[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]



                DEPARTMENTS  OF  VETERANS  AFFAIRS  AND

                 HOUSING  AND  URBAN  DEVELOPMENT,  AND

                  INDEPENDENT AGENCIES APPROPRIATIONS

                                FOR 2003

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS
                             SECOND SESSION
                                ________
            SUBCOMMITTEE ON VA, HUD, AND INDEPENDENT AGENCIES
                   JAMES T. WALSH, New York, Chairman
 TOM DeLAY, Texas                    ALAN B. MOLLOHAN, West Virginia
 DAVID L. HOBSON, Ohio               MARCY KAPTUR, Ohio
 JOE KNOLLENBERG, Michigan           CARRIE P. MEEK, Florida
 RODNEY P. FRELINGHUYSEN, New Jersey DAVID E. PRICE, North Carolina
 ANNE M. NORTHUP, Kentucky           ROBERT E. ``BUD'' CRAMER, Jr., 
 JOHN E. SUNUNU, New Hampshire       Alabama
 VIRGIL H. GOODE, Jr., Virginia      CHAKA FATTAH, Pennsylvania     
 ROBERT B. ADERHOLT, Alabama        
                                    
 NOTE: Under Committee Rules, Mr. Young, as Chairman of the Full 
Committee, and Mr. Obey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
          Frank M. Cushing, Timothy L. Peterson, Dena L. Baron,
         Jennifer Miller, and Jennifer Whitson, Staff Assistants
                                ________
                                 PART 2
                                                                   Page
 Agency for Toxic Substances and Disease Registry.................    1
 Neighborhood Reinvestment Corporation............................  127
 Office of Science and Technology Policy..........................  295
 Department of Defense--Civil Cemeterial Expenses, Army...........  353
 Community Development Financial Institutions Fund................  391
 National Institute of Environmental Health Sciences..............  481
 Council on Environmental Quality/Office of Environmental 
Quality...........................................................  535
 American Battle Monuments Commission.............................  597
 Consumer Product Safety Commission...............................  645
 Chemical Safety Hazard and Investigation Board...................  813
 Federal Consumer Information Center..............................  929
 Office of Inspector General, Federal Deposit 
InsurancePCorporation.............................................  991
 National Credit Union Administration............................. 1035
 Court of Appeals for Veterans Claims............................. 1149
 Selective Service System......................................... 1193
                                ________
                     U.S. GOVERNMENT PRINTING OFFICE
 79-815                     WASHINGTON : 2002




                       COMMITTEE ON APPROPRIATIONS

                   C. W. BILL YOUNG, Florida, Chairman

 RALPH REGULA, Ohio                  DAVID R. OBEY, Wisconsin
 JERRY LEWIS, California             JOHN P. MURTHA, Pennsylvania
 HAROLD ROGERS, Kentucky             NORMAN D. DICKS, Washington
 JOE SKEEN, New Mexico               MARTIN OLAV SABO, Minnesota
 FRANK R. WOLF, Virginia             STENY H. HOYER, Maryland
 TOM DeLAY, Texas                    ALAN B. MOLLOHAN, West Virginia
 JIM KOLBE, Arizona                  MARCY KAPTUR, Ohio
 SONNY CALLAHAN, Alabama             NANCY PELOSI, California
 JAMES T. WALSH, New York            PETER J. VISCLOSKY, Indiana
 CHARLES H. TAYLOR, North Carolina   NITA M. LOWEY, New York
 DAVID L. HOBSON, Ohio               JOSE E. SERRANO, New York
 ERNEST J. ISTOOK, Jr., Oklahoma     ROSA L. DeLAURO, Connecticut
 HENRY BONILLA, Texas                JAMES P. MORAN, Virginia
 JOE KNOLLENBERG, Michigan           JOHN W. OLVER, Massachusetts
 DAN MILLER, Florida                 ED PASTOR, Arizona
 JACK KINGSTON, Georgia              CARRIE P. MEEK, Florida
 RODNEY P. FRELINGHUYSEN, New Jersey DAVID E. PRICE, North Carolina
 ROGER F. WICKER, Mississippi        CHET EDWARDS, Texas
 GEORGE R. NETHERCUTT, Jr.,          ROBERT E. ``BUD'' CRAMER, Jr., 
Washington                           Alabama
 RANDY ``DUKE'' CUNNINGHAM,          PATRICK J. KENNEDY, Rhode Island
California                           JAMES E. CLYBURN, South Carolina
 TODD TIAHRT, Kansas                 MAURICE D. HINCHEY, New York
 ZACH WAMP, Tennessee                LUCILLE ROYBAL-ALLARD, California
 TOM LATHAM, Iowa                    SAM FARR, California
 ANNE M. NORTHUP, Kentucky           JESSE L. JACKSON, Jr., Illinois
 ROBERT B. ADERHOLT, Alabama         CAROLYN C. KILPATRICK, Michigan
 JO ANN EMERSON, Missouri            ALLEN BOYD, Florida
 JOHN E. SUNUNU, New Hampshire       CHAKA FATTAH, Pennsylvania
 KAY GRANGER, Texas                  STEVEN R. ROTHMAN, New Jersey    
 JOHN E. PETERSON, Pennsylvania
 JOHN T. DOOLITTLE, California
 RAY LaHOOD, Illinois
 JOHN E. SWEENEY, New York
 DAVID VITTER, Louisiana
 DON SHERWOOD, Pennsylvania
   
 VIRGIL H. GOODE, Jr., Virginia     
   
                 James W. Dyer, Clerk and Staff Director

                                  (ii)

 
DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT, AND 
              INDEPENDENT AGENCIES APPROPRIATIONS FOR 2003

                              ----------                              

                                           Thursday, March 7, 2002.

            AGENCY FOR TOXIC SUBSTANCES AND DISEASE REGISTRY

                               WITNESSES

HENRY FALK, M.D., MPH, ASSISTANT ADMINISTRATOR, AGENCY FOR TOXIC 
    SUBSTANCES AND DISEASE REGISTRY
PETER McCUMISKEY
    Mr. Walsh. The subcommittee will come to order.
    Good morning, everyone. Today the subcommittee will 
continue its Fiscal Year 2003 budget hearings by taking 
testimony from the Department of the Health and Human Services 
Agency for Toxic Substance and Disease Registry and also from 
the Neighborhood Reinvestment Corporation.
    First up is ATSDR, whose Fiscal Year 2003 budget request, 
excluding the proposed addition of benefits accrual costs, is 
$77,388,000, a decrease of $847,000 from Fiscal Year 2002. I 
should note that despite this decrease, ATSDR has seen growth 
of a little more than ten percent over the past three years, 
perhaps giving us perspective of the important work performed 
by the agency as well as the importance Congress has placed on 
the work that they do.
    When we get to questions in just a few moments, I will have 
specific questions about this proposed decrease.
    Testifying on behalf of the agency again this year is Dr. 
Henry Falk, Assistant Administrator of ATSDR. Accompanying Dr. 
Falk is Mr. Kerry Weems.
    Mr. Falk. I have a correction to that.
    Mr. Walsh. Okay.
    Mr. Falk. Mr. Weems of the Department of HHS is unavailable 
this morning. This actually is my deputy from ATSDR, Peter 
McCumiskey.
    Mr. Walsh. All right. Welcome.
    Mr. McCumiskey. Good morning.
    Mr. Walsh. In the interest of time, I will ask Dr. Falk to 
summarize your opening statement as best you can. Your written 
statement will, of course, be included in full in the record.
    Before you do that, I would like to ask Congressman 
Mollohan of West Virginia, the ranking member of the 
subcommittee, for whatever opening remarks he may have.
    Mr. Mollohan. Thank you, Mr. Chairman. I would just like to 
join you in welcoming Dr. Falk to the hearing today and look 
forward to his testimony.
    Mr. Walsh. All right. Thank you.
    Doctor Falk, please proceed.

                           Opening Statement

    Mr. Falk. Thank you very much, Mr. Chairman, Congressman 
Mollohan.
    Before I start, I just wanted to point out that actually 
the administrator of ATSDR, who is also the director of CDC, 
Dr. Jeffrey Koplan, has announced that he will be leaving that 
position at the end of March, just so that you all are aware 
that I don't yet know who his replacement will be as 
administrator. The deputy director of CDC, Dr. David Flemming, 
is also the deputy administrator of ATSDR. We share those two 
positions at the top. So presumably Dr. Flemming is still 
there, and I work closely with him.
    But just so you are aware that I don't know who the 
replacement will be yet as administrator.
    The testimony that I have provided, I will try to summarize 
very quickly. It is divided into four parts. The first part 
dealt with sites that we have been working on. As you know, I 
approach our work at ATSDR as a very strong service component 
that we provide to communities at hundreds of sites around the 
country during the year.
    Several sites this year were particularly important. One 
that this subcommittee has been very concerned about over a 
number of years is the Toms River, New Jersey site. That study 
was completed in December and presented to the community and 
demonstrated an association between exposure from contaminated 
well waters related to Superfund sites and the development of 
leukemia, particularly in young females exposed prenatally to 
the well water. ATSDR had particularly heavy involvement in 
that work in terms of modeling the well water distribution and 
enabling that study to end up as it did.
    The second site that we have been very actively engaged in 
is in Libby, Montana. As you know, there are many people who 
have been exposed to asbestos from the mining in that area. We 
have done medical testing the past two summers, set up an ad 
hoc clinic, examined 7300 people. Close to 20 percent of all of 
those people have some x-ray abnormality linked to asbestos, 
and almost 50 percent of the former workers that we have 
examined have such abnormalities.
    I think that the Libby, Montana site perhaps is more 
disease related than any of the sites that we have looked at. 
So that has been a very important site for us, and the Libby, 
Montana site will have important work ongoing for a number of 
years in terms of follow up of people who have been exposed to 
asbestos.
    We have had a number of other sites that are very 
important. Fallon, Nevada and the Vieques site, which was a 
petition site funded by way of the Navy on the Federal site 
side, were also very prominent for us this year.
    The second area that I cover in my testimony relates to our 
ongoing programs, the important ones that we have been doing 
for a number of years. We have a cooperative agreement for 
programs with state health departments to do work in the 
states. We now have 33 awardees in 31 states, Puerto Rico, and 
one of the Indian tribes. We have created the pediatric 
environmental health specialty unit program. Now we have a full 
complement in all of the HHS regions.
    The Great Lakes Human Health Effects Research Program is a 
continuing area of importance to us, and Minority Health 
Professions Foundation Program is also another important one.
    The third broad area that I covered relates to the domestic 
terrorism and the events related to September 11th, the World 
Trade Center, and anthrax. This was very unexpected, but a very 
challenging and involving area for us. I took the approach when 
responding to this national emergency that we would be as 
positive as we could in every way to assist the New York City 
Health Department, State Health Department, CDC, EPA, and 
various partners that we work with. So we have, during the 
course of this year, covered those unexpected activities and 
tried to work on them along with our ongoing responsibilities.
    At the World Trade Center, we have been very much involved 
with helping the City Health Department and including recently 
working with EPA and FEMA to do some of the first sampling 
indoors in residential buildings, and we will continue to work 
with EPA and the city on that issue.
    We have also been talking to the New York City Health 
Department about the establishment of some type of roster or 
registry that will encompass the various highly exposed groups 
to be able to keep track of those people and do studies and 
provide information as time goes on. That is an ongoing project 
at the moment.
    On the anthrax side, we have a lot of people at ATSDR who 
have skills that were very helpful during the anthrax episode, 
people such as industrial hygienists, for example, who are 
trained at going into buildings and assessing the distribution 
of spores, collecting samples. They are experienced at suiting 
up with respirators and going into those areas and they also 
provided consultation on decontamination. So we worked closely 
with CDC and EPA and others on that; several members of ATSDR 
were part of the Tiger Team that was working here in Washington 
D.C. very intensively December through the beginning of 
January, on decontamination issues related to the Hart Building 
as well as to portions of the Ford and Longworth Buildings. So 
we were very involved in assisting in those areas.
    In addition to the work the past six months, I remain very 
concerned about the longer-term issues related to the potential 
for chemical terrorism in the future and how that might affect 
our agency and the ways in which we can work with FEMA, EPA, 
and others for the particular kinds of skills that we have. So 
that is a challenge to us as we try to plan and think ahead.
    Finally, the last part of my testimony covers partnerships 
that I have tried to work on over the course of last year. We 
clearly work closely with CDC in Atlanta. We work very closely 
with EPA, and I think I described that to you last year. In 
addition, during this past year, we have had a significant 
planning effort with NIEHS and also with FEMA. With NIEHS, Dr. 
Olden and I set up five working groups to think through what 
the potential areas for collaboration and we have got about a 
dozen proposals from them that we are working on follow up and 
how we can work together.
    The general principle of my approach to working with NIEHS 
is that they have a very talented group of people working on 
basic Superfund research, and I have concerns of delivering 
services in terms of measuring exposure to health effects at 
sites. To the extent that we can benefit from the basic 
research and get newer tests and information out into the 
field, that will only benefit the product that we can provide 
to the communities. So I have a strong interest in continuing 
the development of that collaboration.
    And with FEMA, I think on any of the terrorism issues, 
obviously there can be a lot of concerns in terms of 
preparedness and planning. The discussions with FEMA revolve 
around areas, particularly the medical preparedness and also 
data systems and GIS systems and ways in which we can link 
together. I think that the area where we can contribute in 
terms of working with FEMA is that we have a fair number of 
physicians, including emergency medical physicians, involved 
with health departments, public health groups, and that is the 
logical area in which we could, I think, link up with FEMA, 
plus training programs that we have in terms of toxicology 
information, the kinds of things that would be helpful for 
technological hazards. And so I think those are the kinds of 
areas that we need to be talking about with the FEMA groups.
    And we also just recently provided some services to the 
Chemical Safety Board. I mentioned last year that we work with 
them, and so they have interest and we are trying to define 
what the areas of collaboration could be. We will see how that 
evolves.
    I think this year has been a very challenging one for us, 
both in terms of the Superfund work and the important sites 
that we dealt with and also because of all the events related 
to the terrorism, responding to that as well as thinking ahead 
to the future.
    That concludes my remarks. Thank you very much.
    [The information follows:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                              ATSDR BUDGET

    Mr. Walsh. Thank you. I would like to begin this morning 
with some general questions about your budget formulation 
process, but before doing so, I want to commend to the 
subcommittee the agency's performance plan, which is included 
at the back of the budget justification documents. As it notes 
very clearly, ATSDR has for the last few years been meeting or 
exceeding every single performance target set for it. This 
record is certainly commendable, and you, Dr. Falk, and your 
excellent staff of your agency should be congratulated for a 
job well done.
    Now with regard to the budget, prior to the final fiscal 
year 2001 Appropriation Bill, the budgets for ATSDR and NIEHS 
were included as part of EPA's Superfund account. Fiscal year 
2002 was the first full year in which you were able to operate 
independently of EPA, including presumably an opportunity to 
make the case to OMB.
    Could you please take a moment and comment on how the 
process has gone for you, including your thoughts as to whether 
the change has so far been a benefit or a hinderance to your 
agency?
    Mr. Falk. I think that the change has been a benefit to our 
agency. I think if we look back to the time before the change 
was made, our budget proposals would go to EPA, and that was it 
for us until we actually saw the final appropriation figures. 
We didn't really have the opportunity to present directly to 
you in the subcommittee, and I think we were not as linked to 
the department's process in terms of the Department of HHS 
working with OMB and so on.
    So I think for us, it has definitely increased the 
visibility and has enabled us to speak more forthrightly about 
our programs and to directly answer questions. I mean, there 
are opportunities and challenges, but I think to be able to 
discuss that fully has really been very beneficial to us. I 
think it also been beneficial in terms of our relationship with 
the Department of HHS, because although I think they always 
were concerned about us, I think they pay more attention now 
under the current format.
    So I think it has been beneficial in a number of ways. I 
have worked very hard not to let that hinder in any way our 
relationship to EPA, and we continue to meet regularly with EPA 
leadership for the Superfund program. In my visits to the 
regional offices, I try to reassure them in every way that the 
budget change in no way changes our working relationship. I 
think we have navigated that fine.

               ATSDR WORK WITH OMB ON BUDGET DEVELOPMENT

    Mr. Walsh. How would you characterize your discussions back 
and forth with OMB this year? You did wind up with a reduction 
in budget.
    Mr. Falk. Right. I think the changes this year are not so 
much in the programmatic areas, but due to management 
initiatives which are more generally of concern, the 
President's management initiatives and how that is reflected in 
the Department of the HHS and administrative consolidation 
issues. I don't think they individually reflect on ATSDR. I 
think it was a department-wide initiative.
    I think we have had a good opportunity to speak with the 
department and to convey our issues and concerns; and 
particularly also with all of the work on bioterrorism, I have 
had an opportunity to meet with individuals in the HHS Office 
of Emergency Preparedness, and we have discussed those issues 
as well.
    So I would characterize the relationship as good, and I 
think the decrease is probably related to some broader 
management issues.

                           HOMELAND SECURITY

    Mr. Walsh. Okay. You talked about some of the experiences 
that you have had since 9-11 and your role in the response. In 
your opinion, are there other areas or activities that your 
agency should be involved with in terms of homeland security, 
for whatever reason you have not been involved in thus far?
    Mr. Falk. Well, I think in the immediate response to the 
World Trade Center and the anthrax concerns, I think we have 
done all the things that we should have done. In fact, we have, 
I think, responded to every request made of us, and I don't 
think we have shied away from participating in any way where 
our expertise would have been helpful for any reason.
    So I think in the immediate response, I think we have done 
appropriately, and I think we will continue to be helpful in 
the aftermath of that, such as continued work in Lower 
Manhattan, concerns about exposure to various hazardous 
substances. I guess for me, the concerns are more towards the 
longer term, because it is okay in a sense to make an 
adjustment in the program over a three- or six-month period, 
respond to the emergency and then shift back into a normal 
operating mode; but I do see, looking ahead, we need to really 
think about preparing for those kinds of events.
    And to me there are two parts to that: One is the kinds of 
events that we have seen, let's say anthrax where the lead is 
clearly with the infectious disease, biological-oriented 
agencies like the CDC, but where we have specific kinds of 
expertise that can be helpful. But I think the more complicated 
one is the areas of chemical or radiological terrorism where 
agencies like ours would be looked at maybe more prominently 
because we do have people with those kinds of skills. And there 
I see the need for planning. I see the need for working with 
state health departments, working with FEMA, and that is very 
hard to build in over the longer term. And so that I do see as 
an important issue.

                       NUCLEAR FACILITY TERRORISM

    Mr. Walsh. You alluded to radiological toxins or the so-
called dirty bomb. How do you plan for that? How do you respond 
to that?
    Mr. Falk. I think for those of us in an agency like ATSDR, 
my concerns are on the health end of that response. In other 
words, I try to define what our role could be at ATSDR, what 
the roles for our state health colleagues would be, and try to 
find what we can do to link in with FEMA and EPA and the 
Department of Energy or the Nuclear Regulatory Commission and 
others can do. So from my end, the concerns are the readiness 
of the public health community to be able to participate and to 
do the things that they need to do.
    I think as we have seen this year in the World Trade 
Center, there are many public health concerns that arise in a 
situation like that. My own experience, actually one of my 
first experience in the public health service, was to be the 
CDC liaison to the Pennsylvania Health Department at the time 
of Three Mile Island. So it was one of those formative 
experiences in life, and I spent a week thinking of how to 
evacuate Harrisburg on four hours notice and provide potassium 
iodide tablets to everybody on the way out, which would have 
been impossible, having to go on television to assure people 
that the milk supply was satisfactory.
    Mr. Walsh. I just saw a documentary on that just recently 
on public television. It was fascinating and scary.
    Mr. Falk. So to me, I learned a lot. One of the lessons is 
that no matter which agency has lead responsibility, there are 
a number of public health questions, and so my concern is 
really the preparation of the public health community and 
particularly state and local health departments to be able to 
respond to issues, whether it is chemical, radiological, or 
mass casualty.
    Mr. Walsh. Thank you.
    Mr. Mollohan.

                           EMERGENCY RESPONSE

    Mr. Mollohan. Thank you, Mr. Chairman.
    Just following up a little bit on that, what are the 
Federal agencies that you would work with or have 
responsibility, with in responding to these emergencies or 
preparing for these emergencies? Please list them, and then I 
would like for you to describe how your mission statement fits 
in with their responsibilities now, as opposed to when your 
budget was a part of EPA's superfund account.
    Mr. Falk. Sure. I think the main agencies that we need to 
work with are probably four. One is CDC, and as you know, we 
are closely linked to CDC through our administrator and 
director. But on any infectious or biological type of terrorist 
incident, CDC would have a important role, but on the 
environmental aspects, again as I mentioned before, I think 
that would be one way where we would be able to provide 
assistance. So we try to plan with CDC and work closely with 
them.
    Second obviously, is EPA. We work closely with them all the 
time. EPA is very aware of various kinds of potential chemical 
hazards, the distribution of hazards. We work closely with EPA 
at Superfund sites through our regional offices, and I think a 
chemical release from a terrorist incident is no different 
ultimately than a chemical release from an accident or from 
some acute event. So the nature of our working relationship 
with EPA will be very strong in any kind of chemical terrorist 
incident.
    Third is FEMA, and I think of FEMA in their role in the 
Federal Response Plan to coordinate the efforts of all Federal 
agencies, and so they convene Federal agencies in any disaster 
setting. We will inevitably, if it is appropriate for us to be 
there, we will be working with FEMA. And I think FEMA has a 
much stepped-up role now in terms of preparedness. As I 
mentioned, in the area of public health, medical preparedness 
is one where we could work with them.
    For example, we have a variety of training materials. We 
have produced materials which are being distributed to 
emergency room physicians, local health departments on how to 
deal with technological, chemical emergencies, how to deal with 
common chemicals, what to look for. And so, you know, those 
kinds of things might be helpful to FEMA in terms of their 
emergency preparedness planning.
    Fourth, as I mentioned, NIEHS simply because they, as you 
know, fund a variety of centers around the country, and for 
example in the World Trade Center response, some of the NIEHS-
funded centers at NYU, Mt. Sinai, Columbia, and in the general 
area have become actively involved in investigations. So it is 
very important for us to work closely with NIEHS as well.
    I think on the Federal level, those are the four.
    Mr. Mollohan. What do the NIEHS-Funded centers do?
    Mr. Falk. Dr. Olden will be here next week, and I am sure 
he can do this in a lot more detail, but as part of the NIEHS 
grant programs--and this may be from the HHS side and not just 
the money from the VA-HUD side--they fund environmental health 
programs at public health and environmental health centers and 
a number of academic institutions. Some of the individuals at 
those academic institutions have been prominent in planning to 
respond to the New York City Health Department, being asked by 
community groups for their input.
    Dr. Thurston, for example at NYU [New York University 
School of Medicine], has participated in a number of efforts as 
has, Dr. Landrigan at Mt. Sinai [Medical Center]. So it is just 
important for us to stay in touch on whatever kind of expertise 
is available in a situation.
    In terms of the last part of your question about 
authorities, I had assumed that in terms of chemical releases 
and hazardous substance releases, whether by terrorist 
mechanism or whether this comes about as we deal with a 
Superfund site from some accidental release, that actual 
release is the same, the responses to dealing with a particular 
chemical or hazardous substance. So I have assumed that our 
work is within the kind of emergency response authorities that 
we have under CERCLA.
    We have had some discussions with staff, say from Energy 
and Commerce, and they actually have a paragraph in the Tauzin-
Dingell Bill on Bioterrorism, which actually said that ATSDR, 
for the kinds of things that we can do, ought to be considered 
by the Department of HHS in responses consistent with our 
authorities under CERCLA. So I think the authorizing committees 
have taken the position that our authorities under CERCLA are 
appropriate for hazardous substance releases related to 
terrorism.

                             REIMBURSEMENT

    Mr. Mollohan. As you work with and for these groups, are 
you ever reimbursed for your work?
    Mr. Falk. This is an important issue. I think this year, 
for the work with CDC, we will receive some reimbursement from 
CDC for that. I don't think we will see reimbursement for 
people's salaries or staff time that was put in. They have said 
that they will work with us on actual expenses outside 
salaries, travel and other kinds of expenses that were 
incurred. So I am hoping that we will get some reimbursement 
from CDC for the expenses that are entailed in the anthrax 
episode, for example.
    I think with FEMA, we are just beginning those discussions, 
and we will just have to see how that works out.
    Mr. Mollohan. But you do have discussions ongoing with FEMA 
about reimbursements?
    Mr. Falk. We have had discussions about how we can develop 
the relationship to work together. We are drafting a memorandum 
of understanding between us and FEMA, which I hope we can sign 
soon. We are testing the waters, so to speak, by participating 
in three pilot projects with FEMA's program where they have 
local emergency planning groups, and we are having some medical 
public health input into that planning process. One is in the 
Tri-Town area of Connecticut. One is in Carlisle, Pennsylvania. 
One is in Ithaca, New York.
    And so we are testing the waters there.
    Mr. Mollohan. But this MOU is a cost-sharing idea?
    Mr. Falk. The MOU will, I think, define the working 
relationship, and then we will talk about possibly cost 
sharing. Inevitably to do that work, we will have to have some 
kind of cost sharing.
    Mr. Mollohan. Are there any other places you get money from 
besides this Appropriations Committee?
    Mr. Falk. Under the Superfund program, we work with Federal 
facilities, and we do get reimbursables from the Department of 
Energy, Department of Defense, for their Supefund sites.
    Mr. Mollohan. What is the total amount that you would 
receive from all these reimbursements?
    Mr. Falk. It has run roughly $20-25 million a year. The 
Department of Energy and Department of Defense have been the 
two largest for us.
    Mr. Mollohan. And that is what you anticipate it running, 
about the same in the future?
    Mr. Falk. I think so.

                       FY 2003 PRESIDENT'S BUDGET

    Mr. Mollohan. Well, the reason I ask is that your budget 
request is actually below last year's, and you have now broken 
away from EPA. So you are having to deal with OMB and probably 
did not request a cut in your budget--am I correct?--from OMB?
    Mr. Falk. We didn't request a cut.
    Mr. Mollohan. But you got one?
    Mr. Falk. Right. I think we were anticipating roughly 
something very similar to last year's budget.
    Mr. Mollohan. What was last year?
    Mr. Falk. Last year's was $78.235 million, and I think the 
changes, as I said, are really related to broader 
administration--or department-wide initiatives such as 
management initiatives and consolidation. So those were things 
that we would not have perceived at our level.
    Mr. Mollohan. Can you tell me what your request was to OMB?
    Mr. Falk. I am thinking that it was probably very similar 
to last year's.
    Mr. Mollohan. Let me ask you this: Do you know what your 
request to OMB was? Sitting right here right now, do you know 
what your request to OMB was?
    Mr. Falk. I think in terms of the department and OMB, but I 
think it was the same as last year.

                   FY03 MANAGEMENT REFORM AND SAVINGS

    Mr. Mollohan. Okay. And so you anticipate or have been 
charged with achieving management savings of $1.7 million; is 
that correct?
    Mr. Falk. Correct.
    Mr. Mollohan. I can see where arguably in a broad 
government management directive or overhaul directive that some 
savings can be achieved. It is awfully hard for me to see that 
being achieved in your agency, and I want to give you a chance 
to talk about that.
    Mr. Falk. Right. I think for us, as I have said, the 
biggest challenge relates to events that were not foreseen when 
we submitted the 2003 budget, which is all the events that 
relate to bioterrorism. I have tried to capture a little of the 
flavor of the events of the last six months, but there was an 
extraordinary amount of activity related to the World Trade 
Center, anthrax, and to thinking about how to respond to 
chemical terrorism issues in the future.
    So to me the biggest unknowns are really the changes that 
have occurred since the budget proposal went forward and how do 
we incorporate that into thinking about the future.
    Mr. Mollohan. You haven't taken your cuts from management 
so much. You have taken them from research, development, and 
grants; is that correct?
    Mr. Falk. I think we have had to accommodate.
    Mr. Mollohan. You have a lot more responsibilities. You 
have been given less money. It is going to be awfully hard for 
you to achieve these numbers unless you do cut some of these 
other programs and work in a totally different environment. It 
sounds to me like unless you are getting a lot of 
reimbursements or fees for service from other areas, it is 
going to be awfully hard for you to make this work.
    Thank you, Mr. Chairman. I have taken too long.
    Mr. Walsh. Okay. We have a vote now and another vote right 
after. We will proceed until Mr. Fattah comes back, and then I 
will let him ask questions while we go vote.
    In terms of management reforms, your 2003 proposal shows a 
net decrease of $847,000 below 2002. These figures do not take 
into account the Administration's proposal on benefit accruals, 
which I suspect will not be adopted on a committee-wide basis 
rather than by individual subcommittees.
    As I review your overall proposal, I note that compared to 
2002, in 2003, you will reduce your FTE level from 427 to 419. 
At the same time, your overall compensation and benefits cost 
will rise by $560,000. Your actual reductions are found in the 
research and development contract activity, minus $100,000 in 
grants and subsidies.
    What reforms have you instituted to achieve the savings 
that will be required?
    Mr. McCumiskey. Mr. Walsh, Chairman Walsh, the difference 
you mentioned, the $847,000, represents about a one percent 
decrease from last years appropriation, the estimate for 2003. 
ATSDR procures its administrative services from the Centers for 
Disease Control through an interagency agreement. Of the 
$847,000, and eight FTE reduction, the majority of that 
decrease will be absorbed by CDC, not ATSDR.
    So the decrease to ATSDR from FTE going from 427 to 419, in 
reality, it will be a reduction, probably, of 427 to 424 for 
ATSDR. The management reform is, predominantly on the 
administrative side, to be absorbed by CDC. So for ATSDR, the 
decrease should be very minimal as far as the impact of that 
reduction in FTE.
    Mr. Walsh. Where will those positions come out of?
    Mr. McCumiskey. Well, we haven't fully resolved that, but 
we are looking at getting some consolidation of administrative 
services, maybe some reductions in our grants and cooperative 
agreements and the folks that administer those. But, again, the 
numbers will be very minimal at ATSDR, and the impact will also 
be minimal.
    Mr. Falk. We are hopeful of that. That is the basis of 
discussions. It is not what is printed here, but at least the 
discussions with CDC have gone along that line.

                     ATSDR'S WORK IN LIBBY, MONTANA

    Mr. Walsh. You mentioned some of the locations that you 
have been working on, and the Libby, Montana Health Assessment 
Project, can you give the subcommittee a brief explanation of 
the work that you are currently doing and plan to do in fiscal 
year 2003 in that area as well as Fallon, Nevada?
    Mr. Falk. Right. In Libby, Montana, there are several 
important areas for us coming up in 2003. One, as I mentioned, 
we had done medical testing in the community the last two 
summers, and we are in the process of wanting to transition 
that to state and local health departments and local medical 
facilities. So that we will continue to provide technical 
assistance and resources in future years, but I think the 
actual medical testing will be done locally.
    So that will be a very important transition for us, and we 
need to structure that so that the testing can be set up on an 
ongoing basis in future years and done locally. We have been 
talking to the state health department and local health 
department about that.
    Secondly, we have been planning to put together a registry 
of former workers of W.R. Grace and the family members, as well 
as link to the people who have been in our medical testing 
program so we can stay in touch with these people in future 
years, and we will provide any new information on treatment as 
well as any further testing that needs to be done. So setting 
up that registry will be very important for us in the coming 
year. We have pretty much tracked all the former workers and a 
portion of their household contacts, but we are in the process 
of creating that registry. So that is the second area.
    The third area is that we have done a mortality study. We 
have been reviewing cases among local pulmonary physicians, and 
people have been identified with abnormalities on the chest x-
rays in our medical testing program. We will be doing more 
detailed epidemiologic studies to link the specific forms of 
environmental exposure with the development of disease. There 
are many concerns about exposures in Libby, from insulation, 
from recreational activities, from other sources in the 
community, that we would like to do a proper epidemiologic 
study to see the best evidence for which of these routes of 
exposure are important.
    Those I think are the three main areas that we will focus 
on in Libby.
    Mr. Walsh. We have a vote. We have about a minute and a 
half left. Virgil, have you voted?
    Mr. Goode. Yes, I have.
    Mr. Walsh. And then there is another vote right after. I 
think we will go up and vote. If you could take the chair, Mr. 
Fattah went up to vote. He will have questions when he returns. 
So we will come back right after the second vote if there is a 
second vote.
    You can complete your answer.
    Mr. Falk. Thank you. So to complete that question, the 
second half of the question related to work in Fallon, Nevada, 
and we are working with the Centers for Disease Control 
National Center for Environmental Health on the Case Control 
Study that they have been performing. We have particularly been 
involved in evaluating the environmental exposures in the 
Fallon, Nevada area.
    There are concerns about exposures from pipelines, 
pesticides, arsenic in the water, nearby Naval Fallon Air 
Station. And so at ATSDR, we are evaluating potential exposures 
from those sources, and we will have some of those early 
reports starting, I think, in the spring of 2002 and going 
forward.
    Mr. Goode. I don't have any questions myself.
    Do you have anything you want to say?
    Mr. McCumiskey. No, sir.
    Mr. Goode. Is that it, Dr. Falk.
    Mr. Falk. Yes.
    Mr. Goode. All right. We will just wait, then, until Mr. 
Fattah comes.
    We are in recess now.
    [Recess.]
    Mr. Goode. We will end the recess, and I think Mr. Falk is 
ready for your questions.

                           HOMELAND SECURITY

    Mr. Fattah. If you give a brief response to a fairly simple 
question, which is I notice there is an effort to coordinate a 
variety of agencies. I assume FEMA is the lead agency with some 
nexus to the Office of Homeland Security.
    Have you been involved in that, and has that coordination 
proceeded as it should?
    Mr. Falk. Yes. We have been involved in responding to the 
terrorist incidents, both at the World Trade Center and 
anthrax, and in the emergency response under the Federal 
Response Plan, FEMA coordinates and other agencies will 
participate under that umbrella. And we have worked closely 
with EPA, FEMA, Centers for Disease Control, as part of that 
process.
    So, yes, in the acute event, we have worked closely with 
them, but I am concerned in terms of the future and in terms of 
thinking about how to plan for terrorist episodes in the 
future, and so I have started doing substantive discussions 
with FEMA as to how we might work more closely with them in the 
future.

                           CHEMICAL TERRORISM

    Mr. Fattah. Have you taken note of the events in Italy and 
the efforts, apparently, to use cyanide in some way?
    Mr. Falk. My feeling is that I have a lot of concern about 
issues related to chemical terrorism and use or release of 
common chemicals. In other words, some people focused primarily 
on nerve gas weapons. I remain particularly concerned about 
what a terrorist could do to cause releases of chemicals such 
as cyanide and other materials, attacks on chemical plants.
    In 1984, I was one of, part of a small CDC team that went 
to Bhopal. So I have actually seen the potential that can occur 
from a terrorist event on a chemical plant.
    Mr. Fattah. There was some mention by the Italian 
authorities that the effort there would not have been lethal if 
the plan had been carried out. Have you paid any particular 
attention to whether or not that would have been an effective 
attack?
    Mr. Falk. I don't know enough of the details of that 
tunneling process and where the chemicals were. I would 
hesitate to answer whether it would have worked or not.
    It would not surprise me that some efforts like that could 
be made to work. Certainly, having seen a plane fly into the 
World Trade Center, one has to be very cognizant of the 
potential for a plane to fly into major chemical depots such as 
exist in the northeast. One really has to think about that kind 
of thing now, and so response, preparedness, training of local 
health department, state health department people, all of those 
I think are very important issues, much higher in scale of 
concern now than before 9-11.
    Mr. Fattah. Thank you very much, Mr. Chair.

                            TOMS RIVER STUDY

    Mr. Frelinghuysen. Thank you, Mr. Fattah.
    Dr. Falk, nice to meet you. My timing must be good. I have 
a few questions for you, and then I may be through.
    First of all, I want to thank your agency for your work in 
New Jersey on the Toms River study. Can you discuss just for a 
brief moment whether you will continue to follow the data that 
is associated with that study for the next few years and your 
involvement?
    Mr. Falk. Yes, we will definitely continue to work with the 
New Jersey health department. We will continue to follow with 
them the cancer data collection as it goes on over the next 
several years. That is very important to us.
    One of the things we learned in the Toms River study is 
that it is very important to look at cancer data not just on a 
county level, but more precisely at the township level and 
local communities. In the Toms River situation, the cancer 
rates were elevated in Dover Township, but not in the rest of 
Ocean County. So I think we are working with New Jersey, 
especially on continuing to look at the cancer data at a finer 
perspective than just simply at the county level. I think that 
is one of the lessons from that project.
    So we will continue to work the New Jersey Health 
Department. We are also doing a four-state study on childhood 
brain cancer, which involves New York, New Jersey, 
Pennsylvania, and Florida. That study is ongoing.
    Mr. Frelinghuysen. This relates to environmental factors?
    Mr. Falk. Yes. We are looking at environmental factors and 
potential risk factors for childhood brain cancer, and those 
are four statewide investigations.
    Mr. Frelinghuysen. Potential airborne or ingested? 
Superfund? Non-Superfund?
    Mr. Falk. Yes. We are looking at a variety of factors 
within the environment that could conceivably be related to 
those illnesses. So that is an ongoing study, and we hope to 
have information on that perhaps late in FY 2002. So that is a 
secondary issue that we will work with New Jersey on.
    Administrator Whitman, when we spoke about the Toms River 
study, asked whether there were any follow-up investigations 
that we could do to assess the findings from Toms River and if 
that was more generally applicable. And so we have set up a 
working group with ourselves and some of the key programs at 
EPA to see whether we can develop a protocol for looking more 
generally at the issues we found in Toms River and see if there 
are any follow-up studies that would be appropriate, and that 
would definitely include New Jersey if we were able to do that.
    So in addition to the ongoing cancer data and the childhood 
brain cancer data, we are working with EPA to see if we can 
come up with a protocol for some further studies related to 
what was found in Toms River.

                           EMERGENCY RESPONSE

    Mr. Frelinghuysen. Well, thank you for your specific work 
in that area and for the collaborations with EPA, which I 
assume will have nationwide possibilities in terms of the use 
of that type of information.
    One other question, and if it is repetitive, I apologize: 
Most members of the Congress have been working with a lot of 
First Responders, EMT, fire and police, and hospitals. One of 
the areas that I have had some concerns about is that I am 
never quite sure who is working successfully with FEMA and who 
isn't. I assume you are--whether we have the ability on an 
instantaneous basis when people come through the hands of a 
First Responder into the emergency room to link either to your 
agency or to CDC such that we can have the quickest possible 
diagnosis and sharing of information, besides the issue of 
training which needs to uniform. We have to have standards. We 
have to have one model.
    I just wonder whether you had commented in earlier 
testimony this morning on the linkages issue here.
    Mr. Falk. Yes. I think this is a very important issue and 
certainly heightened by all the events over the last six 
months. We take this very seriously.
    Let me divide my response. There are two parts to this. 
There is the emergency response effort, and then there is the 
preparedness and planning for future events. In the emergency 
situation, we are linked, number one, through the National 
Response Team to EPA. ATSDR represents HHS on the National 
Response Team and contingency plan under Super Fund. So we are 
linked to EPA.
    And, secondly, under the Federal--
    Mr. Frelinghuysen. Just to note, the EPA labs, I hear--
maybe at least in our neck of woods--are like something out of 
the 1950s. So the linkages may be there, but it may not be up 
to speed in terms of response.
    Mr. Falk. Right. What I was really referring to was the 
linkages. In other words, we respond through the National 
Response Team and under the Federal Response Plan. If there is 
a Presidential disaster, we work with FEMA as do the other HHS 
agencies.
    So I think in the emergency setting, there is a plan for 
how to engage everybody. On the other hand, as you point out, 
in terms of preparedness, there are many issues that I think 
really need to be thought about in the current setting in the 
midst of the heightened concern, and particularly in the areas 
that we deal with such as responding to chemical releases from 
terrorist events.
    I think there is real need to think about the preparedness 
levels of state and local health departments, and I think we 
have learned from the World Trade Center episode that there is 
more work to be done in terms of agencies such as ours with EPA 
and others in terms of having protocols fully worked out 
beforehand, what chemical tests need to be done in particular 
scenarios.

                       WORLD TRADE CENTER EVENTS

    Mr. Frelinghuysen. The first World Trade Center attack 
occurred in 1993. People seem to sort of forget, and I assume 
there were some lessons learned after that. Maybe there weren't 
lessons learned.
    Mr. Falk. In fact, there were lessons learned, and when I 
was at CDC at that time, we did an investigation of the 
evacuation of the World Trade Center at that time, and there 
were many lessons learned from the difficulties of doing the 
evacuation in 1993, which were helpful in this time around in 
terms of speeding up the evacuation of people from within the 
building.
    So there were lessons learned, but the lessons learned this 
time are going to be in the area of hazardous substance 
release, how to deal with asbestos, which laboratories do the 
measurements, what are the protocols for doing measurements, 
what are the standards that need to be used. It really benefits 
everybody if those kinds of issues among agencies are all 
resolved beforehand so that for asbestos, for cyanide, whatever 
the issue may be, everybody knows which laboratories are 
capable of doing this analysis, how many specimens they can 
handle, all the other questions, the kind of thing that is 
worked out in advance.
    So we work with CDC and others. As you know, the Department 
of HHS has provided funds to support state and local health 
departments, and so they are very much engaged in this, but I 
think the largest part of the department's funding is focused 
on biological issues such as anthrax and smallpox. I think 
there still are important issues to think through in terms of 
chemical and radiological and mass trauma types of events.

                     Response to Chemical Emergency

    Mr. Frelinghuysen. My particular interest is instantaneous 
linkages. I don't get a feeling that things can be as 
instantaneous as many people in the public think they will be, 
and I am not sure that we have hospitals talking to one 
another, CDC talking to hospitals. I mean, if we have a walking 
smallpox situation, I would hope that we would have an ability 
to deal with it.
    Mr. Falk. I think CDC and HHS are making a considerable 
effort to improve the capacity of state and local health 
departments. So that is on going. I agree with you; more needs 
to be done. I think our own particular interest at ATSDR 
relates to the environmental hazardous substances, chemical 
kinds of issues, things that we deal with on a regular basis, 
and ensuring that similar kinds of capacity and linkages are 
available at the state and local level with adequate Federal 
support in those areas.
    Mr. Frelinghuysen. Thank you very much, Dr. Falk, and you 
and your colleagues for the good work you do.
    The record will remain open for additional questions from 
members, and we would appreciate an expedited response to any 
of those additional questions that might be asked.
    Mr. Mollohan, anything further?
    Mr. Mollohan. No.
    Mr. Frelinghuysen. Mr. Fattah? Mr. Goode?
    Mr. Fattah. No.
    Mr. Goode. No.
    Mr. Frelinghuysen. We stand in recess until our next group. 
Thank you very much.
    Mr. Falk. Thank you very much.
    [Recess.]
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                                           Thursday, March 7, 2002.

                 NEIGHBORHOOD REINVESTMENT CORPORATION

                                WITNESS

ELLEN LAZAR
    Mr. Walsh. The subcommittee will come to order. We will now 
hear from the Neighborhood Reinvestment Corporation, led by Ms. 
Ellen Lazar, Executive Director.
    Welcome back.
    Ms. Lazar. Thank you for having me.
    Mr. Walsh. You are very welcome.
    The budget request for Fiscal Year 2003 is $105 million, 
the same as the appropriation for Fiscal Year 2002. It seems to 
be a recurring theme this year.
    While most of this funding is for ongoing operations, $10 
million is to be used for continued expansion of the program to 
use HUD Section 8 vouchers for homeownership for low(-) income 
families. I would like to talk about that a little bit later.
    The committee continues to be impressed with the work being 
accomplished by the Corporation. We look forward to working 
with you as we finalize the budget for Fiscal Year 2003. Before 
we hear your opening statement and move to questions, I would 
like to recognize Mr. Mollohan for any comments that he may 
have.
    Mr. Mollohan. Mr. Chairman, I would just like to welcome 
the witness to the hearing. We look forward to your testimony. 
Thank you.
    Mr. Walsh. Thank you.
    Well, let's begin. We would like to hear from you.
    Ms. Lazar. Okay. Good morning to both of you, Chairman 
Walsh, Ranking Member Mollohan.
    Mr. Walsh. And Mr. Fattah is here as well.
    Ms. Lazar. Mr. Fattah, nice to meet you.
    Members of the Subcommittee, I am Ellen Lazar, and I am the 
Executive Director of the Neighborhood Reinvestment 
Corporation. I am joined today by Margo Kelly and Clarence 
Snuggs, my Deputy Executive Directors, and Mary Lee Widener, 
the President of Neighborhood Housing Services of America, as 
well as Jeffrey Bryson, our General Counsel.
    This year we are fortunate to have a very strong leadership 
team from our Board of Directors with Governor Edward Gramlich 
of the Federal Reserve Board serving as our chair; John M. 
Reich, the Director of the Federal Deposit Insurance 
Corporation is serving as our vice chair. We have two recent 
members to the board: James E. Gilleran, the new director of 
the Office of Thrift Supervision; Deborah Matz, a new director 
at the National Credit Union Administration; as well as John C. 
Weicher, the Assistant Secretary of Housing; and Julie 
Williams, the Deputy Comptroller of the Currency.
    I am here today to talk about Neighborhood Reinvestment and 
the experience of our 225 affiliated community development non-
profits known as the NeighborWorks network. We serve over 2,000 
urban, suburban, and rural communities in 49 states, the 
District of Columbia, and Puerto Rico and the work they are 
doing to revitalize communities and help low- and moderate-
income families achieve a personal stake in the renewal of 
their communities.
    Neighborhood Reinvestment supports and strengthens 
NeighborWorks affiliates through technical assistance, 
training, direct funding through grants, and program review and 
oversight. I am asking you today to support Neighborhood 
Reinvestment's budget request of $105 million.
    There are three reasons why a continued investment in 
Neighborhood Reinvestment is a wise use of this nation's 
Federal resources.

                      STEWARD OF FEDERAL RESOURCES

    First, Neighborhood Reinvestment takes very seriously the 
stewardship of our Federal appropriation by maximizing the 
effectiveness and efficiency of the NeighborWorks network. We 
use our Federal funding to help attract private resources. For 
every dollar you appropriated to Neighborhood Reinvestment, the 
NeighborWorks system generated more than $15 from private 
sector and other sources, resulting in a direct investment of 
nearly $1.4 billion last year.
    We can achieve this level of impact because our programs 
and services that are highly flexible and tailored to fit the 
credit and resource gaps that can't be filled otherwise. We do 
not utilize a Washington-directed, top-down programmatic 
approach; rather, we ask each of our NeighborWorks 
organizations to identify the specific challenges they face in 
their communities, and we respond with a unique combination of 
training, technical assistance, and financial support.
    Two-thirds of our budget goes out to NeighborWorks 
organizations as direct grants, but we provide much more than 
just funding to these local community development 
organizations. Through our capacity-building services, we try 
to ensure that Federal funding is used responsibly. We provide 
technical assistance to respond to the intricate and timely 
organizational issues these organizations face. Our Risk 
Management Unit monitors the organizations and their financial 
health over time. And our Training Institutes provide training 
and education not only to local staff in the NeighborWorks 
network, but to the broader community development field. Last 
year, we trained more than 4200 people through the training 
institutes.
    The services we provide improve the local organizations, 
help mitigate long-term risk, and maximize the impact of the 
Federal resources we are provided with.

                    COMMUNITY DEVELOPMENT LABORATORY

    My second point is that Neighborhood Reinvestment 
continually looks toward the horizon, seeking new opportunities 
to address persistent challenges, really serving as a 
laboratory environment--the laboratory environment you intended 
us to create.
    Our Section 8 homeownership pilot is a particularly good 
example of this. We provide technical and grant support from 
Neighborhood Reinvestment to NeighborWorks organizations, which 
really helps us bridge the gap between private lenders and 
public housing authorities to make homeownership a reality for 
families.
    This subcommittee provided the resources that have created 
this laboratory and seeded this effort. Last year, we assisted 
21 NeighborWorks organizations, working with 26 public housing 
authorities to begin looking at this potential project, and we 
have trained over a thousand professionals on this option 
through our courses and other venues.
    A second area where we really have been using our 
laboratory environment is with multi-family housing. You 
provided us last year with $5 million, which was designated to 
explore ways to serve families with incomes below 30 percent of 
area median income in mixed rental income housing. This is an 
especially difficult task since folks who are earning 30 
percent or below of median income are often unable to cover the 
operating costs of the projects they live in with their 
incomes. We appreciate the opportunity to examine viable 
options in this important area and to report that back to you.
    The most visible laboratory effort to-date is our 
NeighborWorks Campaign for Homeownership. In Fiscal Year 1998, 
Congress seeded this homeownership effort with a $25 million 
set-aside. That funding has helped produce remarkable results. 
Ninety-five percent of the folks that we have helped are first-
time homebuyers; 52 percent are ethnic minorities; 42 percent 
are female-headed households; and the average income of these 
families is nearly half that of the national average of new 
homeowners, $29,300.
    We have produced a series of integrated strategies, 
including comprehensive homebuyer education, a financial 
literacy initiative, and NeighborWorks Homeownership Centers 
around the country, and we are on target to surpass our five-
year goal of creating 40,000 new homeowners.

                   SOLUTIONS TO A RANGE OF CHALLENGES

    Lastly, Neighborhood Reinvestment provides strategies for a 
range of housing and community development challenges. We have 
learned that a ``one-size-fits-all'' approach doesn't work. We 
are trying to address the needs of underserved communities and 
populations with a particular sensitivity to the needs of low-
income families, immigrants, the disabled, and the elderly.
    This work requires more than grants. It requires us to help 
develop strong organizations led by strong community leaders 
which results in greater civic engagement and helps to 
effectuate positive change.

                           CONTINUED SUPPORT

    Let me close by thanking Chairman Walsh, Ranking Member 
Mollohan, Congressman Fattah, and the Subcommittee for the 
wonderful opportunity you have given this organization to serve 
America's communities and by asking for your continued support. 
At the $105 million level, we will leverage $1.6 billion in 
direct total investment into distressed rural, suburban, and 
urban communities, assist more than 71,000 families obtain and 
maintain safe and affordable rental and homeownership housing, 
and provide pre- and post-purchase homeownership counseling and 
financial literacy to nearly 70,000 families.
    You have encouraged us to be flexible, creative, nimble, 
and responsive in designing and delivering our services and 
resources, and this flexibility and your demonstrated 
confidence in us has created remarkable results. We know that 
your investment in Neighborhood Reinvestment is an investment 
and an expression of confidence in America's communities, and 
all of us in America benefits when our communities are healthy, 
strong, and safe.
    Thank you for letting me talk with you this morning, and I 
would love to answer some questions.
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          Growth of Neighborhood Reinvestment and the Network

    Mr. Walsh. Thank you very much for your testimony. Your 
organization under your leadership has enjoyed broad support on 
the Hill, and I think most of us would agree that the Nation 
gets a great return on the dollar.
    Ms. Lazar. Thanks.
    Mr. Walsh. I personally have enjoyed a very strong 
relationship with the Ithaca Office of Neighborhood 
Reinvestment Corporation under Beth's leadership in 
NeighborWorks in the Syracuse area, and they have contributed 
mightily to what we are trying to do. So thank you for that.
    While you are riding the crest, I will give you an 
opportunity to comment. In the past, we have often increased 
the budget for the Corporation above the amount requested 
because we believe the work you do is worthwhile and we would 
like to see you do more of it. With this in mind, can you tell 
us at what level of funding you can optimize growth of your 
various organizations and yet avoid the dysfunction that so 
often comes by putting more money into an organization than the 
organization can responsibly spend?
    Ms. Lazar. That is an interesting question. When I was 
being interviewed for this position about 18 months ago, the 
Board asked me what we might be able to do with twice as much 
money. I pushed back and said I would really need to go through 
a strategic planning process to see where the real needs are 
and where we could really effectively move forward in a way 
that maximizes our potential.
    We are going through that strategic planning process now. 
We are at the tail end of it. We are doing some implementation 
work. We are looking at growth in a number of ways and 
impacting growth as one of the key goals that we hope to 
achieve realizing the plan. My sense of it is that we are doing 
very well with what we have and that we need to be careful not 
to grow too quickly, and to look at the organizations that we 
are serving now, making sure that they are working optimally.
    As we are developing a strategic plan, we have put a tag 
line on it that we want to create a network of excellence, and 
we want to make sure that the organizations are really strong, 
vibrant, vital organizations. To that end, we have not set a 
high goal of new organizations for ourselves, but really pace 
it at 10 or 12 new organizations a year. In some of the 
communities that we are working in, we need to see whether or 
not organizations need to merge to create more activity. We are 
finding there are relevant ways we could get one organization 
to do much more in a number of communities. We have done some 
geographic mergers over the past year or so that we really 
think will be fairly successful.
    And I would like to take the growth of Neighborhood 
Reinvestment incrementally. I don't think radical growth at 
this point would serve any of us well.
    Mr. Walsh. Thank you for that answer. By the way, I don't 
see Mrs. Meek here, but I think she would be delighted to see 
who is at the table today. She always asks the question of 
departments and agencies: where are your minorities; what are 
you doing to respond to that challenge; and three women and two 
African Americans here at the table is a pretty strong 
statement. We will pass that information on.
    Mr. Fattah. We will make sure we pass that along.

