[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

_______________________________________________________________________
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                                 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\
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    \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.
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    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.
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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.
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    \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.
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    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.
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    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.
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                      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\
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    \5\ Mission statement adopted by notation vote of the Board on 
February 4, 2000.
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                       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).
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    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.
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    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.
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    \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.
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    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        ([email protected]
                                         Assessment of the            v).
                                         Grapevine Environment
                                         (VINTAGE).
California \1\........................  Implementation of            Oliver Chadwick              UCSB....................       124.5    110.7    151.5
                                         Predictive Soil Modeling     ([email protected]).
                                         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       ([email protected]).
                                         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           ([email protected]).
                                         Management and Assessment.
Kansas \1\............................  Remote Sensing-based         Mark Jakubauskas             Univ. of KS.............       198.9    200.0    180.0
                                         Geostatistical Modeling      ([email protected]
                                         for Coniferous Forest        ).
                                         Inventory and
                                         Characterization.
Maryland \1\..........................  Forest Characterization and  Ralph Dubayah                UMD.....................       199.6    198.0    199.5
                                         Inventory using Airborne     ([email protected]).
                                         and Space-based Lidar.
Maryland \1\..........................  Assessment of Global Crop    Paul Doraiswamy              USDA-ARS................       170.1    164.0    156.9
                                         Production from New          ([email protected]
                                         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.             ([email protected]).
Minnesota \1\.........................  Integrating Satellite        Marvin Bauer                 Univ. of MN.............       200.0    200.0    200.0
                                         Remote Sensing into Forest   ([email protected]).
                                         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   ([email protected]).
                                         Forests Derived from
                                         Aerial Lidar.
Montana \1\...........................  Developing Methods for       Robert Keane                 USDA Forest Service.....       199.2    198.7    199.3
                                         Mapping Fuel                 ([email protected]).
                                         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   ([email protected]).
                                         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   ([email protected]).  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
                                                                      ([email protected]).
California \2\ \3\....................  California Land Science      Gary Darling                 CERES, California              470.0    320.0    338.0
                                         Information Partnership      ([email protected]).         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             ([email protected]).          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.       ([email protected]).
Maryland \2\..........................  Integrating Environmental    Konstantinos Kalpakis        USRA/CESDIS.............       320.0    340.0    230.0
                                         and Legal Information        ([email protected]).
                                         Systems.
Minnesota \2\ \3\.....................  TerraSIP: A Spatial          Thomas Burk                  Univ. of MN.............       240.0    260.0    199.0
                                         Information Partnership      ([email protected]).
                                         for Land Managers.
New Mexico \2\ \3\....................  Performing a Regional        Stan Morain                  UNM.....................       200.0    200.0    251.0
                                         Assessment and Prototyping   ([email protected]).
                                         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    ([email protected]).
                                         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         ([email protected]).
                                         Immersive Planetarium
                                         Shows.

                                                         Cooperative Agreements

Arizona \4\...........................  NASA Southwest Earth         Roger Bales                  Univ. of AZ.............  \5\ 1,500.  .......  .......
                                         Science Applications         ([email protected]).                                       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    ([email protected]).                                            0
                                         Center.
California \4\........................  Southern California Center   Chris Lee                    CSU, Dominguez Hills....  \5\ 1,600.  .......  .......
                                         for Managing Fire Hazards    ([email protected]).                                    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-         ([email protected]).                                          0
                                         Atlantic RESAC Consortium.
Minnesota \4\.........................  Upper Great Lakes Regional   Marvin Bauer                 Univ. of MN.............  \5\ 1,500.  .......  .......
                                         Earth Sciences Application   ([email protected]).                                           0
                                         Center.
New York \4\..........................  Use of ESE Data for Cayuga   Bob Brower                   Cayuga County, NY.......     3,000.0  9,200.0
                                         County Planning.             ([email protected]).

