagency initiatives..........................................   903
    Nanotechnology initiative:
        Coordination of the..........................................   914
        Need to publicize............................................   915
    National Science and Technology Council..........................   905
    NSF's ability to fund nuclear-related research...................   917
    OSTP:
        Budget request...............................................   904
        Mission......................................................   904
    President Clinton's fiscal year 2001 R&D budget..................   901
    President's Committee of Advisors on Science and Technology......   905
    R&D budget, highlights of the....................................   902
    Science & Technology:
        Initiative...................................................   902
        Recent advances in...........................................   900
        The engine of our economic growth............................   899

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