                        Section 8 Homeownership

    Mr. Walsh. On Section 8, can you explain to the 
subcommittee, how your Section 8 homeownership program works 
and how its operations relate to proposals in the HUD budget 
for using Section 8 funds for downpayment assistance?
    Ms. Lazar. I am happy to do that. For our Section 8 pilot, 
in Fiscal Year 2001, you provided us with $5 million. We used 
$4.25 million of that as grants to our local NeighborWorks 
organizations with more than two-thirds of that funding being 
used for capital that is going to fund local second mortgages. 
The remaining funds are being used for operating grants. These 
are really critical, these operating grants, since many very 
low-income welfare-dependent families have significant pre-
purchase counseling needs beyond those of the typical 
NeighborWorks client.
    While families who qualify for the voucher must be employed 
in order to take advantage of the homeownership option, many 
face real barriers, such a severe credit impairment, that can 
be addressed only through time intensive one-on-one counseling 
that can be provided with the enhanced operating funds. 
Approximately $750,000 of that first set-aside was used to 
provide technical assistance, training, peer-to-peer learning 
opportunities and research about the NeighborWorks 
organization's effort, utilizing the option.
    One of the key areas that we have been asked to pursue in 
doing this work has been to broker relationships with the PHAs 
and to help train, and educate the public housing authorities 
about this opportunity to really use their Section 8 vouchers 
to bring families into homeownership and ultimately get them 
off the Section 8 voucher. In some of the cases that we are 
working on, we are seeing where the Section 8 voucher can 
evaporate over seven or eight years or as many as 15 years, so 
that in the end, many of these families will have an 
opportunity to permanently go off the Section 8 as they grow 
equity and value in their homes.
    Mr. Walsh. What sort of practical problems are you 
experiencing with this program as it is just getting off the 
ground?
    Ms. Lazar. I am concerned with making sure that we are 
reaching as many PHAs as possible and helping them understand 
what the possibilities are for this. We are working with HUD 
some. We will maybe be doing a big television sequence with HUD 
this coming year to make sure that we reach a lot of PHAs. We 
are working with PHA trade associations.

                PHA RESPONSE TO SECTION 8 HOMEOWNERSHIP

    Mr. Walsh. With the PHAs that you have experience this with 
so far, what sort of response has there been on the part of the 
PHA, but also on the part of potential beneficiaries of this 
program?
    Mr. Lazar. Margo, do you want to answer that?
    Ms. Kelly. Well, it has, frankly, been mixed. We actually 
undertook a study to find out how many of the folks who are 
currently being served by PHAs were potential homebuyers. And 
what we learned is the average income is about $20,000.
    Mr. Walsh. PHA residents?
    Ms. Kelly. The folks who are moving into Section 8 
homeownership in our 21 sites.
    Mr. Walsh. All right.
    Ms. Kelly. We did the study to find out how many residents 
there are among the PHAs who are essentially at that benchmark, 
and the answer was there are about 78,000 folks and they are 
scattered among 256 of the PHAs across the country. So what we 
are to planning to do over the next year is to really zero in 
on those PHAs. We have been meeting with PHA trade 
associations. Some folks are just going to be in the vanguard 
and some folks are going to wait to see how it works for 
others.
    Mr. Walsh. Some markets, it would probably be easier to 
work for them.
    Ms. Kelly. Exactly.
    Ms. Lazar. And I have spoken to a number of PHA directors 
who pushed back and said we have very, very poor people in this 
community who will never really have the facility to be 
homeowners. We have got to respond to them as well.
    Ms. Kelly. You asked what the obstacles are, and I think 
the only real obstacle to date is that the counseling for the 
Section 8 voucher holder to the point that we believe that they 
can sustain homeownership takes at least three times as much 
time as for one of our typical homeownership customers. That is 
why we are giving our network organizations grants to assist 
them to hire the kind of loan counselors who can provide that 
kind of counseling.
    Mr. Walsh. Do you anticipate real growth in this program or 
just gradual increases in commitments of Section 8 vouchers to 
this program?
    Ms. Kelly. We now know at least what the universe is in 
terms of the 78,000 folks that fit the profile of potential 
buyers. We are going to work at it. It is never going to be a 
terribly high-volume program. I think we have to be cautious 
that we don't put people into homeownership until they are 
truly ready.
    Mr. Walsh. Right.
    Ms. Kelly. And can sustain it. We assume that it is going 
to be continually incremental. We are currently funding 21 
sites. I think we will qualify another 20 this year. I believe 
we have created a total of 250 homeowners this year. Another 
thousand are currently in the pipeline.
    We can see that there is incremental growth, but we are 
being cautious about how we grow it so that it is sound and 
sensible growth.
    Mr. Walsh. Is there any reticence on the part of PHAs that, 
they need these vouchers for what they do and they don't want 
to go into this program?
    Ms. Kelly. I think there is some of that, but I think they 
are waiting to see. And they are very correct in saying that 
there are some folks who are simply not ready for 
homeownership, and we need to be sensible about those as well.
    Mr. Walsh. Thank you.
    Ms. Lazar. We are finding good support, from the PHA trade 
associations to really look at this option.
    Ms. Kelly. We are increasingly being invited to speak to 
local PHAs. The volume of that obviously shows that the word is 
getting out that this is working, at least in some places, 
quite well.
    Mr. Walsh. Thank you.
    Mr. Mollohan.
    Mr. Mollohan. Thank you, Mr. Chairman. You have now been in 
this position for about year.
    Ms. Lazar. Yes.

                        SUCCESSES AND CHALLENGES

    Mr. Mollohan. I just would like for you to talk a little 
bit about your successes and what the challenges are, where 
your problems lie.
    Ms. Lazar. That is a good question. I have been very 
reflective of that myself lately. The Board asked me when I 
came in to do a strategic planning process. There hadn't been a 
history of broad strategic planning for the organization. It 
was a closely-held activity.
    What I was asked to do was to cast a very wide net to talk 
with a lot of our stakeholders and bring the staff in. This was 
the first change in leadership in the organization, in its 
history. My predecessor had been the executive director for ten 
years, but he had been with the organization for ten years 
before that. My coming in really was a change in leadership, 
and it was an opportunity for us to all take stock of what we 
had been doing and looking to see what was working and what 
wasn't working.
    I certainly had a set of experiences that were different, 
and I brought some preconceived notions, but I listened first. 
I really had a great time going around and listening and 
hearing about what Neighborhood Reinvestment does.
    We have created a strategic plan for ourselves that is in 
draft form, but it is going to be a blueprint for how we work 
over the next five years. It has been a great accomplishment. 
We have, the whole staff very engaged in designing the 
implementation, putting forth the work plans that will attach 
to this work, and that has been an achievement. We have been 
working with Mary Lee and Neighborhood Housing Services of 
America. We have just completed a program review together and 
we are looking at the NHSA business model and wanting to make 
sure that it is working effectively.
    We are in a time of great change in terms of the investor 
markets--those who are going to make the social investments 
that support the work that we are doing. We are really 
beginning a dialog and some strategic thinking about our basic 
business models.
    We also have been spending time looking at how we could 
better support our network--thinking about greater visibility 
for that network, how we can help grow resources for the 
network, and how we respond to a variety of needs. A big part 
of what we are going to be doing in the future is making sure 
that our service delivery to them is integrated and makes sense 
with where they want to head as a strong network. I think we 
will be able to further leverage our Federal dollars with 
private sector dollars and talk in a unified voice. That is 
where we are heading.
    Mr. Mollohan. Are there any major systemic changes in your 
model of operation that are in the offing, coming out of the 
strategic planning process, as a result of changes in needs or 
demographics?
    Ms. Lazar. That is a good question. We just finished a 
third-party survey with all of our stakeholders, including all 
the network organizations. We are going to be looking at how we 
deliver our services, including our grant funds and technical 
assistance. We want to make sure that we are set up properly 
and that we are maximizing our staff and the resources that we 
have to really meeting the network's needs and their goals in 
their communities.
    It is a challenging opportunity, but we have had great 
input from the Board in this. We have a new Board, and we have 
been in the process of orienting new Board members. It is a way 
of engaging them to help us think about our future.

                          CHANGING MARKETPLACE

    Mr. Mollohan. Is your marketplace changing in ways that 
prompt you to redirect your services or resources, or redefine 
them?
    Ms. Lazar. There is a lot of change, actually. The changes 
in the banking industry, the consolidation of the banking 
industry, has reduced the number of local partners our 
organizations have to participate with. We are trying to build 
relationships at the national level with national players to 
provide the network with resources and funding.
    I think we are seeing a greater emphasis on economic 
development and as part of a comprehensive neighborhood 
revitalization strategy. We are trying to figure out what our 
best niche would be for being involved in broader economic 
development activities.
    Ms. Kelly. In 1991, we had one organization in our network 
that identified itself as having a rural market, and today we 
have 59. We are looking at our marketplaces differently than we 
were. Our large organizations have become larger and more 
sophisticated. While we have always known that one size doesn't 
fit all, we are really looking over the next couple of years to 
even more strategically target the quality and the kind of 
technical assistance we are offering to differentiate the 
marketplaces that sometimes cross geographic boundaries.

               GRADUATION OF NEIGHBORWORKS ORGANIZATIONS

    Mr. Mollohan. Do your affiliates ever graduate or do they 
ever fail?
    Ms. Lazar. We have what we call the dead charter file.
    Ms. Kelly. Neighborhood Reinvestment has a mission to work 
in neighborhoods. We do it through a network of non-profit 
affiliates. There are times when the non-profit affiliates, for 
reasons that we can't help them to overcome, stop fulfilling 
their mission. In those instances, we work with them to the 
extent that we can. We try to help them address the problems 
that they have, but at some point, if we can't help them, we 
still have a mission in that community and we need to take our 
resources and place them elsewhere where they will be deployed 
effectively.
    Mr. Mollohan. What do you call that process?
    Ms. Kelly. We call it disaffiliation.
    Mr. Mollohan. What percentage of disaffiliation do you 
experience every year?
    Ms. Kelly. Probably three organizations. Prior to 
disaffiliation, we put the organization's charter in 
provisional status. That is a warning sign.
    Mr. Mollohan. Thank you. How many affiliates do you have?
    Ms. Kelly. We have approximately 225, and they range 
anywhere from three staff to over 200 staff.
    Mr. Mollohan. That is a negligible disaffiliation rate. Do 
you have such a thing as graduation, affiliates that become so 
sophisticated that they no longer need your support?
    Ms. Kelly. We have organizations that----
    Mr. Mollohan. Do you see your program as a lifetime 
commitment?
    Ms. Kelly. We don't see a commitment of a lifetime. They 
get more sophisticated and they become community institutions. 
They become able to adjust their resources and services to very 
changing marketplaces.

                          RESOURCE DEVELOPMENT

    Mr. Mollohan. Please talk about raising resources outside 
of your support.
    Ms. Kelly. We constitute approximate 12 to 15 percent on 
average of a network organization's budget.
    Mr. Mollohan. I don't think you quite answered my question. 
Is there such a thing as graduation where people disaffiliate 
or you reduce the contributions some because they are so robust 
in and of themselves?
    Ms. Kelly. We do do that, and we have had several 
organizations over my tenure here that have completed the job 
that they set out to do.
    Mr. Mollohan. That is not really a part of your model? It 
is the exception rather than the rule?
    Ms. Kelly. We are in so many very, very large cities. The 
places that are graduating have very often been smaller cities. 
South Portland, Maine comes to mind, and there have been 
several others where literally they did what they set out to 
do. They met their goals. The conventional market took over, 
and our resources were no longer helpful.

                           MEASURING SUCCESS

    Mr. Mollohan. How do you measure success?
    Ms. Lazar. We measure success in a variety of ways. We 
develop every year a series of output measures that are our 
goals for achieving during the course of the year.
    Mr. Mollohan. Number of homes?
    Ms. Lazar. Number of homes, counseling, the services we 
provide in the community.
    Mr. Mollohan. I guess the number homes is probably a bottom 
line.
    Ms. Lazar. The number of homes, the number of rental units 
that have been created, the number of people we counsel through 
our homeownership services are our key indicators. We are also 
working now with the Federal Reserve to develop a study. It is 
at a very nascent stage, but if we could get the data straight, 
we will be able to determine how a NeighborWorks organization 
has, in fact, affected and impacted its community.
    We have gotten some help from our Board Chair in helping to 
design this, and we are working very closely with a number of 
our affiliates on this study.
    We are also doing a study right now that was part of the 
$25 million set-aside in fiscal year 1998 to track some of the 
folks we have put in homeownership. It is a longitudinal study 
that we are doing with the University of North Carolina that 
will help inform us as to the success of these homeownership 
efforts over time.
    Mr. Walsh. If I could interrupt just a second.
    Mr. Mollohan. Please.
    Mr. Walsh. I have got to go down to the White House for a 
meeting on the New York City disaster relief at noon.
    Mr. Mollohan. That was my last question.
    Mr. Walsh. I just want to make sure that David had a chance 
to ask questions, and then I am going to have to adjourn the 
hearing.
    Mr. Mollohan. Okay. I just want to join the chairman in 
thanking you for your good work. It certainly has been of 
assistance in my state. I just ask that you share your 
strategic plan.
    Ms. Lazar. Yes. We are going to finish it up, and we will 
have it neatly packaged for you.
    Mr. Mollohan. Thank you, Mr. Chairman.
    Mr. Walsh. Thank you.
    David.
    Mr. Price. Thank you. Thank you, Mr. Chairman.
    Ms. Lazar, welcome back to you and your colleagues. We are 
glad to have you here.
    You won't be surprised, probably, that the first thing I 
want to ask you about is the Neighborhood Housing Services of 
America secondary market demonstration. I get updates from time 
to from Self-Help in Durham, which is NHSA's partner in this 
demonstration.
    Let me just ask you a few related questions about how that 
is going. This is a seven-year demonstration project. So we 
should be right around the halfway mark. First, can you briefly 
remind the committee about the origin and goals of the project 
and give us an update on its status?
    Secondly and in particular, can you comment on the 
performance of the loans purchased by NHSA to date? Has the 
weak economy affected the performance of those loans? And 
again, in terms of the impact of the weak economy, can you 
compare the performance of these loans to those in the 
conventional market?

                  DEMONSTRATION FOR LOW WEALTH BUYERS

    Ms. Lazar. Well, I am going to defer this question to Mary 
Lee Widener who is the president of Neighborhood Housing 
Services of America. She is fully prepared to answer that.
    Ms. Widener. I would be happy to answer it. First, we have 
taken very seriously the subcommittee's comments that the 
intention of the demonstration is to focus solely on strategies 
to expand the secondary market for affordable home mortgage 
credit from private lenders. We have expanded that in our 
understanding to mean investors. The GSEs, institutional 
investors, and private lender participation has been the focus 
of what we tried to expand.
    The status of the demonstration is that December 31, 2001, 
ended the first phase of the demonstration. The goals of that 
phase were to create the loan pools and to populate data fields 
from those pools in accordance with instructions from HUD. They 
started out with one set of data that expanded substantially. 
All of us had to go back and fill in that data. We had no 
problem doing that because we agreed that the expanded data 
fields would provide a far richer study for HUD.
    We are doing that. We completed all of the basic reporting. 
For the last two months, we have been providing additional 
information about the portfolio and the environments to help 
HUD create a close-out report for the first phase.
    The second phase will be to design a study that will start 
to correlate things like credit scores and loan criteria to 
performance. Because HUD required that loans that went into the 
portfolio be current, we don't have any performance problems at 
this point.

                          PERFORMANCE OF LOANS

    Mr. Price. You have performance data.
    Ms. Widener. Yes, we do, and they are all performing. We 
don't have any that are in the 90-day delinquent category. They 
are all behaving the way most of our loans behave, which is you 
have high delinquencies in the first 30 days. They tend to cure 
in the second 30 days, and then by the time they get to 90 
days, the overall number is not much higher than the 
conventional market.
    Mr. Price. Do you have that comparison available now?
    Ms. Widener. Yes, we do.
    Mr. Price. Good.
    Ms. Widener. We actually presented it to NHSA's trustees in 
January, and I would be more than happy to provide them to you. 
This is a specific comparison of all of the NeighborWorks 
loans, but the comparison that I gave to our trustees is NHSA's 
loan portfolio. So we have both, and they are not necessarily 
the same as all of the NeighborWorks loans.
    Mr. Price. We will place this data in the record. Would you 
like to give a quick oral characterization of your finding?
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    Ms. Widener. In general, our experience is that our 
delinquencies run lower than FHA or VA and slightly above 
conventional. When you add in FHA, VA, and conventional, our 
loans perform better than the average of the three.
    Mr. Price. Now, the program requires the grantees to 
provide information to HUD, of course, on the performance of 
the loans, and the idea is to demonstrate to the traditional 
secondary financial marketers, Freddie Mac and Fannie Mae, the 
financial soundness of making home loans to these families that 
might not otherwise qualify.
    You say you have been building up the data base, the 
computer system, the computer capacity to let you analyze this 
data and pass this information along. Is that what you are 
referring to when you talk about the end of the first phase? 
How far along are you with that?
    Ms. Widener. No. The end of the first phase has to do with 
creating the pool and gathering all of the data, which we had 
to go back out to the programs and to borrowers to populate all 
those fields. We don't know what HUD's requirements are going 
to be for the analytical phase of the program, and they don't 
consider that in the phases. HUD's first phase was to create 
the pools and provide the data, and then the second phase will 
involve analyzing the data in accordance with HUD's 
instructions and design, which we don't have.
    Mr. Price. But where are you with developing the computer 
capacity to perform these operations?
    Ms. Widener. We have developed the computer capacity to 
capture the data. We don't know what will be required of us for 
analysis.
    Mr. Price. But a major point of this is to demonstrate to 
Freddie Mac and Fannie Mae that this works and this can be 
done.
    Ms. Widener. We don't know how HUD wants to do that. We can 
tell you how we are trying to do that, because we do it all the 
time. One of the things we try very hard to do is demonstrate 
that normal requirements for excess reserves and excess pricing 
as a result of things like combined loan-to-values over a 
hundred percent, which gets very expensive, or very low credit 
scores don't necessary justify premium pricing.
    We try and do that by demonstrating delinquency performance 
and foreclosure performance, and our foreclosure performance is 
lower than conventional. We credit the Full Cycle Lending 
process of the NeighborWorks network to making our numbers 
different than they would be without the counseling and support 
systems available to our borrowers.
    I think we can make that case, and that is the case we are 
trying to make. I think HUD, however, has far broader 
objectives, and we don't know what they are yet. I don't want 
to be difficult, but I don't know what they are.
    Mr. Price. Since that is a critical objective of this 
project, I think we need some indication of how this is going 
to unfold, how this case is going to be made and how the data 
are going to be marshalled to analyze this situation.
    Can you add anything in the way of insight?
    Ms. Lazar. I don't know how much progress Self-Help has 
made in this. This isn't meant to be done together. I could 
certainly make some inquiries, and we can talk with Dr. 
Weicher, who is our board member, about trying to find out how 
far they are progressing and pushing them a little bit.
    Mr. Price. Why don't you give us some indication for the 
record and at the same time indicate where we need to turn to 
get a further status report.
    Ms. Lazar. To really make sure that this is working well 
and that we are making progress.
    Mr. Price. This is not just a freestanding project. This is 
designed to influence the kind of eligibility for the secondary 
market and on a much larger scale.
    Ms. Widener. I feel totally confident HUD will offer a 
design, but their schedule didn't call for that being provided 
to us during phase one, which just ended in December.
    Mr. Price. Well, if you could give us your best assessment 
of that, that would be helpful.
    Mr. Chairman, I know you are overdue. So let me ask for the 
record that----
    Ms. Lazar. We will take care of that.
    Mr. Price [continuing]. That I submit a couple of 
additional questions, again, kind of status questions on the 
financial literacy initiative and on your multi-family 
initiative that was part of the Fiscal 2002 bill.
    Ms. Lazar. Great.
    Mr. Price. We would appreciate being updated on this. Thank 
you very much.
    Ms. Lazar. Thank you.
    Mr. Walsh. Thank you very much for you testimony. There may 
be additional questions submitted for the record, and we would 
appreciate it if you would respond and get those back to us 
right away.
    Ms. Lazar. We will do it.
    Mr. Walsh. Thank you for your testimony and congratulations 
on how things are going.
    Ms. Lazar. Thank you. Thanks for all your help.
    Mr. Walsh. The meeting is adjourned.
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                                         Wednesday, March 13, 2002.

                OFFICE OF SCIENCE AND TECHNOLOGY POLICY

                                WITNESS

DR. JOHN H. MARBURGER, III, DIRECTOR
    Mr. Walsh. The subcommittee will come to order.
    Good morning. This morning we will hear testimony from the 
Office of Science and Technology Policy and Department of 
Defense Civil and Cemeterial Expenses, not all at once.
    First will be Office of Science and Technology Policy. This 
year the Administration has submitted a plan to consolidate the 
Executive Office of the President into a single appropriation. 
This plan directly impacts upon the Office of Science and 
Technology Policy as well as the Council on Environment 
Quality, both under this subcommittee's jurisdiction.
    Within this proposal, the budget estimated for OSTP is 
$5,368,000, a 1.9 percent increase over Fiscal Year 2002.
    I would like to welcome Dr. John Marburger, Director of the 
Office of Science and Technology Policy in his first appearance 
before the subcommittee. Dr. Marburger had been the Director of 
U.S. Department of Energy's Brookhaven National Laboratory 
since 1998. Prior to his tenure at Brookhaven, Dr. Marburger 
served as a professor of physics and electrical engineering and 
as dean as president of Stoneybrook University.
    At Stoneybrook, Dr. Marburger led the university to a 
number of accomplishments, but I note several that appear very 
relevant to our bill: Federally-sponsored scientific research 
at Stoneybrook grew to exceed that of any other public 
university in the northeast (that would encompass the National 
Science Foundation); the creation of the on-campus Long Island 
State Veterans Nursing Home, (Veterans Affairs); construction 
of a campus sewage plant and co-generation complex, (EPA); and 
revitalization of the campus center and establishment of the 
Long Island Technology Incubator, which I visited a couple 
years ago, which closely resembles our economic development 
initiatives.
    So we look forward to working with you, sir.
    As you know, this subcommittee has a strong interest 
science and technology policy. We also have jurisdiction over 
NSF, NASA, EPA, and a number of other agencies whose success is 
heavily dependent on emerging technologies and research. We are 
interested in hearing some of ideas that you bring to your 
position and where you would like to see perhaps more Federal 
investment in science or technology, or where, perhaps, we 
should prioritize funding.
    Normally at this time I would call upon my colleague Alan 
Mollohan, who will be a little bit delayed this morning. I will 
give Mr. Frelinghuysen the opportunity, if he would like, to 
make an opening comment.
    Mr. Frelinghuysen. I will reserve my comments for my 
questions, Mr. Chairman.
    Mr. Walsh. All right. In that case, then, if you would like 
to highlight your remarks, we will include your entire 
statement with the record.
    Dr. Marburger. Good. Thank you very much, Mr. Chairman. I 
am very happy to appear before you today. There is a written 
statement for the record, and I would be glad to answer 
questions in writing and, of course, orally today.
    As you well know, the terrorist attacks on September 11th 
dramatically changed the context of this budget. They laid bear 
vulnerabilities in our physical security and exacerbated 
weaknesses in our economy. The priorities of the Nation today 
drastically changed in the matter of a few hours.
    The fiscal year 2003 budget proposal reflects these changes 
in priorities, and it has three primary goals: winning the war 
on terrorism, protecting the homeland, and reviving our 
economy. Recognizing that science must play a role in these 
priorities, the President provides for an unprecedented level 
of investment in Federal R&D, marking the first time in history 
that a president has requested an R&D budget greater than $100 
billion. Precisely, the figure is $111.8 billion, up eight 
percent overall from FY 2002, which is the largest requested 
increase for R&D in over a decade.
    The Administration is committed to working with this 
committee, with you, to see this budget enacted.
    Mr. Chairman, I know that all of us want to maintain 
America's world leadership in science and technology. Over the 
years, OSTP had played an important role in leveraging the 
Government's science and technology investments for broad 
national goals. Our small staff advises the President and other 
White House staff on fast-breaking science and technology 
developments. It coordinates the work of the R&D agencies to 
optimize our expenditures in this area, and it promotes 
strategic partnerships among the entire spectrum of science and 
technology stakeholders: state and local governments, industry, 
academia, and various international players as well. These 
functions are all embedded in the 1976 legislation that created 
OSTP.
    In my oral testimony, I would like to describe two examples 
that give a sense of how OSTP is operating today. First, I 
would like to talk about the Administration's initiative on 
nanotechnology. Then, I would like to talk just briefly about 
our response to Homeland Security's request for technical 
assistance on mail security following the anthrax contamination 
incidents last fall.
    As you well know, Mr. Chairman, OSTP was critical to the 
formation of the multi-agency national nanotechnology 
initiative, and your help was essential to its implementation. 
I am quite aware of the history of that.
    OSTP convened an interagency working group under the 
National Science and Technology Council to look into the 
feasibility of nanotechnology initiatives in FY 2001. This 
subcommittee continues to provide the important interagency 
coordination and long-range planning for Federal research in 
nanoscale science, engineering, and technology. The President 
continues to support this important research and has provided 
the initiative with a 17 percent increase in funding this year, 
bringing the total effort to $679 million distributed among 
nine Federal agencies.
    This $100 million increase over last year's budget will 
accelerate long-term research in the manipulation of matter at 
the atomic and molecular levels, increasing our ability to 
create new functional materials and devices atom by atom, 
something that excites me personally. Research at the nanoscale 
promises revolutionary advances in pharmaceuticals, more 
efficient manufacturing, higher performance materials, faster 
computers and networks, and a cleaner environment.
    Priority research areas for this year will range from 
research to enable efficient nanoscale manufacturing to 
innovative nanotechnology solutions for detection and 
prevention from biochemical and radiological explosion agents. 
About 70 percent of the funding proposed under this initiative 
continues to go to university-based research. It is an 
important aspect of this field. These investment will help 
provide the education and training of a new generation of 
workers for future industries and partnerships to enhance 
industrial participation in the nanotechnology revolution.
    I could talk for a day about nanotechology.
    Mr. Walsh. We will give you an opportunity later.
    Dr. Marburger. The other example that illustrates OSTP's 
work in support of homeland security is our response to the 
bioterrorist exploitation of the mail system. At the request of 
the Office of Homeland Security late last fall, OSTP assembled 
an irradiation technical team with experts from the Armed 
Forces Radiobiology Research Institute, otherwise known as 
AFRRI, the National Institute of Standards in Technology, the 
Food and Drug Administration, Department of Agriculture, 
National Labs, and the U.S. Postal Service.
    Within days of the call from Homeland Security, this team 
created and performed experiments at the Lima, Ohio and 
Bridgeport, New Jersey electron accelerator facilities to 
optimize the proper configuration of mail and to ensure the 
proper dosage of sterilizing radiation, basically verifying the 
technology and providing critical technical support and advice 
to the U.S. Postal Service. This team still updates us 
bimonthly and advises the Postal Service on refinement of the 
irradiation process.
    With the addition of experts from the Centers for Disease 
Control and Prevention, ongoing experiments have helped to 
eliminate some of the negative side effects of irradiation. It 
includes out-gassing of compounds that were created during the 
irradiation process and the browning of the paper, of the 
letters.
    The ability of OSTP to coordinate rapidly the many Federal 
agencies involved in this issue allowed the generation of 
scientific data for which recommendations were made to the 
Postal Service within about 30 days from the original 
contamination incidents, a very rapid response.
    While irradiation of letters and the flat mail solves one 
set of problems, irradiation may not be the answer for parcels 
and packages due to irregularities in thickness and density. 
So, OSTP has formed an ethylene oxide technical team with 
support from the Department of Justice. Experts from FDA, EPA, 
AFRRI, CIA, OSHA, and the U.S. Postal Service have designed and 
are conducting experiments to test the ability of ethylene 
oxide gas to sterilize packages. Recommendations from this 
technical team will be presented to the Postal Service and will 
include guidelines and parameters by which to document the 
sterility of the packages and protect critical contents from 
harm.
    These are just two examples. Nanotechnology, a big national 
program with interagency coordination and mail irradiation, a 
small-focused rapid response program of responding to a 
national need, are just two examples of the outstanding work 
that OSTP performs for the Nation. Over the past year, OSTP has 
also played a critical role in developing coordinated 
interagency budgets and policies in homeland security, plant 
genome, food safety, networking and information technology, 
education and research, and many other areas.
    So, today I asked for your continued support of OSTP's role 
in coordinating science and technology policy for the Executive 
Branch and for our nation at large. OSTP's budget request of 
$5.37 million and 40 FTEs for Fiscal Year 2003 represents no 
increase in the FTE level, but an increase in the budget 
authority of 1.9 percent, as you referenced in your opening 
remarks.
    These additional resources are essential for us to continue 
to provide the highest quality of work across our broad 
spectrum of responsibilities. While I hope, Mr. Chairman, that 
this brief overview combined with my written statement convey 
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, I ask not only 
for your support for this Fiscal Year 2003 budget, but I would 
also like to express my appreciation on behalf of the office 
and the Administration to this committee for OSTP and the 
science and technology research enterprise. I really am very 
optimistic that this successful partnership will continue in 
the future.
    So, I would be pleased to respond to specific questions.
    [The information follows:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    Mr. Walsh. Thank you very much for your testimony, and I am 
sure we will have lots of good questions, and I am looking 
forward to the answers.
    I would like to call upon Mr. Mollohan, the ranking member 
of the subcommittee for an opportunity to make an opening 
statement.
    Mr. Mollohan. Thank you, Mr. Chairman. I just welcome the 
witness to the hearing today and look forward to the testimony.
    Thank you.
    Dr. Marburger. Thank you.
    Mr. Walsh. All right. I expect other members will join us.

                            COUNTERTERRORISM

    Let me begin with counterterrorism. Your statement 
identifies a number of ways OSTP is involved in the war on 
terrorism and homeland security. My friend and counterpart, 
Senate Appropriations Subcommittee Chair, Senator Mikulski, 
invited you to testify on mail security in November. The House 
Science Committee also held a hearing on bioterrorism at which 
you testified. You have had a number of opportunities to talk 
on this issue, but I wonder if you could share with the 
subcommittee how you are going about composing an interagency 
plan for developing and refining research and technologies for 
battling this war on terrorism.
    In the budget transmitted to the Congress, I note that 
research and development funding for homeland security and 
combatting terrorism will rise from nearly $1 billion in 2002 
to $3 billion in 2003. The bulk of this funding is geared 
towards HHS and DOD, $2.4 billion for confronting weapons of 
mass destruction. Certainly no one would diminish the 
importance of this area of research. I will note, however, that 
basic research accounts for only $27 million of the R&D Federal 
investment.
    Do you believe that there is more we should be doing in the 
area of basic research that would support the efforts of HHS 
and DOD?
    Dr. Marburger. Mr. Chairman, I believe that the budget 
proposal provides for the immediate needs of the Office of 
Homeland Security and their recommendations for response to the 
terrorist incidents at this time. No one doubts that basic 
research will be a necessary component for an adequate response 
in the long term, but much of the technology and a good deal of 
the basic research also that is required for an appropriate 
response has been done as a result of the substantial 
investments that have been made in the past. We are in an 
enviable position, having a technology infrastructure that 
enables rapid responses, even within existing programs, to some 
of the most challenging aspects of the war against terrorism.
    So, for example, within the Department of Defense, a 
procurement has already been constructed last fall within about 
a month of the terrorist attacks on 9-11 in which short, 
intermediate, and long-term priorities for DOD were identified, 
required for the response to terrorism, and a list of critical 
technologies was published and an interagency group, the 
Technical Support Working Group, TSWG--I am not sure of the 
exact words that that acronym stands for, but it has been very 
effective in identifying and funding short-term projects.
    Much of the basic research that I believe will be necessary 
for response to these issues will be in the bio area, and the 
substantial increases the President has recommended for that 
area do suffice, in my opinion, to get started in a very 
substantial way in the research, which includes understanding 
the mechanisms of these terrorist pathogens and trying to 
provide some new vaccines for them.
    So, I do believe that the budget addresses the right 
priorities for the immediate response, and we can look forward 
to continuing requests in subsequent years that emphasize 
longer-term issues that may be required.

                         BASIC RESEARCH FUNDING

    Mr. Walsh. Let me ask you this: Congress and the President 
committed to doubling the size of the budget of NIH, and we are 
well on our way to doing that. But I think most would agree 
that by doing that without funding basic research through the 
National Science Foundation, you do not gain all the ground 
that you could gain. You have to do the basic math and physics. 
I suspect that you would agree with that.
    Last year OMB sent a request for a one percent increase for 
NSF. We went, I believe, to about an eight percent increase. 
This year, the request is for about a five percent increase, 
and Director Daniels said that they would do better this year. 
The problem with the five percent increase is about half of 
that, as I understand it, is made up of programs that have been 
shifted over to NSF. So it is not really new money. So we are 
talking again about a two and a half percent increase.
    I would like to hear your thoughts on the commitment of the 
Administration to basic science.
    Dr. Marburger. We can straighten out the numbers on the 
record, but the way I count it, it is about a 3.4 percent 
increase if you take away those transfers for NSF, and given 
the very large increase in NIH, the fact that we have a war 
against terrorism going on and a softness that it looks like we 
are coming out of in the economy, apart from the expenditures 
for NIH and DOD in this area, the average for all the rest of 
the expenditures is about two percent.
    So, I measure the priority that the President sets for 
science against the two percent funding level. 3.4 percent is 
definitely over that. So it is a signal.
    I do believe that we have to establish priorities, and 
within the NSF recommended increase there are some notable 
priorities, and there are programs that are getting 
substantially more than the 3.4 percent on the average, such as 
the nanotechnology initiative. There is an interagency 
information technology initiative that is receiving additional 
funding. The funding for the mathematics program in NSF has 
doubled, and there are other important areas that have received 
some emphasis.
    So, I believe that as time goes on and the economy improves 
and the ability to establish priorities and good management 
practice in the agencies continues to improve, that we will see 
strong and appropriate increases for those areas that deserve 
them.
    Mr. Walsh. We had this discussion last year. We had eminent 
professors and Nobel laureates in the basic sciences, math, 
physics, and others, and they made it very clear that the gains 
that we made in biotechnology could not have been made without 
the basic underlying knowledge of math and physics, and I do 
not think we are putting the cart before the horse, but I think 
that the 17 percent increase proposed in the National 
Institutes of Health and 3.4 percent increase in National 
Science Foundation, things seem to be out of whack a little 
bit.
    I think most members of the subcommittee feel that way, and 
we hope that in your position of leadership at the White House 
that you could help them set those priorities and balance that 
a little bit.

                             Nanotechnology

    I would like to give you a chance to discuss 
nanotechnology, because obviously it is an interest of yours. 
Somebody told me a long time ago that a definition of genius 
was a person with the ability to distill very complex things 
and explain them to people who did not have that knowledge. 
Maybe you could do that for us today.
    Dr. Marburger. If I were a genius, maybe I could do it.
    Mr. Walsh. If you can give us an idea of how nanotechnology 
will start to affect our lives, I guess is the best way to ask 
that.
    Dr. Marburger. What is happening is very exciting, and you 
know because I have read the testimony that Neal Lane presented 
last time on the President's budget for--I think it might have 
been 2001, that the increases, the improvements in technology 
and in powerful computing have made it possible for us to 
visualize and manipulate matter at the atomic level atom by 
atom. Up until just literally a few years ago, the concept that 
everything was made of atoms was nice, but it did not do us lot 
of good because we could not build things atom by atom. But we 
know nature does, and particularly in biological substances, we 
are gaining an understanding of how nature puts together the 
substances that make up our bodies and provide for the process 
of life.
    But the same thing is possible now on the inorganic as well 
as the organic side. We can take advantage of the mechanisms 
that nature uses to make microstructures. We call it 
microbiology or structural biology. But now with new tools, we 
have the ability to build new kinds of inorganic materials atom 
by atom, just the way nature does in our bodies.
    By these new methods with microscopy, synchrotron light 
sources, nuclear magnetic resonance, and powerful computing, it 
is possible to make materials that have properties that nature 
does not provide for us, for example, lasers that would operate 
at new wave lengths and not just being at the mercy of whatever 
crystal nature happens to be able to make. We can now make 
structures within solid materials that resonate at different 
frequencies that nature does not automatically provide, and we 
can understand the properties of catalysts, for example, that 
are very important for the chemical industry, exactly what goes 
on atom by atom on those surfaces. We can create things at the 
molecular scale that have properties that address the needs of 
society, rather than being at the mercy of nature, as it were, 
having to sift through using the kind of alchemy that we have 
today.
    Mr. Walsh. Use a couple of applications of this.
    Dr. Marburger. Ultimately, the applications of 
nanotechnology range across the entire spectrum of technology. 
For example, strength of materials can be dramatically improved 
by just affecting the molecular layers at the surface of the 
material, so that you can make materials that do not corrode, 
that do not develop cracks and fatigue as easily as the ones 
that we have had in the past. That is one example.
    Another, as I mentioned, is in optical properties. We have 
the possibility of making--for example, nature does not provide 
us with a substance that provides laser light at a frequency 
that would penetrate water easily, moisture in the air. So the 
idea of linking homes to internet with lasers, let's say we put 
a little semiconductor laser on the side of your house and have 
another laser on the telephone pole somewhere, it would be nice 
to send light in between them so you did not have to string 
wire or bury cable.
    Nature does not provide us with a laser that operates at 
the frequency that would do that in the rain or the fog or a 
mist, but there is a frequency that would work, and there is a 
potential of making a laser using nanotechnology techniques 
that would do that. So there is a potential example of great 
importance to our technology, but there are many others.
    I mentioned catalysis, the possibility of improving the 
efficiency of chemical reactions in commercial scale, chemical 
reactions reducing the number of waste products, for example, 
or skipping steps in the chemical synthesis process that might 
lead to side effects, toxic materials, or that might endanger 
factory employees or the environment.
    So it is really quite remarkable how many things could be 
affected by this. Many people, when they think about 
nanotechnology, think of small machines, sort of the 
counterparts of the machines in ourselves that make proteins, 
and we could, indeed, make small machines that could be used in 
prosthetic devices, for example, and this is a potential 
application; but it is important to understand that 
nanotechnology is not just about making these tiny machines. It 
is about affecting all of the materials that show up in 
everything that we do, all our physical environment.
    I like to think of nanotechology as the inorganic 
counterpart of biotechnology. So if you do not know what 
nanotechnology is, think of it as inorganic biotechnology; or 
if you do not know what biotechnology is, think of it as 
organic nanotechnology. They are both two sides of the same 
coin.
    So that is sort of a high-level discussion of 
nanotechnology. There is much more in the literature.
    Mr. Walsh. All right. Mr. Mollohan.

               Science advisor role in budget formulation

    Mr. Mollohan. Thank you, Mr. Chairman. Doctor, you were 
confirmed last October and probably did not have a lot of input 
into the 2003 budget, I would imagine, since you were at the 
tail end of that curve.
    In the 2004 budget, do you anticipate playing any 
significant role in developing the science and technology 
budget?
    Dr. Marburger. Yes. Let me tell you what my role was in the 
2003 budget, and then I can add to that for 2004. Although I 
had just arrived in Washington, the budget director, Mitch 
Daniels did invite me to all of the meetings that he had with 
his staff where the details of the science budgets were 
reviewed. He invited me to sit at the table and comment and ask 
questions. I was just learning at that time, but I did have 
that opportunity as the process went on, and subsequently, I 
continued to meet with his staff to get briefings, and whenever 
my office has briefings now, we make it a practice to invite 
the OMB examiners so that they can hear the same things we 
hear, hear how we discuss issues. And we have continued to work 
together since then to try to educate each other about our 
mutual issues looking forward to FY 2004.
    Last year, unfortunately there was no guidance letter to 
agencies on expectations on the science budget proposals. In 
the past, the OSTP director and the budget director have co-
signed a letter of guidance to science agencies, setting forth 
their expectations. That did not happen. It will happen this 
year, and I expect that some of the work that we have done 
together on addressing the science community on issues of 
management and performance evaluation and that sort of thing, 
consistent with the President's management agenda, will show up 
in the proposals that we get from the agencies, and I think 
that will help the process along.
    So we have been asked for input at the stages of budget 
preparation for 2003, and we certainly expect to have 
substantial input to the FY 2004 budget.

              PERFORMANCE MATRIX FOR R&D FUNDING DECISIONS

    Mr. Mollohan. The Administration used a performance matrix 
on a limited basis, I understand, in 2003 in deciding funding 
levels for certain science programs, and according to the 
budget, you plan to use them more extensively in the 2004 
process. The budget described the pilot project for applied 
research programs in the Department of Energy that was used as 
a model for a performance matrix.
    Would you tell us a little bit about that pilot project?
    Dr. Marburger. The idea of the pilot project is to use the 
applied programs at the Department of Energy to develop a 
methodology for performance evaluation, and of course the 
principle is that in an applied program, you have more well-
defined milestones; you have an objective for the research that 
you expect to achieve in a certain time frame, or understand 
why you do not achieve it, unlike basic research where there is 
a discovery process that is very difficult to predict.
    So it should be easier to assess performance in the pilot 
program. Of course, the idea in all these things is that you 
set some expectations through planning, you execute the 
experiments, you see if you get what you thought you would and 
then you change to try to improve your performance the next 
time around. And these planning and assessment parts of this 
cycle need to be strengthened in many programs according to the 
analyses by the Office of Management and Budget. We hope that 
that cycle can be identified in the applied programs and used 
to evaluate the progress that is being made.
    I believe that a similar process is appropriate for basic 
programs, and both the Budget Director and myself have been 
talking with the science community, higher education community, 
through the National Academies of Sciences who have convened 
groups to study how we might do this better, and I think that 
many agencies already have methods for assessing the quality 
and effectiveness of the work that they do; the peer review 
process itself that NSF uses extensively is an example of a 
component of that assessment process.
    So, I think that it should be possible for us to do a 
better job of explaining to the taxpayer exactly how to 
determine whether the money is being used effectively.
    Mr. Mollohan. Yes, that is what we spend a lot of time 
doing through this process. We appreciate your good help.
    Was this pilot program conducted in the Department of 
Energy already?
    Dr. Marburger. Yes. There have certainly been exercises of 
the pilot program. I have not seen a report on the program. I 
am aware that the Department of Energy is attempting to 
implement it.
    Mr. Mollohan. Was that last year or are they in the process 
of beginning the implementation now?
    Dr. Marburger. The Department of Energy has actually had 
evaluation processes for its programs for some time.
    Mr. Mollohan. I know. I am talking about this pilot 
project.
    Dr. Marburger. That particular one, I do not know the 
details of that, how extensively it was implemented in 2002, 
but I do know that the department had plans to do that. They 
were aware of the requirement in 2002.
    Mr. Mollohan. Do you plan on examining that?
    Dr. Marburger. I certainly will, yes.
    Mr. Mollohan. No, I am not asking you to, I was asking if 
you were planning on it.
    Dr. Marburger. Yes. Yes. Absolutely. I am actually very 
interested in this process, and I am watching it very closely.
    Mr. Mollohan. I can tell. Does it have applicability to 
basic research?
    Dr. Marburger. In some respects, yes. The choices that are 
made in basic research are also informed by expert panels, peer 
review panels, but nearly all agencies and research operations 
have some way of assessing the quality of the work that is 
being done. It is not always made explicit, and the results are 
not always recorded in a way that is open to public views.
    Mr. Mollohan. Would you anticipate an effort to do a pilot 
project attempting to develop some matrix evaluation in basic 
research, as this evidently was an effort to look at with 
regard to applied?
    Dr. Marburger. Yes. It is too soon to tell exactly what 
form the application to the basic research will take, but I am 
sure--I expect there to be language in the 2004 budget that 
will lay out some principles for this. There is language the 
2003 budget already in the narrative that gives some indication 
of the areas that might be looked at, but this is subject to an 
ongoing interaction with the science community and with the 
agencies.
    Mr. Mollohan. Well, there is language in the 2003 budget 
which indicate, that the Administration plans to use this 
process matrix in the 2004 budget cycle. It would be 
interesting to have that expounded upon for the record if you 
would do that.
    Dr. Marburger. Well, I feel that the details are still so 
much in process that I am reluctant to say too much about it 
for the record without having OMB here to help explain it, 
because it is their responsibility to implement it. But I do 
believe that a systematic approach to evaluation of basic 
science programs is an important component of managing those 
programs effectively.
    Mr. Mollohan. Let me ask you, then, would you for the 
record provide a more detailed explanation from your 
perspective--not OMB's perspective. We can ask OMB for that--
but just as you look at it and evaluate it and how it is 
applicable to applied as well as basic research also, to what 
extent you would anticipate it being used to develop the 
science accounts in 2004 for the record.
    Dr. Marburger. Yes. I would be glad to provide that.
    Mr. Mollohan. From your perspective.
    Dr. Marburger. From our perspective, yes, and it would be 
in a form that is appropriate for this stage of this 
development.
    [The information follows:]

             Performance Criteria for Research Investments

    I do believe that criteria can and should be established to 
evaluate and prioritize research investments. Scientists make 
judgements all the time about promising lines of research. It makes 
sense for the world's largest sponsor of research, the U.S. Government, 
to want to make such choices as wisely as the most productive 
scientists do. By making explicit the valid processes and criteria by 
which program managers currently evaluate science, I think the entire 
process becomes more credible.
    Directly to your question, OSTP has actively engaged with OMB to 
develop and implement investment criteria to ensure the best 
information is made available to maximize research and development 
opportunities. To this end, OMB and OSTP will shortly issue joint 
guidance to agencies which officially kicks off the process of 
establishing research criteria for the Fiscal year 2004 budget process. 
In short, we will be asking agencies to evaluate their R&D programs 
using the criteria of: Quality, Relevance, and Performance. Agencies 
will be asked to: (1) identify their priorities and opportunities and 
describe how they arrived at them, (2) describe how they will award 
funds and conduct research, (3) self-identify and report progress on 
the milestones that are most critical for making progress, and (4) 
perform retrospective reviews to evaluate whether past opportunities--
both those planned for and those arising unexpectedly--were seized and 
impacts realized. Led by an OSTP-chaired working group, the agencies 
are currently undertaking-exercises to test these criteria and develop 
more detailed implementation strategy as the budget process moves 
forward.
    Although they have been treated separately in the past, there is no 
need to arbitrarily separate basic and applied programs when it comes 
to requiring good management and good decision-making. The investment 
criteria OMB and OSTP are developing recognize that although the goals 
of these types of programs may differ, the information we would want to 
know about agencies' priorities, their performance, and the impacts of 
their programs is largely the same.

       BALANCE OF OVERALL FEDERAL SCIENCE AND TECHNOLOGY FUNDING

    Mr. Mollohan. All right. A lot of people seem to be quite 
concerned about the imbalance of funding for science in the 
2003 budget. I think the chairman certainly expressed some of 
that.
    Budget levels for NIH continue to grow while other non-
defense science programs are flat. Many people have expressed 
concern about that, yet you have stated that you believe the 
opposite. I will give you a chance to expound on that; but, 
quote: That given the new atomic level capabilities, the life 
sciences may still be underfunded relative to the physical 
sciences.
    Dr. Marburger. Yes. That is possible.
    Mr. Mollohan. What is possible?
    Dr. Marburger. Well, first let me say----
    Mr. Mollohan. It is possible that you said it or it is 
possible that it----
    Dr. Marburger. No. I definitely said it, and let me 
explain.
    Mr. Mollohan. Okay.
    Dr. Marburger. First of all, there are two more sentences 
in the paragraph.
    Mr. Mollohan. I bet there were.
    Dr. Marburger. In the paragraph from which that was 
extracted, the remaining two sentences refer to the need to add 
money for the physical sciences because there are also 
opportunities in the inorganic side of this as well.
    But I was trying to make a point there, and the point I was 
trying to make is that the consequences and the implications 
for public policy and quality of life of medical research based 
on new molecular level knowledge could be immensely greater 
than the advantages that would come from a similar application 
of the knowledge on the inorganic side. And the reason for that 
is, first of all, quality of life includes the word ``life'', 
and life is an extremely complicated phenomenon, worthy of 
great respect, and the complexity of the life phenomenon in all 
its mystery and glory is something that may well require much 
greater investments in order to make substantial improvements 
than the corresponding investments in the inorganic side of our 
physical environment.
    So we have a biological environment that is hugely complex, 
then the physical environment that is also complex, but it does 
not reveal the same degree of complexity as life does, which is 
the most complex phenomenon.
    My view of how to fund science is that you should look at 
science and ask what science itself tells you about what the 
priorities are, and so a big complicated phenomenon is 
obviously going to require more study than a simple phenomenon, 
and the imbalances that people perceive should not be based on 
some historical accidents of funding. They should be based on 
the actual opportunities that exist and the costs that are 
necessary.
    So, I am rather suspicious of arbitrary funding, double 
this and triple that. We really should be asking science and 
the science community to tell us how much they need. I am not 
saying that the balance is right at this point. I am not saying 
that the investments that we make in different areas are right 
at this point, but I am saying that we should look to science 
itself and the science community to ask how to make these 
decisions.
    Mr. Mollohan. Thank you, Mr. Chairman.
    Mr. Frelinghuysen. Thank you, Mr. Chairman.
    Welcome, Dr. Marburger. My belated congratulations on your 
appointment. I had the opportunity to visit the Brookhaven lab 
when you were still there. That was an interesting opportunity.
    And I think it has been quite a hiatus between your 
appearance here and when Dr. Lane was here, and there has been, 
I think, quite appropriate hand-wringing and anxiety that 
perhaps there would not be anybody filling your position. We 
are glad you are where you are. You have a good reputation. I 
had breakfast with the new president of Princeton today and one 
of your DOE lab colleagues, Rob Goldston. They both said to 
give you their very best.

                             R&D PRIORITIES

    As a nation at war, and even if we were not at war, we are 
counting on you to be a true advocate for science and 
technology. We understand that your first loyalty is to the 
President and the Administration, but what we are about here to 
my mind, and maybe this is not a politically correct way of 
seeing it, this is a $100 billion enterprise with a lot of 
leaders that are bright and quick, doing the Nation's work. And 
there has been, I think, a considerable vacuum here, and a lot 
of members of Congress, members of this committee have been 
concerned that there has not been somebody out there basically 
countervailing for us to what both the ranking member and the 
chairman have talked about, which is sort of the growth and 
favored status of the National Institutes of Health, and nobody 
here is desirous of setting up competition, but we are glad you 
are where you are.
    And we understand that the National Institutes of Health 
have their advocacy groups, many of whom are our constituents. 
There are not a lot of our constituents who are working to 
support the work of science and technology other than maybe the 
scientific community.
    Having said all that, I want to refocus and re-ask what 
both the chairman and the ranking member have commented on, and 
that is that portion of your budget, and I quote: ``The 
President's Fiscal Year 2003 budget includes principles 
intended to improve the management of the Nation's science and 
technology enterprise, taking advantage of best practices and 
emphasizing the importance of good planning, execution, 
reinforcement of good performance, and changing poor 
performance.''
    Now, I do not think I took that out of context, but to a 
layperson, it sort of makes you wonder whether, in fact, 
everybody is living up to their expectations. I know the nature 
of the beast is that you have to tread carefully because 
everybody has their own turf and responsibilities and their own 
mission. But if we are a nation at war, I would assume we would 
have to the expedite the process and go more full throttle.
    The ranking member mentioned the pilot project, but I 
assume that you and OMB are seized with the notion that we can 
do a better job. I just wonder whether you are committed and 
involved in expediting what some of us would say is the 
necessary focus. A lot of things are happening simultaneously, 
but in reality, if we have the three basic missions, fighting 
the war on terrorism, homeland defense, and economic security, 
somebody needs to be stepping up to the plate and pulling these 
parties together.
    Dr. Marburger. First, the President does not want to go 
backwards in science. While we are fighting the war on 
terrorism, we want to maintain our scientific and technology 
leadership in the world. On the other hand, we cannot do 
everything at once, and there have to be priorities. So 
programs that seem to be most productive and hold the most 
promise should funded more favorably, and we have to have ways 
of finding that out. So, I am committed to the notion of 
improving the quality of management.
    To be concrete about this, one of the practices that OMB 
likes is peer-reviewed, open competition for funding, and one 
of the reasons that OMB likes NSF as an agency and gave it 
pretty good marks is that nearly all of NSF's resources 
available for science funding is awarded through a competitive 
grant process, peer-reviewed competitive grant process, which 
creates in a way a market approach to validating the quality of 
the work that is being performed.
    And all those grants are given with finite lifetimes. So 
there is no permanent entitlement commitment. They are all 
reviewed after a period of time. They all have objectives, and 
so I am sure that that aspect of the NSF operation is one that 
OMB would like to see implemented throughout the spectrum of 
science funding.
    That particular approach that NSF uses for its extramural 
grant program does not apply automatically to all the science 
that the Federal Government supports. There are national 
laboratories and there are other special kinds of programs that 
may require something other than a market mechanism to justify 
their support, and I believe that that is one of the reasons 
why the Department of Energy was chosen for a pilot project, 
because it has in-house work and has an extramural program as 
well. And perhaps the complexity of the way science is done in 
our nation can be explored through this pilot program at the 
Department of Energy.
    So those are some comments that I hope are responsive to 
your question.
    Mr. Frelinghuysen. What I am suggesting is that I know 
there is an issue of management and there is an issue of 
resources available. The process has to be followed, peer 
review and we know that there is NASA and EPA and D0E, but in 
reality, if we are a nation at war, there ought to be an added 
sense of urgency that whatever resources we are outlaying, that 
we get more end product and more basic research and 
identifiable things that we can measure through some sort of 
performance matrix.
    Dr. Marburger. Indeed there is an added sense of urgency, 
and I think that comes through in the budget narrative, and I 
personally have carried this message to the science community 
in my remarks. That may be one reason there is discomfort about 
it.
    Mr. Frelinghuysen. Good. Make them uncomfortable.
    Thank you, Mr. Chairman.
    Mr. Walsh. Thank you. Mrs. Meek.