                                                             Other Projects

Alabama \6\...........................  Southeast Regional           J.F. Cruise                  UAH.....................       300.0    300.0    300.0
                                         Assessment.                  ([email protected]).
Alabama \6\...........................  Economic Impact of Water     J.F. Cruise                  UAH.....................       150.0    100.0    150.0
                                         Allocation on Agriculture    ([email protected]).
                                         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   ([email protected]).
                                         and a Mesoscale
                                         Atmospheric Model.
Arizona \6\...........................  Agriculture Applications     Chuck Hutchinson             Univ. of AZ.............       200.0    140.0    200.0
                                         Research.                    ([email protected]).
Arizona \6\...........................  Space/Land Grant Geospatial  Barron Orr                   Univ. of AZ.............       150.0    100.0    150.0
                                         Technology Extension.        ([email protected]).
California \6\........................  Pest Control in Precision    Nahum Gat ([email protected]).  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.    ([email protected]).
California \6\........................  Hyperspectral Detection of   Lee Johnson                  CSU Monterey Bay........       200.0    204.5  .......
                                         Nitrogen Stress in           ([email protected]
                                         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-           ([email protected]).
                                         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   ([email protected]).
                                         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       ([email protected]).
                                         Development.
California \6\........................  Flood Plain Modeling Based   Van Zyl                      JPL.....................       100.0    100.0    100.0
                                         on Data Fusion of            ([email protected]
                                         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     ([email protected]).        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    ([email protected]
                                         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     ([email protected]).            Integration & Imaging.
                                         for Telecommunication
                                         Tower Siting.
Colorado \6\..........................  Application of Airborne      Phoebe Hauff ([email protected])  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.                     ([email protected]).
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        ([email protected]).     tion.
                                         Remotely Sensed Data
                                         (LANDMOD).
Indiana \6\...........................  Increasing Public Benefits   Bernie Engel                 Purdue University.......       100.0     60.0    100.0
                                         of Existing NASA Earth       ([email protected]).
                                         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         [email protected]).
                                         Monitoring Protocol for
                                         the Great Plains.
Kansas \6\............................  The Great Plains Regional    Edward Martinko (e-          Univ. of KS.............   \5\1,550.  .......  .......
                                         Earth Science Applications   [email protected]).                                           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.                 ([email protected]
                                                                      .gov).
Maryland \6\..........................  Development of a Health      Steve Kempler                NASA/GSFC...............       320.0       na       na
                                         Archive at the Goddard       ([email protected]
                                         Global Change Data Center.   v).
Maryland \6\..........................  Baltimore-Washington         Tim Foresman                 UMBC....................       200.0    130.0    130.0
                                         Corridor Change Detection    ([email protected]).
                                         & 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     ([email protected]).
                                         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            ([email protected]).
                                         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     ([email protected]).       Studies.
                                         Data for Stream and
                                         Riparian Habitat Analysis.
Nebraska \6\..........................  Application of               Paul Doraiswamy              USDA-ARS................       268.2    275.7  .......
                                         Hyperspectral Data for       ([email protected]
                                         Site Specific Farm           ).
                                         Management.
New York \6\..........................  Water Quality Monitoring     Rulon Simmons                Eastman Kodak...........       300.0    300.0  .......
                                         with Hyperspectral Imaging.  ([email protected]).
New York \6\..........................  Kodak Earth Imaging: Demand- Elizabeth Frey               Eastman Kodak-Commercial       300.0    300.0    300.0
                                         Driven LightSAR Product      ([email protected]).         & Gov't Systems Div.
                                         Fulfillment.
New York \6\..........................  Landslide Mechanisms and     Jeff Weissel                 Columbia Univ...........       167.0    148.0    145.0
                                         Hazard Assessment in         ([email protected]).
                                         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     ([email protected]).
                                         into Agribusiness, K-12
                                         Education.
North Dakota \6\......................  Northern Great Plains        George Seielstad             Univ. of North Dakota...  \5\ 1,720.  .......  .......
                                         Regional Earth Science       ([email protected]).                                      0
                                         Applications Center.
Ohio \6\..............................  Applications of              James Riddell                MTL Systems Inc.........       299.6    299.8  .......
                                         Hyperspectral Data.          ([email protected]).
Texas \6\.............................  Commercial Development of    Doran Geise                  Earth Info. Sys. Corp...       292.6    318.9    278.7
                                         Enhanced Products from       ([email protected]).
                                         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     ([email protected]   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   ([email protected]).
                                         Commercial Applications
                                         for Placement of Solar
                                         Power Facilities.
Washington \6\........................  Ocean Current Measurements   David Lai ([email protected])..  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.    ([email protected]   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             ([email protected]                                     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, [email protected]
                                 ______
                                 

  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 [email protected].
                                 ______
                                 

     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, 
[email protected]
                                 ______
                                 

       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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