                       MANAGEMENT AND LEADERSHIP

    Mrs. Meek. Good morning, Dr. Marburger. Welcome to the 
committee.
    I have been listening this morning and I read your 
statement, and you have got to really be a super manager to do 
what you are supposed do. You are pretty much the manager of 
all these various initiatives, and having witnessed the Federal 
Government now for many, many years, it is very difficult to 
coordinate. You have a lot of initiatives that you call multi-
agency efforts, and it is going to take a great job on your 
part and your agency's part to set the kind of policy that is 
going in the direction which my co-members here have talked 
about.
    I am just wondering what are you thinking about. What are 
you dreaming about in terms of how you are going to lead this 
hierarchy you have here. Many of these agencies, one will not 
speak to the other and one will not know what the other one is 
doing. What do you have in mind? You are new. You are coming in 
and have a chance to set tone. What are you thinking about?
    Dr. Marburger. Well, my office does have access to a 
mechanism that I believe is a good one, and that is the 
National Science and Technology Council, which is a set of 
cabinet officers of the science agencies. And under their 
general guidance, we formed these interagency committees that 
know that their bosses have gotten together and agreed what 
needs to be done. We bring in people at the appropriate level 
within the agencies to talk with each other and, under our 
staffing guidance, to work out an agenda so that when they make 
their budget proposals, they will fit together in their 
programs.
    I plan to continue to use that mechanism as much as I can, 
because I think it has a good track record for some programs 
like the nanotechnology initiative and the information 
technology initiative, which are good programs. So that is one 
thing that I plan to do.
    But in addition, I supplemented that mechanism with another 
one which is a little unusual for our office, and that is sort 
of a rapid response mechanism that we use to provide technical 
support for Homeland Security. Ordinarily, we do not play such 
an active role in bringing a product to bear out of OSTP, as it 
were, but because of the needs of the war against terrorism and 
the need for the Office of Homeland Security to grow rapidly 
and to be effective right away, we have used the technical 
expertise in our office and the interagency knowledge that we 
have to put together a rapid response team under the NSTC 
mechanism that actually brings, in most cases Federal, and 
potentially non-Federal science together to actually do 
something, to do a project on behalf of homeland security.
    That is a new mechanism. It is a new thing for OSTP. It is 
not specifically spelled out in the initial charter, but I 
believe it is important during this era of war against 
terrorism.
    Beyond that, I try to bring management practice to the 
office to get us a little organized. We had a management 
retreat, planning treat. I am going to try to improve the 
planning and make better use of information technology in the 
operation of the office and of the interagency committees that 
we staff.
    It is difficult to be a coordinator, but I have the support 
of the President. I have a good working relationship with OMB, 
and the communications with cabinet-level officials are good, 
and in this Administration, there is I think an unusual degree 
of cooperation and agreement about what the objectives are. So, 
I am hoping with my fingers crossed, but I am hoping that we 
can be effective in getting the agencies to work toward these 
very important ends.

                             CLIMATE CHANGE

    Mrs. Meek. This administration was pretty much pushed into 
the climate change debate. Two years ago, if you mentioned 
global warming around here and climate change, you would expect 
to be hammered in the head with a mallet, but I noticed that 
President Bush has stepped up to the plate, and in the budget 
you have come out with some attention to climate change.
    It is going to be hard, though. So I do hope that you can 
do something credible in the area of climate change.
    Dr. Marburger. I hope so too, and I am confident that we 
can.
    Mrs. Meek. Thank you. I will see you next year then.
    Dr. Marburger. Okay. Thank you.
    Mr. Walsh. Are there any other questions of the witness? 
Alan, do you?
    Mr. Mollohan. I have a couple for the record.
    Mr. Walsh. I have a couple I would like to submit for the 
record also.
    We have a vote. We will take a break, and you are free to 
go, and we will bring in the next group when we return.
    Dr. Marburger. Thank you very much.
    Mr. Walsh. Thank you very much for your testimony.
    The committee is in recess.
    [Recess.]
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                                         Wednesday, March 13, 2002.

         DEPARTMENT OF DEFENSE CIVIL, CEMETERIAL EXPENSES, ARMY

                               WITNESSES

LES BROWNLEE, UNDER SECRETARY OF THE ARMY
JOHN C. METZLER, JR., DIRECTOR, ARLINGTON NATIONAL CEMETERY
    Mr. Walsh. The subcommittee will come to order.
    Let us begin. We will now conclude this morning's hearing 
by taking testimony for the Fiscal Year 2003 budget submission 
for the Department of Army and specifically Arlington National 
Cemetery and the U.S. Soldiers' and Airmen's National 
Cemeteries.

                                Welcome

    We welcome the Under Secretary of the Army, Les Brownlee, 
to testify on behalf of the cemeteries.
    The Fiscal Year 2003 budget request is $24.4 million, an 
increase $1.9 million over last year's funding level. I have to 
say that we are quite pleased that OMB decided to build off the 
appropriations increase the Subcommittee provided in Fiscal 
Year 2002 when formulating the 2003 budget.
    As our nation's armed services are engaged in active 
battle, we find ourselves in the unfortunate situation of 
burying young service members who have bravely fought and died 
for our country. The importance of Arlington National Cemetery 
and the healing process of those affected families and the 
Nation cannot be underestimated. We have a responsibility to 
ensure that America's national cemeteries are fully 
operational, meticulously maintained, and ready for the future 
as memorials as we need them.
    Mr. Brownlee, we welcome you to the committee. In a moment, 
I will ask you to introduce your colleagues and briefly present 
your testimony. Before doing so, I would like to recognize my 
colleague Mr. Mollohan for his opening comments.
    Mr. Mollohan. Mr. Chairman, I welcome Mr. Brownlee to the 
hearing today and look forward to his testimony.
    Mr. Walsh. Thank you. Sir, go ahead.

                            OPENING REMARKS

    Mr. Brownlee. Thank you, sir.
    Thank you, Mr. Chairman and members of the subcommittee. It 
is indeed an honor for me to be here today to represent the two 
national treasures and national cemeteries, Arlington and the 
cemetery at the Soldiers' and Airmen's Home.
    I will take the opportunity to introduce those who have 
accompanied me here: Mr. Jack Metzler, the superintendent of 
Arlington National Cemetery; Ms. Claudia Tornblom, the Deputy 
Assistant Secretary for Management and Budget; Mr. John Parez; 
Ms. Jennifer Watkins of my staff; and Mr. Rory Smith, the 
budget officer for the Arlington National Cemetery.
    Sir, again, let me tell you what an honor it is for me to 
come and appear before this subcommittee on this particular 
issue. My son served in the Third Infantry--the Old Guard at 
one time. He served in the unit that we are so proud of and 
does such a good service in honoring our Nation's fallen 
heroes. For so many reasons that place has a special place in a 
lot of our hearts.
    With your permission, sir, I will summarize my complete 
statement.
    Mr. Walsh. Please do.
    Mr. Brownlee. And ask that it be entered into the record.
    Mr. Walsh. Without objection.

                             BUDGET REQUEST

    Mr. Brownlee. Thank you.
    Sir, the Fiscal Year 2003 budget which is before us totals 
$24,445,000, which is $1.9 million or 8.5 percent more than the 
Fiscal Year 2002 appropriation. This budget will permit 
Arlington National Cemetery to improve its infrastructure and 
work toward implementing its ten-year capital investment plan. 
The budget also includes funds to pursue expansion efforts 
needed to ensure that Arlington National Cemetery remains an 
active burial place for our service men and women. It is very 
important to pursue expansion efforts so there will be no 
disruption in services for deceased veterans.
    This budget is made up of three programs: Operation and 
Maintenance, Administration, and Construction. I will briefly 
summarize each one.
    The O and M program is $13,507,000 and funds the cost of 
conducting an average of 23 funeral services per day, 
accommodating four million visitors each year and maintaining 
652 acres of land and associated infrastructure.
    The Administration program is $1,123,000. It provides for 
management and administrative functions, including staff 
supervision at both cemeteries.
    The Construction program is $9.8 million, and I would like 
to highlight three projects in the Construction program that 
are particularly important to the long-term viability of 
Arlington National Cemetery. Project 90 Land Development is 
critical to alleviate crowding of funeral services and to 
extend the cemetery's useful life through the year 2025. It 
consists of developing the remaining 40 acres of open land 
within its current boundaries. Approximately 26,000 additional 
grave sites and 5,000 niches for cremated remains will be 
provided by this development. Project 90 is fully designed and 
construction of phase one is included in the Fiscal Year 2003 
budget for $8.4 million.

                             TEN YEAR PLAN

    By our letter of February 5, 2002--and we have copies of 
that available if need be for the members--we provided this 
subcommittee with a plan that identifies the cemetery's new 
construction, major rehabilitation, major maintenance, and 
study proposals for the next 10 years. It also serves as a 
guide for annually recurring maintenance needs of the cemetery. 
The Fiscal Year 2003 budget includes $50,000 to continue 
developing and refining this multi-year plan for funding 
projects in a technically sound and financially efficient 
manner.

                         LAND UTILIZATION PLAN

    In October of 2000, the Army provided this subcommittee 
with a plan that identifies the requirements for developing 
adjacent land for future expansion. The budget includes 
$200,000 to continue this planning effort. The first site in 
the plan to be developed is the Millennium Project which 
consists of 36 acres. A significant milestone in moving forward 
with the Millennium Project was reached on January 28, 2002 
when the Department of the Interior transferred 12 acres of 
land to the Department of the Army pursuant to the authority 
contained in the National Defense Authorization Act for Fiscal 
Year 2002. This land is now included in the cemetery and will 
be developed as a part of the Millennium Project.
    A preliminary estimate of additional capacity to be 
generated by the Millennium Project is 26,000 grave sites and 
15,000 niches. Actual yields could change significantly 
depending on the final design. The Millennium Project would 
extend the useful life of the cemetery beyond 2025 to somewhere 
between 2038 and 2047, depending on the final layout of the 
land.
    Mr. Chairman, again, it is an honor for me to represent 
these two cemeteries. I look forward to working with your 
subcommittee in support of our collective efforts to provide 
high quality standards befitting our service men and women.
    Mr. Chairman, you mentioned the global war on terrorism 
that is ongoing, and we have taken casualties in that war, some 
of whom have recently been laid to rest in Arlington National 
Cemetery. I had the good fortune of visiting at Christmas time 
some of those troops, and I went over with the intent of 
visiting those who could not be home for Christmas. So I went 
to Germany and Italy, to Bosnia, Kosovo, Kuwait, into Pakistan, 
Uzbekistan, and I had the good fortune to spend Christmas Eve 
and Christmas Day in Afghanistan. Originally, I had been told I 
could only stay for one hour. Fortunately, we got fogged in. It 
was Christmas Eve, so we had the good fortune and got to spend 
longer time than we planned on. So I felt quite fortunate in 
that respect.
    These young men and women in our armed forces today, as you 
well know, sir, are the best and we owe them the best. That is 
our intention with this plan that we have put before you today.
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                        TENTH MOUNTAIN DIVISION

    Mr. Walsh. Thank you. I thank you for your testimony.
    I just spent a few minutes with Congressman John McHugh 
from Upstate New York, and Fort Drum is within his district. 
The Tenth Mountain Division is encamped there, and had just 
been at Walter Reed Hospital visiting some of the wounded, and 
they really have done a marvelous job, marvelous job. It is 
great to see that the training and the equipment and all those 
things come together and stand behind their courage and make 
them an invincible force. It is remarkable what they have 
accomplished there.
    I cannot imagine what it would be like to fight at 10 or 12 
thousand feet above sea level.
    Mr. Brownlee. What the troops have done there has been 
almost incredible--in some cases. There was one company that 
had to move to assist another company. The distance they 
traveled and the time in which they did it at that altitude was 
almost unbelievable.
    Mr. Walsh. Its hurts moving quickly at that level. It 
hurts.
    Mr. Brownlee. You mentioned the Tenth Mountain Division. I 
told you all the places that I visited and everywhere I went I 
ran into soldiers from the Tenth Mountain Division--Bosnia, 
Kosovo, Uzbekistan, and Afghanistan. I did not go to visit the 
battalion in the Sinai that patrols between Israel and Egypt.
    The Tenth Mountain Division is a small division. It is only 
six or seven battalions, and they have been deployed 
extensively and stretched pretty thin. I kept running into 
them, and I finally told the soldiers that either this is the 
biggest division in the Army or they were spread mighty thin. 
They loved that, of course.

                               BODY ARMOR

    Mr. Walsh. One of the interesting things that John said was 
that because of the body armor that they are all wearing now, 
most of the wounds are now leg wounds.
    Mr. Brownlee. That is absolutely true.
    Mr. Walsh. Which is pretty amazing when you think about it.
    Mr. Brownlee. They wear body armor with ceramic plates that 
are inserted at the front and back. With the plates, the armor 
provides protection against 7.62 millimeters bullets, which are 
fired by AK-47's. It truly saves lives by preventing thoracic 
injuries. Most of the wounds that we have observed in these 
soldiers that were evacuated were leg and arm wounds and one 
shoulder wound.
    Mr. Walsh. Less business for Arlington, fortunately.
    Mr. Brownlee. Fortunately, yes, sir.

                               WATER BILL

    Mr. Walsh. At a more mundane level, last year Arlington 
National Cemetery got caught in the middle of a payment dispute 
between the Pentagon and the District of Columbia Water and 
Sewer Authority. I used to referee these disputes between the 
City of Syracuse Water Authority and the county zoo.
    Some things just do not change, but as the former chairman 
of the D.C. subcommittee, I am very familiar with the problems 
the D.C. agencies have in collecting money from the Federal 
Government for services rendered. DOD did not handle the 
situation well, and the Congress included language in the 
Fiscal 2001 supplemental directing DOD to fully fund the water 
bill and refrain from charging the cemetery unfair amounts that 
were estimated by Pentagon engineers.
    How are the Pentagon and the cemetery resolving the issue 
now?
    Mr. Brownlee. Sir, it is my understanding now that the 
water meters have been installed. The city water authority has 
agreed that they are appropriate and compatible. I believe the 
estimated cost for usage in 2003 is a little over $200,000.
    Mr. Walsh. What was the bill prior to installing the 
meters?
    Mr. Brownlee. I do not know what the previous bill was.
    Mr. Metzler. We had estimated billings in the prior years 
of around $65,000, but the dispute last year encompassed a past 
due bill which was close to a million dollars. So without the 
meters in place, it was only an estimate at that point.
    Mr. Walsh. Do you anticipate Congress having to get 
involved in this dispute again?
    Mr. Brownlee. I certainly hope not, sir. It would not be my 
intent that Congress would have to get involved in this. I 
think the meters, since the D.C. Water Authority has indicated 
that they agree they are appropriate and compatible, we will 
keep an eye on it, sir. If it does look like there is going to 
be a problem, then we will let you know. We do not expect to 
get you involved in that.

                            EXPANSION PLANS

    Mr. Walsh. You talked about land utilization a little bit. 
I think we are all in agreement that there are a few options 
for the cemetery to expand and still keep the current 
eligibility criteria; however, as time moves along, and DOD 
finds itself thinking greater ideas, operations or memorials 
for the Navy Annex or excess land at Fort Myer, who is watching 
out for the needs of Arlington National Cemetery as DOD 
formulates its land management plan, and what are DOD's land 
priorities?
    Mr. Brownlee. Sir, as you know, there is some support in 
Congress in that interest, to protect the land that is there 
for burial. There are, of course, other interests, and you 
mentioned, the Air Force Memorial which will be, I understand, 
by law placed on the land where the last section of the Navy 
Annex is now located. The timing on that, I do not believe has 
been decided yet because there is some discussion as to how 
long the Ballistic Missile Defense Organization needs to remain 
in those facilities. That will have to be worked out.
    But I assure you that Mr. Metzler and I have a strong 
interest in ensuring that actions are not taken that displace 
eligible veterans from being buried at Arlington.
    Mr. Walsh. Will you have a place at the table when they are 
making these plans?
    Mr. Brownlee. We will certainly have a place at the table 
when plans are being made within the Administration. Sometimes 
we are consulted when plans are being made by Congress, and as 
you know better that I do, sir, some of these ideas for other 
programs and projects that might displace burial land originate 
in other places, some of it over here, some of it in other 
Services and places like that.
    My personal view, sir, if I might----
    Mr. Walsh. Please.
    Mr. Brownlee. I think we always ought to look to other 
places for some of these memorials and projects rather than 
land that is at Arlington or contiguous to Arlington where 
expansion might be possible, because there is a finite limit to 
that, and at some point in time, there will not be any land 
available that is contiguous to Arlington National Cemetery. It 
is a national treasure and ought to be preserved, and we ought 
to try to extend its life for burial of deceased veterans in 
the military as far in the future as we can.
    I also think that there may be a need at some point in time 
to rethink eligibility criteria, but I think that should be 
done in conjunction with the members of Congress who may have 
an interest in jurisdiction over here, and right now, I do not 
see any move to do that. But at some point in time, that may be 
necessary.
    Mr. Walsh. Thank you. Mr. Mollohan.

                        OTHER PLANS AND OPTIONS

    Mr. Mollohan. Thank you. You are really testifying at a 
important time in our history, and you have a very important 
mission.
    Following up a little bit on the chairman's questions, are 
there other plans and options to acquire surrounding lands at 
this time?
    Mr. Brownlee. Sir, the only other lands that I am aware of 
that are available that are contiguous to Arlington National 
Cemetery have been looked at. Some of it is land on which the 
Navy Annex sits on now, and at some point in time, I understand 
that the Navy Annex will be torn down and that land will be 
become available. There are other competing interests for some 
of that property.
    Mr. Mollohan. I am sure there are.
    Mr. Brownlee. One of those, I understand, has to do with a 
historical Civil War-related or slavery-related museum.
    Mr. Metzler. There is a Black heritage----
    Mr. Brownlee. Black heritage. I am sorry. Black heritage, 
if I could correct myself.
    There is an interest to put that kind of a museum somewhere 
in that vicinity, and of course, the Air Force Memorial, as you 
know, has been identified to go into that area.
    Mr. Mollohan. In an existing structure, would the Black 
heritage museum go into an existing structure as well?
    Mr. Brownlee. No, sir. There would have to be a structure 
constructed for it.
    Mr. Mollohan. So you are identifying possibilities?
    Mr. Brownlee. I am just indicating to you, sir, in response 
to your question what I have heard about other interests that 
might like to compete for some of that land that is available. 
As I indicated earlier, there is a limit to land that is 
immediately available that is contiguous to the cemetery.
    Mr. Mollohan. So that is the answer to the question 
regarding plans or options to acquire surrounding lands.
    Mr. Brownlee. Yes, sir. We have a master plan which 
indicates that that land where the Navy Annex sits now would be 
taken over by the cemetery in time. There is a road which I 
understand is the property of Arlington County, and that would 
have to be worked out.
    Mr. Mollohan. How many acres is that?
    Mr. Metzler. The roadway is 3.5 acres. The Navy Annex is 
somewhere in the neighborhood of 36 to 42 acres. We have not 
done a complete study on that yet.
    Mr. Mollohan. That is a pretty significant piece of ground.
    Mr. Metzler. It is, and that also includes the parking lots 
and the actual land the buildings sit on, and of course the Air 
Force Memorial would be incorporated into that land as well.

                         FUNDING LEVEL INCREASE

    Mr. Mollohan. Last year, congress appropriated an increase 
of $5.3 million over your 2001 funding level. Was that 
adequate, and what were you able to accomplish with that?
    Mr. Brownlee. I am going to defer to Jack on that.
    Mr. Metzler. Yes, it was, and the money is going be used 
this year for a construction project for our next Columbarium 
and to start Project 90, by first looking at the drainage 
issues in that area as we get ready for construction next year. 
The big project is the next Columbarium building.
    Mr. Mollohan. All right. Thank you, Mr. Chairman.
    Mr. Walsh. Thank you. Mr. Goode.

                           CERAMIC BODY ARMOR

    Mr. Goode. Thank you, Mr. Chairman.
    I did not catch what you said about the body armor that the 
troops had on. It is not related to this hearing, but you 
mentioned it.
    Did you say that the ceramic body armor will stop or will 
not stop an AK-47 bullet?
    Mr. Brownlee. It is designed to withstand a hit from 7.62, 
which is the standard round for an AK-47. It is designed to 
stop that. Now, with repeated hits, it might cause it to fail, 
and if you are hit too close to the edge, sometimes you might 
get something that gets in, but the armor is designed to stop 
that. Apparently it was successful in all the cases we know 
about so far.
    Mr. Goode. In Afghanistan?
    Mr. Brownlee. Yes, sir.
    Mr. Walsh. If I could just interject, the reason it came up 
was I was just talking to John McHugh upstairs, and he 
represents Fort Drum in Watertown, New York where the Tenth 
Mountain Division is encamped, and he was over at Walter Reed 
and he met with some of the soldiers, and he said most of the 
wounds were leg wounds because of this body armor, that the 
upper body, the thoracic region, was very well protected. So it 
is pretty remarkable stuff.
    Mr. Brownlee. Yes. Secretary White was over there earlier 
this week to pin Purple Hearts on some of those lads. He gave 
me exactly the same observation--that the absence of major 
thoracic wounds certainly contributed to just wounds and not 
KIAs that we suffered there.
    Mr. Goode. The forces in Afghanistan that we are opposing 
do not have anything like this?
    Mr. Brownlee. Not to my knowledge, sir.

                           BURIAL ELIGIBILITY

    Mr. Goode. To refresh my memory a little, what are the 
standards for burial in Arlington? I know it is not simply 
being a veteran.
    Mr. Brownlee. Yes, sir. And if I miss something here, Jack, 
please correct me.
    If you are retired veteran, in other words, if you serve 
more than 20 years in the military and retire, you are 
eligible. If you are killed or deceased while on active duty, 
you are eligible. If you are a veteran who has been awarded the 
Silver Star or Purple Heart or higher--let me qualify that. It 
is the Purple Heart or the Silver Star or higher. Then you are 
eligible.
    Mr. Metzler. If you are a veteran and a former prisoner of 
war, if you are a veteran and during the time of World War II 
or before received a disability of 30 percent or higher, you 
are eligible for ground burial as well.
    Mr. Goode. That is World War II or before?
    Mr. Metzler. World War II or before. After World War II, 
the award system would afford a Purple Heart with the 
recognition for a disability. Any veteran, their spouses, and 
dependent children, as well, can be buried there, and then any 
veteran who goes on to hold a high office, such as Vice 
President, Congress, Senate, Associate Justice of the Supreme 
Court, and Ambassadors at a Level One mission. The President 
does not have to be a veteran. There is a line that affords the 
President or former Presidents status at Arlington Cemetery, 
and of course I do not want to forget that all veterans who 
have one period of active-duty military service are entitled to 
have their cremated remains placed into the Columbarium at 
Arlington National Cemetery.
    Mr. Goode. Now, you mentioned to the Chairman that that 
issue is not going to be visited this year, but it might be 
looked at sometime in the future. Is it all statutory?
    Mr. Metzler. No, it is not all statutory. Some of it is in 
Army regulation. Some of it is in the Federal Code of 
Regulations, and there are plans to review all of the 
eligibility requirements every five years, and we have been 
asked to start looking at a draft this summer.
    Mr. Goode. I take from what you said, none of it is 
statutory. It is all, you said, Federal Code Regulations, or 
did you mean Federal statute?
    Mr. Metzler. It is in the CFR, the Federal Code of 
Regulation and in the Army policy.
    Mr. Goode. Okay. It is all policy.
    Mr. Metzler. It is all policy.
    Mr. Brownlee. It is not statutory.
    [The information follows:]

    [Agency Note: Almost all eligibility requirements at 
Arlington National Cemetery are specified in Title 33 of the 
Code of Federal Regulations, Part 553 and Army regulation 290-
5. There have been some rare instances when laws were enacted 
to cover specific situations, such as including former 
Prisoners of War, setting aside memorial areas for veterans 
missing in action, designating an area for the unmarked burial 
of cremated remains, and prohibiting the burial of persons who 
committed capital crimes.]

    Mr. Goode. Thank you, Mr. Chairman.
    Mr. Walsh. Thank you, Virgil. Mrs. Meek.
    Mrs. Meek. Thank you, Mr. Chairman.
    Welcome to our subcommittee.
    Mr. Brownlee. Thank you.

                        HISTORICAL SIGNIFICANCE

    Mrs. Meek. I am interested in your expansion plans to 
expand the Cemetery, and I can understand the need to do so. 
This is my fifth year sitting in the subcommittee.
    I note that you are expanding. Have you taken into 
consideration the historical significance of where you are 
going when you expand? And I am saying that because you are in 
the D.C. area, Washington area, and Virginia area, and it is 
really bordering on African American history, some of the 
sites.
    Mr. Brownlee. I understand.
    Mrs. Meek. And I hope that you will keep in consideration 
that even though you do need to expand, that there is a strong 
historical significance to places where you plan to go. Just as 
Congress is looking at the contribution of slave labor in 
building the Capitol, I hope you will look at that in your 
consideration of expanding the National Cemetery. Congress has 
paid significant attention to the work of slaves, particularly 
President Bush, in terms of the contribution they made and what 
will happen as a result of it, and the mansion where you are 
looking at is a place where slave quarters were in Arlington 
where some of your sites are going, as I understand it.
    Particularly down here where the Navy Annex is near that 
river that flows through there, there are a lot of historical 
sites down there. It was part of what we call Freedman's 
Village where the slaves came to that section because that was 
an area where they could become educated and get away from 
slavery. And I do not know exactly what you plan to do near the 
Navy Annex, but I wish you would pay close attention to the 
preservation of some of those historical sites in your 
expansion.
    Mr. Brownlee. Yes, ma'am. We are aware of them. I was not 
as aware of them, but having looked at this, I am more aware of 
them now, and I appreciate your furthering my education on 
that.
    Mrs. Meek. Yes. And I would appreciate it if you would send 
me your plans for the expansion of those sites and what 
historical significance your expansion is going to have in 
terms of those sites. Suffice it to say, I am saying in your 
expansion, I know it is necessary, but please pay attention to 
the preservation of those historical sites.
    Mr. Brownlee. Yes, ma'am. I understand.
    Mrs. Meek. That was my one question, Mr. Chairman.
    Mr. Walsh. Thank you very much.
    Are there any other questions of the witness? Alan?
    Mr. Mollohan. No.

                            ASSISTING THE VA

    Mrs. Meek. I forgot my other one. It has to do with the 
South Florida Cemetery. It is a big, big project for South 
Florida. This veterans cemetery--we had only one--it was in 
Bushnell. It was a long way away from every place else, and it 
is going to be put now by the VA, and I would like to know if 
you are consulting with the VA on this project, because you 
have been in this business a long time.
    Mr. Brownlee. Yes, ma'am.
    Mrs. Meek. To share your expertise with the VA in Florida 
in terms of what has been some of the problems you have seen 
and pass down some of your knowledge to them. This, I am sure 
will help the VA.
    Mr. Brownlee. Yes, ma'am. Ma'am, we would be more than 
anxious to consult with them in any way that we could, 
providing the assistance to Mr. Principi and his people in that 
regard. That, of course as you well know, is not under the 
jurisdiction of the Army, but we would be happy to help in any 
way we could for the preservation, expansion, and enhancement 
of that cemetery.
    Mrs. Meek. Good, because you have established quite a bit 
of expertise in the needs and wants of veterans in your 
capacity. It would be good if you could share that expertise.
    Mr. Brownlee. Mr. Metzler has great expertise in that area 
and we will make him available.
    Mr. Metzler. One of the items that I as the superintendent 
of Arlington Cemetery get to do is to sit on the Department of 
Veterans Affairs National Cemetery Advisory Council. So I do 
meet with them at least twice a year, and I have been talking 
with the leadership of the Department of Veterans Affairs on 
the expansion of cemeteries. So we are able to share ideas back 
and forth.
    Mrs. Meek. Thank you.
    Mr. Metzler. Yes, ma'am.
    Mr. Brownlee. Thank you, ma'am.
    Mr. Walsh. Thank you, Mrs. Meek.
    Anyone else? If not, the hearing is concluded. We thank you 
very much for your testimony. We will submit additional 
questions for the record, and we would appreciate your prompt 
response.
    Mr. Brownlee. Thank you very much for your consideration of 
this important issue.
    Mr. Walsh. You are very welcome.
    Mr. Brownlee. It was a pleasure to meet you, sir.
    Mr. Walsh. Nice to meet you too.
    The subcommittee hearing is closed.
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                                          Thursday, March 14, 2002.

      COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS FUND, TREASURY

                               WITNESSES

TONY T. BROWN, DIRECTOR, COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS 
    FUND
OWEN JONES, CHIEF FINANCIAL OFFICER
FREDERICK C. COOPER, DEPUTY DIRECTOR OF PROGRAMS AND POLICIES
    Mr. Walsh. The subcommittee will come to order.
    This morning the committee would like to welcome Mr. Tony 
Brown, Director of the Community Development Financial 
Institutions Fund, to our hearing and the budget request for 
fiscal year 2003.
    This is your first appearance before the committee, Mr. 
Brown, so we welcome you, and we will include a copy of your 
biography as part of the record.
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    Mr. Walsh. The CDFI Fund was created to expand the 
availability of credit, investment capital, and financial 
services in distressed urban and rural communities. The record 
of accomplishments at the Fund since its establishment by the 
Community Development and Regulatory Improvement Act of 1994 
has been impressive. The challenge will be to continue your 
record of accomplishments into the foreseeable future.
    For fiscal year 2003, the CDFI Fund budget request is $68.3 
million, a reduction of about $12 million from fiscal year 
2002. In addition to this direct appropriation for the Fund, 
your office will also have the responsibility of administering 
the New Markets Tax Credit Program through 2007.
    Before you present your testimony, I would like to yield to 
my colleague, Mr. Mollohan, for any comments that he would like 
to make.
    Mr. Mollohan. Mr. Chairman, I would just like to join you 
in welcoming Mr. Brown, the witness, to the hearing today, and 
look forward to his testimony.
    Mr. Walsh. Thank you.
    Mr. Brown, please feel free to make your remarks, and your 
entire statement will be included in the record.
    Mr. Brown. Thank you. Thank you, Chairman Walsh, 
Congressman Mollohan. I thought I would make a brief opening 
statement and spend the rest of the time with you answering any 
questions you may have.

                              Introduction

    I do thank you for the opportunity to testify today in 
representing the Department of Treasury and the Community 
Development Financial Institutions Fund and in support of the 
President's fiscal year 2003 budget.
    As Chairman Walsh indicated, I am Tony Brown. I am the new 
Director. I was appointed in August. I joined the Fund, having 
served 20 years in banking; 10 years as a community development 
banker from the State of Florida, where community development 
was not only a profession but also a passion. And I bring that 
commitment and that zeal to the CDFI Fund.
    I will keep my remarks brief, and I have brought with me to 
help provide answers to additional questions our two deputies 
for the Fund, Owen Jones, who is our CFO, and Fred Cooper, who 
is our Deputy Director of Programs and Policies.
    As you have noted, the CDFI Fund is a wholly owned 
Government corporation within Treasury that promotes access to 
capital and local economic growth in distressed communities 
with underserved populations. We do this, and we do this in a 
quite unique fashion. We do it by investing in and supporting 
CDFIs that provide loans, investments, and financial services 
to improve the economic vitality of low-income communities. I 
am pleased to report that, to date, we have certified 553 
community development financial institutions.
    I wanted to give you just a general breakdown as to how 
these entities have been certified and describe briefly what 
they do. Twenty-eight percent of the CDFIs that we have 
certified, provide housing or facilities funds. By example, 
this would be an organization that would provide a loan to a 
non-profit organization or a non-profit housing developer, who 
would help them secure site control or funding for due 
diligence. This is the type of activity for which a financial 
institution would not provide a loan. This is the type of thing 
that helps increase affordable housing in our market.
    Another example of a housing facility fund is one from New 
York which provides loans to non-profit health care providers, 
who in turn provide health care centers in low-income 
communities, like Central Harlem or the South Bronx.
    Twenty-six percent of the CDFIs certified provide business 
loan funds, and there are countless number of funds across the 
Nation serving low-income immigrant, minority, and women 
populations with innovative and flexible loan terms and 
underwriting guidelines--again, many of the type of guidelines 
or terms that a financial institution would likely deem to be 
unsafe and not likely sound.
    A third category of our certified CDFIs is the community 
development credit unions. These specialized neighborhood-based 
financial services centers provide targeted services, many of 
which have been formed out of the basements of churches and 
other faith-based institutions.
    The remainder of our CDFIs are affiliates of bank holding 
companies, microenterprise funds, multi-bank community 
development corporations, venture capital funds, or financial 
intermediaries or financial intermediary entities that in turn 
lend to other CDFIs, and they make up the balance of our 
community development financial institutions.
    Our vision at the Fund is to be the Nation's leading 
vehicle for financing economic and community development. We 
feel that in good times or bad times, the Fund serves as a 
stimulus for economic development in many of our low-income 
communities.

                            Accomplishments

    I would like to close and highlight a few other 
accomplishments that we have made this year. This year we 
released and reported to Congress the Native American Lending 
Study, and we introduced our Native American Technical 
Assistance Program where the number of applications wildly 
exceeded our expectation. This was the first year of our SECA 
program, our small and emerging awards program, where we 
provided $8 million in awards to 70 small and emerging CDFIs. 
Over 40 percent were what we call start-up community 
development financial institutions.
    We are in the middle of rolling out what we consider to be 
a very significant program for the Fund, and that is the New 
Markets Tax Credit Program wherein we will provide tax credits 
that will help to spur over $15 billion in private sector 
investments in low-income communities. And when I mention the 
$15 billion, I always like to put a face on it, because when we 
talk about low-income communities, I think many people think 
that low-income communities are an anomaly for America and 
don't recognize how significant a market impact this program 
can have.
    Forty percent of the Nation's census tract, that is 40 
percent of the Nation's geography, qualify for the New Markets 
Tax Credit Program. That represents about 91 million people 
living in these communities, or about 36 percent of the 
Nation's population.
    I share that with you in full recognition that our budget 
request for $68 million is a decrease over the past year and 
comes at a time when there are tight budget constraints as the 
President has prioritized addressing terrorism as it relates to 
homeland and national security. We feel that the worst-case 
scenario will be fewer awards to our recipients, but our 
commitment is to try to offset that by making the successful 
implementation of the New Markets Tax Credit program our 
highest priority.
    The Fund staff and team have worked on operating 
efficiencies where we feel that a quicker disbursement process 
will also aid in offsetting any potential reduction of awards 
to our awardees.
    Again, I thank you for the opportunity to speak, and I will 
address any questions you may have.
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                         Leveraged Investments

    Mr. Walsh. Thank you very much.
    Let me begin with a question on leveraged investments. 
According to information provided by the Coalition of Community 
Development Financial Institutions, each $1 that CDFI Fund 
awards can leverage more than $100 in new investment, 
benefiting economically distressed people and communities. 
During the recent economic downturn, did you see a noticeable 
decrease in the funding that CDFI was able to leverage from 
non-Government sources, or was leveraging still robust?
    Mr. Brown. I will answer that question in two ways. We feel 
that CDFIs, a number of CDFIs that we have provided awards to 
have had--or look to the Fund's commitment to provide an award 
as a way to help stimulate their ability to leverage. Our 
records show that perhaps about 20 to 30 percent of the 
applicants that we approved for funding are hopeful that an 
award from the Fund will help them leverage their private 
sector capital. So, in that sense, we do experience a number of 
applicants that have come to the table for Federal assistance 
first and have used that as an incentive to get an increased 
level of capital. I am not certain that is something that we 
have tracked specifically.
    The other aspect, our own leverage experience and where we 
have surveyed in the past year our Core recipients, show that 
we have effectively leveraged anywhere from about $2.50 to 
about $3.15 in terms of other private sector funds.
    You quoted the CDFI Coalition, and looking at the report of 
the National Community Capital Association, another important 
trade association, they have reported that their members have 
secured nearly $2 billion of investments and loans that they 
determine to be a result of community development awards. And 
we look at that as saying this is also an opportunity of other 
increased leveraging.
    So whether or not we have leveraged, our funds help to 
reduce the cost of funds for CDFIs as well as subsidize 
operating support. All those things we feel provides a leverage 
range anywhere from $2.50 or, as the CDFI Coalition has 
indicated among their membership, up to $100.
    Mr. Walsh. Has there been a reflecting downturn in your 
ability to leverage investments as the economy has slowed over 
the past year?
    Mr. Brown. I have not seen it. I don't know if Fred, our 
program and policy director, has any insight to it. He has 
probably a better sense of the trends.
    Mr. Walsh. Would you comment, sir? And just identify 
yourself for the record.
    Mr. Cooper. My name is Frederick C. Cooper. I am the Deputy 
Director for Policy and Programs at the CDFI Fund.
    I think we will find that out in the next month or two as 
we get into the applications that have just been received for 
our current round. But at face value, they will have to have at 
least the required dollar-for-dollar match.
    What is able to be leveraged above and beyond that, as 
expressed in the applications we have in front of us now, we 
will be finding out as we get into those----
    Mr. Walsh. So those reports aren't available yet?
    Mr. Cooper. Not for the current round, no. We are in the 
process of underwriting those applications.
    Mr. Walsh. Perhaps you could provide that information to 
the subcommittee as the reports become available.
    Mr. Cooper. Definitely.

                           Decreased funding

    Mr. Walsh. The budget request proposes funding the lending 
and investment practices of the Financial Services Organization 
at $21.3 million compared to $48.3 million in fiscal year 2001 
and $24 million in the year 2002. There is a corresponding 
decrease in the number of community development financial 
institutions receiving financial assistance by Bank Enterprise 
Award applicants, the number decreasing from 164 in 2001 to 120 
in both 2002 and 2003.
    Do you think it is wise to decrease support for financial 
institutions in times of economic slowdown?
    Mr. Brown. Mr. Walsh, the challenge for us is determining 
the degree of direct Government funding to provide and what 
stimulus can we provide to ensure that there is private sector 
flow to community development financial institutions. We feel 
that the focus and the energies ought to be on incenting our 
corporate entities and the private sector to increase their 
level of investments into community development financial 
institutions and to report on the impact these organizations 
have in the communities they serve and to help identify ways to 
ensure that we can help sustain their activities.
    Whether it is $68 million in direct funding or--and I think 
FY 2001 is the year we had the highest appropriation of $118 
million. We need to see billions of dollars of capital flow 
into low-income communities, and the challenge for all of us is 
how do we do that with a degree of private economic stimulus as 
well as direct Federal funding. The direction and the 
commitment of the Secretary is to see that the New Markets Tax 
Credit Program is successfully implemented and that it be the 
catalyst to increase the flow of private sector capital into 
low-income communities.

                     New Markets Tax Credit Program

    Mr. Walsh. One more question, and then I will yield to Mr. 
Mollohan. On the New Markets program, your office, in addition 
to administering CDFI, will have responsibility for the New 
Markets Tax Credit program, which was enacted in December of 
2000. During last year's hearing, we were told that the 
Internal Revenue Service regulations for this program were 
going to be issued during this past winter and that your 
organization would seek applications for the tax credit 
allocations shortly thereafter.
    What is the current status of the program, including the 
issuance of final IRS regulations, certification of CDFI 
entities, community development entities, and allocation of tax 
credits?
    Mr. Brown. Great questions. I am pleased to report that we 
are meeting our timetable and deadlines. In December, the IRS 
issued temporary rules on New Markets Tax Credit, and as we 
speak, they are currently conducting a public hearing on the 
temporary reg, as they attempt to put together the final rules.
    Simultaneous in December, when the IRS proposed their 
temporary rules, we also issued guidelines on instructions for 
certifying for Community Development Entities. I am pleased to 
report that in less than 3 months' time, we have over 180 
entities who have been certified as Community Development 
Entities. As you know, the statute allows for CDFIs and 
specialized small business investment corporations to be CDEs. 
What is remarkable in that number is that one-third of our 
certified community development financial institutions have 
opted for certification as a Community Development Entity. So 
we are quite pleased with that result in the short order that 
we have been taking certifications for Community Development 
Entities.
    What is next? We have told the public that it is our intent 
by the spring of this year to publish our first notice of 
allocation availability, and that we are pretty much on target 
there. We will be introducing into clearance the NOAA, the 
Notification of Allocation Availability. Simultaneous with that 
announcement or with that release, we will be taking 
applications for allocation availability.
    It is our goal to announce those awards no later than 
November of this year, and, again, I will reiterate the 
Secretary's commitment and the President's commitment to see 
the New Markets Tax Credit Program be the stimulus to 
increasing private capital flow into low-income communities. 
The commitment of Treasury to see this program succeed is 
extremely high.
    Mr. Walsh. Thank you. Good answer.
    Mr. Mollohan?

                         Reduced Budget Request

    Mr. Mollohan. Thank you, Mr. Chairman, Mr. Brown.
    Your budget request is $12 million below enacted last year, 
and it represents a reduction, as I am looking at it, in every 
one of your programmatic areas. Since the inception of the Fund 
in 1994, grants have leveraged billions of dollars from the 
private sector. You cite three reasons for this reduction in 
your request one, homeland security needs; two, that your 
budget assumes significant improvements in how you process 
applications and thereby, I assume, achieving savings; and 
finally the New Markets Tax Credit Program.
    How much are you assuming in savings as a result of 
streamlined approval and disbursement process?
    Mr. Brown. I wouldn't characterize it--and I apologize if 
my testimony says savings. I would more or less characterize it 
as getting our money on the street quicker. So I don't 
necessarily mean savings.
    Historically in terms of the time that we issue a notice of 
funds availability to the point that we disburse has taken us 
on average 2 to 3 years. The staff is extremely committed, and 
we recognize our mission. If our mission is to help our 
communities that are in greatest need, that have tremendous 
economic ills, we must do a better job of getting our money out 
on the streets. And so a big part of what we have seen in the 
past 3 years is that the number of applications have pretty 
much tapered off. We get about 400 applications a year 
requesting approximately $400 million. But if you look at, for 
instance, in fiscal year 2000, our appropriations was $95 
million, and we have remaining in undisbursed balance about $30 
million, or about 23 percent.
    That number typically goes down to less than 5 percent 
before we are required to return that to Treasury, so I am not 
necessarily concerned about the undisbursed balances. But I do 
feel that----
    Mr. Mollohan. Excuse me, you say that undisbursed balance 
comes from 2000?
    Mr. Brown. From 2000.
    Mr. Mollohan. Okay. Is that an unusual trend line for 
disbursement?
    Mr. Brown. What I see----
    Mr. Mollohan. Historically speaking.
    Mr. Brown. Historically, no. What happens, I will give you 
it for 2001----
    Mr. Mollohan. So we shouldn't necessarily be concerned that 
this disbursement rate is a comment on the program or even the 
administration of the program, unless historically we haven't 
been doing a good job. I do think it is a virtue to get money 
more quickly.
    Mr. Brown. I don't say it as a negative from the standpoint 
of any degree of mismanagement, because I think our audits 
speak for themselves. I say it from the standpoint of being 
responsive to the communities and the markets we serve that it 
cannot take us a year to get that money on the streets.
    Mr. Mollohan. Do you have a goal, a time line for 
disbursing your appropriation?
    Mr. Brown. Yes.
    Mr. Mollohan. What is that?
    Mr. Brown. Our goal is at the end of a fiscal year to have 
disbursed at least 80 percent of our appropriations within the 
current fiscal year, and then within the next 12 months to have 
disbursed half of that remaining undisbursed balance. We also 
want to put in place tighter pipeline management so that we 
will know the reasons for not disbursing funds. Typically the 
reasons fall into one of two categories, either the CDFI has 
not met their match or have not documented their ability to 
meet the match, or there has been issues of compliance and we 
have opted not to disburse.
    Mr. Mollohan. So 90% by the end of second fiscal year?
    Mr. Brown. Yes, and to----
    Mr. Mollohan. Are you on track? You have just been in your 
position a short while. Are you on track for 2003?
    Mr. Brown. It is to be determined.
    Mr. Mollohan. It is to be determined if you are on track?
    Mr. Brown. Actually, I feel good about our SECA Program. 
The way we have targeted this year, I think that we will be 
able to make announcements on our SECA program in June, which 
is a tremendous improvement from last year.
    Mr. Mollohan. We don't want to set a goal we can't meet.
    Mr. Brown. Well, we are on track with the SECA program. We 
will achieve it with SECA. We have given ourselves some room 
with our core program, which are our largest awards. We think 
we will do that beginning with fiscal year 2003.

                             Rural Lending

    Mr. Mollohan. My main point is I think your request is low.
    Let me ask you a couple questions about rural lending, if I 
might. I am pleased to see your testimony includes the 
requested information on your activity in this area. Rural 
areas appreciate that. You note that you have identified 
several options that may increase the flow of funds into rural 
areas. Could you detail some actions that you believe would 
increase rural participation that you have taken 
administratively or otherwise?
    Mr. Brown. I think several programs may be beneficial. The 
introduction this year of SECA has helped get awards into 
smaller states, smaller communities. That has had a tremendous 
impact. Our Native American Technical Assistance program, will 
have a tremendous impact in getting dollars into rural 
communities.
    We surveyed our 2000 core awards, 122 core awardees, who 
indicated that over half serve rural communities and about 7 
percent--I am sorry, about 12 percent indicated that a majority 
of the activities covered rural communities and an additional 
17 percent of the 122 core awardees felt that 100 percent of 
their activities covered rural areas.
    Mr. Mollohan. What period is that covering?
    Mr. Brown. This covers fiscal year 2000 awardees--it covers 
the period between 1996 and 1999 when we surveyed our 2000 core 
awardees.
    Mr. Mollohan. Are those statistics a baseline for better 
performance in the future, or you are citing them as evidence 
of doing a good job?
    Mr. Brown. I cite them as doing a good job in terms of the 
penetration that we have. We are participating, along with 
other trade associations, in a common data project that we feel 
will enhance our ability to report specifically where loans are 
being generated. As you know, our administrative budget for 
this year includes $500,000 to allow us to collect loan level 
data where within the Fund we can create our own repository and 
be able to sort our activities in different ways and tell you 
the impact of loans generated in rural communities as well as 
break it down in terms of empowerment zones and other areas.

                        Demand For CDFI Funding

    Mr. Mollohan. There is just an incredible demand out there, 
isn't there?
    Mr. Brown. Yes.
    Mr. Mollohan. How would you describe the demand? How many 
applications did you have, for example?
    Mr. Brown. As I indicated, we have received historically, 
the last 3 years, on average about 400 applications 
representing about $400 million in direct funding requests.
    Mr. Mollohan. You received that number of applications?
    Mr. Brown. Yes.
    Mr. Mollohan. And how many of them were you able to act 
positively on?
    Mr. Brown. I would say a third of those applications. If 
you break it down--I mean, there is a percentage obviously that 
don't meet the muster.
    Mr. Mollohan. That is my next question. How many of the 
ones that you weren't able to act positively on----
    Mr. Brown. I would say our declination rate, if I can use 
that banking term----
    Mr. Mollohan. What does that mean?
    Mr. Brown. Decline. The ones that we declined that don't 
meet----
    Mr. Mollohan. That don't meet the standard.
    Mr. Brown. Standard.
    Mr. Mollohan. But what I want to do is tease out the ones 
that met the standard but you didn't have funds for. How many 
would that be?
    Mr. Brown. I will ask Fred maybe to speak to it as well, 
but I would estimate it is approximately 200 applications 
representing about maybe $200 million, $250 million of funding.
    Mr. Mollohan. That were good applications, but you just 
didn't have enough money for?
    Mr. Brown. I would say in that category, and we can define 
it in a couple of ways. What staff has done this year is that, 
as you know, we have a readers panel, and where the readers 
have recommended, when you get three readers that have each 
recommended that an awardee, that an applicant receive an 
award--and Fred perhaps can speak to the percentage and what 
that number might represent--those would be the ones that we 
would say without question are applications deserving of an 
award.
    Mr. Mollohan. How many of those weren't you able to 
approve?
    Mr. Cooper. Typically, at our first review, if you will, of 
the applications received, about 40 percent will be removed on 
qualitative reviews. Of the balance, we would then do a further 
degree of due diligence.
    Mr. Mollohan. If we set it at 400, that is 160.
    Mr. Cooper. Yes. And typically of those, about two-thirds 
get funded.
    Mr. Mollohan. Of the remaining 160?
    Mr. Cooper. Yes.
    Mr. Mollohan. So one-third are eligible for funding, but 
you don't have enough money for them.
    Mr. Cooper. You could say that, or in some cases, in 
further investigation we find qualitative issues that would 
deem it not suitable for award.
    The other factor would be many of those that we do give 
awards to, it is less than the amount requested.
    Mr. Mollohan. Now, how many of those that aren't 
qualitatively acceptable to you could be if they had some help 
filling out the applications? I have found that one of the 
things that is the greatest inhibitor to being successful in 
this grant and application process is having a grant writer and 
an application writer who can do a good job and impress the 
panel and make the case.
    Mr. Brown. Well, sir, Mr. Mollohan, you bring up what I 
think is another important opportunity for us. I won't call it 
an issue. Each year we have a number of previous awardees, and 
so once you learn a process and can figure it out, you are 
almost good to go.
    When you look at the need across the country, Alabama, West 
Virginia, parts of Ohio----
    Mr. Mollohan. Thank you for mentioning West Virginia. 
[Laughter.]
    Mr. Brown. I thought I would preempt you.
    When you look at it, one of the things that we are being 
asked to do is to be more market-driven, to look for pockets in 
the country where CDFI activity is important and find ways that 
through our competitive process we can allow those communities 
to better compete; therefore, some of the CDFIs that we 
consider to be some of the best practices, how we can encourage 
them to replicate their services in other markets where there 
is a tremendous amount of need. And our Financial Strategies 
and Research team recognize that this is another high priority 
for the Treasury and for the Secretary, to be able to be 
market-driven and to understand where those needs are so we can 
do it.
    So when you look at it, the issue is--and, clearly, the 
opportunity for us is what is the combination of private sector 
support and what is the level of government assistance to do 
it.
    Mr. Mollohan. Thank you. I appreciate your good work. I 
wish you were asking for more money. I wish we had more money 
to give you because I think you are doing good work.
    Mr. Walsh. Thank you.
    Mr. Knollenberg?

                           USES OF CDFI FUNDS


    Mr. Knollenberg. Thank you, Mr. Chairman.
    I just have a couple of questions, and I wanted to applaud 
you for doing some of the new things you are doing, such as 
monitoring--and I think from, what was it, the GAO report in 
1998, where they indicated that the CDFI Fund needs better 
systems to measure, monitor, and evaluate awardees' 
performance. And I guess that the Fund is working with the 
community development industry to, in fact, build a set of 
performance measures so that they can establish--you call it a 
performance matrix for the awardees.
    I know you serve the underserved community. Does any of 
that money flow into housing, and if so, specifically how?
    Mr. Brown. Mr. Knollenberg, I indicated earlier that when 
we look at the organizations that we have certified, those that 
have indicated a specialty to provide housing for facility 
funds represent the highest category that we have certified. 
About 28 percent of all of our CDFIs are engaged in housing or 
what we will call specialized facility financing. So if you 
look at that measurement, that number is significant.
    Mr. Knollenberg. So you are planning on doing more in the 
housing market?
    Mr. Brown. We certify what we get. I would share the 
statistics just to give you a breakdown as to where 
organizations are focusing.
    Mr. Knollenberg. The underserved would be, for example, 
very quickly, you would locate urban centers, I would think, 
would you not?
    Mr. Brown. Yes.
    Mr. Knollenberg. And not just urban. Rural would be 
conceivable as well. But I guess I am just more interested in 
where that focus might be in the coming years, if, in fact, 
there is anything that you do that would help some of the areas 
that need some help in my district or my community. That is a 
question that I guess we can talk on it for a long time, and I 
just wondered if you could very quickly indicate whether there 
are some opportunities, for example, let's say, in the city of 
Detroit, that might otherwise escape the notice of HUD or 
escape the notice of any other help, and these grants might 
conceivably work with something HUD can't touch.
    Mr. Brown. I would say a tremendous opportunity. I stated 
earlier--and I am not sure at what point you arrived when I 
was----
    Mr. Knollenberg. I was late, so I might have missed 
something. I apologize.
    Mr. Brown. When we talk about--our programs are largely 
eligible by geography. We define the areas that our programs--
unlike maybe HUD and the enterprise zones and the renewal 
cities, where I think they have identified 140 targeted 
markets, our programs qualify for about 40 percent of the 
Nation's geography. In Michigan, 48 percent of your census 
tracts meet our program requirements.
    So when you look at that, our organizations that we 
certify, many are focused on affordable housing, building 
affordable housing units. Many are focused on getting quality 
social services into low-income neighborhoods, be they health 
care centers or charter schools. Many might be focused on small 
business strategies, lending to low-income residents and 
helping them achieve their small business dreams.
    So it is a variety of things, and it is all of those 
things, and I think the beauty of our program is that we let 
the local community come to us and tell us what they need. And 
the only qualifier is to raise the match, and I think that is 
the beauty.

                      OVERLAPPING FEDERAL PROGRAMS

    Mr. Knollenberg. I know this is a tough question for you to 
answer, but would you say as much as possible you avoid 
overlapping or duplication with other agencies, maybe in 
particular HUD? If you do overlap--and I guess there is some of 
that that goes on--does it tend to complement, in your 
judgment?
    Mr. Brown. I would say very much complement. We have 
overlapping missions. The overlapping missions is to see 
increased economic stimulus in low-income communities. But the 
unique distinction for the CDFI Fund and the great opportunity 
for the Treasury is to do it through a flow of capital, to do 
it through a flow of credit.
    Our organizations may be responsible for some of the loans 
that are made or may be responsible for increasing housing in a 
targeted empowerment zone. Our organization may have either 
done the financing or been part of a layer of financing in 
order to get a shopping center done that is tied to a HOPE VI 
grant, and that is the beauty of what we do and just the 
excitement and the energy.
    Mr. Knollenberg. So you do fashion occasionally into those 
things.
    Mr. Brown. Yes.

                            LEVERAGING FUNDS

    Mr. Knollenberg. Mr. Walsh asked this question, but I don't 
know that I heard the answer entirely. The leveraging of 
funds--it comes up every time we have these meetings, and that 
leveraging is about what now? And has it varied from last year?
    Mr. Brown. We survey it through our annual survey, and we 
feel it ranges anywhere from $2.50 to $3.15. Mr. Walsh quoted 
the CDFI Coalition, who felt that the leverage can be as high 
as 100 to 1.
    Mr. Knollenberg. That is the number I remember, and that is 
the one you are going to have to explain robustly because I 
don't know if I understand how you get to that number.
    Mr. Brown. Well, we are getting ready to do a paradigm 
shift at the Fund. I have said to our team that to focus on 
awardees only tells a part of the story. We have 553 CDFIs that 
are engaged to do something in their local markets. That is our 
customer base. That is our delivery system. We need to know 
what they have on their books and how they are getting those 
dollars to flow in, and our money match, it leverages, it 
subsidizes, it helps reduce the cost of funding. It does a lot 
of things. And to say what that exact figure is would be 
difficult to define. But what I do know is that it helps reduce 
the cost of funds. It brings private sector dollars to the 
table. It helps where the Fund has not raised enough and you 
look for that Federal assistance to just get them over the 
hurdle based on that demand, and the role we play is 
significant.
    Mr. Knollenberg. I think that is all I have, Mr. Chairman. 
Mr. Brown, thank you very much. Good luck to you. Welcome 
aboard. You have been in since?
    Mr. Brown. I have been in since August. Yes, sir.
    Mr. Knollenberg. Thank you.
    Mr. Walsh. Thank you.
    We have no further questions now. We will submit questions 
for the record, and we would appreciate a prompt response.
    Mr. Brown. Thank you.
    Mr. Walsh. Thank you.
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                                          Thursday, March 14, 2002.

          NATIONAL INSTITUTE OF ENVIRONMENTAL HEALTH SCIENCES

                               WITNESSES

KENNETH OLDEN, PH.D., DIRECTOR, NATIONAL INSTITUTE OF ENVIRONMENTAL 
    HEALTH SCIENCES
ANNE P. SASSAMAN, PH.D., DIRECTOR, DIVISION OF EXTRAMURAL RESEARCH AND 
    TRAINING
WILLIAM A. SUK, PH.D., DIRECTOR, SUPERFUND BASIC RESEARCH AND TRAINING 
    PROGRAM
JOSEPH T. HUGHES, JR., DIRECTOR, WORKER EDUCATION AND TRAINING PROGRAM

                              Introduction

    Mr. Walsh. The subcommittee will come to order.
    We will now continue this morning's hearing by taking 
testimony on fiscal year 2003 budget submission for the 
National Institute of Environmental Health Sciences. NIEHS is 
one of 19 institutes that are collectively known as the 
National Institutes of Health, and its appropriations annually 
come from two places: approximately 11 percent is provided 
through the VA, HUD, Independent Agencies bill, our bill, to 
conduct work as authorized pursuant to the two primary 
Superfund laws; and the remaining 89 percent, or $607 million, 
is provided through the Labor, Health and Human Services 
appropriation to carry out certain activities pursuant to the 
Public Health Service Act.
    For fiscal year 2003, NIEHS is requesting $76,074,000 an 
increase of $4,243,000 above fiscal year 2002 appropriated 
level. Within this total, $48,936,000 would go to NIEHS Basic 
Research Program and $27,138,000 would go to the Worker 
Education and Training Program.
    I should also note that NIEHS received an additional 
$10,500,000 for both training and research activities in 2002 
terrorism supplemental approved as part of the defense 
appropriation bill in December.
    Testifying for NIEHS again this year will be its Director, 
Dr. Kenneth Olden. We welcome Dr. Olden, and following the 
opening remarks of the subcommittee's ranking member, Mr. 
Mollohan, I will ask you to introduce the associates who have 
accompanied you today, and then summarize your opening 
statement as best you can. Your written statement will be 
included in the record.
    Mr. Mollohan?
    Mr. Mollohan. Mr. Chairman, I join you in welcoming Dr. 
Olden to the hearing today and look forward to his testimony. 
Thank you.

                     WORLD TRADE CENTER ACTIVITIES

    Mr. Walsh. Dr. Olden, please proceed.
    Dr. Olden. Thank you very much.
    Let me start by introducing Dr. William Suk, to my right. 
He is the Director of the basic research component of the 
Superfund program and Dr. Anne Sassaman, to the left, is 
Director of the Division of Extramural Research and Training. 
To arrive soon is Mr. Joseph Hughes, and Mr. Hughes is Director 
of the Worker Education and Training Program.
    Mr. Chairman, Mr. Mollohan, and other members of the 
committee, it is a real pleasure to be here today to support 
the President's request for the Superfund Basic Research and 
Worker Training Programs. The national importance of both 
programs has been most evident, I think, since the September 
11th terrorist attack on the New York World Trade Center. I 
want to emphasize that the performance of the principal 
investigators in both programs has really been outstanding. I 
will summarize towards the end and thank you for your support 
in getting the supplemental so that we could address some of 
the important issues surrounding the World Trade Center.
    Several other principal investigators--that is principal 
investigators in the Worker Training Program and principal 
investigators in the Basic Research Program--played very 
prominent roles in the rescue, recovery, removal, and 
environmental assessment, and also in education and outreach.
    Mr. Joseph Hughes, who heads the Worker Education and 
Training Program, was honored by Secretary Tommy Thompson. He 
received a special award for his heroic efforts to mobilize the 
resources, both human and otherwise, and also to provide the 
protective gear that was needed to protect the workers at the 
World Trade Center. So with the committee's indulgence, when 
Mr. Hughes and his colleagues get here, I would like to ask 
them to stand and to be recognized by this committee.

                        ENVIRONMENTAL EXPOSURES

    Last year I indicated that the management of hazardous 
waste is a major challenge that this country and other nations 
are facing, and that hazardous waste sites contain chemicals 
that are known to be animal or human carcinogens: chemicals 
that are known to be poisonous or toxic to the nervous system, 
chemicals that are toxic to the immune system, and chemicals 
that impair the growth and development of young children.
    In other words, if workers and community residents are 
exposed to these agents, it could contribute to diseases, such 
as cancer, Alzheimer's, Parkinson's, autism, osteoporosis, 
diabetes, and development of birth defects.
    In fact, we know that most diseases are caused by basically 
two things: genetics and the environment. In fact, one can 
inherit a genetic predisposition to develop a disease but 
never, ever develop the disease unless exposed to the 
environmental trigger.
    So investment in environmental health prevention research 
and worker education and training will help in eliminating the 
epidemic of diseases. That is really the major reason that this 
program was started by Congress.
    In my testimony a year ago, I discussed some of the 
successes of the program, and I wanted to convince you that the 
program had a definite public benefit and had a definite impact 
on human health and the economy.
    I described a lot of the new technologies that had been 
developed in the program--technologies that had already been 
used in cleanup efforts at various hazardous waste sites around 
the country. I mentioned that several patents had been awarded 
and licensed to various biotech companies to pursue 
commercialization.
    I talked about newly developed bioremediation technologies 
that are far more efficient and less costly than conventional 
methods based on pump and treat technologies or methodologies. 
I described how our education and training program had improved 
the knowledge, the attitudes, and practices among hazardous 
waste workers and emergency responders. I talked about how job-
related accidents and injuries had declined in both industries. 
Today I would like to just briefly mention how the programs 
have impacted public policy and decisionmaking with respect to 
cleanup and health assessments at hazardous waste sites.
    I would like to cite three examples that the administration 
and Congress have had to deal with over the past 3 months.
    The first one is the recent EPA decision to lower the 
permissible level of arsenic in drinking water from 50 parts 
per billion down to 10 parts per billion.
    The second issue would be the recent EPA decision to dredge 
PCBs from the Hudson River bed in New York.
    Finally, I would like to return to the issue of rescue, 
recovery, removal, risk assessment and outreach and education 
in the New York City area in response to the World Trade Center 
disaster. All three are examples of where the research 
supported by this program has been very useful.

                                ARSENIC

    The new arsenic standard will likely require procedures to 
remove arsenic from the water in several parts of the United 
States, for example, in Northeastern U.S. and also in the 
Southwest part of the United States. As arsenic is a natural 
contaminant, we are going to need new, low-cost, effective 
technologies to remove arsenic from drinking water sources in 
many municipalities. Some of our grantees are already working 
on technologies to do just that. They are using iron filings as 
filters, and it turns out by using this technology that one can 
lower arsenic levels to the point that they are non-detectable 
in water.
    In addition to the technology to extract arsenic from 
water, over 200 publications that were produced by our grantees 
provided a large body of the information that the EPA used in 
its decision about arsenic. Many of our grantees served as 
expert witnesses and served on advisory panels for EPA during 
the deliberation to develop the consensus on what was the 
appropriate level to implement or to recommend.
    Arsenic is a known human carcinogen, and it is present in 
over 70 percent of Superfund sites. The other interesting 
development with respect to our research on arsenic is that our 
researchers have also identified a mechanism by which arsenic 
causes cancer. They have indicated that they can prevent the 
disease by subsidizing the diet with antioxidants, so that is a 
very important prevention strategy.

                                  PCBS

    For the Hudson River, as I said, our grantees provided, 
again, a lot of the research on which that decision was based. 
For example, our investigators demonstrated that PCBs were 
being degraded much slower in the sediment in the river bed 
than laboratory studies had predicted.
    Mr. Walsh. Sorry. Would you say that again?
    Dr. Olden. Yes. Our grantees demonstrated that PCBs were 
being degraded much more slowly in the sediment in the river 
beds than what had earlier been predicted based on laboratory 
studies. They also demonstrated that PCBs were accumulating in 
fish and crab that were subsequently consumed by humans. They 
then demonstrated that they could detect PCBs in the tissues of 
humans that had consumed crab and fish from the river.
    For many years one of our major efforts had been studying 
fate and transport, and so clearly our laboratory studies, plus 
our field studies on fate and transport were a very important 
bit of information that was used by EPA in making the decision 
that the PCBs should be dredged rather than remain there in the 
river.

                     WORLD TRADE CENTER ACTIVITIES

    Finally, individuals that were trained in our worker 
training program have shouldered much of the burden for the 
rescue, recovery, and removal activities at the World Trade 
Center.
    The New York City Fire Department lost 54 of the 87 hazmat 
technicians that they had in the department on the day of the 
attack. That was a large number of people, and just not in 
human resources, but also in terms of expertise that was simply 
lost.
    Now, with the supplement that you helped obtain for us, we 
are in the process, with the International Association of Fire 
Fighters, of retraining personnel to provide for New York City, 
and so that is one of the things that we are going to use much 
of this money to do.
    Now, I want to take this opportunity again, Congressman 
Walsh, to thank you for your leadership on this issue in 
obtaining the funds in the defense appropriation.
    The International Union of Operating Engineers--almost 
within 48 hours they were on-site--provided training using a 
mobile facility. They also provided equipment that was needed, 
like respirators, hard hats, and ongoing air monitoring. And 
they provided a hygienist that was on-site, and is still on-
site, to help and give advice to the workers. I mentioned Mr. 
Hughes earlier who had received the Secretary's distinguished 
award, and Mr. Hughes is here now. And I would like for any 
other members of the Worker Training or Superfund Basic 
Research Programs that participated in the New York Trade 
Center recovery, to stand, if they are in the audience. Mr. 
Carson, thank you very much.
    In closing, let me state that investments that we are 
making in this program, I think one can safely say, are not too 
much to make certain that we are setting the right priorities, 
that is, determining what sites to clean up, and how much 
should we clean up those sites; that we are using the most 
efficient and cost-effective technologies; and, finally, that 
we are protecting the health and safety of persons who are 
working in emergency response and remediation industries.

                             COLLABORATIONS

    Without good information and effective technologies, the 
risks to humans and the environment cannot be established and 
appropriate risk reduction measures cannot be introduced. I 
won't take time to go into it, but our collaborations and 
interactions with EPA and ATSDR are, I think, going very well 
and we are very pleased with them, and I hope that when the 
representatives of EPA and ATSDR appeared before you, that you 
heard the same from them.
    I can comment on some new interactions that we are having 
with ATSDR if you have time to hear them.
    I am convinced that the interactions with ATSDR and EPA are 
really critical to ensuring the relevance of our research in 
terms of what the issues are in the field. I have emphasized 
that, and we have spent a lot of time over the past year 
developing new collaborations with ATSDR.
    This concludes my testimony, and I would be happy to answer 
any questions that you might have.
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                             BIOREMEDIATION

    Mr. Walsh. Thank you very much, Dr. Olden. That was a very 
thorough report. Three of the items you picked out, 
coincidentally are very important to my State: arsenic, the 
dredging of the Hudson, and your response in New York. And I 
thank my staff for helping to provide us with the direction to 
go after those funds specifically for NIEHS, and I thank all of 
you for the remarkable and important work that you did there. 
In the midst of a tragedy, a true tragedy for our country, I 
think a great deal was learned in how to respond. And I think 
in the unlikely event that something of this magnitude happens 
again, although you never know, we will be much better prepared 
to respond.
    Rather than go in the order that we have been going in, if 
I could, I would like to call on Mr. Hobson, who is a defense 
subcommittee member, now and he just had a question he would 
like to put to you, sir.
    Mr. Hobson. I, too, want to congratulate you on New York. I 
was there and that is a very difficult situation. But I think 
we will learn things. We may not have a tragedy of that sort, 
but there is a mix of things that happened at the World Trade 
Center that could happen in a lot of communities in other ways. 
So what we have learned I think is good.
    I just have one question. I know that an emerging manner 
for cleaning up toxins in our soil and water is bioremediation.
    Dr. Olden. Yes.
    Mr. Hobson. In fact, I understand there is some innovative 
research on ways to use this and to clean up carcinogenic 
metals, and it is being done at the University of Cincinnati in 
Ohio.
    Dr. Olden. Yes.
    Mr. Hobson. Which happens to be the State I am from, and I 
grew up there.
    I think some constituents from the University of Cincinnati 
in Ohio just happened to show up today.
    I would just like you to discuss some of the successes of 
this research and the potential impacts it might have on public 
health, because it is an intriguing thing that is a little 
different than what is usually done. You know, we always want 
to treat something with some sort of substance or chemicals 
which then creates other problems. This is kind of a natural 
sort of thing that I would like you to talk about.
    Dr. Olden. Well, last year, I spent a fair amount of time 
talking about the bioremediation efforts. I talked about some 
of the plants that had been developed, such as the hybrid 
poplar tree. I talked about a technology where the gene that 
produces the light in a firefly was incorporated into a 
bacterium, and they can use that bacterium--put it in the 
soil--and every time that it is exposed to dioxin-like 
compounds, it will light up. So that is a way of detecting 
toxins in the soil.
    I mention that because today I want to tell you that that 
technology has, first of all, been improved upon, and it has 
been licensed by the Food and Drug Administration to detect 
dioxin-like compounds in our foods, as well in feed that 
livestock eat. It has also been licensed in Germany and 
Belgium.
    There are a number of genetically modified organisms--
plants and bacteria--that are being used to degrade chemicals, 
and they are very innovative. For example, down in the soil, 
one often needs more than one set of genes--one bacterium. 
Because there are conditions where animals will have lots of 
oxygen or no oxygen, maybe one bacterium will only degrade it 
to Product A, but you need to go from Product A to B to C, and 
so you need a mixed culture.
    So some very innovative things have been done. Last year, 
one of you asked me about the willow tree. You realize that a 
willow grows along streams. Well, the willow tree is one of the 
trees now that is being manipulated like the poplar tree and 
the tobacco plant. So there are a lot of very innovative 
technologies that are being developed with genetic 
recombination and gene transfer technologies.
    The technology dealing with metals is a very important one 
because metals are natural products. So we typically have had 
no way to degrade them, and so I think--they can correct me, 
but this must be a way of sequestering the metals and it is not 
a breakdown. But it is a way to extract the metal from the soil 
or water by the bacteria.
    So there are some really exciting things that are being 
done, and these are being introduced into commerce.

                            LESSONS LEARNED

    Mr. Hobson. That is good. You know, the fireflies, really--
and I don't want to take up too much time on this, it is 
interesting. I went to Wright Patterson Air Force Base to look 
at nanotechnology research and some light materials. They are 
looking at the firefly and how it does its thing. And they are 
looking at fish and how they change their colors and things of 
this sort. So there is lots of research going on in labs 
everywhere on things that are natural to our society that we 
are beginning to look at rather than these exotic concoctions 
of chemical cocktails.
    Dr. Olden. Right. The grantees have been extremely 
innovative and productive, and you can justify it and make that 
case based on the number of patents, the number of products 
that have been commercialized, and the number of products that 
have been introduced into the field to actually clean up sites.
    So before you leave, let me just say that based on what we 
have learned as a consequence of the New York World Trade 
Center crisis, we are going to take a look at our Worker 
Training Program and incorporate best practices and our 
experience to rebound, if necessary. We know now that some 
things need to be done differently, and so Mr. Hughes and his 
colleagues are going to do that.
    For example, I approached the Director of the National 
Institute for Mental Health and talked to him about some of the 
issues in terms of emotional support. When I went up to visit 
Don Carson, he showed me around the World Trade Center site, 
and I met with workers during the day. None of us have ever 
faced that kind of tragedy before where we lost so many 
colleagues and friends. So the impact on families, and on the 
workers, is something that we have never experienced in the 
kind of accidents that we have around the Beltway or any other 
disaster. This is of a very different magnitude.
    So I think we need to incorporate some training to deal 
with the human emotional part. But there are other things as 
well that we have learned that will be incorporated, and so the 
new dollars will be spent, in part, to do that this year.
    Mr. Hobson. Thank you very much. I appreciate it.
    Thank you, Mr. Chairman. I appreciate your indulgence.

                           SUPPLEMENTAL FUNDS


    Mr. Walsh. You are welcome.
    Dr. Olden, as I noted in my opening remarks, NIEHS was 
provided $10,500,000 in the supplemental for specific 
terrorism-related activities. I am aware that some of these 
funds went to research programs, some went to worker training. 
What was the split? Do you recall?
    Dr. Suk. It was $4.5 million to the Research Program and $6 
million to Worker Training.
    Mr. Walsh. Did the additional funding for research go to 
new research and training, or did it go to supplement existing 
research and training?
    Dr. Olden. The answer is probably it is a supplement 
because we have received, I think, seven applications in 
response to our request. They are from principal investigators 
that already have grants. So we are focusing on the things that 
we got started.
    I think you know that we pulled together some funds from 
within the Institute because it was at the end of the year. We 
pulled together some funds to provide the grantees in and 
around the New York area, who responded to the World Trade 
Center, with some supplements. Let's say the basic researchers 
got in there and collected samples. They began a community 
outreach and education effort, and they started some 
epidemiology studies. What we are hoping to do is provide them 
money so that these samples can be analyzed and that the 
cohorts that they identify, for example, a cohort of women that 
were pregnant, can be followed and the outcome determined. We 
want to provide the resources to not just those. As a matter of 
fact, there is competition nationwide, but certainly the focus, 
the priority, obviously has to be on providing money to follow 
up with the fine studies that were started by the four to five 
centers in and around New York. So the answer is they are 
supplementals.
    Mr. Walsh. If you could for the record submit how all the 
additional funding was utilized, we would appreciate it.
    Dr. Olden. Right.
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                           HOMELAND SECURITY

    Mr. Walsh. In reviewing your 2003 request, I don't see any 
specific funding for homeland security per se. Are you not 
doing new work in this regard? Or is it included in other 
programs?
    Dr. Olden. It is included in other programs, and this 
budget went forward, at least from us, to OMB before the New 
York World Trade Center disaster.
    We are having discussions through the Department with FEMA, 
and we do have a request in for monies through that mechanism.
    Mr. Walsh. So you would request funds from FEMA?
    Dr. Olden. Yes.
    Mr. Walsh. As you know, their budget will more than double 
this year.
    Dr. Olden. Yes.
    Mr. Walsh. So you would try to attach some of those funds?
    Dr. Olden. Yes. The NIH was asked, and I was asked to 
represent the NIH in the discussions with FEMA, and we 
identified exactly what our scientists had been doing and the 
worker training PIs as well. We were asked to submit a budget 
to cover those issues, and we did. So we may be successful in 
getting the monies we asked for. Thus far they have been 
accepted by FEMA leadership. Now, they have to be appropriated 
someplace.

                    SUPERFUND BASIC RESEARCH PROGRAM

    Mr. Walsh. On the Superfund Basic Research Program, with 
regard to that program, I would note the program supported by 
the Institute pursuant to our Superfund statute was designed to 
foster an interdisciplinary approach in developing remediation 
and public health strategies. This interdisciplinary approach 
is, in part, achieved through research activities conducted by 
individual universities or university consortiums.
    As you indicate in your budget justification, the primary 
areas of research upon which you focus include: reducing the 
unique environmental health risks to children; solving complex 
environmental problems with new technologies; identifying 
mechanisms of toxicity; and improving remediation strategies.
    As each of these areas is complex and of obvious 
importance, how do you establish research priorities among 
them?
    Dr. Olden. Well, Dr. Suk has regional meetings around the 
United States where he involves the regional EPA and ATSDR 
leadership out in those regions. In other words, the EPA people 
who are actually doing the cleanup participate in these 
regional meetings. These are outreach efforts designed to get 
input into the decision-making in the Institute.
    In addition, we have workshops and conferences that involve 
EPA and ATSDR and the public, the same as with regional 
meetings. And so we get input through that mechanism to make 
sure that the science we are supporting is actually the 
technologies that are really needed in the field.
    In addition, once we release a request for applications and 
they are submitted and reviewed by the usual peer review 
mechanism, we then meet with EPA and ATSDR to look at those 
grants that score in the outstanding range, and discuss which 
technologies--what bit of information--is actually needed. So 
they go sit with us and help us decide which of the 
applications that are outstanding should be funded, based on 
needs and priorities in the field. So that is how we set our 
priorities.

                             SUPERFUND SITE

    Mr. Walsh. Let me ask you about a specific situation. Just 
feel free to comment on providing me with some direction. We 
have a Superfund site in my community. It is a lake. It is a 5-
mile-long by a mile-wide lake, maybe 6 miles long. It is 
polluted by a number of factors. There was benzene plume 
leaching into the lake. There is metropolitan wastewater going 
into the lake which is being remediated now through a combined 
sewer overflow program. But there is also industrial pollution, 
and it is primarily mercury, although the sediments of this 
lake have lots of chemical compounds in it.
    There has been a tremendous amount of research done by 
environmentalists, scientists. Core samples of the sediment 
have been drawn. And there is a remediation plan in place now 
on the lake. Honeywell is the owner of the industrial site now, 
so they would be responsible. And so they are trying to reach 
an agreement with the Attorney General of the State of New 
York, and I would think they are coming close to remediating 
the problems on land, but the sediments are sort of to be 
determined how to deal with those.
    Since a lot of the sediment analysis work has been done, 
and those sediments have been analyzed and people are aware of 
what chemicals are there, how might your agency or ATSDR or EPA 
intervene to help to determine how best, as you did with the 
Hudson, to deal with these mercury hot spots and the 
combinations of chemicals that are in the lake?
    How would you be drawn into something like that?
    Dr. Olden. Well, typically our research is not site-
specific. I mean, we address what are identified as generic 
problems and develop technologies to deal with those.
    Now, metals is clearly one of those, and mercury is a metal 
that is poisonous. So we have supported a lot of research on 
mercury.
    We could be drawn in many ways. For example, Dr. Suk in his 
regional meetings--and we could certainly hold a regional 
meeting in the area with the EPA and ATSDR--the three of us--to 
discuss with them what remediation technologies and strategies 
they think they are going to use and whether they have the 
knowhow, the knowledge to do that, or if they do not and wish 
for us to support research to help with the remediation.
    Now, we know about the toxicity of mercury. That I think is 
well established, that part would not require research. But the 
remediation part may. Any of us could take the leadership on 
it. Usually if you contacted me, I would bring in ATSDR and 
EPA, and we have done that a number of places. In New York 
State, in fact, we went up to Sag Harbor with Congressman 
Forbes, ATSDR and myself, and we had a town meeting. We decided 
that what was needed for that site was for ATSDR to go in and 
do a site assessment, which is what the community wanted. But I 
was involved because our National Toxicology Program had done a 
lot of toxicity testing on many of the chemicals in that site. 
So we could do a similar kind of thing in your district to deal 
with the lake issue.
    Mr. Walsh. Thank you.
    Mr. Mollohan.
    Mr. Mollohan. Thank you, Mr. Chairman.

                            BUDGET INCREASE

    Mr. Mollohan. Dr. Olden, your budget request, excluding the 
supplemental funding, is $5.8 million over last year. Are there 
specific program areas that you plan to address with that?
    Dr. Olden. Yes. We have had some internal discussions, and 
I would say three things.
    One, when I talked with you last year, I indicated that our 
grants that we already have awarded are underfunded and at that 
time we estimated by about 25 percent. We did subsidize those 
grants a bit, and I indicated that I would do that.
    Mr. Mollohan. A 7.2% increase to do that.
    Dr. Olden. Yes, and we did subsidize them. They are still 
underfunded, but obviously not as much so as they were in the 
past. So we would provide some supplement to those grants.
    The other thing that we would do is small business 
innovation grants, and we hope to fund four to six of those 
sometime soon based on the money you gave us for this fiscal 
year.
    We would like to expand those as well. I don't know what 
number, so that would be another area that we would invest some 
of the proposed increase. And I didn't go into it, but we have 
identified four to five areas of collaboration with ATSDR, for 
example, children's health and looking at the effects of PCBs 
on thyroxin, a thyroid hormone of the thyroid gland.
    We would use some of the funds to promote those 
collaborations as well. There may be something I am leaving 
out.
    Mr. Mollohan. What are the other areas of research that you 
have targeted that you might be able to get into with 
additional funding?
    Dr. Olden. Do you want to comment?
    Dr. Suk. One of the things that you mentioned before, which 
has to do with what do you do with metals----how do you deal 
with metals from a remediation standpoint. They are not 
degraded per se, but they can have their toxicity reduced with 
microorganisms or worms, or plants, for example. So it would be 
nice to be able to do something in a targeted program that 
would look at the sequestration of metals and ways to reduce 
their toxicity.
    Dr. Olden. Oh, yes. And the other thing that certainly you 
told me and neither of us have mentioned, is that we also want 
to do some high-risk, short-term kind of high-payoff grants. We 
have never supported those through this mechanism. We wouldn't 
want to make 5-year awards yet, but we could make an award for 
1 or 2 years for a technology or an idea that we thought was 
maybe high risk, but high payoff if it worked. We could put----
    Mr. Mollohan. Give us some examples of high-risk, high-
payoff, short-term grants.
    Dr. Suk. I can give you an example. The one we have just 
been talking about with regards to metals, that is one. The 
other issue is what has been discussed here with Representative 
Walsh about this lake in upstate New York. It is obvious that 
it is mixtures. We are all exposed to different levels of 
mixtures, and there are important research questions that can 
be addressed to get a better understanding as to how to assess 
risk to a variety of chemicals, rather than just single 
chemicals.
    Dr. Olden. Let me just say, in the Labor, HHS 
appropriation, we are making significant investments in a new 
technology called toxicogenomics. In that testimony, I 
indicated that we think that that will be a high-throughput, 
low-cost, very specific way of identifying toxic agents in the 
future. It will, we think, ultimately replace the conventional 
rodent bioassays.
    That is one of the things that we discussed with Dr. Henry 
Falk at ATSDR that we are partnered with. We think that we can 
develop these technologies not only for the National Toxicology 
Program and other NIEHS research but also for this program as 
well. We could identify toxic agents associated with Superfund 
hazardous waste sites much more efficiently using genomic 
approaches. That, again, would be a high risk, but the payoff 
would be enormous, however.

                              COORDINATION

    Mr. Mollohan. To what extent do you or do you not 
coordinate with National Science Foundation or other research 
entities?
    Dr. Olden. Well----
    Mr. Mollohan. Or do you?
    Dr. Olden. We do. Yes, we do. It is clear that we don't 
want to unnecessarily duplicate any effort that is being 
supported by the taxpayers in any other agency.
    Mr. Mollohan. Right.
    Dr. Olden. So we have strategic planning efforts in the 
Institute on a yearly basis that bring in experts from all 
over, and we have conferences and workshops, and in those 
conferences and workshops and brainstorming sessions, we have 
people from other agencies. We have a lot of collaboration with 
NSF, for example, on oceans and the environment. And we are co-
funding efforts with other agencies such as DOE for just that 
reason.
    So that is how we do it. We are very definitely concerned 
because none of us have----
    Mr. Mollohan. So you do coordinate and you do have 
boundaries, and you do----
    Dr. Olden. Yes, absolutely. We have had a number of 
meetings with Dr. Rita Colwell at NSF and her colleagues about 
a number of issues, so we do coordinate through the National 
Academy of Sciences. We have a roundtable, and many of the 
agencies that you talked about are members of that roundtable. 
As a matter of fact, the roundtable, met yesterday. We are 
collaborating with USGS, and I just read an interesting study 
that was published yesterday or the day before in the newspaper 
about pharmaceuticals and drugs in our water supply.
    Mr. Mollohan. I have heard about that report.
    Dr. Olden. We have had discussions with them about that 
issue, and so they have technologies already in hand that we 
need to use. We have an exposure assessment, and so that is how 
we do it.

                   SMALL BUSINESS INNOVATIVE RESEARCH

    Mr. Mollohan. Thank you.
    Part of your 2002 increase in basic research is a new set-
aside for small business. I understand that a request for 
applications has gone out for these funds.
    Dr. Olden. Yes.
    Mr. Mollohan. Can you assess that and----
    Dr. Olden. Yes, I think they are going to be awarded in a 
matter of weeks.
    Dr. Sassaman. They are waiting to be peer reviewed. They 
were received, I believe, last month.

                              BIOTERRORISM

    Mr. Mollohan. So you can't comment on the quality of them 
because you haven't gone into them yet. It would be interesting 
to find out how that is going.
    I would like to close by joining the chairman in 
complimenting you and your role and Mr. Hughes' and Don 
Carson's role in the efforts following the 9/11 tragedy. It is 
very impressive.
    Are you requesting enough funds here for your Worker 
Training Program?
    Dr. Olden. Yes, we----
    Mr. Mollohan. And while I ask that, I would just like to 
add a little bit. Considering biological threats and 
radiological threats, is this funding adequate or inadequate to 
address that additional dimension to the problem?
    Dr. Olden. I do talk about that in my other testimony, 
because I think the NIEHS programs are ultimately going to play 
a major role in bioterrorism, not only the kind of attack that 
we just experienced, but also in bioterrorism or chemical 
terrorism. And I think we have some of the technologies that 
will allow us to determine, in a short period of time, exactly 
what the risk is going to be once one has been exposed. We can 
identify the causative agent using genomic technologies, and we 
will have an opportunity to put forward, I hope, a budget that 
will allow us at some point to expand our efforts. But I think 
we do have adequate funds now to move forward.
    Mr. Mollohan. Have you developed a budget with that focus 
on what is going to be necessary for your participation in 
that? And is that a part of this budget or do you anticipate 
putting it forward in a supplemental?
    Dr. Olden. It will probably go forward in the supplemental. 
It is in FEMA in part. Some parts of it are in the FEMA effort. 
All of these budgets that we are talking about now went forward 
before this was an issue. Some parts of it are in FEMA, but all 
aspects of what I think we will be able to do ultimately, are 
not in any budget at the present time.
    Mr. Mollohan. Thank you, Doctor.
    Mr. Hughes. Just in terms of the bioterrorism and our 
priority for this year, we have put that as our number one 
priority. That was back in June. Basically we have created the 
main anthrax remediation course for the workers who remediated 
that. So in terms of what we have tried to do, I think we have 
tried to use the additional funds that you all gave us 
connected with the World Trade Center to also be able to try to 
respond to the bioterrorism threat.
    Mr. Mollohan. Thank you, Mr. Chairman.
    Mr. Walsh. Mr. Goode.

                    SUPERFUND BASIC RESEARCH PROGRAM

    Mr. Goode. Thank you, Mr. Chairman.
    I recall your testimony last year about the poplar trees. 
[Laughter.]
    How much did you give in grants for research, either short 
term, high expectations, high risk, or long term last year? I 
think the chairman touched on it, but I have forgotten the 
figure that he said.
    Dr. Olden. Yes, and I will have to ask somebody to tell me 
the exact number, 45----
    Dr. Suk. The whole 2002 budget.
    Dr. Olden. For Superfund Basic Research.
    Dr. Suk. It is $45.8 million.
    Mr. Goode. All right. Now, how much of that was to 
institutions of higher education that are expert in research? 
Just a ballpark figure.
    Dr. Suk. All of it.
    Mr. Goode. All of it. All right. Did you do any with 
Virginia Tech?
    Dr. Suk. No, we did not.
    Mr. Goode. Did you do any with the University of Virginia?
    Dr. Suk. No, we did not. [Laughter.]
    Just to anticipate your question, a while back when we put 
together this program for this particular funding cycle, I had 
discussions with the Vice President for Research at the 
University of Virginia, and the University of Virginia chose 
not to come in. I just thought I would mention that.
    Mr. Goode. Well, let me ask you this: Has the deadline 
passed for submitting grant requests for this year? When was 
the deadline?
    Dr. Suk. Well, it is in a 5-year cycle.
    Mr. Goode. What about those 1-year high-risk----
    Dr. Olden. That is new.
    Dr. Suk. That is new. That is the one we have been 
discussing.
    Dr. Olden. That is right. With the funds for 2003, that is 
one of the things that we are discussing doing.
    Mr. Goode. But you didn't talk to Virginia Tech? Or did 
you?
    Dr. Suk. No, I did not. You mean this past year?
    Mr. Goode. Yes.
    Dr. Suk. No.
    Dr. Olden. But I would be very pleased to go and visit. I 
visit a lot of institutions all over the country, and I would 
be very pleased to go. Why don't I just promise you that I will 
go and meet with the leadership of those two institutions.
    Mr. Goode. All right. And how about promising me you will 
come to my office well before the deadline so I can touch base 
with Virginia Tech and get you somebody that will respond 
better than the response you got at UVA, where I went to 
school. [Laughter.]
    Dr. Suk. I will do that.

                             BIOREMEDIATION

    Mr. Goode. You mentioned plant life and that can be 
genetically modified with ease as offering the greatest 
potential. Well, I am told that tobacco is the most easily 
genetically modified plant in the world, or certainly in the 
United States, and already a tremendous amount of research on 
genetically modified tobacco has taken place at Virginia Tech.
    Dr. Olden. Congressman, I am from North carolina, so I am 
very much----
    Mr. Goode. Well, we don't want N.C. State now to get it 
all. [Laughter.]
    Dr. Olden. You are right, and certainly one of the plants 
that is being genetically modified for remediation purposes is 
the tobacco plant. So it is one that we hope will someday be 
used in remediation efforts.
    Mr. Goode. Are there any projects or research funded by 
NIEHS with the tobacco plant now?
    Dr. Suk. Yes. The University of Washington--the folks who 
did the poplar--they actually have a tobacco plant project for 
studying the feasibility of tobacco as a model. They have not 
as yet put it out into the field to determine its usefulness at 
this point. They don't grow a lot of tobacco in the State of 
Washington, either.
    Mr. Goode. But in Southside, Virginia, they grow a lot of 
tobacco, and it can change around a lot, and down in North 
Carolina, where David Price is from, there is a whole lot of 
tobacco.
    Dr. Suk. We can certainly put the people from Virginia Tech 
in touch with the people at the University of Washington if 
that would be helpful.
    Dr. Olden. Something that we are planning for now, once we 
complete this cycle, which will be in 2005, is to stagger the 
time when the grant applications come in. In other words, we 
have an annual competition, so that if any institution has an 
unsuccessful proposal, they don't have to wait for 5 years. 
That is not good for the program. We want to have annual 
competition so if one submits a grant application that misses 
the payline a bit, it can be revised and resubmitted the 
following year. We wish we could have done that a long time 
ago, but the way that we got a pass-through, we just couldn't 
do that. Now that is handled differently, we can certainly put 
this on an annual basis. I think it is going to be good for the 
program, because if you are not funded for 5 years, it is hard 
to keep the momentum in one's laboratory.
    I think that will be good, and we hope to do that when we 
end this funding cycle.
    Mr. Goode. Mr. Chairman, thank you, and thank you for 
responding.
    Mr. Walsh. Thank you. Virgil, I thought you knew that most 
connoisseurs of tobacco preferred Washington tobacco to 
Virginia tobacco. [Laughter.]
    Mr. Price.

                         DOWNWARD NEGOTIATIONS

    Mr. Price. Thank you, Mr. Chairman.
    I want to welcome Dr. Olden, Dr. Suk, and their colleagues, 
who are constituents of mine, and an important presence in the 
Research Triangle area of North Carolina that give us great 
pride.
    Following up a bit on your answer to Mr. Mollohan earlier 
about the ways the increment of funding proposed for 2003 would 
be utilized, you touched on the Small Business Innovation 
Research Program and also your desire to get your percentage 
funded number up for existing grants.
    Dr. Olden. Yes.
    Mr. Price. Let's start with that because it does follow 
upon an ongoing effort, I know, and something that we discussed 
at this point last year. I asked you about the adequacy of the 
funding for the Basic Research Program, and specifically how 
the grants to your 19 participating institutions compared with 
average NIH grants. As I recall, you stated that SBRP grants 
are generally funded at about 75 percent of their approved 
level, while the average NIH grant is funded at around 85 
percent of its approved level. I know you have been working on 
this.
    To what extent has the funding you received for 2002, 
exclusive of the supplemental funding relating to terrorism, to 
what extent has that funding helped you get the funding 
percentage higher? How much higher? And for 2003 are we talking 
about sufficient funding, assuming this is still a priority?
    Dr. Olden. Right, it is still a priority.
    Mr. Price. So what would get us approximately to that 85 
percent level?
    Dr. Olden. Let me say we certainly used some of the 
increase that we received last year to subsidize the 19 
programs that are funded. We intend to do the same as one of 
our priorities for the year 2003, the budget that we are 
testifying for now.
    Now, how close we come to taking care of the underfunding, 
if Bill or Anne would tell me that.
    Dr. Suk. With the monies that we received in 2002, we will 
be able to close in on about the 20 percent level. So we will 
be about at 20 percent as opposed to 25 percent reduction.
    Dr. Olden. So we will be still about 5 percent under the 
typical NIH?
    Dr. Suk. That is right.
    Mr. Price. Would you translate that in terms of 75, 85, the 
terms I was using? I am not sure I get the comparison.
    Dr. Suk. Okay. Rather than it being 75 percent--75 cents on 
the dollar--it would be 80 cents on the dollar.
    Mr. Price. I see. So we are halfway there in terms of----
    Dr. Suk. Right, exactly.
    Dr. Olden. And this year, we are going to do some. We don't 
know exactly how much.
    Dr. Suk. Right.
    Dr. Olden. But we will subsidize the existing grants again 
a bit to get them, if not to the typical NIH level, close to 
it.
    Mr. Price. All right. And just remind us again for the 
record what is wrong year after year with funding your grants 
at a 75 percent level, and particularly when other agencies are 
managing to do better?
    Dr. Olden. Well, obviously we get what we pay for. So if we 
are not providing the researchers with the money that they 
need--that they have outlined in their grant application--they 
have to eliminate personnel, they have to eliminate projects, 
they can't buy supplies. There is something that can't happen. 
That is the bottom line. So we are postponing the purchase of a 
product to the out-years. None of our grantees can conduct the 
research that they proposed and were approved for without the 
money to buy the people, the supplies, or whatever it is they 
need. So we are just simply--while we have the potential to do 
the science--we simply are postponing the purchase of it. So I 
would say that is fundamentally what we are doing.
    Mr. Price. Well, it is one thing to stretch your dollars 
just as far as they can possibly go.
    Dr. Olden. Right, right.
    Mr. Price. But it is quite another thing to take such an 
increment off of each grant that you really are forcing these 
projects to be cut back or to deliver less than they promise in 
terms of----
    Dr. Olden. Right. And we also run the risk, Congressman 
Price, that people will lose the interest of our outstanding 
investigators, and they will go to other agencies where they 
can more closely approach the recommended and approved levels 
of funding.

                   SMALL BUSINESS INNOVATIVE RESEARCH

    Mr. Price. Let me ask you about your SBIR plans. This is 
part of your effort, of course, to bring new remediation 
technologies to application to provide this critical link 
between basic science and results out in the field.
    Could you say a bit more about your track record with SBIR, 
how it has worked for your agency, and the kind of efforts you 
have made to track the connections between funded research, the 
resulting publications and patents, and technologies used on 
the ground? How has this gone thus far, if you can generalize? 
And what would you like to do with this additional funding?
    Dr. Olden. I think we have received 41 applications----
    Dr. Suk. Right.
    Dr. Olden [continuing]. For the small business innovation 
grants. So there is a good response to the request for 
applications for those. We expect to have enough money in 2002 
to fund four to six of those and--is that about right?
    Dr. Suk. Yes, we plan on funding about four to eight of 
these applications. We received 41. There are approximately 
eight to ten new companies or existing companies that have been 
developed in order to be responsive to this particular 
announcement. I think that is really very, very good, actually. 
All of these applications use the technologies that have been 
developed by this program.
    My personal feeling is that obviously when you have 41 
applications in an SBIR program, we are going to be able to 
fund some very high quality work. But we are probably not going 
to be funding a lot of high quality work because we have set 
aside only--my recollection is $1.5 to $1.7 million for this 
program.
    Mr. Price. Now, the Superfund Basic Research Program has 
produced a substantial number of patents. Is that not----
    Dr. Olden. That is right, yes.
    Mr. Price. Do you have any idea how many companies are 
using those technologies?
    Dr. Suk. I don't really know how many companies are using 
those technologies other than the companies that we have been 
able to track through this SBIR announcement. I think 40-some-
odd patents have been generated by this program over the past 
couple of years, two of which are from the University of North 
Carolina-Chapel Hill. Casey Miller's work there has been 
substantial in developing a new technology that goes beyond 
pump and treat for looking at recalcitrant waste that just is 
not easily degraded, and he has coupled with a company in 
Chatham County to make this happen.
    So, in this situation, we can actually trace when he 
received his dollars, the publications that he has published in 
peer-reviewed literature, the development of the technology 
into the field, and this SBIR program and the development of a 
company as well. We can do that for him and for a number of 
other people as well.
    Mr. Price. So given that experience and also given the 
level of applications, you seem to be attracting----
    Dr. Suk. Yes.
    Mr. Price. With this SBIR initiative, it sounds like the 
funds can be well utilized.
    Dr. Suk. Yes.
    Dr. Olden. I think our record of getting our science 
translated into products, commercialized, was good before we 
had the small business innovation component. We were very 
pleased last year to inform you that we intended to use the 
small business innovation mechanism to stimulate the 
translation of our science into products, goods, and services. 
So we have had a good track record, and it should get better.

                        AGENT ORANGE AND DIOXIN

    Mr. Price. Good. Let me close with a more open-ended 
question but one I think of great interest to the subcommittee. 
I know you have recently been on a mission to Vietnam.
    Dr. Olden. Yes. Dr. Sassaman----
    Mr. Price. That involved the Superfund program. I wonder if 
you could comment on the purpose of that, what comes from it, 
how it will affect your activity.
    Dr. Olden. Well, Congressman Price, in the end I did not 
go. Dr. Sassaman went in my stead because I had to testify 
before a committee chaired by Senator Kennedy during that week.
    The purpose of the visit was to develop a collaborative 
research program with Vietnamese scientists on the dioxin Agent 
Orange--or Agent Orange dioxin, I guess I should say.
    We have known for a number of years that for the Vietnamese 
people, the level of exposure to dioxin Agent Orange was much 
higher than for our veterans, and there had been an effort on 
the part of American veterans to open up communication with 
Vietnam so we could conduct research, because of the number of 
years since the end of the war has been several.
    We now have, through lots of negotiations over a large 
number of years, opened channels of communication with Vietnam. 
We are in charge of the research on dioxin Agent Orange, and we 
have signed a couple of collaborative agreements and identified 
the areas of research. So we are going to be allowed to go into 
the country to interact with the scientists and exchange ideas 
and samples, so that we can actually do the science to 
determine what the exposure levels were, because, you know, 
dioxin turns over very slowly. So we can still go back, even 20 
or 30 years, and extract back to zero.
    We are interested in health effects, things like cancer, 
birth defects, developmental problems, immune. We are 
developing a suite of research activities now that we think 
that we have the collaboration, the infrastructure in place, 
and the support of the U.S. Government and the Vietnam 
Government, so that we can actually get some results.
    Historically, the problem had been the Vietnamese 
scientists were not allowed to collaborate with us, and so we 
just couldn't do the science. I think we can now.
    Mr. Price. Well, I had understood there were some pretty 
substantial barriers.
    Dr. Olden. That is right.
    Mr. Price. Is our State Department involved in overcoming 
those now?
    Dr. Olden. Yes. This is an activity that is tiered by the 
State Department, and every time that we have been there, 
including this time, the Ambassador to Vietnam has been a major 
player. This time Ambassador Burghardt participated. The 
negotiations have been rather intense, and they are the kinds 
of things that scientists don't typically get involved in, but 
thank goodness we have had the support of the State Department 
and we have made a lot of progress, but mostly in the last 2 
years. Prior to this, there was a major meeting in Vietnam that 
Ambassador Peterson participated in.
    I will have to be briefed when I get back to the 
institution, but I think we now have overcome the barriers. We 
can do the research. The U.S. Government was interested in 
doing this 20 years ago, but I think now we are going to be 
able to do it and finally, once and for all, determine what the 
health consequences are.
    Dr. Sassaman. If I could just add one thing, it was quite 
an experience being there on this occasion. One of the main 
issues is exposure assessment, and really being able to know 
who was exposed, and to what level, and how much is remaining 
in the soil and other media there.
    One of the barriers has been the expense and the difficulty 
of doing the assessments. They haven't had the capability to do 
it there.
    One of the assays that has been developed in the Superfund 
Program at the University of California at Davis, which is a 
simple and much cheaper assay, holds a lot of promise in being 
able to overcome that particular problem there and to be able 
to give the Vietnamese scientists a quick way of bringing 
samples that they have not had before. So that is a direct link 
between this program and what we hope to be able to do in the 
future in Vietnam.
    Dr. Olden. And I should say that EPA has certainly been a 
full partner in this effort and has participated in every 
international meeting we have had in Vietnam on this issue.
    Mr. Price. Thank you.
    Mr. Walsh. Thank you, Mr. Price.
    Any other questions we have we will submit for the record.
    Dr. Olden. All right.
    Mr. Walsh. And we would appreciate a prompt response to 
those.
    Dr. Olden. All right.
    Mr. Walsh. Thank you very much for your leadership, sir, 
and for your forthright, thoughtful, and instructive answers. 
We appreciate it very much.
    Dr. Olden. Thank you very much, Congressman Walsh.
    Mr. Walsh. The hearing is closed.
    [The following questions were submitted to be answered for 
the record:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                                         Wednesday, March 20, 2002.

    COUNCIL ON ENVIRONMENTAL QUALITY/OFFICE OF ENVIRONMENTAL QUALITY

                                WITNESS

JAMES L. CONNAUGHTON, CHAIRMAN
    Mr. Walsh. The subcommittee will come to order. We will 
continue this morning's hearing by taking testimony on the 
fiscal year 2003 budget request of the Council on Environmental 
Quality and Office of Environmental Quality. For 2003, the CEQ/
OEQ request totals $3,031,000, an increase of just $57,000 
above the 2002 appropriated level. For comparison's sake, I 
should note that this year's request of $3,031,000 is just 
$11,000 over CEQ's request for fiscal years 1998, 1999, and 
2000. I bet OMB was happy with you. [Laughter.]
    Mr. Connaughton. They were.
    Mr. Walsh. Testifying for the first time before the 
committee will be its new Chairman, James Lawrence Connaughton.
    Mr. Connaughton. Thank you.
    Mr. Walsh. Welcome, sir. I took a brief look at your 
resume. My condolences. You only finished second in your class. 
[Laughter.]
    Mr. Connaughton. The story of my life.
    Mr. Walsh. Well, you are in first place now. A year ago at 
this time your name had only recently been announced by the 
White House, and so Ms. Dinah Bear----
    Mr. Connaughton. Who is here today.
    Mr. Walsh [continuing]. Who is here today, and Mr. John 
Howard, testified on behalf of the council. I am glad the 
Senate moved you through expeditiously, and it is my pleasure 
to welcome you here today.
    In a moment I will ask you to summarize your opening 
remarks as best you can. Your written statement will, of 
course, be included in its entirety in the subcommittee's 
record. Before doing so, however, I would like to call upon my 
colleague and friend from West Virginia, Mr. Mollohan, for any 
opening remarks.
    Mr. Mollohan. Thank you, Mr. Chairman. I would just like to 
join you in welcoming the witness to the hearing today, and 
look forward to his testimony.

                   Opening Remarks of Mr. Connaughton

    Mr. Walsh. All right. It is all yours.
    Mr. Connaughton. Thank you, Mr. Chairman, and good morning 
to all of you. It is a real honor for me to serve as the 
Chairman of the Council on Environmental Quality, and in 
particular to appear for the first time before you and the 
other distinguished members of this subcommittee to testify 
about our request for appropriations for the Council on 
Environmental Quality and the Office of Environmental Quality.
    As you indicated, Mr. Chairman, the President has requested 
just a little over $3 million in fiscal year 2003 funding for 
CEQ, which would fund 24 full time positions. This 
appropriation would provide funds for CEQ to continue to carry 
out its responsibilities under the National Environmental 
Policy Act and other laws, to advise the President on 
environmental policy and coordination of environmental policy, 
and of course to conduct the oversight activities of Federal 
agencies' compliance with NEPA.
    When it enacted NEPA and created CEQ over 30 years ago, 
Congress declared--and this is a guidepost for me in my job--
that it is the policy of the Federal Government, ``in 
cooperation''--and this is an important word--``in cooperation 
with State and local governments and other concerned public and 
private organizations, to use all practicable means and 
measures, including financial and technical assistance, in a 
manner that is calculated to promote the general welfare, to 
create and maintain conditions under which man and nature can 
exist in productive harmony and fulfill the social, economic, 
and other requirements of present and future generations of 
Americans.''
    That is a mouthful and it is a really ambitious goal, but 
it is one that is worthy of our full commitment. In the nine 
months that I have served as CEQ's Chairman, I have actually 
been privileged to work with an outstanding staff at CEQ as 
well as throughout the Federal Government in our efforts to 
fulfill that responsibility, and I must say in these last nine 
months we have touched upon every single one of those statutory 
guideposts.
    These efforts are reflected in a wide range of policies and 
responsibilities that we have assumed in my office. At its core 
the CEQ has three missions. The first is to provide objective, 
well informed, and realistic advice to the President, his 
advisors, and the Cabinet about the future direction of 
environmental policy. Second, we are heavily engaged in 
coordinating the implementation of environmental programs and 
resolving policy disputes among the various Federal agencies, 
State, tribal, local government, and private citizens. And, 
third, the built-in agenda is to promote a balanced and 
effective decisionmaking process through our oversight of the 
National Environmental Policy Act, that also reflects the views 
of all affected parties.
    Taking advantage of this charter from Congress, President 
Bush has closely integrated CEQ into the policy development and 
coordination function of the Executive Office of the President. 
Consistent with the charter, my office does provide advice 
directly to the President, his advisors, and the Cabinet on the 
environmental and natural resource implications of our 
policies, and we have day-to-day responsibility for 
coordinating and advising on environmental and natural resource 
issues that come before each of the three policymaking 
councils: the National Security Council, the Domestic Policy 
Council, and the National Economic Council. We also work 
closely with OMB with respect to the policy implications of 
budgeting decisions in the environment and natural resource 
area.
    To give the committee a better sense of who I am and how I 
am approaching my job as the Chairman of CEQ, I just wanted to 
talk briefly about five guideposts that steer our activities in 
advancing initiatives or in seeking to resolve the numerous 
issues that come before us.
    The first is the concept of stewardship. The President has 
frequently spoken about the need to promote an ethic of 
stewardship among all Americans. This, of course, is consistent 
with the President's commitment to public policies to promote 
personal responsibility in every aspect of our lives.
    This idea, interestingly, is reflected in an overlooked 
passage in NEPA itself, which states: ``The Congress recognizes 
that each person should enjoy a healthful environment and that 
each person has a responsibility to contribute to the 
preservation and enhancement of the environment.''
    We are looking forward to further progress in which we can 
empower and work in partnership with property owners, with 
business owners, State and local governments, and individual 
Americans from every walk of life to meet this stewardship 
objective. It is something that I worked very hard on many 
years before I took this job, and saw stewardship happening 
really at the personal level. It was really quite exciting. We 
are in a very great place at this point in our country's 
history with respect to personal stewardship.
    At the programmatic level, many Federal programs that we 
are advancing are seeking to do just that. They range from our 
commitment to funding the Land and Water Conservation Fund, our 
commitment to a strong conservation title in the farm bill, 
initiatives such as the Interior Department's Cooperative 
Conservation Initiative that we proposed this year.
    And at a personal level I am particularly proud of the 
great work that continues to be done by Coastal America, which 
was set up by President Bush, carried on through the Clinton 
Administration, and we have maintained and are expanding on the 
efforts of Coastal America, which is a public/private 
partnership that is dedicated to protecting and enhancing 
America's coastal resources and, in particular, our wetland 
resources.
    The second key principle for environmental progress that we 
operated under is the concept of innovation. We have come a 
long way in the last several decades in terms of environmental 
regulations and the protections and the quality of life that 
that has enhanced, but we are in a new area with new, greater, 
more complex challenges that do require innovative approaches 
that will enable us to accomplish greater improvements in 
environmental protection, more effectively and at less cost.
    The President's recently announced Clear Skies Initiative 
is an excellent example of how we can do just that. Building 
upon the remarkable success of the 1990 Clean Air Act acid rain 
training program, the Clear Skies initiative would use a ``cap-
and-trade'' program to cut air pollution from power plants by 
70 percent over the next 20 years.
    This program would produce dramatically greater reductions 
in air pollution than current law will, an estimated net 
benefit of 35 million tons of air pollution removed in just the 
next 10 years, and it would accomplish this on a certain time 
line with guaranteed results and at far lower cost than the 
command and control approach that would ordinarily be applied.
    The third theme that I am operating under is the promotion 
of science-based decisionmaking. Now, this is true whether we 
are talking about water pollution issues, air pollution issues, 
where scientific studies of the health effects of pollution are 
critical to our decisions, and not just pollution, also with 
respect to our resource management issues.
    Fourth, I am a strong proponent of federalism, and I mean 
practical and active federalism. What this means is going 
beyond local input--we have had a good history of local input--
but actually getting much more aggressively into the area of 
local involvement in our decisions. In many cases the success 
or failure of our environmental policies depends far more on 
implementation, which happens at the local level, and less on 
the policy decisions that are made here in Washington.
    In the NEPA context, I recently issued a memorandum to all 
the Federal agencies to grant cooperating agency status to 
State, local, and other governmental entities when they have 
appropriate jurisdiction and expertise to bear on the 
preparation of environmental impact statements. I must say that 
memorandum has been received with great acceptance and desire 
by State and local actors, who really worked to build their 
capacity so they can participate along with the Federal 
agencies in making important decisions in the context of NEPA.
    EPA's new Watershed Initiative also puts this principle 
into practice by working in partnership with local communities 
on targeted efforts to create public/private partnerships. Now, 
this is going to replicate the successful approaches of 
watershed restoration projects such as what occurred in Charles 
River.
    Finally, and it is final because it is the most important 
but it is a given, is the foundation principle of compliance. 
That is compliance in both the private and the public sectors. 
All of our environmental goals, the laws, regulations, don't 
mean much if they don't result in actual compliance among the 
regulated community.
    This requires a strong commitment to enforcement, on which 
our record is quite strong, and I am happy to give you detail 
on that. But, as important, it requires an increased effort to 
implement tools of what we know as compliance assurance. It is 
a lot better to know you are going to be in compliance than 
inspect your way and find out that you are out of compliance.
    This includes market-based tools such as the Clear Skies 
Initiative that I mentioned, which would guarantee measurable 
results without resort to lawyers and lawsuits; broader use of 
environmental systems, which is a personal passion of mine; and 
incentive-based programs that promote sensible strategies for 
success.
    In conclusion, I hope these brief comments give the 
committee sort of a flavor of who I am and how I am approaching 
our mission. I have only touched upon a few of the important 
environmental issues that are facing America and that we are 
working to promote at CEQ, and I am very appreciative of this 
committee's continued support for CEQ. I request that my 
written testimony be submitted for the record, and I am happy 
to answer any and all questions that you have.
    [The information follows:]

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                            Clean Air Policy

    Mr. Walsh. Thank you. Let me begin with this recent 
initiative on the part of the administration vis-a-vis 
parklands and clean air. I come from New York. We have had 
broad-scale disruption of the ecosystems in the Adirondacks due 
to acid rain. I was a strong supporter of the acid rain 
legislation, and was very hopeful that this would resolve our 
problem. It has not. There are still tremendous amounts of 
airborne acid compounds that are coming into the Adirondacks, 
particulates and otherwise.
    So I would look at any change in the approach to how we 
deal with clean air with a little bit of a jaundiced eye. We 
just had Secretary Whitman here to testify. She talked about 
this and a new source review.
    As an attorney who worked in environmental law yourself, 
how involved were you with formulating this new Clear Skies 
Initiative policy you spoke of? How involved was CEQ? Just to 
get an idea of what role you folks play. I think you talked 
about your predilection and how to deal with these, but would 
you care to explain your interrelationship with the White House 
and with Secretary Whitman and how this policy was determined?
    Mr. Connaughton. As with any legislative initiative 
advanced by the President, the White House coordinates that 
activity. So CEQ served as the core coordination post for input 
in the policy development that started with EPA, as they pulled 
the legislative package together; included input from the 
Department of Energy, the Department of Interior, as well as 
the various advising entities within the Executive Office of 
the President: Council of Economic Advisors, National Economic 
Council, National Energy Policy Development Group.
    So it was our function to bring the interagency process 
together so we could work; get the information we needed to put 
together the detail of that proposal. And then, consistent with 
the policymaking apparatus of the White House, that proposal 
was then brought through the Domestic Policy Council and 
brought to the President for recommendation and decision as to 
the content of that. So we were, again, in a coordinating role 
there.
    I would note with respect to your comments, Mr. Chairman, 
that the issue of acid rain and the progress that has been made 
so far with the acid rain trading program was recognized, and 
we really saw this tool, of all the tools that have been out 
there in clean air, the trading program accomplished more 
reduction in pollution in the last 10 years than any of the 
other regulatory programs under the Clean Air Act Amendments of 
1990. Now, it didn't go far enough.
    Mr. Walsh. The problem is that a lot of the plants that are 
west of us, and we have to deal with prevailing westerlies, 
have traded but they still pollute. And while New York power 
plants have done a pretty good job, we are bearing the brunt of 
Midwestern bad air that is being carried aloft and deposited in 
the higher elevations of New York State. It is not working for 
us.
    Mr. Connaughton. And I think that is, Mr. Chairman, that is 
an indicator of the cap, while strong at the time, was not 
enough. The analysis that we have done, and this is supported 
by some additional analysis done by the Adirondack Council, is 
that we think the numbers that the President has proposed--and 
the Adirondack Council has indicated as much--will be 
sufficient to address the acid rain problem.
    Now, it also deals with other issues, as well, but the 
particular issue that you have discussed, these numbers will 
get us there. So the existing cap didn't get us there. We are 
calling for a 70 percent further reduction. That is a huge, a 
huge leap.
    The thing we do know about the tool is, it delivered 
results without lawsuits, and it delivered them on a certain 
time line, and it delivered at less cost. So I think we have to 
really look at this tool, the cap-and-trade tool, as one of--as 
probably the single most effective pollution reduction tool 
that has come forward.
    And then the issue only becomes, have we set the cap at the 
right level? Our analysis shows that we have, with respect to 
your particular issue, but I am sure Administrator Whitman and 
Jeff Holmstead, the Assistant Administrator at EPA, would be 
more than happy to sit down with you and your staff and walk 
you through the details of that.

                        Clean AIr Cap-And-Trade

    Mr. Walsh. Well, this cap-and-trade may be a good national 
policy, but is it a good regional policy? Do certain regions 
end up with more of the deposition than others?
    Mr. Connaughton. That was a concern when first proposed, 
when the cap-and-trade was first proposed in 1990. All of the 
independent analysis of the program since then has shown that 
it has not had the ``hot spot'' effect that people are 
concerned about. Especially with the kinds of numbers that we 
are talking about, the potential for hot spots is even greatly 
diminished. When you are talking about a 70 percent reduction, 
what that means is, everybody ultimately will be controlling in 
some way or another. It is just a question of the rate at which 
the controls get put on and who makes the decision first.
    EPA has done some fairly intensive modeling that looks at 
the regional issues you have discussed, and we are not 
anticipating a further hot spot issue as a result of the policy 
we proposed. We actually think it will cool the hot spots. 
Today, we have hot spots under the command and control regime. 
We actually think the trading program softens those more than 
command and control does.
    Mr. Walsh. How does our national policy affect the 
transported acid rain from Canada?
    Mr. Connaughton. Obviously we are proposing a national cap 
that will actually then be divided into East and West regions, 
to offset one of the concerns you have raised. Canada is 
looking at legislation and is taking their own efforts with 
respect to acid rain deposition.
    It would be useful--we have already had some initial 
conversations about trying to coordinate our policies, because 
we recognize that this is a cross-border policy. We have had 
conversations with Minister Anderson, who is very intrigued 
with the President's recent cap-and-trade proposal. He is 
having conversations in Canada about pursuing similar 
approaches, and I think that is a really fruitful area to 
explore. I think it would be quite exciting to explore that.
    I think, longer term, the idea of exploring a regional 
trading system would really deliver. I think we are a little 
ways off from that. We have to get national legislation through 
before we could consider a regional approach, but I think that 
would be worthy of consideration.

                Administration's Perceived Role for CEQ

    Mr. Walsh. Okay. We will leave that for a second and we 
will go to the macro-level.
    CEQ seems to change somewhat with each administration. In 
the early 1980s, for example, CEQ had a much larger staff, 
seemingly a much larger role in the review and approval process 
for agency regulations. While the staff has decreased, it has 
been difficult these past two years to detect any corresponding 
reduction in CEQ's ability to impact on policy. Your 
predecessors, Ms. McGinty and Mr. Frampton, both seemed to walk 
very softly in public and carry an awfully big and effective 
stick behind closed doors.
    Now that you have had a little more than six months to 
settle in as chairman, I wonder if you could give this 
committee an idea of the administration's vision for CEQ, at 
least these next three years?
    Mr. Connaughton. I think in large measure the basic 
functioning of it will proceed along the lines begun with the 
first Bush Administration, carried through in the Clinton 
Administration, but we have some important, I think, nuances.
    We are expected to be sort of the key entity in the White 
House, in the Executive Office of the President, to pay 
attention to, address and deal especially with the interagency 
and the intergovernmental concerns that arise where an honest 
broker is needed. And certainly the big chunk of my time is 
spent when agencies are having difficulty resolving issues 
among themselves, they come to CEQ and we try to convene and 
mediate solutions and sort of break some of the gridlock.
    The same is true in terms of providing a resource for 
governors and State and tribal entities, where they can come to 
us when they have concerns about different activities of the 
different Federal agencies, so again we can advise through the 
policy council process and advise the President on how we need 
to bring together these disparate interests and come to some 
reasonable resolutions.
    I think we have a dynamic and full schedule of events every 
day. I have worked hard to maintain a position as an honest 
broker in these interagency policy disputes, consistent with 
the charter from NEPA, and to ensure that in these disputes, 
though, that the environment and natural resource implications 
of these issues are well addressed and well understood.
    I have also been working, though--as you see, we have not 
asked for a substantial increase in staff. Because I also come 
from my private sector experience, from the experience that as 
you build staff, you build turf and you build equities, and it 
is not really my goal to build hard equities. It really is my 
goal to act like a policy council, to bring together the 
different actors. I also know that when you keep your staff 
relatively limited, you set priorities a lot better, so that is 
one of the philosophies behind our limited, our more limited 
request.
    That has proven to work well because we are able then to 
kick issues back to the agencies and make them rely a little 
bit less on us to solve their problems, and take a little more 
responsibility themselves to try to solve their problems, 
knowing that if it is not going to work, that we do have a 
full, effective voice in the White House establishment to raise 
these issues to a much higher level. So it is striking that 
balance.
    I have been pleased with how things have progressed so far, 
and we have been--you talked about walking softly but carrying 
a big stick. I think I try to walk a little more strongly but 
not wield a stick nearly as much. So I am trying to take the 
experience I had negotiating international standards with a 
very interesting group of stakeholders, both nationally and 
internationally, in reaching consensus on issues, and really 
trying to apply those same skills in my current position, and 
it seems to be going pretty well.
    Mr. Walsh. All right. Thank you.
    Mr. Mollohan?

                         CLEAR SKIES INITIATIVE

    Mr. Mollohan. Thank you, Mr. Chairman. Welcome to the 
hearing.
    You cited the President's Clear Skies Initiative as one of 
his most promising initiatives in approaching environmental 
problems. What input did you have in developing that plan?
    Mr. Connaughton. As I indicated, CEQ was responsible for 
coordinating the policy development effort, so that required 
receiving from EPA their initial proposals, receiving input 
from all the various--from the relevant Cabinet departments as 
well as from the Executive Office of the President offices, 
such as the Council of Economic Advisors.
    Mr. Mollohan. Did you initiate that activity?
    Mr. Connaughton. I guess the answer to that is yes. It was 
a campaign commitment, so we were charged with making sure that 
a proposal came forward, as we did with the brownfields 
legislation, as we have done with land and water conservation 
and a host of other presidential commitments.
    Mr. Mollohan. Right, so all that information came in to 
you, and you came up with the Clear Skies Initiative?
    Mr. Connaughton. Well, actually it was the Domestic Policy 
Council that made the recommendations to the President, so my 
job was to coordinate the policy development exercise that led 
to recommendations that were brought before the Domestic Policy 
Council. That resulted in a recommendation to the President, 
who evaluated the proposal and then made his decision as to how 
we would proceed. So, again, it was my job to shepherd that 
through the policy process.
    Mr. Mollohan. Yes. I note there are very optimistic 
reduction targets, and I find myself philosophically not 
unsympathetic, as you might imagine, with the approach. Having 
said that, can you tell me how he proposes to achieve those 
reductions?
    Mr. Connaughton. The cap-and-trade approach--early on in 
the campaign and since taking office, the President indicated 
if we use a cap-and-trade approach and we do it with a 
reasonable time line, so that the affected sector, the power 
generation sector, can make and plan for the kind of capital 
investments necessary to achieve those reductions, with the 
certainty that they are not going to see different new 
alternatives, schedules, time lines, pollution reductions----
    Mr. Mollohan. We don't have a moving target.
    Mr. Connaughton. We don't have a moving target in 
reduction, we don't have a moving target on the date, and you 
give them enough time.
    One, the entities that can most cost-effectively achieve 
reductions under a cap-and-trade system do so first. And the 
beauty of the system is, they start the day after enactment 
rather than waiting until the compliance date, because they can 
get credit for those early reductions. So that is one.
    Two, it gives you, then, the time for new technologies to 
get more application and for the price of those to come down. 
And, by the way, it creates an incentive for the research and 
development deployers, it creates an incentive for them to now 
invest in the opportunities that new technology will bring 
because they know----
    Mr. Mollohan. Because of the certainty of the standard?
    Mr. Connaughton. Exactly, because of the certainty of the 
standard. And then, with that, when you are talking about 
bringing new plants on line, the new plants know what they are 
facing, and they actually have to go into the market to buy 
credits. And that creates a funding source for those who would 
install emission reduction technology that doesn't exist today, 
so you actually can make money or at least offset your costs of 
installing emission control technology. That is why this 
approach is so----

                       CLEAR SKIES AND TECHNOLOGY

    Mr. Mollohan. I would like to explore a little bit with 
you, how this proposal affects the development of new 
technologies.
    At the same time you are proposing this attractive concept, 
you are significantly cutting the very research programs the 
government is sponsoring in partnership with industry that 
would make it possible to come up with the technologies to 
achieve the desired results.
    Was the Department of Energy involved? Were they players in 
this process?
    Mr. Connaughton. Yes, they were.
    Mr. Mollohan. All right. And their budget was cut in fossil 
energy research and development, which is the area that is 
supposed to be coming forward with new technology. Do you think 
that cutting that budget is a wise decision?
    Mr. Connaughton. Let me address your question on two 
levels. First with respect to the proposal, the Clear Skies 
proposal, one of the key factors that went into the President's 
ultimate decision as to what the appropriate cap should be was 
the current state of technology and what we are expecting to 
come on line in the time frame that we are talking about.
    Now, we believe that newer and even more effective 
technologies will be incentivized by this program, but we did 
not pick our numbers unrealistically in terms of where current 
technology is. So that is issue one.
    Mr. Mollohan. I am sorry. I don't understand what you just 
said.
    Mr. Connaughton. If you take the existing control 
technologies, in particular for fossil fuels, what we know we 
have on the shelf today----
    Mr. Mollohan. What is an example of that?
    Mr. Connaughton. The scrubber technologies.
    Mr. Mollohan. All right.
    Mr. Connaughton. Okay, and then you look at what is in 
development and deployment today, including things like IGCC, 
which is the gasification process, if you take the known 
technologies and DOE's projections of what will be available 
under the current technology projections, we believe that our 
caps are consistent with current and expected technology. So 
that is issue one.
    Mr. Mollohan. Yes, sure, at expected funding levels.
    Mr. Connaughton. This is with respect to, actually, private 
sector development and deployment of those technologies.
    Now this will be the second problem of--
    Mr. Mollohan. Private sector development? You are relying 
upon the private sector to develop this technology, under the 
President's proposal?
    Mr. Connaughton. We are actually relying on the private 
sector to----
    Mr. Mollohan. I am sorry. I interrupted you. Go ahead.
    Mr. Connaughton. Yes. I am sorry.
    The private sector will enhance the existing technologies 
under this program. They have incentive to do that.
    Mr. Mollohan. Well, they do under the current program. They 
are partnership programs.
    Mr. Connaughton. Right, and this actually builds--I am 
sorry. Let me back up.
    Under the Clear Skies, with the known reductions that are 
going to be needed and the known time line, the private sector 
providers of emission control technology have a stepped-up 
incentive to enhance those technologies and make them cheaper.
    Mr. Mollohan. Yes, because of the certainty of the market 
being there. Okay.
    Mr. Connaughton. With respect to the new technologies, 
which is the second part that I wanted to address, I was not 
personally closely involved in the DOE budgeting process with 
respect to that department. So I can give you the high level 
explanation that came to me, and I think that--and I can follow 
up for you.
    Mr. Mollohan. I am very interested in the high level 
explanation. Go ahead.
    Mr. Connaughton. The high level is that they took a look at 
the programs that they had and did not see that they were 
delivering what was necessary to get applied technology out 
there.
    Mr. Mollohan. We can all disagree on that.
    Mr. Connaughton. Yes. Again, I am not close to that, so I 
don't have an independent basis of evaluating that decision.
    Mr. Mollohan. Well, that is a very key thing you should get 
close to.
    Mr. Connaughton. I think in response to this, I will.
    Secondly, we have a very substantial commitment in terms of 
clean coal technology development outside of that budgeting 
program. I mean, we have the $2 billion commitment that also is 
coupled with our desire to do clean energy technology exports, 
which have to do with creating incentives in the export market 
to, again, advance clean coal technologies that can be utilized 
not just here and abroad.
    So we have a bundle of activities that are centered around 
advancing clean fossil, clean use of fossil fuels, so it is not 
just limited to that particular line item in the DOE budget. 
That is sort of the macro picture.

                     FOSSIL ENERGY PROGRAM FUNDING

    Mr. Mollohan. Let me encourage you to look at the funding 
of the fossil energy programs.
    The President is requesting a reduction in the fossil 
energy research and development program by 15 percent, and the 
fossil energy coal program by 9 percent. These are the accounts 
where the relevant research is really being done.
    The President has pledged a $2 billion investment over the 
next 10 years in clean coal technology. Yet part of his 
proposal is transferring the remaining money in the clean coal 
technology account that Senator Byrd created, which is about 
$280 million, to count toward the $2 billion in new money the 
President promised, so the Administration is really double 
counting.
    I encourage you to sort through that to make sure that we 
are being real about these proposals and how much money we are 
representing that we are spending on them. And I would submit 
that the President is cutting the very technology programs that 
are really necessary to achieve the emission reductions he is 
seeking.
    So I appreciate talking to you, and will talk with you 
later.
    Mr. Connaughton. And I would appreciate the opportunity to 
work with you further on that. You know, I think nobody has any 
illusions, we have a strong commitment to continued reliance on 
usage of fossil fuels. It is important for domestic security, 
it is important for economic well-being, and it is reliable and 
affordable.
    The issue is, how can we do it in a way that does advance 
the deployment of the very technologies that you are strongly 
interested in, Congressman, as are we. I think that we should 
get into the weeds of this discussion a little bit more. The 
issue is effectiveness of the research and development 
programs, I think, more than a lack of common ground on where 
we want to be on this.
    Mr. Mollohan. Thank you, Mr. Chairman. Thank you.
    Mr. Walsh. Mr. Knollenberg.
    Mr. Knollenberg. Good to see you.
    Mr. Connaughton. Good to see you.
    Mr. Knollenberg. Congratulations, in the flesh now.
    Mr. Connaughton. Yes. Thank you.
    Mr. Knollenberg. We have talked on the phone, but now we 
have a chance to see each other face-to-face and this is your 
first time before this committee, I believe.
    Mr. Connaughton. It is.

                             NUCLEAR POWER

    Mr. Knollenberg. So let me get into a couple of things. 
Incidentally, I do want to praise the President for his views 
on Kyoto and the climate control issue, because I think he is 
on the right track, and in the end I think we will get where we 
want to go and we will help everybody on either side of the 
fence on this issue, if we utilize some of those views.
    I want to talk about nuclear power for just a moment. I am 
a strong believer in it, and I believe if we are going to bring 
about an energy policy or plan that is going to reach the 
goals, we have to have that as a major component. Obviously 
coal is a major component now, and with the clean coal 
technology that will continue to be, I think, a strong source 
of power for electricity, etcetera.
    One of the problems we have, and you know this as well as 
anybody, is getting permitting for new plants. And with the, 
what I think is an ambitious program to put a lot of new plants 
in place around the country, we have got to break some ground, 
though, in terms of getting the first plant there, and I think 
that we are on the way with respect to Yucca. I think if we 
could get that established as the repository for all this 
waste, I think that will help convince the doubters and the 
nay-sayers that there is need now to go forward and put plants 
in place.
    But let me ask you, is this something that you work on in 
terms of influencing the President with respect to bringing it 
about? As an example, is the task force involved? You mentioned 
a task force, I know. Is it involved with issues that are 
related to nuclear energy?
    Mr. Connaughton. There are a couple of components to that. 
One, just to reiterate, the President and the Vice President 
are strongly committed to a role for nuclear, as you know.
    CEQ has been involved, consistent with our role, in the 
Yucca Mountain decision as that was prepared and then brought 
to the President. I was involved in the advisory process 
associated with that, in terms of the environmental 
implications of that decision that he would be making. So I was 
involved, again, through the Domestic Policy Council and the 
National Economic Council, so I have been involved in that 
respect.
    With respect to the--we have the Energy Project 
Streamlining Task Force. We have been monitoring the efforts of 
NRC with respect to making more opportunities for expansion of 
nuclear available, again on a more programmatic, more 
streamlined basis.
    I am not aware that we have a specific--I don't think the 
streamlining group itself, I don't think anyone has come to the 
task force looking for additional assistance. The task force is 
there. We have about three dozen projects that have come to the 
task force looking for assistance to get the decisions through. 
If there was a particular nuclear project that thought they 
could benefit from the assistance of the task force, they would 
be available for that purpose, but it hasn't happened yet, so I 
assume they are feeling comfortable about the progress NRC is 
making.
    Mr. Knollenberg. So you are not involved in that, then. And 
the NRC I think has--even in the prior administration I think 
they were moving in the right direction. I think there was some 
solidity about their vision that is there, was there then, and 
hopefully it will continue to be, certainly under this 
administration.
    So you are saying that that is really not on your page.
    Mr. Connaughton. I don't have an active project, although 
you should know that it is an issue--because nuclear is one of 
the few nonemitting sources, and really its only impact is the 
waste management issue, we should be looking to that as part of 
our overall mix. And so I remain personally engaged, as 
discussions arise, to push the point, are we making progress on 
ensuring a future for nuclear in this country?
    Mr. Knollenberg. I am glad to hear that, and I hear 
obviously the President and the Vice President. One of the 
things that we haven't seen, though, we haven't seen one built 
in over 20 years, and that is problematic. We have got to have 
some successes before we can get to a point where we can see 
nuclear on the horizon.
    One thing about nuclear, and I am not telling you anything 
you don't know, but during the late '90s nuclear was a source 
that was there and running close to 98 percent of capacity. You 
sure won't get that out of wind or solar. You probably won't 
get that out of any other source. So it is capable of rising to 
the occasion, so I am just very hopeful we can do something 
about pushing that, continuing to see it emphasized.

           COMBINE SEWER OVERFLOWS--SANITARY SEWER OVERFLOWS

    On another topic, in working with the EPA--you do some 
coordination there, I know--we have a huge problem in my 
district back in Michigan, but it is not just us, it is all 
over the country, where we have CSO problems and SSO problems. 
Someone said that these overflows created by these systems, 
combine sewer overflows and sanitary sewer overflows, this is 
the last intentional discharge of untreated waste water in the 
country.
    And we passed legislation in Congress that authorized 
funding for this problem, once the Clean Water Revolving Loan 
Fund was fully funded, and I think that funding level was $1.25 
billion. I am disappointed the President did not include this 
funding in the request this year. Historically the Federal 
Government has picked up a good chunk of the cost of that.
    What role, if any, do you play with the President on this 
issue, and what role do you play with the EPA to determine the 
appropriate level of Federal funding for this problem?
    Mr. Connaughton. On this particular issue it is not 
required. We have been monitoring it, in our role of monitoring 
activities of all the various resource agencies, but we have 
not had an active role in that particular one. That has largely 
been a discussion between EPA, OMB, and the executive 
decisionmaking process.
    Mr. Knollenberg. Well, I think that concludes any questions 
that I have, and I thank you again for coming before the 
committee.
    Thank you, Mr. Chairman.
    Mr. Walsh. Sounds like OMB is winning that argument so far.
    Mr. Knollenberg. Well, it looks that way a little bit, yes.

                         EVERGLADES RESTORATION

    Mr. Walsh. Mrs. Meek.
    Mrs. Meek. Thank you.
    Welcome to the committee. I am from Florida, and we are 
going through, very responsibly, the restoration of the 
Everglades. I have had quite a bit of experience with CEQ in 
the past, because I always associate it after Hurricane Andrew 
with the restoration of South Dade, and one such part of it had 
to do with our air base that was there, the Homestead Air Base.
    My association with CEQ wasn't too happy. It wasn't too 
positive because we could never really get some things 
resolved. I guess that is the case when you are dealing with 
environmental problems that are left over from the military, 
that are left at an air force base.
    But I am concerned today. What do you think about 
Everglades restoration? Do you have any statutory 
responsibility for the Everglades restoration? If so, what do 
you have?
    Mr. Connaughton. The statutory responsibility relating to 
the Everglades would relate to the implementation of NEPA, the 
National Environmental Policy Act, and any associated oversight 
of the environmental assessments and the environmental impacts 
that would accompany that whole project. So that is the 
specific--that would be the pointed statutory authority.
    More broadly, though, I--because the Everglades is such an 
important initiative that requires a significant amount of 
interagency coordination, CEQ has and will continue to pay very 
close attention to progress with respect to the implementation 
of the SER and the other commitments. For example, I was down--
I had just a joyful visit down to the Everglades this past 
January.
    Mrs. Meek. Excuse me. So you will be looking at the 
contract that they offer?
    Mr. Connaughton. No, we will not be micromanaging the 
Everglades restoration project. As you know, the Department of 
Interior has a task force set up, and then the Corps----
    Mrs. Meek. And then the Corps of Engineers, right.
    Mr. Connaughton. It will be, it will continue to be our 
role to be sure that we are moving forward. The President has a 
very strong commitment to Everglades restoration. As you know, 
he has been down there. He has sent me down there. You know, 
all of the top administration officials have been there, will 
continue to go down there, to make sure we stay on track with 
respect to that project.
    It will be my job, and continue to be, to be sure--the 
President asks about this from time to time. It is my job to 
make sure that I am up to speed on what is happening at a macro 
level and can report to him accurately where things stand.
    We also worked on ensuring the recent agreement between the 
President and the Governor to assure the availability of water 
for the project, and we obviously--our role at CEQ was to pull 
that agreement together and to ensure that the signing of that 
occurred, and we were delighted to have done that. I mean, that 
was--we worked very closely with the stakeholders. We consulted 
with them in putting that accord together, and they were very 
pleased and comfortable at the outcome of that. We were really 
pleased with that ourselves.
    Mrs. Meek. So you do have the oversight?
    Mr. Connaughton. Yes. We also have a veteran, Bill Leary, 
Associate Director at CEQ.
    Mrs. Meek. Yes.
    Mr. Connaughton. As you know, he has been working on the 
Everglades restoration issue for 20 years, and so he remains on 
staff and ever vigilant.

                          DEEP WELL INJECTION

    Mrs. Meek. This is another thing, I would like to find out 
what your philosophy is. On deep well injection, you know our 
situation in Florida. You know how our waste water goes deep 
down in the aquifer, and I would like to know what your 
philosophy is on that, if CEQ has different ideas about it. 
What do you think about it?
    Mr. Connaughton. I haven't weighed in. I have neither been 
briefed up in detail nor weighed in on that particular issue. I 
am--in general, we have to very carefully manage the aquifer 
impacts of activities, especially in sensitive eco-regions like 
Florida, and especially south Florida. I go to Key West two or 
three times a year. They have got significant issues up and 
down the Keys, just with respect to their--you know, they don't 
have aquifers per se, and they have got problems.
    Mrs. Meek. Right.
    Mr. Connaughton. So I am philosophically oriented toward 
doing no further harm, but on that particular issue, I don't 
have detail on that. I will be happy to follow up on that for 
you, though.
    Mrs. Meek. All right. You will probably continue to hear 
from me about that. It has been something I have worked on very 
closely.
    Mr. Connaughton. Please do.

                   CLIMATE CHANGE AND GLOBAL RESEARCH

    Mrs. Meek. I am sorry Mr. Knollenberg left, but your agency 
has statutory responsibilities over global research and change. 
Tell me, what are you thinking about that? The administration 
before this had a fairly good, positive outlook on climate 
change and global research, and then it swiftly changed, so I 
would like to know what your thoughts are on the matter.
    Mr. Connaughton. At a policy level, the President has 
actually strongly, strongly stated his acknowledgement that 
climate change is a serious issue that must be dealt with 
seriously. I think the differences are surrounding the policy 
tools by which we accomplish that outcome.
    I believe, consistent with the President, that the science 
is sufficient, we know enough about the science that we need a 
sufficient and responsible policy response. We are moving 
forward with three pillars. One is to advance the science, and 
the budget that we have sought on science is quite substantial.
    The second is, we have to really advance the technology, 
and I am sorry Mr. Mollohan is not here, but I think all 
recognize there are two paths toward reducing emissions: either 
turning off your economy, so putting yourself into recession, 
or developing and deploying the technologies that will lead us 
to a low or no emission future, and we have to aggressively go 
after that.
    There, too, our budget, our combined budget for science and 
technology that we have proposed is $4.7 billion or $4.6 
billion, which is a $700 million increase. So our commitment is 
quite real at a good old-fashioned dollars level, is quite real 
at a policy level.
    And then, of course, we need a suite of mitigation 
strategies. Now, we have taken the approach, an incentive-based 
approach, because we think you will get much greater 
participation and acceptance through an incentive-based 
approach, through mitigation strategies. That includes things 
like our $4.5 billion commitment for tax credits for renewable 
energy sources, for the purchase of fuel cell and hybrid 
vehicles. We have a whole suite of those kinds of technologies, 
and we want to enhance the deployment of those.
    And then, finally, in terms of an overall commitment, it 
has been actually a rare privilege for me to have come into 
this job, to have a role in the coordination of our climate 
policy, a role that has been subsidiary to 11 Cabinet members 
meeting on more than a dozen occasions. Our Cabinet, the level 
of personal commitment to this issue is unprecedented in our 
Cabinet. The amount of Cabinet time that we have spent on this 
issue is unprecedented around the world. There is no other 
country in the world that has committed this level of time to 
this issue. So that alone, I think, should be regarded as a 
real signal of our seriousness and the seriousness with which 
we take this issue.
    Again, we may differ over ways of getting there, addressing 
the issue, but I think the commitment is as strong as it has 
ever been.
    Mrs. Meek. Thank you.
    Thank you, Mr. Chairman.
    Mr. Walsh. Thank you. That concludes our discussion, and we 
would ask that you respond to our questions in writing for the 
record, and we wish you well.
    Mr. Connaughton. Thank you very much, Mr. Chairman.
    Mr. Walsh. You are welcome. The hearing is adjourned.

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                                          Thursday, April 18, 2002.

                  AMERICAN BATTLE MONUMENTS COMMISSION

                                WITNESS

MAJ. GEN. JOHN P. HERRLING, USA (RET), SECRETARY

                                Welcome

    Mr. Walsh. Good morning. Today is the day we have all been 
waiting for. It is the final day of our subcommittee hearings 
for 2003, and this morning we will take testimony from the 
American Battle Monuments Commission, the Consumer Product 
Safety Commission, and the Chemical Safety and Hazard 
Investigation Board. First up will be the American Battle 
Monuments Commission, whose 2003 request of $30,400,000 
represents a decrease of $5,066,000 from last year's 
appropriated level.
    For comparison's sake, I should note that $5 million was included in last year's appropriation to begin planning and 
design work associated with a new visitor facility at the 
Normandy American Cemetery near St. Laurent-Sur-Mer in France. 
This expense has been dropped for the 2003 request.
    On the positive side, this year's request appears to have 
included as part of the base, an additional $2 million included 
by Congress last year to complete the backlog of maintenance 
needs at cemeteries throughout the ABMC system.
    I would like to note at the outset of this hearing that 
construction is finally underway, moving ahead briskly, 
actually, at the World War II Memorial on the Mall. I am sure 
ABMC will have more to say on the subject during the hearing, 
but I want to mention this and thank the Commission for its 
perseverance in moving this proposed project forward.
    Testifying on behalf of the Commission will be its 
Secretary, Major General John Herrling, United States Army 
(Retired). General Herrling has been with us many times over 
the past few years, and we wish to welcome you back again. In a 
moment, I will ask that you present your opening statement. 
Before doing so, I would like to call upon the subcommittee's 
ranking member, Mr. Mollohan of West Virginia, for any remarks 
that he would like to make.
    Mr. Mollohan. Mr. Chairman, I would just like to join you 
in welcoming the witnesses to the hearing today, and I look 
forward to their testimony.
    Mr. Walsh. Thank you. We are also joined today by Mr. 
Hobson and Mr. Frelinghuysen.
    I would now recognize General Herrling and ask that you 
summarize your statement as best you can, and your written 
statement will be included in its entirety in the record.

                           Opening Statement

    General Herrling. Thank you, Mr. Chairman.
    Mr. Chairman and members of the committee, thank you for 
the opportunity to testify on the American Battle Monuments 
Commission's fiscal year 2003 appropriations request. Our 
chairman, General P. X. Kelley, regrets that he is not able to 
appear before the committee this morning.
    I believe the members of this committee are familiar with 
the mission and operations of the American Battle Monuments 
Commission. We administer, operate, and maintain 24 permanent 
memorial cemeteries and 27 monuments, memorials, and markers in 
the United States and around the world.
    Our cemeteries and their infrastructure range from 45 to 80 
years old. During fiscal year 2001, we began an Infrastructure 
Modernization Program. This program allows us to examine in 
detail the infrastructure of our facilities and to bring them 
up to today's standards. During 2002, we are dedicating $2 
million to this effort and requesting $2 million for fiscal 
year 2003 to continue this program.
    In fiscal year 2002, Congress added $5 million to the 
American Battle Monuments Commission's appropriations 
specifically for the partial cost of designing and constructing 
a new interpretive and visitor center at the Normandy American 
Cemetery in France. We have developed a conceptual management 
plan. We are currently in the process of selecting an 
architect/engineering firm to develop the program requirements 
and the initial scope, as well as providing project management 
and design services.
    In 1993, Congress directed the American Battle Monuments 
Commission to establish the national World War II Memorial here 
in Washington, D.C. I am happy to report this morning that 
construction began on the World War II Memorial in September 
and is scheduled for completion in March 2004.
    Since 1923, the American Battle Monuments Commission's 
memorials and cemeteries have held a high standard in order to 
reflect America's continuing commitment to its honored 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.
    I have provided the committee for the record a detailed 
account of the ABMC's activities and financial requirements. It 
reflects our $30,400,000 appropriation request for fiscal year 
2003.
    This concludes my prepared statement, and, Mr. Chairman, I 
would be happy to respond to your questions and the questions 
of the members of the committee.
    [The information follows:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                          Maintenance Backlog

    Mr. Walsh. Thank you very much. I will begin. As I noted a 
few moments ago, the Congress included in your fiscal year 2002 
appropriation an additional $2 million, which, when added to 
the funds designated by you for similar purpose in your budget 
submission, was intended to complete the backlog maintenance 
needs at cemeteries and monuments throughout the ABMC system. 
Although fiscal year 2002 is not quite half over, do you still 
believe these additional funds would be sufficient to complete 
the backlog maintenance and engineering program we have worked 
on together for about 5 years now?
    General Herrling. Mr. Chairman, I do. In fact, this has 
been a very successful program, and our projection is by the 
end of this fiscal year, that backlog of maintenance will be 
down to $300,000. So with the help of this committee, that 
program has been very successful, and the backlog has just 
about been eradicated.
    Mr. Walsh. That is great news. And at what point do you 
think you will be able to report it is completely concluded?
    General Herrling. This time next year.
    Mr. Walsh. Is that right?
    General Herrling. I feel fairly confident it will be. We 
will be in that position.

                      Infrastructure Modernization

    Mr. Walsh. You have noted that as the maintenance and 
repair program winds down, it is being replaced by your 
Infrastructure Modernization Program. Can you please tell us 
how this new program is similar to and differs from the soon-
to-be-completed backlog program?
    General Herrling. As I mentioned earlier, Mr. Chairman, our 
infrastructure ranges from 45 to 80 years old, and back several 
years ago, we decided to take a look at the infrastructure to 
determine its condition and its use for the future to try to 
get ahead of the maintenance problem again and not build up 
this huge backlog. So we hired a very competent A&E firm in 
Europe and asked them to go to each of our cemeteries and do 
very detailed studies in various areas. They started out with 
electrical systems.
    Mr. Walsh. When did they begin this?
    General Herrling. They began it in fiscal year 2000. The 
first phase of it was to take a look at electrical systems to 
make sure they were up to code and they met safety 
requirements, because some of those electrical systems had been 
in place for many, many years. They did that, and we have 
started a Phase II on electrical systems where we are going in 
and repairing the most serious deficiencies in that area.
    The second area they took a look at was structual integrity 
aspects, how solid are our buildings, these large cemetery 
memorials and monuments, and the quality of the stone and how 
well that is holding up.
    The next area they will go into are our water systems: 
water sources, reservoirs, supply and distribution systems, 
drainage systems, water quality issues and so forth. And in 
Europe, I would say that water in some areas can be a problem.
    Other areas we will inspect as we continue this program 
include mechanical engineering, heating, air conditioning, and 
ventilation systems, and things of this nature.
    So that is the real purpose of the Infrastructure 
Modernization Program, to take a look at what is there and try 
to get out ahead of it a little bit and determine what the 
maintenance requirements are going to be in the future.
    Mr. Walsh. As your Phase I surveys are completed, are needs 
being prioritized among the various facilities within the 
system? Or are you trying to completely upgrade all needs 
identified as you have just described?
    General Herrling. No, there is a definite priority system, 
Mr. Chairman, and we are taking on those first that are most 
important--the priorities would start with safety being the 
first consideration. Any electrical problem that had a safety 
implication has been handled first.
    Mr. Walsh. Regardless of the location.
    General Herrling. Regardless of the location. And then the 
priorities will go according to the most serious needs and 
basically getting the entire Commission's facilities up to code 
in whichever country they are.
    Mr. Walsh. Have the Phase I surveys conducted so far given 
you a true idea of what your annual costs will be if all 
identified problems are dealt with in a timely manner?
    General Herrling. Yes, they have. In fact, the cost of the 
Phase I repairs we thought were very reasonable. We thought we 
might have a bigger problem than the survey showed. So I think 
we will have a good handle on it.
    Mr. Walsh. When these facilities were initially built, they 
were built well, would you say?
    General Herrling. They were. The wiring, electrical panels, 
and the generators and things like that are very old in some 
cases and just needed to be replaced.
    Mr. Walsh. Is the $2 million you have budgeted going to be 
sufficient for next year?
    General Herrling. It will be sufficient for next year.
    Mr. Walsh. Do you have specific plans for Phase II and 
beyond?
    General Herrling. We do. My engineer has laid out a program 
where we will take a look at those other aspects that I 
mentioned as far as infrastructures, water systems, mechanicals 
and so forth. They will also be looked at and prioritized.
    Mr. Walsh. Thank you.
    General Herrling. Yes, sir.
    Mr. Walsh. Mr. Mollohan.

                        NORMANDY VISITOR CENTER

    Mr. Mollohan. Thank you, Mr. Chairman.
    How is the visitor center at the American cemetery in 
Normandy coming along?
    General Herrling. It is in the initial planning stage, Mr. 
Mollohan. We have met with Mike Stevens, and he has been over 
to Normandy to take a look at the cemetery and has been briefed 
on possible locations.
    We are in the process here in Washington of hiring an 
architectural and engineering firm to really start putting 
together a program of requirements for this memorial. Once we 
have a program plan put together, we will come back and brief 
the staff on what that program is. Based on their reaction to 
it, we will go ahead with a detailed design for the 
interpretive center.
    So we are in the first stage of this, the pre design 
programming stage.
    Mr. Mollohan. What do you think the total cost will be?
    General Herrling. I have no idea at this point. I know in 
talking to Mr. Stevens, $15 to $20 million is a number. But we 
won't know until an architect actually puts together a plan and 
does a cost estimate on the plan. So I would say we are 
probably a year away from that.
    Mr. Mollohan. And how are you engaging the host country, 
France? Are they included in the process? Please talk a little 
bit about what you think it is going to look like, what you 
think its capabilities are going to be. I understand that it is 
going to be more of an interpretive center and have that 
capability more than other cemeteries have at this point.
    General Herrling. Yes, that is our understanding also. We 
have a visitor center at Normandy, but I think when you look 
around in another 10 or 15 years, there are going to be very 
few World War II veterans still alive. So the interpretive 
center idea is to keep this whole idea of Normandy and the 
Normandy invasion in some permanent facility.
    It was the largest military operation ever undertaken, and 
it was very complex, as you know. It involved our allies and 
every aspect of joint/combined planning.
    Now, how you capture that and how you put that together in 
one building is the question. It can involve a theater, a small 
theater with a film; it can involve displays, documents and 
things like that. It might even involve a room where you have 
oral histories that somebody could go in and listen to.
    But the center itself would try to retain the significance 
of that invasion and what its impact was on not only Europe but 
the world. How you do that, how you take that large idea and 
put it into one building, and what you put in there to 
transpose that information, I am not sure we know yet.
    Mr. Mollohan. Who is thinking about that, what it is going 
to be? What kind of a team have you put together?
    General Herrling. I have our Director of the European 
Region, who is going to be primarily responsible for this 
project, doing some thinking about it. He has been to the 
National Park Service Center at Harper's Ferry where he has 
talked to the experts. He has met with the Director of the 
National Park Service and her staff. He has been to the Library 
of Congress to talk to the Folklife Center people. So he is 
pulling together the information, and will build a team to pull 
all these disparate pieces together and develop the concept.
    Mr. Mollohan. That could be a fabulous historical resource.
    General Herrling. It really could.
    Mr. Mollohan. Thank you, Mr. Chairman.
    Mr. Walsh. Thank you, Alan.
    Mr. Hobson?
    Mr. Hobson. Thank you.

                             ANNUAL REPORT

    First of all, I want to commend you on the Commission 
report. I first went to this cemetery in 1961 when I was on 
active duty in France and we built the Berlin Wall. I have been 
back there at least twice since then. It is a very moving place 
to go, and you do a great job with it.
    General Herrling. Thank you.
    Mr. Hobson. I was in Hawaii not too long ago, and I went to 
the cemetery there and laid a wreath. It is very moving.
    I have said this before in this hearing, and I want to say 
it again. What everybody ought to do is when you go to this 
cemetery, go down the road and across the road; there is a 
German cemetery. If you haven't done that, people should do 
that. It is a very different experience on how they do their 
cemeteries and how we do ours in France, for example. I don't 
know if you have ever been there.
    General Herrling. Oh, I have, and at many places.
    Mr. Hobson. I first did that in 1961, when I was a lot 
younger. But it was a very moving experience, and it still is.

                         RENT AND UTILITY COSTS

    I want to ask two questions. I always ask questions about 
rent and utilities and things like that, and I am interested in 
the increased costs of your rent, communication, and utilities. 
Your budget indicates an increase of $139,000 for these 
expenses. And I remember last year I complimented you on 
decreasing these costs for 2002. I just want you to know we 
still watch these things, and I try to send the message to 
other agencies to watch their rent and similar costs.
    Can you elaborate on the needs for this increase in 2003?
    General Herrling. I think I will ask Tony Corea, who is our 
Director of Finance, to address that particular question.
    Mr. Corea. Sir, the increases in rent this year, contrasted 
with the decreases last year, partially are attributable to the 
foreign currency rates that we use. As you know, most of our 
budget is spent in foreign currency. We change the rates every 
year based on the number we get from OMB, which they actually 
derive from DOD. And so part of that change this next year is 
because of our foreign currency rates.
    And, secondly, we do have some increases in the rents and 
utility costs this year. It is relatively small. We are proud 
of how small it is.

                             ABMC VISITORS

    Mr. Hobson. I see you had over 8 million visitors to the 
cemeteries, monuments, and memorials in 2001. That is a good 
sign of the respect people have for these individuals who 
sacrificed themselves for our freedom, and I am pleased to see 
that your attendance numbers are so high.
    Along those lines, do you have any figures on the voluntary 
donations that are received from these visitors? I am thinking 
along the lines of the donation boxes you see at the various 
battlefields, such as Gettysburg. I would assume that the 
National Park Service makes a fair amount of funds through 
these donations, and I wonder if you folks have anything 
similar.
    General Herrling. Mr. Hobson, we don't. We don't require 
anybody to pay an admission fee at any of our cemeteries----
    Mr. Hobson. No, I know you don't.
    General Herrling. And there is no collection box there 
either.
    Mr. Hobson. If someone wanted to make a donation after 
being at one of these places, how do they know where to do that 
or what is available as an informational piece?
    Mr. Corea. Yes, sir, they can. On our website, for 
instance, we have information about public fund raising for the 
Vietnam Veterans Memorial plaque. We get people writing in all 
the time saying they would like to make donations.
    What we have been doing in the past number of years is 
saying thank you very much, you can make the donation to our 
campaign to raise funds for the World War II Memorial. We have 
brought in $184 million on that fund raising campaign over the 
last number of years.
    And so anything that anybody has ever asked us--and I see 
these letters regularly--we say, yes, you are welcome to go 
ahead and here is the World War II Memorial, or now the Vietnam 
Plaque to which you can contribute. Further, we still have some 
people giving small amounts of money, and this might be $10,000 
or $12,000 a year, for the Korean War Veterans Memorial. They 
can do that also.
    Mr. Hobson. That is all I have, Mr. Chairman.
    Mr. Walsh. Thank you.
    Mrs. Meek?
    Mrs. Meek. I don't have any questions, but thank you very 
much for appearing before us, and I appreciate the work you 
have done.
    Mr. Walsh. Mr. Frelinghuysen?

                         HEADSTONE REPLACEMENT

    Mr. Frelinghuysen. Thank you for your good work. Headstone 
replacement for World War I, have you been doing that, or are 
you just starting that?
    General Herrling. We have been doing that all along for 
years. If one happens to break or a branch falls on it, it is 
replaced. We spend probably in the vicinity of $300,000 a year 
for headstone replacements.

                       COROZAL AMERICAN CEMETERY

    Mr. Frelinghuysen. The cemetery in Panama, once we left 
there, was somewhat left in haste, but obviously we left a 
number of gravesites. Who actually looks after that? Is that 
your jurisdiction?
    General Herrling. It is.
    Mr. Frelinghuysen. And you are happy with all the 
arrangements?
    General Herrling. When the United States Army pulled out of 
Panama, with the Department of Defense, we had an agreement 
with the Panamanian Government for that cemetery, so it is 
under agreement with the government. We have an American 
superintendent down there. It is very well maintained like our 
other cemeteries are, and we have not had any problems.
    Mr. Frelinghuysen. Excellent. When I was on a CODEL that 
ended up in Russia, we stopped in Rome, and the new Italian 
Premier, Berlusconi, invoked the sacrifices of Americans in 
liberating his country. And he said if anyone ever had any 
doubt, you go visit those cemeteries--not that you need any 
allies, because I think you are doing a good job, but it is 
nice to have somebody heading up a country that respects the 
sacrifices of the people who fought for their liberation.
    Thank you.

                         BURIAL ON FOREIGN SOIL

    Mr. Walsh. If I could ask about the history. The burial of 
American soldiers on foreign land, I suspect, was a function of 
the times and the inability to move these bodies back home in a 
timely way.
    Today, all of our war dead are brought home, correct?
    General Herrling. That is correct.
    Mr. Walsh. And at the time, families did not have the 
option to have the body brought home?
    General Herrling. They did.
    Mr. Walsh. They did.
    General Herrling. It was left up to the next of kin whether 
they wanted the servicemember brought back to the States for 
burial or if they wanted the servicemember buried in an 
overseas American cemetery. The next-of-kin had to sign an 
affidavit to that effect, so it became pretty much locked in 
place. If it was a son, the parents; in the case of a married 
servicemember, it was the spouse who made that decision, and 
all those decisions are on record.
    So over many, many years, we have only probably had two 
disinterments from those cemeteries. But the family, the next 
of kin had a choice.
    Mr. Walsh. And what would this represent in terms of our 
losses, for example, World War II, the number of American 
soldiers buried overseas as opposed to those returned home?
    General Herrling. About a third of them are buried 
overseas.
    Mr. Walsh. A third.
    General Herrling. A third or about 90,000.
    Mr. Walsh. I think that completes our questions. So let me 
conclude by thanking you once again for the important work that 
you are doing. It is very much appreciated by this subcommittee 
and the Members of Congress, and we will try to continue to 
meet your needs as you continue to maintain these hallowed 
grounds.
    General Herrling. Thank you very much.
    Mr. Walsh. And we will submit additional questions for the 
record.
    General Herrling. Thank you very much, Mr. Chairman. Thank 
you to the committee.
    [Recess.]
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                                          Thursday, April 18, 2002.

                   CONSUMER PRODUCT SAFETY COMMISSION

                               WITNESSES

THOMAS H. MOORE, ACTING CHAIRMAN
MARY SHEILA GALL, COMMISSIONER
    Mr. Walsh. We will now hear from the Consumer Product 
Safety Commission. We would like to welcome back to the 
committee Commissioner and Acting Chairman Thomas Moore and 
Commissioner Mary Sheila Gall. Commissioner Moore took on the 
role of Acting Chairman in November following the departure of 
the former Chairman, Ann Brown.
    We appreciate both of you appearing today on behalf of CPSC 
to discuss the fiscal year 2003 budget. Also at the table is 
CPSC's Executive Director Tom Murr.
    For the benefit of those here today, I understand that the 
President has announced Harold Stratton as his nominee as 
Commissioner and Chairman of the CPSC and that his nomination 
hearing has been scheduled in the Senate for later this month.
    The fiscal year 2003 budget request for the Consumer 
Product Safety Commission is $59,875,000, which includes $3 
million for the administration's proposed accrual transfer of 
CSRS retirement and health benefits. Using an apples-to-apples 
comparison, this proposed budget represents a 2.9 percent 
increase in program levels over the appropriation of 
$55,200,000 for fiscal year 2002.
    I would also note here that the subcommittee appropriated 
an additional $1 million over the budget request last year, so 
the fiscal year 2003 represents a 4.75 percent increase over 
the requested level for 2002.
    Mr. Moore and Ms. Gall, I will ask you to summarize your 
testimony. I would ask Mr. Mollohan to make an opening 
statement. I will give him that opportunity when he returns. 
Your written statement will be entered in the record in its 
entirety.
    So, Chairman Moore, why don't you proceed, and we will hear 
from Ms. Gall, if she has a statement, and then we will proceed 
with questions.
    Mr. Moore. Good morning, Mr. Chairman and members of the 
subcommittee. I am Thomas H. Moore, and I am here in the role 
of Acting Chairman of the U.S. Consumer Product Safety 
Commission, CPSC, to present the Commission's budget request to 
the subcommittee. With me today are Commissioner Mary Sheila 
Gall and members of the Commission staff.
    I would like to offer the full text of my written statement 
for acceptance into the hearing record, and I would like to 
summarize my statement for the subcommittee.
    Mr. Walsh. We will submit that for the record.

                              INTRODUCTION

    Mr. Moore. I am here today as Acting Chairman because of 
the resignation, effective November 1, 2001, of Ann Brown as 
Chairman of our agency. Additionally, as of today, the 
President's nominee to fill that position has not been 
confirmed by the United States Senate. Nevertheless, I am happy 
to report to the subcommittee that President Bush has, as 
mentioned, nominated Harold Stratton to fill the vacancy of the 
Chairman's position. His confirmation hearing is scheduled for 
April 25, and I anticipate that he will soon be on board as the 
new leader of CPSC.

                                 BUDGET

    Taking a look at the fiscal year 2003 budget proposal, for 
that year, consistent with the President's budget request, the 
Commission is requesting an appropriation of $56.8 million, an 
increase of $1.6 million over our fiscal year 2002 allocation 
of $55.2 million. The $1.6 million represents a 2.9 percent 
increase over fiscal year 2002 funding. Nevertheless, full 
maintenance of our current safety activities at fiscal year 
2003 prices requires funding of $2.6 million over our fiscal 
year 2002 allocation.
    In fact, CPSC's original request to the administration was 
a budget request of $64.4 million for fiscal year 2003. 
Therefore, today we find ourselves in the same funding 
situation as last year when we presented our budget request to 
this subcommittee. The budget request for fiscal year 2003 is 
again at least $1 million short of the funding necessary to 
maintain our current level of activities at next year's prices.
    Our budget estimate of $2.6 million over our fiscal year 
2002 allocation contemplates full staffing at our target 
staffing level of 480 FTEs. Our budgeted projects and planned 
workload assumed that number of staff; that target staffing 
level of 480 FTEs has remained constant for the last 5 years. 
However, the OMB-proposed resources would only sustain our 
current consumer safety services at a reduced target FTE level 
of 471.
    While the immediate impact of such a reduction can be 
minimized with management, such staffing reductions would, in 
the long term, diminish the ability of the Commission to meet 
workload needs and to provide adequate staff coverage for the 
over 15,000 consumer product categories that fall under our 
responsibility.
    As I have indicated, our first priority is to obtain a 
level of funding so that we can continue our target workforce 
in fiscal year 2003 at the same level as today. This would 
allow us to effectively continue our life-saving mission.
    However, I must point out that there are a number of other 
critical investments that are not funded by the present budget 
request and must be deferred. Critical information technology 
investments such as the integration of our databases and a 
planned cycle for modernization of our computer equipment must 
be deferred.
    Additionally, we continue to defer the reestablishment of 
our research program. One project under consideration is to 
conduct long-term testing and evaluation of the performance of 
circuit breakers and panel boards to determine whether the 
safety standards for these products should be upgraded. This 
research could provide important safety benefits because 
residential electrical distribution systems--that is, circuit 
breakers, panel boards, and wiring--were implicated in an 
estimated 38,000 fires resulting in 280 deaths and $680 million 
in property damage in 1998, the last year for which this data 
is available.
    Most other Federal health and safety agencies have research 
budgets that are a vital part of their programs. Clearly, 
Congress envisioned research as part of the Commission's safety 
efforts when it established the Commission. The language in 
Section 5(b)(1) of the Consumer Product Safety Act explicitly 
addresses conducting research, yet we must continue to defer 
any research efforts for lack of funding.

                       COMMISSION WORK CONTINUES

    Let's take a look at our workforce efforts, please, and I 
want to emphasize the importance of the Commission's workforce. 
While it is true that the Commission leadership positions have 
undergone some significant changes since we presented our last 
budget request to this subcommittee, certain things remain 
constant. CPSC's critical mission is to protect children and 
families against unreasonable risks of injury and death from 
the more than 15,000 types of consumer products under our 
jurisdiction. That remains unchanged. Additionally, the hard 
work and dedicated spirit of the Commission's workforce 
continue, despite the change in leadership at the Commission. 
It is the workforce that is the heart and soul of the 
Commission's work, and the real reason, as well as Ann Brown's 
leadership, why the Commission has been so successful in recent 
years in addressing consumer product safety-related hazards.
    Therefore, while the leadership may have changed, the good 
work of the Commission continues. For example, in 5 months, 
from November 2001 to April 2002, during which I acted as 
Chairman, our compliance office has announced more than 120 
recalls affecting more than 27 million product units. Moreover, 
we have obtained civil penalties from six companies totaling 
over $1.85 million.
    During that same period of time, our general counsel's 
office has also been very active. Due to the hard work of our 
legal staff, the Federal courts have issued two important 
rulings in our favor. One ruling affirmed our fireworks 
inspection program. The other affirmed that companies must 
immediately report to the Commission when they receive 
information reasonably supporting the conclusion that a product 
contains a defect that creates a substantial product hazard or 
that a product creates an unreasonable risk of serious injury 
or death. Additionally, we recently obtained a felony 
conviction against an importer of violative products for lying 
to the Government.
    The Commission staff has also been very active in providing 
safety information to the public during my short tenure here as 
Chairman. In the past 5\1/2\ months, our Office of Public 
Affairs has issued more than 128 press releases on product 
recalls and other safety information and has distributed over 
789,000 safety publications to consumers nationwide. 
Additionally, the office has produced or instructed industry to 
produce 12 video news releases, VNRs, on hazardous products. 
The office has also completed five safety campaigns, including 
a campaign to prevent home fires caused by space heaters.
    Also worth noting is the fact that yesterday, April 17th, 
the Commission announced its annual ``Recall Roundup'' program. 
This program is designed to encourage consumers to examine 
items in the home in order to identify those that present a 
hazard and have already been recalled. Consumers are encouraged 
to take advantage of the recall programs currently offered by 
the manufacturers of these products. This year, Recall Roundup 
featured a new initiative to get in touch with personnel at our 
Nation's military bases to alert them to recalled products.
    The Commission staff has also remained vigilant in the 
rulemaking and programmatic areas. The staff is currently 
reviewing comments received on an advance notice of proposed 
rulemaking to address open-flame ignition of mattresses and 
bedding, working on a proposed baby bath seat rule, and 
evaluating the risks associated with the use of chromated 
copper arsenate in pressure-treated wood. So far this year, the 
Commission staff has sent four briefing packages to the 
Commission, worked with industry to complete three new 
voluntary safety standards, and completed eight hazard analyses 
or studies on safety-related issues. We have been busy.
    Therefore, for those who may have had some concerns that 
things might slow down, or even come to a stop, during this 
interim period, I can confidently assert that the facts clearly 
show that any such concerns are unfounded. Let me make it clear 
that while the style of leadership may have changed at the 
Commission, the fundamental mandate and the serious dedication 
to fulfilling that mandate remain steadfastly unaffected.

                       LITIGATION TRAVEL LANGUAGE

    I will take a quick look at litigation travel. I would like 
to briefly summarize a proposed language change included in the 
President's budget request. The change is to exempt from 
Section 401 travel ceiling travel performed by U.S. Consumer 
Product Safety Commission in connection with litigation. This 
is not a request for additional funds but a request for more 
flexibility to reallocate existing funds to meet litigation 
needs as they arise.
    The scope of litigation-related travel is difficult to 
determine in advance. Litigation is usually authorized after 
the agency's budget is submitted to Congress. Once litigation 
is authorized, travel must be undertaken, often at the 
direction of the courts. The travel ceiling prohibits us from 
increasing our travel funding to accommodate litigation travel 
in excess of the amount provided in our original budget. We 
must then reduce other planned and approved program travel to 
provide for increased litigation travel. The language change 
would continue the travel ceiling on the majority of agency 
travel but, on those rare occasions when necessary, would allow 
the agency to use any available funds to meet the unanticipated 
litigation requirements that may emerge during a fiscal year.

                               CONCLUSION

    In conclusion, Mr. Chairman, we all recognize that the 
Nation is facing very difficult decisions regarding its 
allocation of resources. In our presentation, we seek to fairly 
portray the impact of our directed funding on the Nation's 
consumer product safety programs. Our presentation tells this 
subcommittee what the impact of the requested funding level 
could be. We may have to reduce our target staffing level by 
nine FTEs if we cannot find other savings or sources of 
funding. But it should be pointed out that most of our work can 
continue forward under the President's funding recommendation, 
and under these circumstances that is definitely a positive 
step.
    Last year, the House and the Senate agreed to add $1 
million to our budget request in order to provide sufficient 
funds to staff the Commission at the 480 FTE target staff 
level. That agreement was a vote of confidence in the 
Commission's work, and I would like to express my sincere 
appreciation to the subcommittee for its support.
    The Commission staff has demonstrated tremendous effort in 
fulfilling its product safety mandate, and the additional 
funding was viewed by all as recognition of that hard work. In 
recent years, the President, Congress, and the American public 
have all shown great confidence in CPSC and its consumer 
product safety programs. The work of CPSC has contributed 
significantly to the 30 percent decline in the rate of deaths 
and injuries related to consumer products since the agency's 
inception. In just one example, our actions on making cigarette 
lighters child-resistant have prevented an estimated 4,800 
fires, 130 deaths, 950 injuries, and $76.4 million in 
residential property loss in 1998 alone. The total societal 
saving in 1998 is estimated at $773 million.
    However, despite all the progress the Commission has made 
and is currently making in reducing deaths and injuries related 
to consumer products, the marketing of unsafe consumer products 
remains a major national problem. We still have a long way to 
go to prevent hazardous consumer products from killing and 
injuring people. The continual support of this subcommittee is 
absolutely essential to us. We cannot successfully fulfill our 
mission without your support.
    By the time our fiscal year 2003 funds are allocated, my 
extraordinarily effective personal staff and I will no longer 
be directing the Commission from the Chairman's position. 
However, I can assure this subcommittee that we will use the 
funds you provide to us to efficiently and effectively 
safeguard the health and safety of American consumers.
    Thank you for your attention, and at this time my 
colleague, Commissioner Gall, would like to offer a statement 
to the subcommittee. After her statement, we are available, 
along with Commission staff, to respond to questions that you 
may have.
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    Ms. Gall. Good morning. As both our Chairmen here today 
have mentioned, our nominee for the chairmanship of CPSC will 
have his hearing next Thursday. So I thought this was an 
appropriate time for me to publicly thank Commissioner Moore in 
his role as Acting Chairman. He and his staff have done a 
terrific job. They have kept us very busy at the agency, but 
they have done so in a terrific atmosphere of respect for our 
staff and their expertise and treated each individual at the 
agency with tremendous dignity. And the staff is appreciative, 
as I am. So thank you very much, Thomas.

                                 BUDGET

    I can simply say I support this budget. All of us paid our 
taxes earlier this week on April 15th, and I can say that as a 
taxpayer I am very satisfied with the work that is done at 
CPSC. We work smart with little money. And I think we are a 
good bargain for the American taxpayer and, more importantly, 
we are a good bargain for America's families.
    We do have a shortage of $1.1 million, as Chairman Moore 
has mentioned, if we are able to provide current services to 
the public. Eighty percent of our budget is made up of salary 
and benefits for our staff. We have made a tremendous effort to 
cut costs and have done a terrific job getting it right down to 
the bone. A lot of our costs are involved in retirement and 
health benefits, retention pay, contract support, and so on.
    Now, last year, as the Chairman mentioned, the Congress 
gave us an additional $1 million. We want to say thank you very 
much, and could we see that again? [Laughter.]
    We need it. We are very proud that the administration 
supported us to the extent that they did. I think that 
underscores the work that we do at CPSC.
    We have met our unanticipated costs, and we have additional 
unanticipated costs that we must meet related to new laws about 
headquarters telecommuting, new GSA security costs, transit 
benefits for staff, and so on, a number of things like that. 
And we have other costs that we can discuss in further detail 
this morning.

                             TRAVEL CEILING

    Chairman Moore mentioned the litigation travel situation 
that we find ourselves in. Normally we are able to do quite 
well with the budgets that we allot for travel for the various 
offices. However, we are in a special circumstance right now 
that really underscores the need for exempting litigation 
travel from the travel ceiling that we have. As the Chairman 
said, we wouldn't be requesting additional funds. We just would 
like greater flexibility in the litigation travel arena.
    Right now we are in the unusual position of having two 
cases that are now before administrative law judges. That is 
very unusual for us. And there are new costs related to that 
that are pretty much, you know, the demands of the court. At 
the direction of the court, we have to pay for travel, for 
discovery, trying the cases. In some cases, our people are 
testifying and arguing appeals and so on. So we have a full 
plate of litigation-related expenses that we don't normally 
have.
    So it is very unusual for us, and it has put us in a bind, 
and we have other travel commitments of other program offices 
that we have to meet. And so we would ask for your help in 
making the arrangements to change the language so that we can 
address the litigation travel needs that we have, and we ask 
your support for the budget.
    I, too, would be happy to answer any questions you may 
have.
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    Mr. Walsh. Thank you both for your statements.

                            BUDGET SHORTFALL

    As the committee saw last year, CPSC's budget justification 
indicates that the requested level of funding may result in a 
reduction of nine FTEs if savings are not found in fiscal year 
2003. I mentioned earlier in my opening statement that this 
subcommittee provided an addition $1 million above the budget 
request in fiscal year 2002 to prevent this reduction in FTEs. 
This increase appears to be incorporated into your base level 
of funding, and the increase proposed for CPSC is greater than 
many other agencies under this subcommittee's jurisdiction have 
requested.
    I also note that in fiscal year 2002 it now appears that 
many of the additional funds provided by this committee will 
not be required for personnel compensation and benefits due to 
a number of agency vacancies, many of which are political 
appointees and beyond your direct control.
    Could you explain how this $1 million gap is derived?
    Mr. Moore. Well, right now I believe the 2002 shortage is 
related to the fact that we have had something like 47 
retirements. Also, we have a matter relating to the Chairman's 
office being vacant. Therefore, right now we don't have that 
staffing in that office. Ordinarily, those salaries would be 
covered.
    Do you know of any other elements that----
    Mr. Walsh. Were those not funded in the 2002 budget? Were 
those positions not funded?
    Ms. Gall. Yes, they were.
    Mr. Walsh. They were funded. So you saved money.
    Mr. Murr. Let me see if I can explain some of what we are 
saying about the shortfall. To take the 2002 levels to the 2003 
level at our current services, that is, the same purchasing 
power, we need about a 5.6 percent increase. We got a 2.8 
percent increase. That is the difference that we are talking 
about, a little over $1 million. I can tell you what that $1 
million represents.
    Some of the costs that were funded last year are not one-
time costs. They are built into the base, but then additional 
costs occur the next year. A good example of that would be 
health benefits. Health benefits go up every year. What we 
received in our passback from OMB was funding for the cost-of-
living increase only. So a rise in health benefits is not 
covered. Health benefits have been averaging about 14 percent 
increase each year. That is a pretty big cost in a small 
budget.
    Another thing that is beyond our control would be the 
change, the aging, if you will, of our workforce. Many of the 
people in the Civil Service Retirement System are leaving. They 
are replaced by people in the FERS system. The FERS system is 
just more expensive for us to fund. It is cheaper for the 
Government later on, but it is more expensive initially because 
you match contributions to the thrift plan.
    So it is costs like that, the health benefits, the change 
to retirement systems, more people in FERS, and additional 
career ladder promotions that were not provided by the ONB 
passback. Those are important to us each year because that is 
one tool we have to try to retain staff. We don't compete very 
well with some of our sister agencies, like EPA or FDA, where 
the grade structure is a little bit higher. So we try to make 
sure people get career ladder promotions if they are performing 
well when they are due.
    Mr. Walsh. How many budgeted unfilled positions are there 
in your agency right now?
    Mr. Murr. Right now we are at about 470.
    Mr. Walsh. And how many are unfilled?
    Mr. Murr. No, we budgeted for 480. We are at about 470.
    Mr. Walsh. Okay. Ten vacancies.
    Mr. Murr. Right. We average a vacancy rate, over the last 
few years, of about 2 percent. I have looked at other 
Government agencies similar to us, and the weighted average is 
usually about 98 percent of the allotted FTEs.

                               CONTRACTS

    Mr. Walsh. Commissioner Gall mentioned contracts. Are the 
number of contracts and the cost of contracts increasing for 
the agency?
    Mr. Murr. Yes.
    Ms. Gall. Yes.
    Mr. Murr. That is also funding we didn't get although we 
asked for the additional dollars.
    Mr. Walsh. Contracts with whom?
    Mr. Murr. Well, we contract for some administrative 
services, things like accounting systems. We actually contract 
with the Department of Interior for that. They run the system 
for us. So there are quite a few administrative services of 
that sort. We have things like the FAIR Act to deal with where 
we are trying to contract out non-inherently governmental 
positions. And then we have programmatic contracts. They could 
be product testing, they could be in support of litigation. So 
that most of our contract money is directly programmatic 
contracts.
    If you take our salaries and our rent and set that aside, 
that is 86 percent of the money we have. So that leaves us the 
other 14 percent to really do the product safety work, to pay 
for the product testing, to keep our laboratory running, to buy 
our IT equipment.
    Ms. Gall. And this contracting is a very important 
component of our compliance and our other testing, because we 
can't keep all kinds of experts on board when it isn't 
necessary. We have electrical engineers. We have mechanical 
engineers, economists--we have a lot of experts on staff. But 
as products become more and more complicated, we sometimes have 
to contract out with expertise that we don't have on board. It 
is very important.
    For example, we have a case right now with overhead 
sprinklers that are to provide safety in case of a fire that is 
now before an administrative law judge. And some of that 
testing that needed to be done had to be contracted out because 
it required a certain expertise that we didn't necessarily 
have. And, of course, our labs are hampered because we have 
been unable to provide the kind of improvements in the labs we 
need. For example, the electrical wiring at the labs is 50 
years old. We have to be extremely careful about how many tests 
we are doing at one time so we don't cause a brownout in the 
area.
    Mr. Walsh. Do you contract with Underwriters Labs or ITS to 
do this testing or any of those companies that do this for 
industry?
    Mr. Murr. Not Underwriters Lab, per se, but we do work with 
some private contractors as well as other Government 
organizations, like NIST, which the Consumer Product Safety Act 
actually directed us to. They often have the facilities and the 
staffing that we don't have.
    Ms. Gall. And we work in concert with UL and with other 
testing facilities and compare notes and work together on 
particular situations. But we don't contract with them.
    Mr. Murr. And universities, that sort of thing.

                            RESEARCH BUDGET

    Mr. Walsh. Mr. Moore, you mentioned research. Staff advises 
me that CPSC has not been reauthorized since 1992. Is that why 
you don't do research?
    Mr. Moore. Well, it hasn't been funded, and we have been 
asking for research now for several years, a research budget. 
It is authorized in the statute.
    Mr. Walsh. It is authorized in the statute, but it has not 
been reauthorized by the Congress. Why is that? What have they 
told you?
    Mr. Moore. I am not sure. They haven't said anything. They 
haven't said why it hasn't been funded.
    Mr. Murr. I can't speak to why there hasn't been 
reauthorization. No one has talked about changing anything per 
se in the law, in the act.
    Ms. Gall. I think it is a budget constraint issue, probably 
more than anything else. You know, in terms of the research we 
would like to do, there are some wonderful----
    Mr. Walsh. Those authorizers don't normally worry about 
budget issues as much as we do.
    Ms. Gall. I mean as far as we have been working from year 
to year. Well, I won't get into that. It is not a safe issue 
for those of us on this side of the table.
    Mr. Walsh. I don't want to start a fight here.
    Ms. Gall. But my concern is that there are some areas that 
we could really go into. Sensor technology is one of those 
areas that is very important where there are a number of 
issues--lawn mowers, stoves and ranges, a whole host of issues 
where sensor technology could turn something off and prevent 
accidents. That is an area we are interested in, also circuit 
breakers.

                         RESEARCH AUTHORIZATION

    Mr. Walsh. On that point, it is our understanding that the 
Senate had provided money to do that sensor research, and the 
authorizing committee weighed in against that expenditure 
during conference negotiations. That is pretty aggressive.
    Ms. Gall. Yes.
    Mr. Walsh. Is that not true?
    Mr. Moore. I am not aware of----
    Mr. Murr. I am not aware of any opposition to research. In 
fact, we have organizations like the Institute of Medicine 
which recommended that CPSC needed additional resources for 
research to study safety problems. It is important because 
individual manufacturers do specific product research. This is 
really a research effort aimed at classes of products and ways 
of making them safer.
    For example, a lot of the technology we have today that 
fails, does not necessarily fail in a fail-safe manner. So we 
could do some generic research aimed at if something failed, 
like a GFCI, it would fail safe. As it is now, when it fails, 
you have no protection. So it is looking at classes of products 
like that.
    The GFCI is a good example of what we had the capability to 
do quite a few years ago. We took----
    Mr. Walsh. I am going to ask you to hold that thought so we 
can go vote. We will take a brief recess and be right back. 
Thank you.
    [Recess.]
    Mr. Walsh. We can probably move things along. We will make 
sure everybody has their opportunity.
    You were commenting on my last question, sir.
    Mr. Murr. I was just going to give an example of some past 
research that had some pretty big payoffs for us. Close to 20 
years ago, we actually took the technology that is in the 
ground fault circuit interruptor and made it smaller, we 
miniaturized it. We built the prototype of it. It was rather 
rudimentary, but it demonstrated to the industry that this 
could be done. And as a result, what you see today are the type 
of products that have these built in, like in a hair dryer, 
which prevent electrocution.
    It also takes that kind of effort to show that this sort of 
technology can cut across a lot of products, is possible, and 
will save lives. And so that is the kind of thing that we are 
talking about. That is what we no longer are able to do. We 
just don't have the resources to do that sort of work.
    Mr. Moore. And, of course, the statute authorizes research 
in Section 5(b)(1).
    Mr. Walsh. You have made that point several times.
    Mr. Moore. Yes.
    Ms. Gall. Isn't he good? [Laughter.]

                       LITIGATION TRAVEL LANGUAGE

    Mr. Walsh. Let me ask a couple questions on this issue of 
litigation travel because you raised it and apparently it is 
important to you. Budget documents request legislative language 
to exempt CPSC litigation travel from the travel ceiling. Just 
to clarify for those here, the General Provision referred to 
here states that expenditures for travel may not exceed the 
amount set forth in the budget submission unless approved by 
the Appropriations Committee. Some of the reasons given were 
that litigation travel is difficult to determine, litigation is 
usually authorized after the budget is submitted, and a large 
degree of litigation this year.
    The current language allows for CPSC to request through 
reprogramming a change in the travel ceiling that would have to 
be approved by the committee. Have you ever made a 
reprogramming request before in this area?
    Mr. Murr. Travel-related, not specifically. Travel was 
included in some of the reprogramming requests that we made on 
efforts like all terrain vehicles and several other things in 
the past where we have asked for reprogramming.
    We are in a unique situation where we have two large cases 
at one time, and once it starts, we are sort of at the mercy of 
the administrative law judge. If he wants to start discovery, 
thus requiring depositions that need to be taken, then we are 
kind of locked into the schedule. The Government would be in 
the unfortunate situation of saying we have to wait.
    Mr. Walsh. We have a number of agencies that have to deal 
with this, EPA and others, and I am just wondering why CPSC 
should be treated differently than other agencies within our 
bill.
    Mr. Murr. I guess, to me, part of the reason is the 
smallness of the funds we have available in travel. I don't 
know the other agencies' situations. Our problem is we have a 
limited amount of funds in a budget that we can identify for 
travel. Barring any unforeseen contingencies, which these two 
cases represent, we are normally okay. We have planned out what 
sort of travel we need for both compliance activities and 
programmatic kinds of activities. When something comes up, 
especially two, that we can't anticipate, that is where the 
problem comes in. There is not enough----
    Ms. Gall. I have been at the Commission 10 years, and this 
is the first time we have ever come across this particular 
situation where we have these two huge cases that we have to 
deal with at the same time. Normally we don't have that kind of 
situation.
    Mr. Walsh. Okay. If you would, then, would you provide the 
subcommittee with a breakdown of actual travel expenses for the 
past 5 years that identifies the amount and percentage of 
travel directly related to litigation.
    Ms. Gall. And I would just like to add that if this is 
granted and someone needs additional travel money for 
litigation, the Commissioners would watch that very carefully 
so that we would assure that it was something that was 
necessary and nothing else.
    Mr. Walsh. Thank you.
    [The information follows:]

                                                 TRAVEL EXPENSES
                                             [Dollars in thousands]
----------------------------------------------------------------------------------------------------------------
                                                              1997     1998     1999     2000     2001     2002
                         Category                             Act.     Act.     Act.     Act.     Act.     Est.
----------------------------------------------------------------------------------------------------------------
Staff.....................................................     $356     $382     $382     $439     $463     $500
GSA Cars..................................................      226      225      249      247      256      260
Litigation................................................        8       13        4       11        6      100
Total.....................................................      590      620      648      697      725      860
Travel Ceiling............................................  .......  .......  .......  .......  .......      840
Potential Travel Ceiling Shortfall........................  .......  .......  .......  .......  .......     -$20
----------------------------------------------------------------------------------------------------------------

    This chart illustrates that in the past we have had much 
less litigation expenses than projected in FY 2002. When we do 
have major litigation, as projected in 2002, it can prove 
disruptive because we have to reduce our other planned staff 
travel to stay within our travel ceiling. Even if the 
litigation is resolved in time to avoid the travel 
expenditures, the prospect of possible litigation is disruptive 
to agency travel plans. This has often been the case in FY 1997 
to 2001. In each of these years, we had litigation prospects 
but actual litigation was avoided by settlements. However, in 
each year we faced disruption of our travel plans because of 
potential litigation.

    Mrs. Meek?
    Mrs. Meek. Thank you, Mr. Chairman. Welcome. I think you 
have done a good job, Mr. Moore.
    Mr. Moore. You are very encouraging. Thank you. Very 
generous, too.
    Mrs. Meek. Yes, I have watched this Commission in my tenure 
on this committee, and I hope that you realize, as I do, that 
this is a very important Commission in terms of our 
constituency and the services that you render to them. I think 
sometimes what you render is underestimated, really. But it is 
significant and in terms of what it does for the populace, many 
of the things you come out with and many of the products that 
you watch and report to us mean a great deal in terms of really 
the quality of lives of our citizenry.
    So I am concerned about the fact that your leadership now 
is not in a vacuum because Commissioner Gall has said, no, 
everything is going along fine even though you don't have a 
Chairman at this point that is beginning to--one has been 
designated and as soon as that person comes on, it looks like 
you filled in for that. But there is that leadership vacuum, 
and, of course, as soon as you have it, I am sure you will go 
even further.

                            BUDGET SHORTFALL

    But I am concerned about that you are consistently 
underfunded in terms of the projections which you give to the 
committee. Why do you keep having a shortfall in terms of your 
budgeting? The budget request doesn't cover the cost of the 
salary expenses and it doesn't cover the rent adjustments and 
projects, and you have a $1.1 million shortfall. Can you 
explain why you think this is happening?
    Mr. Moore. That is a tough one. I know we try to adhere to 
what is going on in the Government, particularly from the 
President's perspective, with budgets and trying to meet costs. 
And we adhere as closely as we can to a tight line because we 
don't want to aggravate the budget situation for the Government 
in total. So we try to run it as tightly as we can. We try to 
run a tight ship and try to work within close boundaries, 
because we are watching the budget applications around the 
Government, and we have a feel for what the situation is.
    We know in general when there are budget accessions, so we 
try to stay within our budget and we ask for minimal 
requirements that we can get along with.
    Ms. Gall. And I think, Congresswoman, that this year in 
particular OMB did try to help us and did give us something of 
an increase, recognizing that we had some constraints that were 
related to salary and benefits and so on. And I think we all 
recognize that this is a tough year, you know, that there are 
many competing, very serious needs in the Federal Government. 
Certainly we recognize that we have new requirements for our 
money that are related to security issues and so on. And we 
have been very active within our offices in dealing with some 
of those issues.
    You know, this past month, we had a meeting with all the 
appropriate Federal agencies to discuss gas masks, for 
instance, because we have received numerous requests from 
constituents across the country, your constituents, asking us 
about the safety of gas masks. So we brought together all the 
appropriate agencies, and now FEMA is going to coordinate from 
now on, take that over, because of their experience with nerve 
gas in Alabama. They feel that they would like to coordinate 
that, and that is wonderful and we agree with that. But there 
are a number of other security concerns this year that we are 
dealing with, with the ATF and, you know, some other issues. 
And we all recognize that there are security concerns that have 
been to be paid for, security issues that have to be addressed 
in this budget.
    So we are very grateful for the additional money that OMB 
gave us, and, you know, we do need to address these other costs 
that we are coming across at our agency. But we recognize that 
there are competing needs.

                            PURCHASING POWER

    Mrs. Meek. Just trying to get enough to carry on your 
mission that you have indicated that you were to do.
    Ms. Gall. Right. We still need the money. Tough as that is, 
we still need the money.
    Mr. Moore. May I ask our Acting Executive Director Tom Murr 
to add to this explanation, please?
    Mr. Murr. I won't speak to how things are allocated across 
government. I can only say what is happening within our budget.
    By not getting the same level, the same purchasing power as 
the year before, we start to experience an erosion. A good 
example is why the FTE issue is so important to us. In the last 
10 years we have lost almost 11 percent of our FTEs. So in any 
given year, you could look at it and say six, seven, eight, 
nine, that is not a big deal. And in and of itself, it may not 
be. But over time the cumulative effect of that has really 
taken its toll. So we find ourselves with no back-ups to 
people. If a crucial engineer leaves, gets sick, whatever, 
there is no one to back them up.
    In addition, there are actually increasing demands. 
Products have gotten more complex. We need more work. We even 
have a greater demand in administrative areas. We have cut 
those back over the years, but now we are finding that things 
are in arrears like information technology where the need is 
growing. You know, it has gotten so complex compared to the 
environment we are used to working in. We can't get by with the 
same level of support staff. We are not getting the same 
funding as the year before.
    The second thing that occurs are the unfunded mandates that 
get thrown on to agencies. Good examples of those are the 
transit benefit subsidy, a lot of the requirements in the IT 
area for IT security, and telecommuting.
    These are things that we don't have budgeted. We have asked 
for increased funding each year for additional IT funding, et 
cetera. It never quite makes it, obviously, since we are not 
even getting the same level as the year before. It is not quite 
getting the level of funding as the year before and then adding 
these additional funding requirements over which we have no 
control.

                         LAB MODERNIZATION PLAN

    Mrs. Meek. What is the status of the GSA assessment? There 
was a GSA assessment to estimate the cost of the lab and needs 
to modernize the lab. You talked about that last time.
    Mr. Moore. Well, we are waiting for the approval of a 
master plan. A master plan has--there has been a need for a 
master plan, and the National Capital Planning Commission has 
pushed back the completion date from December 2001 to January 
2003. They changed the date. The lab modernization plans have 
been delayed pending the completion of this master plan. Once 
we get the master plan approved, we can go ahead with the lab 
plan.
    Mrs. Meek. Thank you.
    Thank you, Mr. Chairman.
    Mr. Walsh. Thank you.
    Mr. Frelinghuysen?
    Mr. Frelinghuysen. Thank you, Mr. Chairman.

                     CRITICAL INVESTMENTS DEFERRED

    Mr. Moore, Ms. Gall, nice to see you again, and thank you 
for all the good work of the Commission. I think that this is 
my eighth hearing with the Consumer Product Safety Commission, 
and as I look over both of your testimonies, there seems to be 
somewhat of a disconnect. For the last couple of years, it has 
been a fairly amicable process, but I haven't seen testimony 
weighing in to the degree that this testimony weighs in on 
issues which seem to be fairly important. And out of Mr. 
Moore's testimony, critical information technology investments 
such as the integration of our databases and a planned cycle 
for modernization of our computer equipment must be deferred. 
One item.
    You go on: The modernization of our testing laboratory 
site, which would include the upgrading of almost a 50-year-old 
laboratory's electrical system also cannot be contemplated 
under the present request.
    I have been here, and I don't remember these issues having 
been raised on other occasions, which surprises me. And these 
are not problems that have just come as a result of the passage 
of new administration. I assume these are some long-term 
issues.
    Ms. Gall. Oh, sure.
    Mr. Frelinghuysen. I don't remember hearing where any of 
these issues were accentuated. Could you react to that?
    Mr. Moore. As we go along, we determine where we can make 
improvements. We have determined that there is a need for 
efficiencies, particularly in our lab work. Our laboratory is 
quite a ways out, and it is isolated out there. And, we are 
looking for a way to make it more efficient to work there. And 
we do request improvements through OMB for that particular 
facility. But usually our passback does not include the 
requested funding.
    Mr. Frelinghuysen. My point is that this is the 
appropriations process. If there are some problems with IT, 
that is what should have been highlighted over the last couple 
of years. I know we have highlighted some things that were of 
high visibility and important in terms of product safety and 
taking care of small children. But, in reality, to do your 
job----
    Ms. Gall. You have to have the nuts and bolts to do it. 
That is true.
    Mr. Frelinghuysen. And it seems to me that just the issue 
of it going on in your comments here, one project under 
consideration is to conduct long-term testing and evaluation of 
the performance of circuit breakers and panel boards to 
determine whether the safety standards for these products 
should be upgraded.
    I would assume our society has developed enough that this 
would have been on the radar screen for a number of years as 
well.
    Ms. Gall. Yes, and----

                      HIGHLIGHTING FUNDING ISSUES

    Mr. Frelinghuysen. It seems to be highlighted in this 
testimony. I don't have last year's testimony or the previous 
year's, but I don't remember the degree to which these types of 
fairly critical items have been highlighted.
    Ms. Gall. The circuit breakers in particular have been 
mentioned every time we have made an appeal for a research 
budget. I remember that because that has been close to my 
heart. I think that is work we need to do. The sensor 
technology has been an issue that we have brought up in the 
past as well.
    As far as the lab improvements go, this is something I have 
been concerned about for the 10 years I have been at the 
agency. Our laboratory is on a site that was a 1950s missile 
base, and as I mentioned a few minutes ago, our electrical 
wiring system is 50 years old, and we have to be careful. It 
sounds silly and it is funny, but we have to be careful how 
many electrical experiments we run at one time.
    We have need of a storage facility that we have talked 
about for a couple years now. We are still trying to get the 
money to do a safe storage facility. We are in a residential 
area. Our lab is located in a residential area. We want to be 
good neighbors, and we want to make sure that all our product 
storage is safe and in appropriate conditions.
    Our lab folks, our engineers, design equipment to run 
tests. They actually build the equipment, and because there is 
no place to store it, they have to break the equipment down and 
then rebuild it the next time. It is not a good, efficient use 
of our engineers' time.
    There are a number of other issues that we need that are 
ongoing concerns that we have had over the years.
    Mr. Frelinghuysen. I think you----
    Ms. Gall. I appreciate the opportunity to highlight that 
again.
    Mr. Frelinghuysen. I think you know what I am driving at. A 
comment was made earlier about the change of style of 
leadership. Well, we are more interested in management rather 
than style----
    Ms. Gall. Absolutely. I can tell you, I have been here 
through several leaders now, and I can tell you that the lab 
has always been a concern.
    Mr. Frelinghuysen. And I am glad you have highlighted it. I 
am not sure that there are the resources. I understand this 
sort of falls into the unfunded needs, and there have been 
budget documents which support this need. But, quite honestly, 
if you want to get our attention, we need to get attention to 
these types of items, and perhaps upon reconsideration that 
should have been done on previous occasions.
    Ms. Gall. Well, I am glad you gave us the opportunity to 
bring it up again. In terms of information technology, one of 
the concerns we have is that when our field people are out 
working and doing an investigation, they have to go to four 
different databases to get information that should be pulled in 
together--what is that term they use?--integrating data. I am 
not good on computer terminology.
    Mr. Frelinghuysen. Interoperability.
    Ms. Gall. But essentially bringing all those pieces of 
information into one place so they can reach it and not have to 
go back and forth. And, frankly, many people at our 
headquarters have to do the same thing. You have to track four 
different databases. And we would love to bring all that 
together into one system to re-create information efficiently.
    Mr. Frelinghuysen. I am glad we are now embracing some 
reality. I think in the past the hearing has been somewhat of a 
sharing of affection.[Laughter.]
    Ms. Gall. Well, that is nice, too.
    Mr. Frelinghuysen. But there are some basic things that 
need to be done.
    Ms. Gall. Right.
    Mr. Frelinghuysen. And I am glad we had the opportunity to 
highlight them.
    Thank you, Mr. Chairman.
    Ms. Gall. Thank you.
    Mr. Walsh. Mr. Sununu?
    Mr. Sununu. Thank you, Mr. Chairman.

                          SEGWAY JURISDICTION

    Commissioners, I have a question about a new product that 
was recently introduced going under the name Segway. It happens 
to be manufactured in the State of New Hampshire, in my 
congressional district. It is a low-speed, electric mobility 
device. It is for personal use.
    My question is about the regulation, obviously. Have you 
been able to evaluate the product, develop an understanding and 
have you made a determination whether this kind of a product 
ought to be classified as a consumer device, as opposed to, 
say, a motor vehicle that would come under jurisdiction of DOT.
    Mr. Moore. Last summer our legal staff provided an informal 
opinion on the jurisdictional question based on some 
representations by counsel, and the informal opinion concluded, 
on the basis of those representations, that the CPSC probably 
had jurisdiction over this vehicle over the consumer product.
    The Commission has not taken a formal position, at this 
particular point, with respect to the product and whether it 
falls under our jurisdiction. We have not had a necessity at 
this point to take a formal position. But if Congress, for 
instance, through legislation sees fit to declare that our 
jurisdiction covers this product, then we will welcome it. I am 
sure we would, but it is not out there on the market yet in any 
wholesale way. I think they are looking at large-use agencies, 
maybe like Police Departments and Post Offices. We do not 
usually get involved until, for instance, there may be a 
problem. We may not get involved unless there is some 
indication that there are some problems resulting from the use 
of the product. I have seen the product. The fact is I have 
ridden it. [Laughter.]
    It is fun.
    Mr. Sununu. Without incident, right?
    Mr. Moore. Inside our corridors, but how it might perform 
on the sidewalks of our cities and with large groups of 
pedestrians, I have no idea, at this particular stage, and I do 
not think any of us do. We will have to wait and see.
    Mr. Sununu. But as a classification, the informal legal 
opinion that your staff put together stated, it would, and 
ought to be classified as a consumer product.
    Ms. Gall. And also the Department of Transportation said in 
a letter that it was not a motor vehicle, and we have had that 
happen before with the situation with electric bikes where DOT 
said it was not theirs, and it probably would be ours, and so 
we have worked those issues out in the past one-by-one.
    Mr. Sununu. So the opinions of both of the counsels have 
been similar.
    Ms. Gall. That is right.
    Mr. Sununu. They have come to an agreement, which is always 
a nice thing in Government.
    Ms. Gall. That is right. And I did not ride the Segway 
because I am dangerous enough on my scooter. [Laughter.]
    Mr. Sununu. I hope you will never have to regulate people 
walking or running around. We all have our missteps.
    Thank you very much.
    Mr. Moore. Thank you.
    Mr. Sununu. Thank you, Mr. Chairman.
    Mr. Walsh. Thank you, John.
    Mr. Goode?

                 PRIVACY ISSUES IN ENFORCEMENT MATTERS

    Mr. Goode. Thank you, Mr. Chairman. Let me ask you this: 
Your policy, if you find something amiss with a product, you 
issue a complaint; is that correct?
    Ms. Gall. Well, we try not to do that. We try to resolve it 
amicably by negotiating with the company to develop an action 
plan and to notify the public, recall the product and so on.
    Mr. Goode. If you have staff develop a report for you on a 
particular product, is that report confidential to you or is it 
publicly available, if they want to give that report out to the 
news media, can they do that?
    Ms. Gall. If it is a pending matter before the Compliance 
Division, it is considered like law enforcement, and therefore 
it is private.
    Mr. Goode. If it is private.
    Ms. Gall. If it is pending before us.
    Mr. Goode. Right. If you had any matters pending like that 
and staff released a report, what would you do with that staff?
    Ms. Gall. Well----
    Mr. Goode. Would it depend on the circumstances?
    Ms. Gall. Mr. Chairman, do you want to take that one? 
[Laughter.]
    I would not be a happy camper, I will tell you that.
    Mr. Moore. I would like to think that is not something that 
would occur. Our people are very, very committed to the work 
that they do, and premature exposure is highly risky because 
you are talking about our professionals evaluating, carefully 
evaluating. This evaluation goes on for a while in terms of 
trying to find whether there are serious defects in a 
particular product. In other words, why are injuries occurring?
    That person probably would be in serious trouble if that 
person did something like that.

                          OUTSIDE CONSULTANTS

    Mr. Goode. Somewhat tangentially related, how do you 
evaluate persons in terms of getting reports on products? Do 
you use in-house people solely or do you get consultants 
frequently?
    Mr. Murr. Primarily, if we have an incident with a computer 
product that we want to investigate, we refer to them as in-
depth investigations. Our field staff is mainly how we get that 
done.
    Mr. Goode. Say, in the last 2 years, how many outside 
sources have you utilized for investigations?
    Mr. Murr. How many investigations? We do thousands a year.
    Mr. Goode. I know, but how many have you utilized not your 
staff, but consultants or hired somebody?
    Mr. Murr. The only other people that we have do in-depth 
investigations for us, and that is pretty rare, are State and 
local officials that we have trained and commissioned to do the 
work. We get some work from States if it is in an area where we 
do not have staff ourself. However, primarily the on-site 
investigation of consumer products is done by CPSC staff.
    Now there is a different level of investigation, which 
involves taking information over the phone. We sometimes 
contract with those. Those are simply, though, following----
    Ms. Gall. Survey type.
    Mr. Murr. Yes, almost like a survey list of questions and 
that list of questions is developed by CPSC staff.
    Mr. Goode. So you are telling me over the last 2 years, you 
have not used any outside experts to evaluate the safety of 
products?
    Mr. Murr. No, that is a different question.
    Ms. Gall. No, that is not true.
    Mr. Murr. I am sorry. I misunderstood your question.
    Sure, we do hire experts, where we lack the expertise 
ourselves, to evaluate products after we have identified a 
hazard. I am sorry. I thought you were talking about going out 
and actually investigating an incident.
    Mr. Goode. How much do you spend on those outside experts? 
How many cases were outside experts utilized on in the last 2 
years? Just give me a ballpark.
    Mr. Murr. Alan Schoem?
    Mr. Shoem. I am Alan Shoem, the director of the Office of 
Compliance at the Commission.
    As the Commissioners have said, when we do not have the in-
house expertise, we would go outside sources. If we are in 
litigation with the company, we would use outside experts to 
supplement the expertise that we have on our staff. I would say 
half a dozen to ten times.
    Mr. Goode. Between six and ten.
    Mr. Shoem. Over the last 2 years, right.
    Mr. Goode. How much have you spent for utilization of 
outside experts on average?
    Mr. Shoem. A total amount would probably be under $20,000 
per expert.
    Ms. Gall. We could provide that for the record.
    Mr. Goode. Yes, and you do not have to name the, and would 
not, the instance, but if you could say, A, B, C. You said six 
to ten. If you could take me down to ten and say how much you 
have spent on outside experts in each of those particular 
cases, ten max over the last 2 years, ballpark.
    Ms. Gall. If I could just one thing, Alan. When we go to 
experts, sometimes we use experts within the Government. For 
example, if we are analyzing the financial resources of a 
company, and we are looking at a civil penalty, we will perhaps 
go to a financial expert over at Department of Justice who does 
this thing as part of his or her regular job.
    Mr. Goode. Would that come out of your budget or the 
Department of Justice budget?
    Ms. Gall. Well, it would come out of our budget--or 
sometimes it depends on how it works, but we will provide all 
of that for you, sir.
    Mr. Goode. You will provide how much each cost each time.
    Ms. Gall. You bet.
    [The information follows:]

                   EXPERT EXPENDITURES FOR LITIGATION
                         [Dollars in thousands]
------------------------------------------------------------------------
                                                    2000         2001
------------------------------------------------------------------------
Dollars.......................................         $105          $76
Number of cases...............................            5            4
Number of experts.............................           13            6
------------------------------------------------------------------------

                            REOPENING CASES

    Mr. Goode. Let me ask you this, if you have a case, and 
then it is closed, and it is reopened, do you have to establish 
procedures for reopening the case or do you begin the complaint 
process?
    Ms. Gall. If we hear of additional complaints, we begin 
investigating once again, that is true. If we feel the matter 
has been addressed, and it is closed, that is one thing, but we 
always do that with the understanding, with the company, that 
if the issue arises again, that we will open up and go back to 
them.
    For example, cedar chests, we worked with them years ago, 
the Lane Chests, and you may have seen----
    Mr. Goode. I am real familiar with Lane Chests.
    Ms. Gall. You may have seen that on the news, and Lane 
actually was very cooperative about working with us to do 
additional notification because we had some additional children 
hurt.
    Mr. Goode. Let me ask you this. They may have gone to China 
or Mexico. They got out of here. Do you all have any authority 
over them in--I guess you do after----
    Ms. Gall. Imports. When they come into our country, that is 
right, we have the responsibility for addressing that.
    Mr. Goode. Would you have authority the same as they were 
in Rocky Mountain and Alta Vista?
    Ms. Gall. Pardon?
    Mr. Goode. Lane made the chests in Rocky Mountain and Alta 
Vista, would you have authority over this--you have still got 
the same authority----
    Ms. Gall. We still have the same authority, as they come 
into commerce in the United States----
    Mr. Murr. We work with Customs.
    Ms. Gall. We work them. That is right, we work with 
Customs.
    Mr. Goode. Let me ask you, and I was not really going down 
this road, but did you all go to the plants and look at the 
manufactures of the chests when you were dealing with the Lane 
Chests?
    Mr. Murr. We cannot answer that specifically. It is pretty 
unusual that we go and do an establishment inspection. It 
happens occasionally. Most frequently we pick up samples of the 
product that we are interested in and either tested ourselves 
or, if we lack the facility or expertise to test it, we would 
hire someone or go to another Government agency to do it.
    Ms. Gall. But we also have companies who will come to us 
and say, you know, we have a problem with this. We are 
notifying you, which is what they are supposed to do, and then 
we work together with them to resolve the issue.
    Mr. Goode. Are you telling me the products that come from 
China, you closely inspect as those made in the U.S.A.?
    Ms. Gall. Well, we work with Customs. Customs has been busy 
with other things, understandably, since 9/11, but they work 
very closely with us. We are about to sign an MOU sharing 
database information so that we can alleviate some of the 
pressures on the Custom's staff and, at the same time, get the 
information we need to go and check incoming goods at the 
various ports.
    Mr. Moore. We do look for those products at the ports, 
products that have been determined to be problematic.
    Mr. Goode. Upon reopening cases, do you use the same 
standards and the same notices to the manufacturer or retailer 
making the product?
    Mr. Murr. Yes. In fact, most of our recalls involve 
products, not manufactured in the United States.
    Mr. Goode. But I am saying if you----
    Mr. Murr. We follow all of the same procedures. All of the 
same laws apply.
    Ms. Gall. Right.
    Mr. Goode. To reopen a case that you had closed, are the 
notices to the people the same as if you were initiating a new 
investigation?
    Mr. Murr. Yes.
    Mr. Goode. The procedures are exactly the same.
    Mr. Murr. It does not matter if it is a domestic 
manufacturer or a foreign manufacturer.
    Mr. Goode. Thank you, Mr. Chairman.

                          DAMAGING BUSINESSES

    Mr. Walsh. Just on that note, and this will be my last 
question, and then we will submit additional questions for the 
record, you listed or you presented to us a very impressive 
list of savings to the country in lives, and fires and so 
forth, and I suspect you keep pretty close records on that, you 
talked about a specific manufacturer, Lane, and I am not 
familiar with that, but staff is, so I got some background on 
it, but the point is do you keep track of businesses that close 
or move out of the country because of litigation or actions 
proceeded against them by CPSC?
    Mr. Murr. To my knowledge, no. We start by identifying 
products or product areas to look at. Then, if we see a 
problem, we backtrack to find out who made it, where it was 
made, who imported it, et cetera. So we do not routinely track 
manufacturers.
    We have lists and records of everything we have done with 
specific manufacturers.
    Mr. Walsh. Have businesses actually gone out of business 
because of actions brought against them by CPSC?
    Ms. Gall. I would hope not. That is not our point.
    Mr. Walsh. I understand that.
    Ms. Gall. But I will say this----
    Mr. Walsh. I am just trying to get at whether you have 
records.
    Ms. Gall. We run the gamut because we have one heater 
company that I can think of, off the top of my head, where they 
had one problem, then they had another problem, and they had 
tremendous financial difficulties. We worked with them and with 
some of the countries that brought their product to work 
together to try and resolve that particular issue. They had 
great financial difficulties before we came along. We tried to 
work with them so that would not happen.
    Now we have the other end of the spectrum, where we have 
bad actors who repeatedly bring products, dangerous products, 
into the country--I am thinking of one case in particular, but 
I cannot discuss it here, unfortunately--where this gentleman 
has repeatedly, at least for the 10 years I have been at the 
Agency, brought in dangerous toys for children. So that is the 
kind of person we see as taking very serious steps against 
because of the repeat history.
    There is full knowledge of what our laws are and what the 
safety is for children, and this particular gentleman has 
broken those laws every single time. This is the kind of actor 
we do not want in the business of toys. So we have gone after 
some folks with criminal and civil penalties, and it is 
sometimes easier for them to jump from one product to another. 
So they may leave toys, and they may go into something else.
    So we run the gamut of situations.
    Mr. Walsh. Mr. Frelinghuysen has an additional question.

                          RECALL EFFECTIVENESS

    Mr. Frelinghuysen. Apropos of my earlier comments, in your 
testimony you said the Commission is also looking at the 
effectiveness of our recall process. I assume this is ongoing 
and that there is not something more spectacular that you are 
about to roll out? I know it is complicated. That was extremely 
complicated, but something that was absolutely necessary, but 
is there some reason that there has been a reinvigoration on 
this, and it is highlighted again in this testimony?
    Mr. Moore. It is an ongoing process because--
    Ms. Gall. While they are discussing, I can say that recall 
effectiveness is always a concern. We get about a 30-percent, 
generally speaking, recall response. However, because we have 
seen this over and over again, and even though we address it 
through Recall Round-Up and other avenues, our concern is that 
we reach as many people as possible. So we have started a 
special initiative this year. There have been a number of 
proposals that have been presented, to use registration cards 
for certain types of appliances, for example, and we are 
exploring that along with other avenues.
    We have to get the basic information first. So what we are 
doing with some of our compliance activities, when we have a 
company that has an 800 number for a recall, you know, you may 
get 1,000 phone calls, but maybe only 300 people followed 
through and actually get the fix-it kit or get the refund or 
whatever. And so we want to know why the other 700 did not 
respond. They may have made the phone call. Some of that is 
because they do not have the model number. Their dishwasher may 
be one that is not in the recall. It may be that same brand 
name, but it is not that model, so that may explain part of the 
reason those people do not pursue it further.
    Mr. Frelinghuysen. But here again, this is not an unusual--
--
    Ms. Gall. That is right, but what we want to do is improve 
those rates and make sure that people have safety in their 
homes. So we are looking at it to collect basic information 
first, and then decide what options would be best.
    Mr. Frelinghuysen. Excuse me. That is being done now.
    Ms. Gall. Right, that is being done right now, but this is 
a special----
    Mr. Frelinghuysen. So you were doing something over and 
above----
    Ms. Gall. Right.
    Mr. Frelinghuysen [continuing]. Because of electronic 
commerce----
    Mr. Moore. We have not done it yet. We are looking at that.
    Ms. Gall. We are working on it.
    Mr. Moore. That is one of the considerations.
    Mr. Frelinghuysen. I am all for it.
    Mr. Moore. I know, but we have not firmly decided what we 
are going to do with the registration card issue. We have a 
committee at the Commission, across the board from various 
divisions, looking at this whole question. We may very well do 
something, but right now we are still trying to make sure that 
we are going to get additional responses to these recall 
problems in terms of products that are in the homes of 
consumers. If we can immediately go to a card and identify 
where the product is, that will be helpful, but the underlying 
assumption is that somebody filled out the card in the first 
place. So we are looking at this carefully.
    Mr. Frelinghuysen. Human nature being what it is--
    Ms. Gall. Exactly.
    Mr. Frelinghuysen. Good luck. [Laughter.]
    Thank you very much.
    Ms. Gall. That is part of the problem.
    Mr. Walsh. That concludes this portion of the 
subcommittee's work. We thank you for your testimony. We will 
submit additional questions for the record, and we ask you to 
respond in a timely manner.
    Thank you very much, and good luck in continuing your 
acting role.
    [The information follows:]

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                                          Thursday, April 18, 2002.

          U.S. CHEMICAL SAFETY AND HAZARD INVESTIGATION BOARD

                               WITNESSES

DR. ANDREA KIDD TAYLOR, BOARD MEMBER, U.S. CHEMICAL SAFETY AND HAZARD 
    INVESTIGATION BOARD
DR. GERALD POJE, BOARD MEMBER, U.S. CHEMICAL SAFETY AND HAZARD 
    INVESTIGATION BOARD
DR. IRV ROSENTHAL, BOARD MEMBER, U.S. CHEMICAL SAFETY AND HAZARD 
    INVESTIGATION BOARD
    Mr. Walsh. We have an agreement to proceed. Mrs. Meek will 
be here shortly.
    Thank you for coming here this morning. We will now hear 
from the Chemical Safety and Hazard Investigation Board. 
Appearing before the subcommittee again this year are the three 
current members, Dr. Gerald Poje, Dr. Irv Rosenthal and Dr. 
Andrea Kidd Taylor.
    I should mention that there are currently two vacancies on 
the board and the board has been without a chairman now for two 
years. At this point the President has not made any 
announcements regarding the nomination for either of these two 
positions. Due to a provision of the board's authorizing 
statute, I should remind members that the budget submission 
from the board is submitted concurrently to the Congress and 
the Executive Branch. As such the board has requested $9 
million for fiscal year 2003, the same as requested for 2002, 
and an increase of $1.15 million over the fiscal year 2002 
appropriation. I understand that the board may be revising the 
requested level today to the President's budget request of 
$8,047,000 for fiscal year 2003.

                 Opening Statement From Chairman Walsh

    Before we get into your testimony, I have some opening 
remarks that I will introduce that may become the focus of the 
hearing today. Let me start off by saying that the Committee 
received a rather critical report from the Office of Inspector 
General for the Board on Friday, March 15th. I was aware that 
this report was forthcoming and was not likely to be available 
before our originally schedule hearing date of March 13th, so 
we changed the date.
    This committee has vocalized a number of concerns with the 
Board's development and management in the past, based both on 
testimony from GAO and a GAO report on awards management during 
consideration of the fiscal year 2001 budget for CSB.
    Last year you came before the Subcommittee and claimed that 
the Board had reorganized and was making, ``a significant 
turnaround.'' Your budget justification also indicated that you 
were heeding the direction given by Congress in the fiscal year 
2000 Appropriation Conference Report, and were allocating 
resources to give the highest priority to investigations in 
safety, that which is your primary mission, rather than 
investigating in education, outreach activities and information 
technology. We thought you were clear that our position had not 
changed.
    I am discouraged to learn from the just released IG's 
Report, that not only do serious management problems persist, 
but that the Board continues to feel that expanding resources 
on external affairs and information technology are effective 
uses of limited resources, and that these expenditures would be 
prudent before the agency is even fully operational. By your 
own estimates, you do not expect to be fully operational until 
fiscal year 2005. We have been as patient as can be expected, 
as the CSB has been experiencing significant growing pains. I 
am not sure, however, how much longer you can expect us to 
wait, or how many more damaging reports we can tolerate before 
we decide to take drastic steps to either get this agency on 
track or give up all together.
    Let me continue by stating that the Board was created to 
investigate chemical incidents and hazards. The name of the 
board itself should make this clear. Any outreach or education 
activities that the board takes at this stage, however well 
meaning, should be viewed with great caution, and at the very 
least should be a very subordinate role. I will also note here 
that as you proceed through your fifth year of operation, the 
product of your work consists of a total of 7 investigation 
reports, a safety bulletin and a case study, hardly enough to 
establish widespread credibility as a trainer/educator in the 
prevention of chemical safety accidents.
    The Inspector General's Report cited a number of other 
problems including, number one, management and accountability 
problems that in many instances stem from the lack of a 
chairman, and an empowered chief operating officer. Two: 
atypical procurement practices that raise certain ethical 
concerns. Three: declining attention to the Sunshine act. And 
four: overall working environment of distrust and disunity 
between the professional staff and the Board members. To avoid 
repeating the entire IG findings here, we will include a copy 
of the report into the hearing record.
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    Mr. Walsh. I realize that my opening remarks have been 
lengthy. However, I hope you will recognize that we cannot bury 
our heads in the sand in the face of these repeated findings. 
After reviewing the details of the IG's Report, I also find it 
incredibly difficult to accept that many of these problems stem 
from innocent intentions or situations that are completely 
outside the Board's immediate control.
    In your response to the Inspector General you set out for 
yourselves an aggressive schedule for acting on their 
recommendations. Let me assure you that we will be keeping your 
agency under a magnifying glass, as we proceed through the 
appropriations process this year. Furthermore, we will be 
checking to see that you meet each and every one of these 
deadlines you have set for yourselves, and we will view this 
only as a first step toward redeeming yourselves in the eyes of 
this Committee. We want to see more than empty promises of 
change.
    Mr. Mollohan is not here, and I would like to offer the 
opportunity to Mrs. Meek. If she has any opening comments, I 
would be happy to entertain those.
    Mrs. Meek. I have a question, but I will wait for the 
question period.
    Mr. Walsh. Fine. Then we will proceed with questions. I 
understand that Mr. Poje has been designated to take the lead 
for responding to questions on behalf of the Board, and we 
first offer Dr. Taylor the opportunity to speak on behalf of 
the board.
    Ms. Taylor. Thank you, Mr. Chairman.

                             CSB STATEMENT


    Mr. Chairman, members of the subcommittee, I am Dr. Andrea 
Kidd Taylor, a member of the U.S. Chemical Safety and Hazard 
Investigation Board. With me today are my fellow Board members, 
Dr. Gerald Poje and Dr. Irv Rosenthal, and members of our 
staff, including our general counsel and acting chief operating 
officer, Mr. Chris Warner.
    We appreciate the opportunity to present our fiscal year 
2003 budget. At the outset we want to say that we are severely 
chastened by the Inspector General's Report and by your 
statement today. We have made major management mistakes. We are 
not here today to offer arguments or excuses. Rather we are 
here to tell you how we are rapidly reforming this agency. We 
accept all 10 of the IG's recommendations and will implement 
every one of them by September 30th, 2002.
    To restore your confidence in us, we offer to report to the 
subcommittee every 90 days or more often on our progress. The 
IG is optimistic about the future of the agency once the 
reforms are in place. The report said, quote: ``Once the 
recommendations are implemented, the CSB should see significant 
improvement in its management and organizational 
infrastructure, and the improvements should better position the 
agency to pursue its mission.''
    Now I want to turn briefly to our fiscal year 2003 budget 
request. We are reducing our budget request from the previous 
$9 million to the $8 million in the President's budget. We are 
postponing our planned expansion until we have demonstrated an 
improved management system. But with this amount, we still will 
be able to perform our core mission of investigating accidents 
and making recommendations.
    Our top priority is hiring more investigators and 
recommendation specialists, the people who do our core work. 
And, Mr. Chairman, we want to point out that we are performing 
our core work. In the past 12 months we have initiated 3 new 
chemical accident investigations and completed 3 reports on 
previous accidents in Indiana, Pennsylvania and Maryland. And 
we in the middle of a ground breaking investigation into 
reactive chemical accidents that are caused when otherwise safe 
chemicals become dangerous when they are mixed together. These 
preventable accidents have killed almost 200 people in the last 
20 years. We are deeply motivated by our mission to prevent 
just such accidents and save lives.
    Mr. Chairman and members of the subcommittee, we know that 
we have a long way to go to regain your confidence and respect. 
With the IG Report as a guide, we are reforming our management 
very quickly. You can see some results now, and you will see 
all of them by September 30th. The IG is confident that once 
reforms are in place we will be in a better position to perform 
our mission. So do we. We request the opportunity to prove to 
you that we can perform our mission. We are supported in this 
request by two members who are very familiar with our work, 
Congressman Castle of Delaware, the State where we are actively 
engaged in an investigation which killed on worker and injured 
8 others at the Motiva Refinery in Delaware City; and 
Congressman George Miller, who represents Martinez, California, 
where the Board completed a widely praised investigation of an 
incident at the Tosco Oil Refinery, which killed 4 men and 
seriously injured another. Both members have written you, 
urging that the board be funded at $8 million for the coming 
year.
    We hope you will seriously consider these requests from 
these members who strongly support us. Thank you. Now, as I 
believe has been arranged, Dr. Poje will respond to your 
questions. Thank you.
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    Mr. Walsh. Thank you for that very forthright response. 
There are ways to respond to criticism. One is to be defensive, 
and one is to be open to criticism, accept it, and move on, and 
I think you have chosen the second course, and I think it is 
the wiser course, and so we begin again.

                          CSB OUTREACH EFFORTS

    I would like to talk about your outreach effort. While 
outreach activities for the Board have a role in the future, I 
believe I was clear in the opening statement that based on the 
limited resources of the agency and the fact that you are still 
building your infrastructure, you simply should not be 
diverting resources from investigations for activities such as 
outreach, training and data collection. I note that you 
recently created an Office of Prevention, Outreach and Policy. 
What was the purpose for creating this office, and what is the 
current and planned staffing for this office?
    Mr. Poje. Yes. Thank you, Mr. Chairman. We created an 
Office of Prevention, Outreach and Policy in January of this 
year. It was created to better enable the agency to achieve its 
aims under a strategic plan for which we have three major 
goals. One is investigate and produce reports with 
recommendations. The second is to promote the prevention of 
accidents through this outreach functionality, and the third is 
to assess and build a data system that will allow us to better 
measure our performance in investigative matters. Currently 
that office is staffed with a single person, the individual 
whose major function is interaction with Congressional 
committees and other governmental agencies.
    Mr. Walsh. So it is not for the purpose of self-
justification.
    Mr. Poje. No, Mr. Chairman. I hope you would understand 
that we believe strongly in our mission of investigating to 
prevent accidents. Every investigation of the Chemical Safety 
Board is designed to prevent loss of lives in the future from 
similar type events. Each of those investigation reports has 
embedded within the report a set of recommendations. The Board 
currently has 66 such recommendations that are addressed to any 
parties who might be enabled to better prevent such accidents 
in the future. The Board's outreach efforts, as defined by our 
statements and our activities in the last several months have 
been to focus primarily on implementing those recommendations 
and bringing them to full conclusions, which we believe will 
help save lives.
    Mr. Walsh. You stated that you had one person currently 
staffing this office. How many have you budgeted for? How many 
positions have you budgeted for fiscal year 2003?
    Mr. Poje. I believe that the current design of that office 
would be to have an office director, an individual who would be 
in charge of governmental relations and governmental affairs 
kind of position; a data analyst that would help us better 
track incidents of chemical accidents and make use of that 
information in our investigative and safety recommendation, or 
a library support function that would allow us to research more 
effectively for our investigative program; and a person whose 
primary function would be allow us to have functionality on 
media relations which are very important in every one of our 
investigations at the beginning, at the middle and at the end.
    Mr. Walsh. Is that 4 or 5 positions total?
    Dr. Rosenthal. 5.
    Mr. Walsh. You said your emphasis would be on hiring 
investigators, but I don't see any investigators there.

                              OPOP ON HOLD

    Mr. Poje. We have put on hold every one of those positions 
except the one that was currently----
    Mr. Walsh. So you are not going forward with that in 2003?
    Mr. Poje. We are evaluating that. We promised to evaluate 
that and report back under the Inspector General's 
recommendation by the end of June I believe.
    All of the positions that we are pursuing right now are in 
the Investigation and Safety Programs area. We have two major 
categories of positions that we are pursuing, one are 
investigators and the other are safety recommendation 
specialists. The second category would be people who would work 
on investigations, but also follow beyond investigations 
towards implementing those recommendations.
    Mr. Walsh. The authorizing legislation states that you had 
the authority to require reporting of accidental releases. Our 
understanding is that this information is already reported to 
the government under other statutes and that you receive 
notification information that you need from the National 
Response Center and National Transportation Safety Board. What 
is your need for collecting additional data?
    Mr. Poje. Mr. Chairman, we are in the midst of a major 
reactive study. That study has required us to go back in time 
and look to see where such incidents have occurred. Currently 
we have over 160 such incident that are forming a basis for 
this major evaluation of the adequacy of policy and safety 
systems. We need the opportunity to have everybody understand 
the current system of data access is insufficient for the Board 
to find the most important areas for us to spend our $8 million 
in a way that will reach those accident potentials that are out 
there on the front lines of the industry right now. Our goal in 
this area would be to make use of available data sources, which 
we are doing, but also to assure ourselves that the capture of 
that data is rich enough to inform the larger system of safety 
about priorities.
    Mr. Walsh. This is historic data that has been collected by 
other agencies?
    Mr. Poje. Currently we are making use of the EPA Risk 
Management Program data, 5-year accident history data that is 
available every 5 years, so it is not real time. We are making 
use with our partner, the NTSB, of information that might come 
across CNN about an incident, and that informs us for our 
response. But what we do not have access to is a data set that 
will allow us to say, is that incident one that has a pattern 
of accident potential that should merit us spending or meager 
resources--not meager in the sense of $8 million, but not 
sufficient for all of the incidents that are occurring 
annually.
    Mr. Walsh. Well, I guess the caution there would be that 
you wouldn't want to recreate existing government records and 
documents and build redundancy that isn't required.
    Mr. Poje. I share your concern and admonition about not 
making another unwise foray into new data systems.

                            CARRYOVER FUNDS

    Mr. Walsh. Let me ask you about carryover funds. Beginning 
in fiscal year 2001, this committee allowed some of the Board's 
funding to be carried over into the next fiscal year. The 
purpose for providing a portion of funding to be available for 
2 years was, from a base perspective, to provide some 
continuity in funding of investigations that might continue in 
the following fiscal year, and also recognize that the cost of 
an investigation can fluctuate dramatically depending upon the 
incident.
    How much did you reserve from your fiscal year 2001 
appropriation as contingent funding for investigating a 
potential chemical incident?
    Mr. Poje. Mr. Chairman, our fiscal year 2001 carryover, I 
believe, was $1.6 million out of the total allocated 2.5.
    Mr. Walsh. You carried over $1.6 million?
    Mr. Poje. $1.6 million out of a permissible $2.5 million. 
And I believe our staff----
    Mr. Walsh. Permissible carryover?
    Mr. Poje. The carryover allowed was $2.5 million.
    Mr. Walsh. And you budgeted how much of that for an 
anticipated incident?
    Mr. Poje. That was--I don't have an exact figure here, but 
I would profess that my staff would be happy to give that to 
your staff as soon as we can.
    [The information follows:]

    [Agency Note: Approximately $750,000 of the carryover was 
budgeted for travel, consultants, supplies, and other expenses 
directly related to investigations.]

    Mr. Walsh. At the end of the fiscal year staff had been 
provided with an estimate that the anticipated carryover would 
be $350 to $450,000, and perhaps would be significantly less. 
How much of this actual carryover was derived from the two 
board vacancies and why is the actual carryover so much higher 
than anticipated?
    [The information follows:]

    [Agency Note: At the end of September 2001, the CSB had a 
remaining balance of $108,000 for Board member compensation. At 
the end of FY 2001, we anticipated that we would spend the 
majority of the carryover by the end of the calendar year. 
However, due to delays in hiring and the time associated with 
awarding contracts (i.e., preparing statements of work, 
identifying vendors, and performing technical evaluations of 
proposals) we were unable to spend the carryover at the 
anticipated level.]

    Mr. Poje. The figure I have available to me right here is 
that currently we have a remaining carryover of $750,000. The 
cost accountancy for the Board positions can be delivered to 
you. I don't have that number right here, but I will provide it 
for the record.
    There are two other issues that are germane to this 
carryover. One has been lower than expected investigative 
expenses, including our reduced use of contractors that we had 
predicted based upon the special nature of every investigation. 
We have had some that have required very high contractor costs 
and some that have been lower. The ones from last year proved 
to be lower.
    Mr. Walsh. So you don't think it is a result of just not 
effective utilization of appropriated funds, it is just your 
inability to estimate what these costs would be due to the 
variable nature of what you do?
    Mr. Poje. I think that is part of it. We have as a very 
high priority making sure that every fiscal system that we have 
is accounting for every bit of our funding, particularly making 
sure we are maximizing the potential for investigative efforts. 
We have promised, under the IG Report, to have in place by the 
end of this month, a management information system that will 
allow us to better gather and track that performance on all of 
our expenses, but carryover as well.
    Mr. Walsh. How much do you anticipate to carryover from 
fiscal year 2002 into fiscal year 2003?
    Mr. Poje. I think our current estimate is projected at $1.8 
million. We are a little more than halfway through the year, so 
again, we are professing the inability to state explicitly what 
incidents will occur over the next half year.
    Mr. Walsh. Is that one of the reasons that you have reduced 
your budget request?
    Mr. Poje. In part we have reduced it because I think we 
have to establish for you our better command of management 
systems. I think we have also expressed a great degree of 
willingness working with your staff about other fiscal controls 
that the committee might want to exercise to be assured that 
every category of expense has been expended appropriately, and 
that should we see a need for change, we will be meeting with 
your committee to request the opportunity to effectuate that 
change.
    Mr. Walsh. You have offered me a basis of every 3 months, 
was it?
    Mr. Poje. We have offered to give you a report every 3 
months about our progress, but on the fiscal matters we have 
also been working with your staff to assure yourselves that you 
have full command over our budget and our license for changing 
expenses within our budget, so that you will be fully informed.

                          REPROGRAMMING FUNDS

    Mr. Walsh. Do you anticipate asking us for a reprogramming 
of funds?
    Mr. Poje. That possibility will always exist, particularly 
with the potential for a major catastrophic event. Not this 
country, but the country of France had a major one on September 
21st that caused an enormous change in policy at the 
governmental level for chemical safety, that killed over 30 
people, injured hundreds of others, and caused lots of damage 
to the community of Toulouse. We pray that there are no such 
incidents in the offing for the world as a whole, but for our 
nation in particular, but we are quite concerned about the 
potentiality of such an event, given that it was a major 
multinational corporation who had one event in Michigan earlier 
this year.
    Mr. Walsh. Same company?
    Mr. Poje. Same company.

                        HIRING OF INVESTIGATORS

    Mr. Walsh. Let me ask some questions regarding the hiring 
of technical staff. The IG's Report states clearly that--and I 
quote: ``The current Office of Investigations Safety Programs 
workload exceeds staff capability. The findings seem to 
attribute much of this due to the fact that the office has only 
9 investigators and 4 investigative support staff, and 
investigators are pulled from project to project. This 
arrangement has not only been inefficient, but has led to 
project delays,'' and I can imagine some morale issues also. 
The IG Report also found that people in support positions 
outnumber investigators by a 2 to 1 margin. Here again is 
another area of confusion. The CSB's performance plan for 2002 
stated that 16 positions in the Office of Investigations and 
Safety Programs had been filled and there were 4 vacancies. In 
the fiscal year 2003 budget justification and the IG Report, we 
are told that this office now has only 13 people on board.
    How many investigative positions does the Board have, and 
how many of these positions are vacant?
    Mr. Poje. We currently have 7 investigative position in an 
office of 12 people, and we have targeted to add 6 to that 
office during this fiscal year.
    Mr. Walsh. Which would come to 13?
    Mr. Poje. Would probably come to 18 in total.
    Mr. Walsh. Well, 13 plus the 5 support staff.
    Mr. Poje. Yes.
    Mr. Walsh. And what actions are you taking right now to 
fill these positions?
    Mr. Poje. Right now, at the end of the calendar year 2000, 
the Board was no longer allowed to use the Schedule A hiring 
process, a process that has a greater flexibility for the 
agency than the regular competitive hiring. Since 2000 we have 
had that Title V hiring process. We have petitioned the Office 
of Personnel Management a month ago to give us permission in 
the Investigation and Safety Program area to hire under 
Schedule A. During the one year that we managed to hire under 
that authority, we hired 9 professionals. We have had greater 
difficulty absorbing the strictures of the Title V hiring 
process, and being able to meet the demands of our core 
employee pool that we would be targeting. Some of these are 
quite specialized in both training and experience, and operate 
outside of the Washington area, and we have had great 
difficulty attracting them under Title V into our agency.
    Nonetheless we are still pursuing that in a very aggressive 
way and have one offer out to a new investigator under Title V.
    Mr. Walsh. Page 4 of your budget justification indicates 
that with the CSB's budget hovering at $7.5 to $8 million over 
the last 3 years, the agency is severely limited in its ability 
to hire any additional investigators. Now, we just heard you 
say that your carryover is about $1.6 million from fiscal year 
2001 funds, funds that should have been used to fill technical 
staff vacancies. This committee also provided an increase over 
the President's request in fiscal year 2002. Furthermore, we 
have a commitment to the taxpayers at home to make sure that 
their tax dollars are being used wisely and efficiently.
    Given the Board's past and continued management problems, 
why should we provide funding increases, especially if they are 
not going to investigators, but rather to, for example, this 
Office of Prevention and Outreach?
    Mr. Poje. Mr. Chairman, I think we replied earlier about 
our putting on hold the additional hiring in the Office of 
Prevention, Outreach and Policy----
    Mr. Walsh. Yes.
    Mr. Poje [continuing]. As a commitment of the Board. We 
also are aggressively pursuing at the staff level--our chief 
operating officer spends a fair amount of time in this hiring 
arena to pursue the investigative and safety program staff. We 
are committed to this hiring. We do have one offer out right 
now. We know we have had difficulties, as we have submitted to 
the Office of Personnel Management, in being able to 
effectively hire under Title V. We have asked for permission to 
return to a Schedule A hiring. The Inspector General's Office 
actually supported us in that contention. We would urge the 
committee to help us with that too, if it is so deemed, but we 
are fully committed to doing what we can right now under our 
existing hiring license. We are not slacking in pursuit of 
people, and we do have advertisements out and offers out.
    Mr. Walsh. I will stop at that point, and give Mr. 
Frelinghuysen an opportunity to ask questions.

                        FRELINGHUYSEN STATEMENT

    Mr. Frelinghuysen. Thank you, Mr. Chairman.
    When I was elected in 1994 I was very lucky to get on the 
Appropriations Committee, and I can remember being lobbied by a 
Senator from New Jersey to match a $4 million request for this 
agency's budget. And I said to my staff--I knew here that this 
was being created, and we know somewhat the history of this 
agency, as a result basically of Bhopal and horrible things 
that happened abroad and some of which happened at home--and I 
said, ``Why isn't the EPA, why isn't OSHA doing this?'' I said, 
``Well, we need to be supportive of our Senator because this is 
obviously an important thing and potentially could be important 
for our State.''
    I must say to some extent what has occurred here is a 
result of Congress trying to do the right thing but this is a 
hell of a mess, and maybe back then I should have asked some 
more questions, and maybe we should be asking these very same 
questions now.
    You want to react to that?
    Mr. Poje. Yes. Mr. Congressman----
    Mr. Frelinghuysen. Obviously, there have been some huge 
management problems, or you wouldn't see an IG's Report here 
basically saying some incredible things here.
    Mr. Poje. Mr. Congressman, yes, I agree----
    Mr. Frelinghuysen. This is somewhat an issue of raised 
expectations here. Congress raised some expectations, and 
didn't provide any money to meet them, and then things got 
mired down when money was forthcoming, and nobody appeared to 
be, quote, ``managing the store,'' unquote.
    Mr. Poje. Mr. Congressman, I do understand your skepticism 
about where we are with our management related issues. I think 
our commitments and the transparency by which we want to meet 
the ends of the IG recommendations are important ones that you 
and others can measure us by, but I would not want you to 
believe that we are not fully committed to our core mission of 
investigating accidents and our having value even in your own 
State. We intend to be there on May 30th in Paterson, New 
Jersey, to institute a major public review that will involve 
the chemical manufacturing industry, the distribution industry, 
trade unions, the public interest organizations, emergency 
management agencies, to address reactive chemical hazards in 
the most densely populated State in the union with a very rich 
and robust chemical productive capability. We have selected New 
Jersey to hold that meeting because of the great interest that 
many members, the Chemical Industry Council of New Jersey, the 
AFL-CIO, have expressed to us about this issue.
    Mr. Frelinghuysen. I commend you for that, and obviously, I 
am glad it is happening in a State that has had such a history 
of chemical production, and obviously chemicals do a lot of 
things to keep us healthy and provide incredible products. But 
this IG's Report does raise some issues here that relate to 
management, one might ask the question whether truly all of 
those things can be addressed. There are some questions.
    Thank you, Mr. Chairman.
    Mr. Walsh. Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman.

                               CSB BUDGET

    Welcome. We have you here every year. I just have one basic 
question that I don't think anyone else has asked, and that 
concerns the budget that the Board committed to Congress versus 
what is in the President's budget, and there appears to be a 
million dollar difference, the figures that I have. $9 million 
that the board is requesting from the Congress, differing from 
the proposal of $8 million in the President's request. Could 
you please explain to us how that difference might limit your 
ability to investigate and carry out your mandated duties?
    Mr. Poje. Yes. Congresswoman, we have committed to the 
budget request of the President. We are not asking for the $9 
million. We do see that we will not be able to fill 3 
investigative positions because of that, but we are committed 
to producing the same output of investigations and safety 
recommendations and pursuit of safety recommendations. That 
will be achieved by some reductions in the hiring, as I said, 
but also in contract support functions in the administrative 
area of the agency. We believe we will be in relatively tight 
shoes on these other fronts as a small agency, but we are 
committed to our mission of investigation and safety, and the 
chief operating officer and the staff assured the Board members 
of our ability to produce the work output that we intended to 
now.
    Ms. Kaptur. So you are saying that this won't have any 
impact on your ability to carry out your----
    Mr. Poje. It could have an effect, depending upon the 
nature of the incidents that we investigate. Our recent track 
record of some incidents that we have investigated indicated 
that they came in under expected costs. We are basing our 
projections on the estimates that we have from the current 
history of the Board, and projecting that we can achieve the 
ends, not achieve the full developmental status of the agency 
of adding new investigators, but achieve the ends of producing 
the work output of investigation reports and safety 
recommendations.
    Ms. Kaptur. What year did you begin operations?
    Mr. Poje. The Board began operations in January of 1998.
    Ms. Kaptur. 1998. Are there particular chemicals or toxins 
that are increasing in terms of a public health hazard compared 
to others? I wonder if you could give us the three that we have 
really done a good job with, and three that are on your list 
of--or doesn't it work that way?
    Mr. Poje. It is very hard to characterize the chemical 
accident potential solely based upon chemicals. The Board is 
quite cognizant that some chemicals are increasing in 
production rates. We have just completed an investigation 
report into an incident in Pennsylvania where production of 
hydroxylamine, which is increasingly being targeted for its 
utilization in the computer industry, is one chemical that has 
a higher production rate being projected across the globe. That 
terrible tragedy was one that mirrored a tragedy in Japan, 
making the same chemical. So we are alerted to that, and our 
report is alerting those who might be engaged in that 
production about the higher safety vigilance that the should 
observe.
    Our general request to have the ability to track incidents 
is the one that might give us a better understanding of which 
chemicals are proving to be more problematical than others in 
the area of accidents. Some existing data indicates a higher 
frequency of the chemical ammonia and chlorine in accidents, in 
part because of their much wider use throughout society. And 
the Board would hope at a future time to have better command of 
the information so that we could set our priorities correctly 
to do the best service to the American people to preventing 
accidents.
    Ms. Kaptur. I don't want to go over my time, but I just 
wanted to ask, do you have any trouble identifying which 
chemicals are under your jurisdiction, or is that pretty well 
defined in the law?
    Mr. Poje. It is defined in the statute that it actually is 
the consequences of the incident and the chemical, the 
involvement of chemicals, that sets us in motion for 
investigating. So we are not limited, per se, by a named list 
of chemicals.
    Ms. Kaptur. So you don't have a definitional problem in 
terms of responding to requests?
    Mr. Poje. No. And because of that, our investigations have 
been relatively diverse. We completed investigation into a 
steel industry with a coke gas problem. We have an ongoing 
investigation of the paper industry around a hydrogen sulfide 
release, a number of investigations in the chemical handling 
sector with some reactive chemicals. Our clientele, if you 
will, is quite broad.
    Ms. Kaptur. Do you ever do anything in the nuclear 
industry?
    Mr. Poje. There is a Defense Nuclear Facility Safety Board 
that has a similar parallel function that involves the nuclear 
industry.
    Ms. Kaptur. All right. Thank you very much, Mr. Chairman.
    Mr. Walsh. Thank you.

                          BOARD MEMBERS' ROLES

    This series of questions regards the Board members' roles 
and responsibilities. CSB's authorizing statute provides for 5 
full-time board members. Each of you was nominated and 
confirmed because of your expertise in the areas of chemical 
and safety fields. Do each of you come to the office on a 
regular basis and work a full-time schedule?
    Mr. Poje. Yes, Mr. Congressman. This is a full-time job for 
all of us. We are providing, I think, a great vale to the 
agency through or technical expertise in reviewing and managing 
the recommendations and the investigative work.
    Mr. Walsh. Where is the office that you work at?
    Mr. Poje. The office is located at 2175 K Street. Because 
we are a small independent agency, we are renting space.
    Mr. Walsh. And do each of the members come to work every 
day?
    Mr. Poje. Well, we are on the job. I may not be present in 
the office when I am out in the field on an investigation, 
maybe at meetings across town, but we are here.
    Mr. Walsh. Do you all consider this a full-time job?
    Mr. Poje. Every one of us considers this a full-time job. 
This is the most serious business that this Board could be 
engaged in, and each of us I think as individuals are quite 
committed.
    Dr. Rosenthal. I would like to add, I do not come to the 
office every day. I am in the office 1 or 2 days a week. My 
record on e-mail correspondence and production of reports show 
that I am at my e-mail and at my desk at least 50 hours a week. 
That can be factually checked, but I find that my contributions 
tend to be more towards the technical end. Reports, background 
and research studies are regularly done from my office at home.
    Mr. Walsh. How often would you come to the 2175 K Street 
address?
    Dr. Rosenthal. One or two days a week.
    Mr. Walsh. And how far do you commute to do that?
    Dr. Rosenthal. From Philadelphia.
    Mr. Walsh. Philadelphia.
    Dr. Rosenthal. Get up in the morning, catch the 6 o'clock 
train, catch the 6 o'clock train back, or if I stay overnight, 
hunt the Internet for the cheapest hotel available since I am 
paying for it.
    Ms. Taylor. And I commute from Baltimore every day on the 
MARC train.
    Mr. Walsh. I used the MARC when the airport was closed. I 
flew to BWI and took the MARC down.
    Ms. Taylor. The only way.
    Mr. Walsh. The IG also reported that two of the Board 
members estimated that between 30 percent and 50 percent of 
their time had been spent in administrative roles, whereas 
board members in a comparable agency would be expected to spend 
no more than 10 percent of their time on administrative 
matters. How much of this level of involvement in 
administration can be attributed to a lack of a chairman and 
full-time CEO?
    Mr. Poje. I think that is a root cause, if you will, for an 
investigator, to say that is the problem. We have just 
requested an opinion from the Office of Legal Counsel at the 
Department of Justice about our intent to redelegate 
responsibilities across the current 3 Board members, and for an 
interim time provide more responsibility for executive and 
administrative functionality in a single person. It is our 
intent to execute that by the end of May, barring an adverse 
opinion from that office.
    Our General Counsel has been in close contact with them and 
we hope to have a response back soon, but we think that will 
help solve the problem.
    The Board also is in active pursuit and has been for now 
since last summer of a full-time chief operating officer. We 
are on the cusp of beginning interviewing of our best-qualified 
candidates, and we hope to have that done as soon as possible. 
We think both critically important positions will help reshape 
the infrastructure of the offices that we have operated under 
for the last two years, and we still are optimistic that the 
President will act to nominate, and the Senate act to confirm. 
The Board has been openly interacting with the White House to 
help facilitate that process and remain available to the White 
House to help out in any way possible.
    Mr. Walsh. Well, we would certainly welcome that. 
Leadership is critical.

                         PROCUREMENT PRACTICES

    Let me ask just one last question, and that is regarding 
procurement practices, and then we will close the hearing, 
unless one of the other members has a question.
    The IG Report provided a number of examples of atypical 
procurement practices. I found this section particularly 
remarkable in the face of previous complaints that you, as 
board members, made against the first chairman of the Board. I 
believe in the wake of the procurement problems aired during 
Dr. Hill's brief tenure, and to avoid future problems, the 
board revised its procurement procedures and now contracts with 
the Bureau of Public Debt for most of its procurement services. 
I was surprised to read in the IG Report, page 25, that despite 
Bureau of Public Debt and staff concerns about the value and 
appropriateness of participating in a particular workshop, the 
Board reallocated travel money to other services without 
honestly identifying the funds that it would use to pay for the 
workshop. Regardless of the fact that the workshop was 
ultimately canceled, I see this as a prime example of what I 
referred to in my opening statement as an action that certainly 
appears to represent a conscious effort to undermine, 
procedures the agency has put in place.
    Could you respond to this specific example?
    Mr. Poje. Yes, certainly, Mr. Chairman. The example I 
believe you are citing is one that involved a relationship with 
the National Institute of Environmental Health Sciences, one 
that the Board had been--this vendor in particular, had been 
pursuing to better utilize its investigative work for training 
educators that are supported by this particular Appropriations 
Committee for their efforts. The Board, because of the 
disagreement has not funded that activity. We pulled ourselves 
out of it. And we have set in motion what we hope to have 
achieved by the end of next month, a revision by our Office of 
General Counsel of procurement procedures that will change the 
oversight by Board members into higher amounts. And it is 
explicitly expressed, what is the current operating procedures 
of Board involvement in expenditures.
    Just one moment.
    [Pause]
    Mr. Poje. I am sorry. One of my staff just reminded me that 
you are referring to a different category of expense. That was 
an interaction with a group called SACHE.
    Mr. Walsh. That is right.
    Mr. Poje. That is a professional group in the academic 
arena, those who are training the next generation of chemical 
engineers, and with whom the Board had had a previous 
interaction, making our investigative work and our 
recommendation more broadly known across the next generation of 
chemical engineers.
    Mr. Walsh. That is outreach.
    Mr. Poje. We did do that as part of an outreach function.
    Mr. Walsh. For $10,000 the CSB was given the opportunity to 
present the results of an investigation for an hour to 
professors, who in turn completed a feedback survey. $10,000?
    Mr. Poje. And also made use of that report in training 
endeavors for their own next generation of chemical engineers. 
But again, that activity is one that is not an ongoing activity 
now.
    Mr. Walsh. But this is exactly what we were talking about 
earlier, getting to the core mission here, as opposed to 
justification or outreach at a point where you are really not 
prepared to do outreach.
    Mr. Poje. Our intent again on outreach, as I stated 
earlier, is to pursue our recommendations program which are 
embedded in investigation reports, and that activity is not 
being funded at this time.
    Mr. Walsh. There are a number of other items cited in here. 
You have read the report. What I would strongly urge is that 
you and your staff look very closely at the recommendations, 
make that timetable and that chart that you have described, to 
get to the point where you can respond to all of these 
criticisms.

                            CLOSING REMARKS

    And we will close the hearing at this point, and I do have 
some closing remarks that I would like to make in general. But 
I appreciate, again, your forthrightness, and we have serious 
problems. And we, the subcommittee, has to make some important 
funding decisions, and obviously the departments that are 
performing well need to be rewarded for that, and the ones that 
aren't, will probably suffer in the comparison.
    So we will do our level best to meet the core mission of 
what you are trying to do, and then as we go down the road, 
make decisions on the long-term future of the agency.

                       CLOSE OF HEARING SCHEDULE

    This will conclude the VA/HUD and Independent Agency 
Subcommittee scheduled hearings on the President's budget 
submission for 2003. Any additional hearings dealing with 
fiscal year 2002 or 2003 or any other matters consistent with 
the subcommittee's jurisdiction are subject to call of the 
Chair. With present time constraints, the subcommittee did not 
schedule fiscal year 2003 budget hearings for 5 Federal 
entities under its jurisdiction, including U.S. Court of 
Appeals of Veterans Claims, IG for FDIC, Federal Consumer 
Information Center, National Credit Union Administration and 
Selective Service. Although formal hearings for these five have 
not been held, each has been asked to submit testimony as well 
as respond to all questions submitted by the subcommittee. This 
testimony and responses to our questions will be included in 
the published hearing of the committee record.
    In response to many individuals who have asked what the 
subcommittee's fiscal year 2003 markup plans may be, I would 
say that it is our intention to move forward as quickly as 
possible. Ideally we would hope to move our bill through 
subcommittee before the Memorial Day recess, through the full 
committee and the House floor during the 4-week period leading 
up to Independence Day.
    This schedule, of course, is contingent on a number of 
factors, not the least of which is receiving a realistic 302(b) 
allocation in a timely fashion. At this stage of the process we 
can only hope we will see such an allocation sooner rather than 
later.
    In closing I would like to express my sincere appreciation 
to all members of the subcommittee for their attendance and 
participation in the 19 public hearings that we have conducted 
over the past 2 months. In particular, I would like to single 
out my colleague, Alan Mollohan, the subcommittee's ranking 
member, for all of his hard work and support through this 
process. We have sat side-by-side in each of these 19 hearings, 
and I daresay we will spend many, many more hours together as 
we work together to move our bill to conference and to the 
President's desk. I am very thankful for his friendship and for 
our positive productive working relationship.
    I would also like to thank each and every one of the 
members, the staff, the members of associate staff, for all of 
their dedicated work, as well as all of those individuals from 
the Office of Official Reporters, who do such an outstanding 
job in providing us the stenographic minutes of our hearings. 
Without these two groups, the folks who are supporting us, I 
daresay it would be very difficult to conduct these hearings as 
we do now.
    With that, the subcommittee will stand adjourned subject to 
call of the Chair.
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DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT, AND 
              INDEPENDENT AGENCIES APPROPRIATIONS FOR 2003

                              ----------                              

                                           Thursday, March 7, 2002.

            AGENCY FOR TOXIC SUBSTANCES AND DISEASE REGISTRY

                               WITNESSES

HENRY FALK, M.D., MPH, ASSISTANT ADMINISTRATOR, AGENCY FOR TOXIC 
    SUBSTANCES AND DISEASE REGISTRY
PETER McCUMISKEY
    Mr. Walsh. The subcommittee will come to order.
    Good morning, everyone. Today the subcommittee will 
continue its Fiscal Year 2003 budget hearings by taking 
testimony from the Department of the Health and Human Services 
Agency for Toxic Substance and Disease Registry and also from 
the Neighborhood Reinvestment Corporation.
    First up is ATSDR, whose Fiscal Year 2003 budget request, 
excluding the proposed addition of benefits accrual costs, is 
$77,388,000, a decrease of $847,000 from Fiscal Year 2002. I 
should note that despite this decrease, ATSDR has seen growth 
of a little more than ten percent over the past three years, 
perhaps giving us perspective of the important work performed 
by the agency as well as the importance Congress has placed on 
the work that they do.
    When we get to questions in just a few moments, I will have 
specific questions about this proposed decrease.
    Testifying on behalf of the agency again this year is Dr. 
Henry Falk, Assistant Administrator of ATSDR. Accompanying Dr. 
Falk is Mr. Kerry Weems.
    Mr. Falk. I have a correction to that.
    Mr. Walsh. Okay.
    Mr. Falk. Mr. Weems of the Department of HHS is unavailable 
this morning. This actually is my deputy from ATSDR, Peter 
McCumiskey.
    Mr. Walsh. All right. Welcome.
    Mr. McCumiskey. Good morning.
    Mr. Walsh. In the interest of time, I will ask Dr. Falk to 
summarize your opening statement as best you can. Your written 
statement will, of course, be included in full in the record.
    Before you do that, I would like to ask Congressman 
Mollohan of West Virginia, the ranking member of the 
subcommittee, for whatever opening remarks he may have.
    Mr. Mollohan. Thank you, Mr. Chairman. I would just like to 
join you in welcoming Dr. Falk to the hearing today and look 
forward to his testimony.
    Mr. Walsh. All right. Thank you.
    Doctor Falk, please proceed.

                           Opening Statement

    Mr. Falk. Thank you very much, Mr. Chairman, Congressman 
Mollohan.
    Before I start, I just wanted to point out that actually 
the administrator of ATSDR, who is also the director of CDC, 
Dr. Jeffrey Koplan, has announced that he will be leaving that 
position at the end of March, just so that you all are aware 
that I don't yet know who his replacement will be as 
administrator. The deputy director of CDC, Dr. David Flemming, 
is also the deputy administrator of ATSDR. We share those two 
positions at the top. So presumably Dr. Flemming is still 
there, and I work closely with him.
    But just so you are aware that I don't know who the 
replacement will be yet as administrator.
    The testimony that I have provided, I will try to summarize 
very quickly. It is divided into four parts. The first part 
dealt with sites that we have been working on. As you know, I 
approach our work at ATSDR as a very strong service component 
that we provide to communities at hundreds of sites around the 
country during the year.
    Several sites this year were particularly important. One 
that this subcommittee has been very concerned about over a 
number of years is the Toms River, New Jersey site. That study 
was completed in December and presented to the community and 
demonstrated an association between exposure from contaminated 
well waters related to Superfund sites and the development of 
leukemia, particularly in young females exposed prenatally to 
the well water. ATSDR had particularly heavy involvement in 
that work in terms of modeling the well water distribution and 
enabling that study to end up as it did.
    The second site that we have been very actively engaged in 
is in Libby, Montana. As you know, there are many people who 
have been exposed to asbestos from the mining in that area. We 
have done medical testing the past two summers, set up an ad 
hoc clinic, examined 7300 people. Close to 20 percent of all of 
those people have some x-ray abnormality linked to asbestos, 
and almost 50 percent of the former workers that we have 
examined have such abnormalities.
    I think that the Libby, Montana site perhaps is more 
disease related than any of the sites that we have looked at. 
So that has been a very important site for us, and the Libby, 
Montana site will have important work ongoing for a number of 
years in terms of follow up of people who have been exposed to 
asbestos.
    We have had a number of other sites that are very 
important. Fallon, Nevada and the Vieques site, which was a 
petition site funded by way of the Navy on the Federal site 
side, were also very prominent for us this year.
    The second area that I cover in my testimony relates to our 
ongoing programs, the important ones that we have been doing 
for a number of years. We have a cooperative agreement for 
programs with state health departments to do work in the 
states. We now have 33 awardees in 31 states, Puerto Rico, and 
one of the Indian tribes. We have created the pediatric 
environmental health specialty unit program. Now we have a full 
complement in all of the HHS regions.
    The Great Lakes Human Health Effects Research Program is a 
continuing area of importance to us, and Minority Health 
Professions Foundation Program is also another important one.
    The third broad area that I covered relates to the domestic 
terrorism and the events related to September 11th, the World 
Trade Center, and anthrax. This was very unexpected, but a very 
challenging and involving area for us. I took the approach when 
responding to this national emergency that we would be as 
positive as we could in every way to assist the New York City 
Health Department, State Health Department, CDC, EPA, and 
various partners that we work with. So we have, during the 
course of this year, covered those unexpected activities and 
tried to work on them along with our ongoing responsibilities.
    At the World Trade Center, we have been very much involved 
with helping the City Health Department and including recently 
working with EPA and FEMA to do some of the first sampling 
indoors in residential buildings, and we will continue to work 
with EPA and the city on that issue.
    We have also been talking to the New York City Health 
Department about the establishment of some type of roster or 
registry that will encompass the various highly exposed groups 
to be able to keep track of those people and do studies and 
provide information as time goes on. That is an ongoing project 
at the moment.
    On the anthrax side, we have a lot of people at ATSDR who 
have skills that were very helpful during the anthrax episode, 
people such as industrial hygienists, for example, who are 
trained at going into buildings and assessing the distribution 
of spores, collecting samples. They are experienced at suiting 
up with respirators and going into those areas and they also 
provided consultation on decontamination. So we worked closely 
with CDC and EPA and others on that; several members of ATSDR 
were part of the Tiger Team that was working here in Washington 
D.C. very intensively December through the beginning of 
January, on decontamination issues related to the Hart Building 
as well as to portions of the Ford and Longworth Buildings. So 
we were very involved in assisting in those areas.
    In addition to the work the past six months, I remain very 
concerned about the longer-term issues related to the potential 
for chemical terrorism in the future and how that might affect 
our agency and the ways in which we can work with FEMA, EPA, 
and others for the particular kinds of skills that we have. So 
that is a challenge to us as we try to plan and think ahead.
    Finally, the last part of my testimony covers partnerships 
that I have tried to work on over the course of last year. We 
clearly work closely with CDC in Atlanta. We work very closely 
with EPA, and I think I described that to you last year. In 
addition, during this past year, we have had a significant 
planning effort with NIEHS and also with FEMA. With NIEHS, Dr. 
Olden and I set up five working groups to think through what 
the potential areas for collaboration and we have got about a 
dozen proposals from them that we are working on follow up and 
how we can work together.
    The general principle of my approach to working with NIEHS 
is that they have a very talented group of people working on 
basic Superfund research, and I have concerns of delivering 
services in terms of measuring exposure to health effects at 
sites. To the extent that we can benefit from the basic 
research and get newer tests and information out into the 
field, that will only benefit the product that we can provide 
to the communities. So I have a strong interest in continuing 
the development of that collaboration.
    And with FEMA, I think on any of the terrorism issues, 
obviously there can be a lot of concerns in terms of 
preparedness and planning. The discussions with FEMA revolve 
around areas, particularly the medical preparedness and also 
data systems and GIS systems and ways in which we can link 
together. I think that the area where we can contribute in 
terms of working with FEMA is that we have a fair number of 
physicians, including emergency medical physicians, involved 
with health departments, public health groups, and that is the 
logical area in which we could, I think, link up with FEMA, 
plus training programs that we have in terms of toxicology 
information, the kinds of things that would be helpful for 
technological hazards. And so I think those are the kinds of 
areas that we need to be talking about with the FEMA groups.
    And we also just recently provided some services to the 
Chemical Safety Board. I mentioned last year that we work with 
them, and so they have interest and we are trying to define 
what the areas of collaboration could be. We will see how that 
evolves.
    I think this year has been a very challenging one for us, 
both in terms of the Superfund work and the important sites 
that we dealt with and also because of all the events related 
to the terrorism, responding to that as well as thinking ahead 
to the future.
    That concludes my remarks. Thank you very much.
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                              ATSDR BUDGET

    Mr. Walsh. Thank you. I would like to begin this morning 
with some general questions about your budget formulation 
process, but before doing so, I want to commend to the 
subcommittee the agency's performance plan, which is included 
at the back of the budget justification documents. As it notes 
very clearly, ATSDR has for the last few years been meeting or 
exceeding every single performance target set for it. This 
record is certainly commendable, and you, Dr. Falk, and your 
excellent staff of your agency should be congratulated for a 
job well done.
    Now with regard to the budget, prior to the final fiscal 
year 2001 Appropriation Bill, the budgets for ATSDR and NIEHS 
were included as part of EPA's Superfund account. Fiscal year 
2002 was the first full year in which you were able to operate 
independently of EPA, including presumably an opportunity to 
make the case to OMB.
    Could you please take a moment and comment on how the 
process has gone for you, including your thoughts as to whether 
the change has so far been a benefit or a hinderance to your 
agency?
    Mr. Falk. I think that the change has been a benefit to our 
agency. I think if we look back to the time before the change 
was made, our budget proposals would go to EPA, and that was it 
for us until we actually saw the final appropriation figures. 
We didn't really have the opportunity to present directly to 
you in the subcommittee, and I think we were not as linked to 
the department's process in terms of the Department of HHS 
working with OMB and so on.
    So I think for us, it has definitely increased the 
visibility and has enabled us to speak more forthrightly about 
our programs and to directly answer questions. I mean, there 
are opportunities and challenges, but I think to be able to 
discuss that fully has really been very beneficial to us. I 
think it also been beneficial in terms of our relationship with 
the Department of HHS, because although I think they always 
were concerned about us, I think they pay more attention now 
under the current format.
    So I think it has been beneficial in a number of ways. I 
have worked very hard not to let that hinder in any way our 
relationship to EPA, and we continue to meet regularly with EPA 
leadership for the Superfund program. In my visits to the 
regional offices, I try to reassure them in every way that the 
budget change in no way changes our working relationship. I 
think we have navigated that fine.

               ATSDR WORK WITH OMB ON BUDGET DEVELOPMENT

    Mr. Walsh. How would you characterize your discussions back 
and forth with OMB this year? You did wind up with a reduction 
in budget.
    Mr. Falk. Right. I think the changes this year are not so 
much in the programmatic areas, but due to management 
initiatives which are more generally of concern, the 
President's management initiatives and how that is reflected in 
the Department of the HHS and administrative consolidation 
issues. I don't think they individually reflect on ATSDR. I 
think it was a department-wide initiative.
    I think we have had a good opportunity to speak with the 
department and to convey our issues and concerns; and 
particularly also with all of the work on bioterrorism, I have 
had an opportunity to meet with individuals in the HHS Office 
of Emergency Preparedness, and we have discussed those issues 
as well.
    So I would characterize the relationship as good, and I 
think the decrease is probably related to some broader 
management issues.

                           HOMELAND SECURITY

    Mr. Walsh. Okay. You talked about some of the experiences 
that you have had since 9-11 and your role in the response. In 
your opinion, are there other areas or activities that your 
agency should be involved with in terms of homeland security, 
for whatever reason you have not been involved in thus far?
    Mr. Falk. Well, I think in the immediate response to the 
World Trade Center and the anthrax concerns, I think we have 
done all the things that we should have done. In fact, we have, 
I think, responded to every request made of us, and I don't 
think we have shied away from participating in any way where 
our expertise would have been helpful for any reason.
    So I think in the immediate response, I think we have done 
appropriately, and I think we will continue to be helpful in 
the aftermath of that, such as continued work in Lower 
Manhattan, concerns about exposure to various hazardous 
substances. I guess for me, the concerns are more towards the 
longer term, because it is okay in a sense to make an 
adjustment in the program over a three- or six-month period, 
respond to the emergency and then shift back into a normal 
operating mode; but I do see, looking ahead, we need to really 
think about preparing for those kinds of events.
    And to me there are two parts to that: One is the kinds of 
events that we have seen, let's say anthrax where the lead is 
clearly with the infectious disease, biological-oriented 
agencies like the CDC, but where we have specific kinds of 
expertise that can be helpful. But I think the more complicated 
one is the areas of chemical or radiological terrorism where 
agencies like ours would be looked at maybe more prominently 
because we do have people with those kinds of skills. And there 
I see the need for planning. I see the need for working with 
state health departments, working with FEMA, and that is very 
hard to build in over the longer term. And so that I do see as 
an important issue.

                       NUCLEAR FACILITY TERRORISM

    Mr. Walsh. You alluded to radiological toxins or the so-
called dirty bomb. How do you plan for that? How do you respond 
to that?
    Mr. Falk. I think for those of us in an agency like ATSDR, 
my concerns are on the health end of that response. In other 
words, I try to define what our role could be at ATSDR, what 
the roles for our state health colleagues would be, and try to 
find what we can do to link in with FEMA and EPA and the 
Department of Energy or the Nuclear Regulatory Commission and 
others can do. So from my end, the concerns are the readiness 
of the public health community to be able to participate and to 
do the things that they need to do.
    I think as we have seen this year in the World Trade 
Center, there are many public health concerns that arise in a 
situation like that. My own experience, actually one of my 
first experience in the public health service, was to be the 
CDC liaison to the Pennsylvania Health Department at the time 
of Three Mile Island. So it was one of those formative 
experiences in life, and I spent a week thinking of how to 
evacuate Harrisburg on four hours notice and provide potassium 
iodide tablets to everybody on the way out, which would have 
been impossible, having to go on television to assure people 
that the milk supply was satisfactory.
    Mr. Walsh. I just saw a documentary on that just recently 
on public television. It was fascinating and scary.
    Mr. Falk. So to me, I learned a lot. One of the lessons is 
that no matter which agency has lead responsibility, there are 
a number of public health questions, and so my concern is 
really the preparation of the public health community and 
particularly state and local health departments to be able to 
respond to issues, whether it is chemical, radiological, or 
mass casualty.
    Mr. Walsh. Thank you.
    Mr. Mollohan.

                           EMERGENCY RESPONSE

    Mr. Mollohan. Thank you, Mr. Chairman.
    Just following up a little bit on that, what are the 
Federal agencies that you would work with or have 
responsibility, with in responding to these emergencies or 
preparing for these emergencies? Please list them, and then I 
would like for you to describe how your mission statement fits 
in with their responsibilities now, as opposed to when your 
budget was a part of EPA's superfund account.
    Mr. Falk. Sure. I think the main agencies that we need to 
work with are probably four. One is CDC, and as you know, we 
are closely linked to CDC through our administrator and 
director. But on any infectious or biological type of terrorist 
incident, CDC would have a important role, but on the 
environmental aspects, again as I mentioned before, I think 
that would be one way where we would be able to provide 
assistance. So we try to plan with CDC and work closely with 
them.
    Second obviously, is EPA. We work closely with them all the 
time. EPA is very aware of various kinds of potential chemical 
hazards, the distribution of hazards. We work closely with EPA 
at Superfund sites through our regional offices, and I think a 
chemical release from a terrorist incident is no different 
ultimately than a chemical release from an accident or from 
some acute event. So the nature of our working relationship 
with EPA will be very strong in any kind of chemical terrorist 
incident.
    Third is FEMA, and I think of FEMA in their role in the 
Federal Response Plan to coordinate the efforts of all Federal 
agencies, and so they convene Federal agencies in any disaster 
setting. We will inevitably, if it is appropriate for us to be 
there, we will be working with FEMA. And I think FEMA has a 
much stepped-up role now in terms of preparedness. As I 
mentioned, in the area of public health, medical preparedness 
is one where we could work with them.
    For example, we have a variety of training materials. We 
have produced materials which are being distributed to 
emergency room physicians, local health departments on how to 
deal with technological, chemical emergencies, how to deal with 
common chemicals, what to look for. And so, you know, those 
kinds of things might be helpful to FEMA in terms of their 
emergency preparedness planning.
    Fourth, as I mentioned, NIEHS simply because they, as you 
know, fund a variety of centers around the country, and for 
example in the World Trade Center response, some of the NIEHS-
funded centers at NYU, Mt. Sinai, Columbia, and in the general 
area have become actively involved in investigations. So it is 
very important for us to work closely with NIEHS as well.
    I think on the Federal level, those are the four.
    Mr. Mollohan. What do the NIEHS-Funded centers do?
    Mr. Falk. Dr. Olden will be here next week, and I am sure 
he can do this in a lot more detail, but as part of the NIEHS 
grant programs--and this may be from the HHS side and not just 
the money from the VA-HUD side--they fund environmental health 
programs at public health and environmental health centers and 
a number of academic institutions. Some of the individuals at 
those academic institutions have been prominent in planning to 
respond to the New York City Health Department, being asked by 
community groups for their input.
    Dr. Thurston, for example at NYU [New York University 
School of Medicine], has participated in a number of efforts as 
has, Dr. Landrigan at Mt. Sinai [Medical Center]. So it is just 
important for us to stay in touch on whatever kind of expertise 
is available in a situation.
    In terms of the last part of your question about 
authorities, I had assumed that in terms of chemical releases 
and hazardous substance releases, whether by terrorist 
mechanism or whether this comes about as we deal with a 
Superfund site from some accidental release, that actual 
release is the same, the responses to dealing with a particular 
chemical or hazardous substance. So I have assumed that our 
work is within the kind of emergency response authorities that 
we have under CERCLA.
    We have had some discussions with staff, say from Energy 
and Commerce, and they actually have a paragraph in the Tauzin-
Dingell Bill on Bioterrorism, which actually said that ATSDR, 
for the kinds of things that we can do, ought to be considered 
by the Department of HHS in responses consistent with our 
authorities under CERCLA. So I think the authorizing committees 
have taken the position that our authorities under CERCLA are 
appropriate for hazardous substance releases related to 
terrorism.

                             REIMBURSEMENT

    Mr. Mollohan. As you work with and for these groups, are 
you ever reimbursed for your work?
    Mr. Falk. This is an important issue. I think this year, 
for the work with CDC, we will receive some reimbursement from 
CDC for that. I don't think we will see reimbursement for 
people's salaries or staff time that was put in. They have said 
that they will work with us on actual expenses outside 
salaries, travel and other kinds of expenses that were 
incurred. So I am hoping that we will get some reimbursement 
from CDC for the expenses that are entailed in the anthrax 
episode, for example.
    I think with FEMA, we are just beginning those discussions, 
and we will just have to see how that works out.
    Mr. Mollohan. But you do have discussions ongoing with FEMA 
about reimbursements?
    Mr. Falk. We have had discussions about how we can develop 
the relationship to work together. We are drafting a memorandum 
of understanding between us and FEMA, which I hope we can sign 
soon. We are testing the waters, so to speak, by participating 
in three pilot projects with FEMA's program where they have 
local emergency planning groups, and we are having some medical 
public health input into that planning process. One is in the 
Tri-Town area of Connecticut. One is in Carlisle, Pennsylvania. 
One is in Ithaca, New York.
    And so we are testing the waters there.
    Mr. Mollohan. But this MOU is a cost-sharing idea?
    Mr. Falk. The MOU will, I think, define the working 
relationship, and then we will talk about possibly cost 
sharing. Inevitably to do that work, we will have to have some 
kind of cost sharing.
    Mr. Mollohan. Are there any other places you get money from 
besides this Appropriations Committee?
    Mr. Falk. Under the Superfund program, we work with Federal 
facilities, and we do get reimbursables from the Department of 
Energy, Department of Defense, for their Supefund sites.
    Mr. Mollohan. What is the total amount that you would 
receive from all these reimbursements?
    Mr. Falk. It has run roughly $20-25 million a year. The 
Department of Energy and Department of Defense have been the 
two largest for us.
    Mr. Mollohan. And that is what you anticipate it running, 
about the same in the future?
    Mr. Falk. I think so.

                       FY 2003 PRESIDENT'S BUDGET

    Mr. Mollohan. Well, the reason I ask is that your budget 
request is actually below last year's, and you have now broken 
away from EPA. So you are having to deal with OMB and probably 
did not request a cut in your budget--am I correct?--from OMB?
    Mr. Falk. We didn't request a cut.
    Mr. Mollohan. But you got one?
    Mr. Falk. Right. I think we were anticipating roughly 
something very similar to last year's budget.
    Mr. Mollohan. What was last year?
    Mr. Falk. Last year's was $78.235 million, and I think the 
changes, as I said, are really related to broader 
administration--or department-wide initiatives such as 
management initiatives and consolidation. So those were things 
that we would not have perceived at our level.
    Mr. Mollohan. Can you tell me what your request was to OMB?
    Mr. Falk. I am thinking that it was probably very similar 
to last year's.
    Mr. Mollohan. Let me ask you this: Do you know what your 
request to OMB was? Sitting right here right now, do you know 
what your request to OMB was?
    Mr. Falk. I think in terms of the department and OMB, but I 
think it was the same as last year.

                   FY03 MANAGEMENT REFORM AND SAVINGS

    Mr. Mollohan. Okay. And so you anticipate or have been 
charged with achieving management savings of $1.7 million; is 
that correct?
    Mr. Falk. Correct.
    Mr. Mollohan. I can see where arguably in a broad 
government management directive or overhaul directive that some 
savings can be achieved. It is awfully hard for me to see that 
being achieved in your agency, and I want to give you a chance 
to talk about that.
    Mr. Falk. Right. I think for us, as I have said, the 
biggest challenge relates to events that were not foreseen when 
we submitted the 2003 budget, which is all the events that 
relate to bioterrorism. I have tried to capture a little of the 
flavor of the events of the last six months, but there was an 
extraordinary amount of activity related to the World Trade 
Center, anthrax, and to thinking about how to respond to 
chemical terrorism issues in the future.
    So to me the biggest unknowns are really the changes that 
have occurred since the budget proposal went forward and how do 
we incorporate that into thinking about the future.
    Mr. Mollohan. You haven't taken your cuts from management 
so much. You have taken them from research, development, and 
grants; is that correct?
    Mr. Falk. I think we have had to accommodate.
    Mr. Mollohan. You have a lot more responsibilities. You 
have been given less money. It is going to be awfully hard for 
you to achieve these numbers unless you do cut some of these 
other programs and work in a totally different environment. It 
sounds to me like unless you are getting a lot of 
reimbursements or fees for service from other areas, it is 
going to be awfully hard for you to make this work.
    Thank you, Mr. Chairman. I have taken too long.
    Mr. Walsh. Okay. We have a vote now and another vote right 
after. We will proceed until Mr. Fattah comes back, and then I 
will let him ask questions while we go vote.
    In terms of management reforms, your 2003 proposal shows a 
net decrease of $847,000 below 2002. These figures do not take 
into account the Administration's proposal on benefit accruals, 
which I suspect will not be adopted on a committee-wide basis 
rather than by individual subcommittees.
    As I review your overall proposal, I note that compared to 
2002, in 2003, you will reduce your FTE level from 427 to 419. 
At the same time, your overall compensation and benefits cost 
will rise by $560,000. Your actual reductions are found in the 
research and development contract activity, minus $100,000 in 
grants and subsidies.
    What reforms have you instituted to achieve the savings 
that will be required?
    Mr. McCumiskey. Mr. Walsh, Chairman Walsh, the difference 
you mentioned, the $847,000, represents about a one percent 
decrease from last years appropriation, the estimate for 2003. 
ATSDR procures its administrative services from the Centers for 
Disease Control through an interagency agreement. Of the 
$847,000, and eight FTE reduction, the majority of that 
decrease will be absorbed by CDC, not ATSDR.
    So the decrease to ATSDR from FTE going from 427 to 419, in 
reality, it will be a reduction, probably, of 427 to 424 for 
ATSDR. The management reform is, predominantly on the 
administrative side, to be absorbed by CDC. So for ATSDR, the 
decrease should be very minimal as far as the impact of that 
reduction in FTE.
    Mr. Walsh. Where will those positions come out of?
    Mr. McCumiskey. Well, we haven't fully resolved that, but 
we are looking at getting some consolidation of administrative 
services, maybe some reductions in our grants and cooperative 
agreements and the folks that administer those. But, again, the 
numbers will be very minimal at ATSDR, and the impact will also 
be minimal.
    Mr. Falk. We are hopeful of that. That is the basis of 
discussions. It is not what is printed here, but at least the 
discussions with CDC have gone along that line.

                     ATSDR'S WORK IN LIBBY, MONTANA

    Mr. Walsh. You mentioned some of the locations that you 
have been working on, and the Libby, Montana Health Assessment 
Project, can you give the subcommittee a brief explanation of 
the work that you are currently doing and plan to do in fiscal 
year 2003 in that area as well as Fallon, Nevada?
    Mr. Falk. Right. In Libby, Montana, there are several 
important areas for us coming up in 2003. One, as I mentioned, 
we had done medical testing in the community the last two 
summers, and we are in the process of wanting to transition 
that to state and local health departments and local medical 
facilities. So that we will continue to provide technical 
assistance and resources in future years, but I think the 
actual medical testing will be done locally.
    So that will be a very important transition for us, and we 
need to structure that so that the testing can be set up on an 
ongoing basis in future years and done locally. We have been 
talking to the state health department and local health 
department about that.
    Secondly, we have been planning to put together a registry 
of former workers of W.R. Grace and the family members, as well 
as link to the people who have been in our medical testing 
program so we can stay in touch with these people in future 
years, and we will provide any new information on treatment as 
well as any further testing that needs to be done. So setting 
up that registry will be very important for us in the coming 
year. We have pretty much tracked all the former workers and a 
portion of their household contacts, but we are in the process 
of creating that registry. So that is the second area.
    The third area is that we have done a mortality study. We 
have been reviewing cases among local pulmonary physicians, and 
people have been identified with abnormalities on the chest x-
rays in our medical testing program. We will be doing more 
detailed epidemiologic studies to link the specific forms of 
environmental exposure with the development of disease. There 
are many concerns about exposures in Libby, from insulation, 
from recreational activities, from other sources in the 
community, that we would like to do a proper epidemiologic 
study to see the best evidence for which of these routes of 
exposure are important.
    Those I think are the three main areas that we will focus 
on in Libby.
    Mr. Walsh. We have a vote. We have about a minute and a 
half left. Virgil, have you voted?
    Mr. Goode. Yes, I have.
    Mr. Walsh. And then there is another vote right after. I 
think we will go up and vote. If you could take the chair, Mr. 
Fattah went up to vote. He will have questions when he returns. 
So we will come back right after the second vote if there is a 
second vote.
    You can complete your answer.
    Mr. Falk. Thank you. So to complete that question, the 
second half of the question related to work in Fallon, Nevada, 
and we are working with the Centers for Disease Control 
National Center for Environmental Health on the Case Control 
Study that they have been performing. We have particularly been 
involved in evaluating the environmental exposures in the 
Fallon, Nevada area.
    There are concerns about exposures from pipelines, 
pesticides, arsenic in the water, nearby Naval Fallon Air 
Station. And so at ATSDR, we are evaluating potential exposures 
from those sources, and we will have some of those early 
reports starting, I think, in the spring of 2002 and going 
forward.
    Mr. Goode. I don't have any questions myself.
    Do you have anything you want to say?
    Mr. McCumiskey. No, sir.
    Mr. Goode. Is that it, Dr. Falk.
    Mr. Falk. Yes.
    Mr. Goode. All right. We will just wait, then, until Mr. 
Fattah comes.
    We are in recess now.
    [Recess.]
    Mr. Goode. We will end the recess, and I think Mr. Falk is 
ready for your questions.

                           HOMELAND SECURITY

    Mr. Fattah. If you give a brief response to a fairly simple 
question, which is I notice there is an effort to coordinate a 
variety of agencies. I assume FEMA is the lead agency with some 
nexus to the Office of Homeland Security.
    Have you been involved in that, and has that coordination 
proceeded as it should?
    Mr. Falk. Yes. We have been involved in responding to the 
terrorist incidents, both at the World Trade Center and 
anthrax, and in the emergency response under the Federal 
Response Plan, FEMA coordinates and other agencies will 
participate under that umbrella. And we have worked closely 
with EPA, FEMA, Centers for Disease Control, as part of that 
process.
    So, yes, in the acute event, we have worked closely with 
them, but I am concerned in terms of the future and in terms of 
thinking about how to plan for terrorist episodes in the 
future, and so I have started doing substantive discussions 
with FEMA as to how we might work more closely with them in the 
future.

                           CHEMICAL TERRORISM

    Mr. Fattah. Have you taken note of the events in Italy and 
the efforts, apparently, to use cyanide in some way?
    Mr. Falk. My feeling is that I have a lot of concern about 
issues related to chemical terrorism and use or release of 
common chemicals. In other words, some people focused primarily 
on nerve gas weapons. I remain particularly concerned about 
what a terrorist could do to cause releases of chemicals such 
as cyanide and other materials, attacks on chemical plants.
    In 1984, I was one of, part of a small CDC team that went 
to Bhopal. So I have actually seen the potential that can occur 
from a terrorist event on a chemical plant.
    Mr. Fattah. There was some mention by the Italian 
authorities that the effort there would not have been lethal if 
the plan had been carried out. Have you paid any particular 
attention to whether or not that would have been an effective 
attack?
    Mr. Falk. I don't know enough of the details of that 
tunneling process and where the chemicals were. I would 
hesitate to answer whether it would have worked or not.
    It would not surprise me that some efforts like that could 
be made to work. Certainly, having seen a plane fly into the 
World Trade Center, one has to be very cognizant of the 
potential for a plane to fly into major chemical depots such as 
exist in the northeast. One really has to think about that kind 
of thing now, and so response, preparedness, training of local 
health department, state health department people, all of those 
I think are very important issues, much higher in scale of 
concern now than before 9-11.
    Mr. Fattah. Thank you very much, Mr. Chair.

                            TOMS RIVER STUDY

    Mr. Frelinghuysen. Thank you, Mr. Fattah.
    Dr. Falk, nice to meet you. My timing must be good. I have 
a few questions for you, and then I may be through.
    First of all, I want to thank your agency for your work in 
New Jersey on the Toms River study. Can you discuss just for a 
brief moment whether you will continue to follow the data that 
is associated with that study for the next few years and your 
involvement?
    Mr. Falk. Yes, we will definitely continue to work with the 
New Jersey health department. We will continue to follow with 
them the cancer data collection as it goes on over the next 
several years. That is very important to us.
    One of the things we learned in the Toms River study is 
that it is very important to look at cancer data not just on a 
county level, but more precisely at the township level and 
local communities. In the Toms River situation, the cancer 
rates were elevated in Dover Township, but not in the rest of 
Ocean County. So I think we are working with New Jersey, 
especially on continuing to look at the cancer data at a finer 
perspective than just simply at the county level. I think that 
is one of the lessons from that project.
    So we will continue to work the New Jersey Health 
Department. We are also doing a four-state study on childhood 
brain cancer, which involves New York, New Jersey, 
Pennsylvania, and Florida. That study is ongoing.
    Mr. Frelinghuysen. This relates to environmental factors?
    Mr. Falk. Yes. We are looking at environmental factors and 
potential risk factors for childhood brain cancer, and those 
are four statewide investigations.
    Mr. Frelinghuysen. Potential airborne or ingested? 
Superfund? Non-Superfund?
    Mr. Falk. Yes. We are looking at a variety of factors 
within the environment that could conceivably be related to 
those illnesses. So that is an ongoing study, and we hope to 
have information on that perhaps late in FY 2002. So that is a 
secondary issue that we will work with New Jersey on.
    Administrator Whitman, when we spoke about the Toms River 
study, asked whether there were any follow-up investigations 
that we could do to assess the findings from Toms River and if 
that was more generally applicable. And so we have set up a 
working group with ourselves and some of the key programs at 
EPA to see whether we can develop a protocol for looking more 
generally at the issues we found in Toms River and see if there 
are any follow-up studies that would be appropriate, and that 
would definitely include New Jersey if we were able to do that.
    So in addition to the ongoing cancer data and the childhood 
brain cancer data, we are working with EPA to see if we can 
come up with a protocol for some further studies related to 
what was found in Toms River.

                           EMERGENCY RESPONSE

    Mr. Frelinghuysen. Well, thank you for your specific work 
in that area and for the collaborations with EPA, which I 
assume will have nationwide possibilities in terms of the use 
of that type of information.
    One other question, and if it is repetitive, I apologize: 
Most members of the Congress have been working with a lot of 
First Responders, EMT, fire and police, and hospitals. One of 
the areas that I have had some concerns about is that I am 
never quite sure who is working successfully with FEMA and who 
isn't. I assume you are--whether we have the ability on an 
instantaneous basis when people come through the hands of a 
First Responder into the emergency room to link either to your 
agency or to CDC such that we can have the quickest possible 
diagnosis and sharing of information, besides the issue of 
training which needs to uniform. We have to have standards. We 
have to have one model.
    I just wonder whether you had commented in earlier 
testimony this morning on the linkages issue here.
    Mr. Falk. Yes. I think this is a very important issue and 
certainly heightened by all the events over the last six 
months. We take this very seriously.
    Let me divide my response. There are two parts to this. 
There is the emergency response effort, and then there is the 
preparedness and planning for future events. In the emergency 
situation, we are linked, number one, through the National 
Response Team to EPA. ATSDR represents HHS on the National 
Response Team and contingency plan under Super Fund. So we are 
linked to EPA.
    And, secondly, under the Federal--
    Mr. Frelinghuysen. Just to note, the EPA labs, I hear--
maybe at least in our neck of woods--are like something out of 
the 1950s. So the linkages may be there, but it may not be up 
to speed in terms of response.
    Mr. Falk. Right. What I was really referring to was the 
linkages. In other words, we respond through the National 
Response Team and under the Federal Response Plan. If there is 
a Presidential disaster, we work with FEMA as do the other HHS 
agencies.
    So I think in the emergency setting, there is a plan for 
how to engage everybody. On the other hand, as you point out, 
in terms of preparedness, there are many issues that I think 
really need to be thought about in the current setting in the 
midst of the heightened concern, and particularly in the areas 
that we deal with such as responding to chemical releases from 
terrorist events.
    I think there is real need to think about the preparedness 
levels of state and local health departments, and I think we 
have learned from the World Trade Center episode that there is 
more work to be done in terms of agencies such as ours with EPA 
and others in terms of having protocols fully worked out 
beforehand, what chemical tests need to be done in particular 
scenarios.

                       WORLD TRADE CENTER EVENTS

    Mr. Frelinghuysen. The first World Trade Center attack 
occurred in 1993. People seem to sort of forget, and I assume 
there were some lessons learned after that. Maybe there weren't 
lessons learned.
    Mr. Falk. In fact, there were lessons learned, and when I 
was at CDC at that time, we did an investigation of the 
evacuation of the World Trade Center at that time, and there 
were many lessons learned from the difficulties of doing the 
evacuation in 1993, which were helpful in this time around in 
terms of speeding up the evacuation of people from within the 
building.
    So there were lessons learned, but the lessons learned this 
time are going to be in the area of hazardous substance 
release, how to deal with asbestos, which laboratories do the 
measurements, what are the protocols for doing measurements, 
what are the standards that need to be used. It really benefits 
everybody if those kinds of issues among agencies are all 
resolved beforehand so that for asbestos, for cyanide, whatever 
the issue may be, everybody knows which laboratories are 
capable of doing this analysis, how many specimens they can 
handle, all the other questions, the kind of thing that is 
worked out in advance.
    So we work with CDC and others. As you know, the Department 
of HHS has provided funds to support state and local health 
departments, and so they are very much engaged in this, but I 
think the largest part of the department's funding is focused 
on biological issues such as anthrax and smallpox. I think 
there still are important issues to think through in terms of 
chemical and radiological and mass trauma types of events.

                     Response to Chemical Emergency

    Mr. Frelinghuysen. My particular interest is instantaneous 
linkages. I don't get a feeling that things can be as 
instantaneous as many people in the public think they will be, 
and I am not sure that we have hospitals talking to one 
another, CDC talking to hospitals. I mean, if we have a walking 
smallpox situation, I would hope that we would have an ability 
to deal with it.
    Mr. Falk. I think CDC and HHS are making a considerable 
effort to improve the capacity of state and local health 
departments. So that is on going. I agree with you; more needs 
to be done. I think our own particular interest at ATSDR 
relates to the environmental hazardous substances, chemical 
kinds of issues, things that we deal with on a regular basis, 
and ensuring that similar kinds of capacity and linkages are 
available at the state and local level with adequate Federal 
support in those areas.
    Mr. Frelinghuysen. Thank you very much, Dr. Falk, and you 
and your colleagues for the good work you do.
    The record will remain open for additional questions from 
members, and we would appreciate an expedited response to any 
of those additional questions that might be asked.
    Mr. Mollohan, anything further?
    Mr. Mollohan. No.
    Mr. Frelinghuysen. Mr. Fattah? Mr. Goode?
    Mr. Fattah. No.
    Mr. Goode. No.
    Mr. Frelinghuysen. We stand in recess until our next group. 
Thank you very much.
    Mr. Falk. Thank you very much.
    [Recess.]
    [The information follows:]

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                                           Thursday, March 7, 2002.

                 NEIGHBORHOOD REINVESTMENT CORPORATION

                                WITNESS

ELLEN LAZAR
    Mr. Walsh. The subcommittee will come to order. We will now 
hear from the Neighborhood Reinvestment Corporation, led by Ms. 
Ellen Lazar, Executive Director.
    Welcome back.
    Ms. Lazar. Thank you for having me.
    Mr. Walsh. You are very welcome.
    The budget request for Fiscal Year 2003 is $105 million, 
the same as the appropriation for Fiscal Year 2002. It seems to 
be a recurring theme this year.
    While most of this funding is for ongoing operations, $10 
million is to be used for continued expansion of the program to 
use HUD Section 8 vouchers for homeownership for low(-) income 
families. I would like to talk about that a little bit later.
    The committee continues to be impressed with the work being 
accomplished by the Corporation. We look forward to working 
with you as we finalize the budget for Fiscal Year 2003. Before 
we hear your opening statement and move to questions, I would 
like to recognize Mr. Mollohan for any comments that he may 
have.
    Mr. Mollohan. Mr. Chairman, I would just like to welcome 
the witness to the hearing. We look forward to your testimony. 
Thank you.
    Mr. Walsh. Thank you.
    Well, let's begin. We would like to hear from you.
    Ms. Lazar. Okay. Good morning to both of you, Chairman 
Walsh, Ranking Member Mollohan.
    Mr. Walsh. And Mr. Fattah is here as well.
    Ms. Lazar. Mr. Fattah, nice to meet you.
    Members of the Subcommittee, I am Ellen Lazar, and I am the 
Executive Director of the Neighborhood Reinvestment 
Corporation. I am joined today by Margo Kelly and Clarence 
Snuggs, my Deputy Executive Directors, and Mary Lee Widener, 
the President of Neighborhood Housing Services of America, as 
well as Jeffrey Bryson, our General Counsel.
    This year we are fortunate to have a very strong leadership 
team from our Board of Directors with Governor Edward Gramlich 
of the Federal Reserve Board serving as our chair; John M. 
Reich, the Director of the Federal Deposit Insurance 
Corporation is serving as our vice chair. We have two recent 
members to the board: James E. Gilleran, the new director of 
the Office of Thrift Supervision; Deborah Matz, a new director 
at the National Credit Union Administration; as well as John C. 
Weicher, the Assistant Secretary of Housing; and Julie 
Williams, the Deputy Comptroller of the Currency.
    I am here today to talk about Neighborhood Reinvestment and 
the experience of our 225 affiliated community development non-
profits known as the NeighborWorks network. We serve over 2,000 
urban, suburban, and rural communities in 49 states, the 
District of Columbia, and Puerto Rico and the work they are 
doing to revitalize communities and help low- and moderate-
income families achieve a personal stake in the renewal of 
their communities.
    Neighborhood Reinvestment supports and strengthens 
NeighborWorks affiliates through technical assistance, 
training, direct funding through grants, and program review and 
oversight. I am asking you today to support Neighborhood 
Reinvestment's budget request of $105 million.
    There are three reasons why a continued investment in 
Neighborhood Reinvestment is a wise use of this nation's 
Federal resources.

                      STEWARD OF FEDERAL RESOURCES

    First, Neighborhood Reinvestment takes very seriously the 
stewardship of our Federal appropriation by maximizing the 
effectiveness and efficiency of the NeighborWorks network. We 
use our Federal funding to help attract private resources. For 
every dollar you appropriated to Neighborhood Reinvestment, the 
NeighborWorks system generated more than $15 from private 
sector and other sources, resulting in a direct investment of 
nearly $1.4 billion last year.
    We can achieve this level of impact because our programs 
and services that are highly flexible and tailored to fit the 
credit and resource gaps that can't be filled otherwise. We do 
not utilize a Washington-directed, top-down programmatic 
approach; rather, we ask each of our NeighborWorks 
organizations to identify the specific challenges they face in 
their communities, and we respond with a unique combination of 
training, technical assistance, and financial support.
    Two-thirds of our budget goes out to NeighborWorks 
organizations as direct grants, but we provide much more than 
just funding to these local community development 
organizations. Through our capacity-building services, we try 
to ensure that Federal funding is used responsibly. We provide 
technical assistance to respond to the intricate and timely 
organizational issues these organizations face. Our Risk 
Management Unit monitors the organizations and their financial 
health over time. And our Training Institutes provide training 
and education not only to local staff in the NeighborWorks 
network, but to the broader community development field. Last 
year, we trained more than 4200 people through the training 
institutes.
    The services we provide improve the local organizations, 
help mitigate long-term risk, and maximize the impact of the 
Federal resources we are provided with.

                    COMMUNITY DEVELOPMENT LABORATORY

    My second point is that Neighborhood Reinvestment 
continually looks toward the horizon, seeking new opportunities 
to address persistent challenges, really serving as a 
laboratory environment--the laboratory environment you intended 
us to create.
    Our Section 8 homeownership pilot is a particularly good 
example of this. We provide technical and grant support from 
Neighborhood Reinvestment to NeighborWorks organizations, which 
really helps us bridge the gap between private lenders and 
public housing authorities to make homeownership a reality for 
families.
    This subcommittee provided the resources that have created 
this laboratory and seeded this effort. Last year, we assisted 
21 NeighborWorks organizations, working with 26 public housing 
authorities to begin looking at this potential project, and we 
have trained over a thousand professionals on this option 
through our courses and other venues.
    A second area where we really have been using our 
laboratory environment is with multi-family housing. You 
provided us last year with $5 million, which was designated to 
explore ways to serve families with incomes below 30 percent of 
area median income in mixed rental income housing. This is an 
especially difficult task since folks who are earning 30 
percent or below of median income are often unable to cover the 
operating costs of the projects they live in with their 
incomes. We appreciate the opportunity to examine viable 
options in this important area and to report that back to you.
    The most visible laboratory effort to-date is our 
NeighborWorks Campaign for Homeownership. In Fiscal Year 1998, 
Congress seeded this homeownership effort with a $25 million 
set-aside. That funding has helped produce remarkable results. 
Ninety-five percent of the folks that we have helped are first-
time homebuyers; 52 percent are ethnic minorities; 42 percent 
are female-headed households; and the average income of these 
families is nearly half that of the national average of new 
homeowners, $29,300.
    We have produced a series of integrated strategies, 
including comprehensive homebuyer education, a financial 
literacy initiative, and NeighborWorks Homeownership Centers 
around the country, and we are on target to surpass our five-
year goal of creating 40,000 new homeowners.

                   SOLUTIONS TO A RANGE OF CHALLENGES

    Lastly, Neighborhood Reinvestment provides strategies for a 
range of housing and community development challenges. We have 
learned that a ``one-size-fits-all'' approach doesn't work. We 
are trying to address the needs of underserved communities and 
populations with a particular sensitivity to the needs of low-
income families, immigrants, the disabled, and the elderly.
    This work requires more than grants. It requires us to help 
develop strong organizations led by strong community leaders 
which results in greater civic engagement and helps to 
effectuate positive change.

                           CONTINUED SUPPORT

    Let me close by thanking Chairman Walsh, Ranking Member 
Mollohan, Congressman Fattah, and the Subcommittee for the 
wonderful opportunity you have given this organization to serve 
America's communities and by asking for your continued support. 
At the $105 million level, we will leverage $1.6 billion in 
direct total investment into distressed rural, suburban, and 
urban communities, assist more than 71,000 families obtain and 
maintain safe and affordable rental and homeownership housing, 
and provide pre- and post-purchase homeownership counseling and 
financial literacy to nearly 70,000 families.
    You have encouraged us to be flexible, creative, nimble, 
and responsive in designing and delivering our services and 
resources, and this flexibility and your demonstrated 
confidence in us has created remarkable results. We know that 
your investment in Neighborhood Reinvestment is an investment 
and an expression of confidence in America's communities, and 
all of us in America benefits when our communities are healthy, 
strong, and safe.
    Thank you for letting me talk with you this morning, and I 
would love to answer some questions.
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          Growth of Neighborhood Reinvestment and the Network

    Mr. Walsh. Thank you very much for your testimony. Your 
organization under your leadership has enjoyed broad support on 
the Hill, and I think most of us would agree that the Nation 
gets a great return on the dollar.
    Ms. Lazar. Thanks.
    Mr. Walsh. I personally have enjoyed a very strong 
relationship with the Ithaca Office of Neighborhood 
Reinvestment Corporation under Beth's leadership in 
NeighborWorks in the Syracuse area, and they have contributed 
mightily to what we are trying to do. So thank you for that.
    While you are riding the crest, I will give you an 
opportunity to comment. In the past, we have often increased 
the budget for the Corporation above the amount requested 
because we believe the work you do is worthwhile and we would 
like to see you do more of it. With this in mind, can you tell 
us at what level of funding you can optimize growth of your 
various organizations and yet avoid the dysfunction that so 
often comes by putting more money into an organization than the 
organization can responsibly spend?
    Ms. Lazar. That is an interesting question. When I was 
being interviewed for this position about 18 months ago, the 
Board asked me what we might be able to do with twice as much 
money. I pushed back and said I would really need to go through 
a strategic planning process to see where the real needs are 
and where we could really effectively move forward in a way 
that maximizes our potential.
    We are going through that strategic planning process now. 
We are at the tail end of it. We are doing some implementation 
work. We are looking at growth in a number of ways and 
impacting growth as one of the key goals that we hope to 
achieve realizing the plan. My sense of it is that we are doing 
very well with what we have and that we need to be careful not 
to grow too quickly, and to look at the organizations that we 
are serving now, making sure that they are working optimally.
    As we are developing a strategic plan, we have put a tag 
line on it that we want to create a network of excellence, and 
we want to make sure that the organizations are really strong, 
vibrant, vital organizations. To that end, we have not set a 
high goal of new organizations for ourselves, but really pace 
it at 10 or 12 new organizations a year. In some of the 
communities that we are working in, we need to see whether or 
not organizations need to merge to create more activity. We are 
finding there are relevant ways we could get one organization 
to do much more in a number of communities. We have done some 
geographic mergers over the past year or so that we really 
think will be fairly successful.
    And I would like to take the growth of Neighborhood 
Reinvestment incrementally. I don't think radical growth at 
this point would serve any of us well.
    Mr. Walsh. Thank you for that answer. By the way, I don't 
see Mrs. Meek here, but I think she would be delighted to see 
who is at the table today. She always asks the question of 
departments and agencies: where are your minorities; what are 
you doing to respond to that challenge; and three women and two 
African Americans here at the table is a pretty strong 
statement. We will pass that information on.
    Mr. Fattah. We will make sure we pass that along.

                        Section 8 Homeownership

    Mr. Walsh. On Section 8, can you explain to the 
subcommittee, how your Section 8 homeownership program works 
and how its operations relate to proposals in the HUD budget 
for using Section 8 funds for downpayment assistance?
    Ms. Lazar. I am happy to do that. For our Section 8 pilot, 
in Fiscal Year 2001, you provided us with $5 million. We used 
$4.25 million of that as grants to our local NeighborWorks 
organizations with more than two-thirds of that funding being 
used for capital that is going to fund local second mortgages. 
The remaining funds are being used for operating grants. These 
are really critical, these operating grants, since many very 
low-income welfare-dependent families have significant pre-
purchase counseling needs beyond those of the typical 
NeighborWorks client.
    While families who qualify for the voucher must be employed 
in order to take advantage of the homeownership option, many 
face real barriers, such a severe credit impairment, that can 
be addressed only through time intensive one-on-one counseling 
that can be provided with the enhanced operating funds. 
Approximately $750,000 of that first set-aside was used to 
provide technical assistance, training, peer-to-peer learning 
opportunities and research about the NeighborWorks 
organization's effort, utilizing the option.
    One of the key areas that we have been asked to pursue in 
doing this work has been to broker relationships with the PHAs 
and to help train, and educate the public housing authorities 
about this opportunity to really use their Section 8 vouchers 
to bring families into homeownership and ultimately get them 
off the Section 8 voucher. In some of the cases that we are 
working on, we are seeing where the Section 8 voucher can 
evaporate over seven or eight years or as many as 15 years, so 
that in the end, many of these families will have an 
opportunity to permanently go off the Section 8 as they grow 
equity and value in their homes.
    Mr. Walsh. What sort of practical problems are you 
experiencing with this program as it is just getting off the 
ground?
    Ms. Lazar. I am concerned with making sure that we are 
reaching as many PHAs as possible and helping them understand 
what the possibilities are for this. We are working with HUD 
some. We will maybe be doing a big television sequence with HUD 
this coming year to make sure that we reach a lot of PHAs. We 
are working with PHA trade associations.

                PHA RESPONSE TO SECTION 8 HOMEOWNERSHIP

    Mr. Walsh. With the PHAs that you have experience this with 
so far, what sort of response has there been on the part of the 
PHA, but also on the part of potential beneficiaries of this 
program?
    Mr. Lazar. Margo, do you want to answer that?
    Ms. Kelly. Well, it has, frankly, been mixed. We actually 
undertook a study to find out how many of the folks who are 
currently being served by PHAs were potential homebuyers. And 
what we learned is the average income is about $20,000.
    Mr. Walsh. PHA residents?
    Ms. Kelly. The folks who are moving into Section 8 
homeownership in our 21 sites.
    Mr. Walsh. All right.
    Ms. Kelly. We did the study to find out how many residents 
there are among the PHAs who are essentially at that benchmark, 
and the answer was there are about 78,000 folks and they are 
scattered among 256 of the PHAs across the country. So what we 
are to planning to do over the next year is to really zero in 
on those PHAs. We have been meeting with PHA trade 
associations. Some folks are just going to be in the vanguard 
and some folks are going to wait to see how it works for 
others.
    Mr. Walsh. Some markets, it would probably be easier to 
work for them.
    Ms. Kelly. Exactly.
    Ms. Lazar. And I have spoken to a number of PHA directors 
who pushed back and said we have very, very poor people in this 
community who will never really have the facility to be 
homeowners. We have got to respond to them as well.
    Ms. Kelly. You asked what the obstacles are, and I think 
the only real obstacle to date is that the counseling for the 
Section 8 voucher holder to the point that we believe that they 
can sustain homeownership takes at least three times as much 
time as for one of our typical homeownership customers. That is 
why we are giving our network organizations grants to assist 
them to hire the kind of loan counselors who can provide that 
kind of counseling.
    Mr. Walsh. Do you anticipate real growth in this program or 
just gradual increases in commitments of Section 8 vouchers to 
this program?
    Ms. Kelly. We now know at least what the universe is in 
terms of the 78,000 folks that fit the profile of potential 
buyers. We are going to work at it. It is never going to be a 
terribly high-volume program. I think we have to be cautious 
that we don't put people into homeownership until they are 
truly ready.
    Mr. Walsh. Right.
    Ms. Kelly. And can sustain it. We assume that it is going 
to be continually incremental. We are currently funding 21 
sites. I think we will qualify another 20 this year. I believe 
we have created a total of 250 homeowners this year. Another 
thousand are currently in the pipeline.
    We can see that there is incremental growth, but we are 
being cautious about how we grow it so that it is sound and 
sensible growth.
    Mr. Walsh. Is there any reticence on the part of PHAs that, 
they need these vouchers for what they do and they don't want 
to go into this program?
    Ms. Kelly. I think there is some of that, but I think they 
are waiting to see. And they are very correct in saying that 
there are some folks who are simply not ready for 
homeownership, and we need to be sensible about those as well.
    Mr. Walsh. Thank you.
    Ms. Lazar. We are finding good support, from the PHA trade 
associations to really look at this option.
    Ms. Kelly. We are increasingly being invited to speak to 
local PHAs. The volume of that obviously shows that the word is 
getting out that this is working, at least in some places, 
quite well.
    Mr. Walsh. Thank you.
    Mr. Mollohan.
    Mr. Mollohan. Thank you, Mr. Chairman. You have now been in 
this position for about year.
    Ms. Lazar. Yes.

                        SUCCESSES AND CHALLENGES

    Mr. Mollohan. I just would like for you to talk a little 
bit about your successes and what the challenges are, where 
your problems lie.
    Ms. Lazar. That is a good question. I have been very 
reflective of that myself lately. The Board asked me when I 
came in to do a strategic planning process. There hadn't been a 
history of broad strategic planning for the organization. It 
was a closely-held activity.
    What I was asked to do was to cast a very wide net to talk 
with a lot of our stakeholders and bring the staff in. This was 
the first change in leadership in the organization, in its 
history. My predecessor had been the executive director for ten 
years, but he had been with the organization for ten years 
before that. My coming in really was a change in leadership, 
and it was an opportunity for us to all take stock of what we 
had been doing and looking to see what was working and what 
wasn't working.
    I certainly had a set of experiences that were different, 
and I brought some preconceived notions, but I listened first. 
I really had a great time going around and listening and 
hearing about what Neighborhood Reinvestment does.
    We have created a strategic plan for ourselves that is in 
draft form, but it is going to be a blueprint for how we work 
over the next five years. It has been a great accomplishment. 
We have, the whole staff very engaged in designing the 
implementation, putting forth the work plans that will attach 
to this work, and that has been an achievement. We have been 
working with Mary Lee and Neighborhood Housing Services of 
America. We have just completed a program review together and 
we are looking at the NHSA business model and wanting to make 
sure that it is working effectively.
    We are in a time of great change in terms of the investor 
markets--those who are going to make the social investments 
that support the work that we are doing. We are really 
beginning a dialog and some strategic thinking about our basic 
business models.
    We also have been spending time looking at how we could 
better support our network--thinking about greater visibility 
for that network, how we can help grow resources for the 
network, and how we respond to a variety of needs. A big part 
of what we are going to be doing in the future is making sure 
that our service delivery to them is integrated and makes sense 
with where they want to head as a strong network. I think we 
will be able to further leverage our Federal dollars with 
private sector dollars and talk in a unified voice. That is 
where we are heading.
    Mr. Mollohan. Are there any major systemic changes in your 
model of operation that are in the offing, coming out of the 
strategic planning process, as a result of changes in needs or 
demographics?
    Ms. Lazar. That is a good question. We just finished a 
third-party survey with all of our stakeholders, including all 
the network organizations. We are going to be looking at how we 
deliver our services, including our grant funds and technical 
assistance. We want to make sure that we are set up properly 
and that we are maximizing our staff and the resources that we 
have to really meeting the network's needs and their goals in 
their communities.
    It is a challenging opportunity, but we have had great 
input from the Board in this. We have a new Board, and we have 
been in the process of orienting new Board members. It is a way 
of engaging them to help us think about our future.

                          CHANGING MARKETPLACE

    Mr. Mollohan. Is your marketplace changing in ways that 
prompt you to redirect your services or resources, or redefine 
them?
    Ms. Lazar. There is a lot of change, actually. The changes 
in the banking industry, the consolidation of the banking 
industry, has reduced the number of local partners our 
organizations have to participate with. We are trying to build 
relationships at the national level with national players to 
provide the network with resources and funding.
    I think we are seeing a greater emphasis on economic 
development and as part of a comprehensive neighborhood 
revitalization strategy. We are trying to figure out what our 
best niche would be for being involved in broader economic 
development activities.
    Ms. Kelly. In 1991, we had one organization in our network 
that identified itself as having a rural market, and today we 
have 59. We are looking at our marketplaces differently than we 
were. Our large organizations have become larger and more 
sophisticated. While we have always known that one size doesn't 
fit all, we are really looking over the next couple of years to 
even more strategically target the quality and the kind of 
technical assistance we are offering to differentiate the 
marketplaces that sometimes cross geographic boundaries.

               GRADUATION OF NEIGHBORWORKS ORGANIZATIONS

    Mr. Mollohan. Do your affiliates ever graduate or do they 
ever fail?
    Ms. Lazar. We have what we call the dead charter file.
    Ms. Kelly. Neighborhood Reinvestment has a mission to work 
in neighborhoods. We do it through a network of non-profit 
affiliates. There are times when the non-profit affiliates, for 
reasons that we can't help them to overcome, stop fulfilling 
their mission. In those instances, we work with them to the 
extent that we can. We try to help them address the problems 
that they have, but at some point, if we can't help them, we 
still have a mission in that community and we need to take our 
resources and place them elsewhere where they will be deployed 
effectively.
    Mr. Mollohan. What do you call that process?
    Ms. Kelly. We call it disaffiliation.
    Mr. Mollohan. What percentage of disaffiliation do you 
experience every year?
    Ms. Kelly. Probably three organizations. Prior to 
disaffiliation, we put the organization's charter in 
provisional status. That is a warning sign.
    Mr. Mollohan. Thank you. How many affiliates do you have?
    Ms. Kelly. We have approximately 225, and they range 
anywhere from three staff to over 200 staff.
    Mr. Mollohan. That is a negligible disaffiliation rate. Do 
you have such a thing as graduation, affiliates that become so 
sophisticated that they no longer need your support?
    Ms. Kelly. We have organizations that----
    Mr. Mollohan. Do you see your program as a lifetime 
commitment?
    Ms. Kelly. We don't see a commitment of a lifetime. They 
get more sophisticated and they become community institutions. 
They become able to adjust their resources and services to very 
changing marketplaces.

                          RESOURCE DEVELOPMENT

    Mr. Mollohan. Please talk about raising resources outside 
of your support.
    Ms. Kelly. We constitute approximate 12 to 15 percent on 
average of a network organization's budget.
    Mr. Mollohan. I don't think you quite answered my question. 
Is there such a thing as graduation where people disaffiliate 
or you reduce the contributions some because they are so robust 
in and of themselves?
    Ms. Kelly. We do do that, and we have had several 
organizations over my tenure here that have completed the job 
that they set out to do.
    Mr. Mollohan. That is not really a part of your model? It 
is the exception rather than the rule?
    Ms. Kelly. We are in so many very, very large cities. The 
places that are graduating have very often been smaller cities. 
South Portland, Maine comes to mind, and there have been 
several others where literally they did what they set out to 
do. They met their goals. The conventional market took over, 
and our resources were no longer helpful.

                           MEASURING SUCCESS

    Mr. Mollohan. How do you measure success?
    Ms. Lazar. We measure success in a variety of ways. We 
develop every year a series of output measures that are our 
goals for achieving during the course of the year.
    Mr. Mollohan. Number of homes?
    Ms. Lazar. Number of homes, counseling, the services we 
provide in the community.
    Mr. Mollohan. I guess the number homes is probably a bottom 
line.
    Ms. Lazar. The number of homes, the number of rental units 
that have been created, the number of people we counsel through 
our homeownership services are our key indicators. We are also 
working now with the Federal Reserve to develop a study. It is 
at a very nascent stage, but if we could get the data straight, 
we will be able to determine how a NeighborWorks organization 
has, in fact, affected and impacted its community.
    We have gotten some help from our Board Chair in helping to 
design this, and we are working very closely with a number of 
our affiliates on this study.
    We are also doing a study right now that was part of the 
$25 million set-aside in fiscal year 1998 to track some of the 
folks we have put in homeownership. It is a longitudinal study 
that we are doing with the University of North Carolina that 
will help inform us as to the success of these homeownership 
efforts over time.
    Mr. Walsh. If I could interrupt just a second.
    Mr. Mollohan. Please.
    Mr. Walsh. I have got to go down to the White House for a 
meeting on the New York City disaster relief at noon.
    Mr. Mollohan. That was my last question.
    Mr. Walsh. I just want to make sure that David had a chance 
to ask questions, and then I am going to have to adjourn the 
hearing.
    Mr. Mollohan. Okay. I just want to join the chairman in 
thanking you for your good work. It certainly has been of 
assistance in my state. I just ask that you share your 
strategic plan.
    Ms. Lazar. Yes. We are going to finish it up, and we will 
have it neatly packaged for you.
    Mr. Mollohan. Thank you, Mr. Chairman.
    Mr. Walsh. Thank you.
    David.
    Mr. Price. Thank you. Thank you, Mr. Chairman.
    Ms. Lazar, welcome back to you and your colleagues. We are 
glad to have you here.
    You won't be surprised, probably, that the first thing I 
want to ask you about is the Neighborhood Housing Services of 
America secondary market demonstration. I get updates from time 
to from Self-Help in Durham, which is NHSA's partner in this 
demonstration.
    Let me just ask you a few related questions about how that 
is going. This is a seven-year demonstration project. So we 
should be right around the halfway mark. First, can you briefly 
remind the committee about the origin and goals of the project 
and give us an update on its status?
    Secondly and in particular, can you comment on the 
performance of the loans purchased by NHSA to date? Has the 
weak economy affected the performance of those loans? And 
again, in terms of the impact of the weak economy, can you 
compare the performance of these loans to those in the 
conventional market?

                  DEMONSTRATION FOR LOW WEALTH BUYERS

    Ms. Lazar. Well, I am going to defer this question to Mary 
Lee Widener who is the president of Neighborhood Housing 
Services of America. She is fully prepared to answer that.
    Ms. Widener. I would be happy to answer it. First, we have 
taken very seriously the subcommittee's comments that the 
intention of the demonstration is to focus solely on strategies 
to expand the secondary market for affordable home mortgage 
credit from private lenders. We have expanded that in our 
understanding to mean investors. The GSEs, institutional 
investors, and private lender participation has been the focus 
of what we tried to expand.
    The status of the demonstration is that December 31, 2001, 
ended the first phase of the demonstration. The goals of that 
phase were to create the loan pools and to populate data fields 
from those pools in accordance with instructions from HUD. They 
started out with one set of data that expanded substantially. 
All of us had to go back and fill in that data. We had no 
problem doing that because we agreed that the expanded data 
fields would provide a far richer study for HUD.
    We are doing that. We completed all of the basic reporting. 
For the last two months, we have been providing additional 
information about the portfolio and the environments to help 
HUD create a close-out report for the first phase.
    The second phase will be to design a study that will start 
to correlate things like credit scores and loan criteria to 
performance. Because HUD required that loans that went into the 
portfolio be current, we don't have any performance problems at 
this point.

                          PERFORMANCE OF LOANS

    Mr. Price. You have performance data.
    Ms. Widener. Yes, we do, and they are all performing. We 
don't have any that are in the 90-day delinquent category. They 
are all behaving the way most of our loans behave, which is you 
have high delinquencies in the first 30 days. They tend to cure 
in the second 30 days, and then by the time they get to 90 
days, the overall number is not much higher than the 
conventional market.
    Mr. Price. Do you have that comparison available now?
    Ms. Widener. Yes, we do.
    Mr. Price. Good.
    Ms. Widener. We actually presented it to NHSA's trustees in 
January, and I would be more than happy to provide them to you. 
This is a specific comparison of all of the NeighborWorks 
loans, but the comparison that I gave to our trustees is NHSA's 
loan portfolio. So we have both, and they are not necessarily 
the same as all of the NeighborWorks loans.
    Mr. Price. We will place this data in the record. Would you 
like to give a quick oral characterization of your finding?
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    Ms. Widener. In general, our experience is that our 
delinquencies run lower than FHA or VA and slightly above 
conventional. When you add in FHA, VA, and conventional, our 
loans perform better than the average of the three.
    Mr. Price. Now, the program requires the grantees to 
provide information to HUD, of course, on the performance of 
the loans, and the idea is to demonstrate to the traditional 
secondary financial marketers, Freddie Mac and Fannie Mae, the 
financial soundness of making home loans to these families that 
might not otherwise qualify.
    You say you have been building up the data base, the 
computer system, the computer capacity to let you analyze this 
data and pass this information along. Is that what you are 
referring to when you talk about the end of the first phase? 
How far along are you with that?
    Ms. Widener. No. The end of the first phase has to do with 
creating the pool and gathering all of the data, which we had 
to go back out to the programs and to borrowers to populate all 
those fields. We don't know what HUD's requirements are going 
to be for the analytical phase of the program, and they don't 
consider that in the phases. HUD's first phase was to create 
the pools and provide the data, and then the second phase will 
involve analyzing the data in accordance with HUD's 
instructions and design, which we don't have.
    Mr. Price. But where are you with developing the computer 
capacity to perform these operations?
    Ms. Widener. We have developed the computer capacity to 
capture the data. We don't know what will be required of us for 
analysis.
    Mr. Price. But a major point of this is to demonstrate to 
Freddie Mac and Fannie Mae that this works and this can be 
done.
    Ms. Widener. We don't know how HUD wants to do that. We can 
tell you how we are trying to do that, because we do it all the 
time. One of the things we try very hard to do is demonstrate 
that normal requirements for excess reserves and excess pricing 
as a result of things like combined loan-to-values over a 
hundred percent, which gets very expensive, or very low credit 
scores don't necessary justify premium pricing.
    We try and do that by demonstrating delinquency performance 
and foreclosure performance, and our foreclosure performance is 
lower than conventional. We credit the Full Cycle Lending 
process of the NeighborWorks network to making our numbers 
different than they would be without the counseling and support 
systems available to our borrowers.
    I think we can make that case, and that is the case we are 
trying to make. I think HUD, however, has far broader 
objectives, and we don't know what they are yet. I don't want 
to be difficult, but I don't know what they are.
    Mr. Price. Since that is a critical objective of this 
project, I think we need some indication of how this is going 
to unfold, how this case is going to be made and how the data 
are going to be marshalled to analyze this situation.
    Can you add anything in the way of insight?
    Ms. Lazar. I don't know how much progress Self-Help has 
made in this. This isn't meant to be done together. I could 
certainly make some inquiries, and we can talk with Dr. 
Weicher, who is our board member, about trying to find out how 
far they are progressing and pushing them a little bit.
    Mr. Price. Why don't you give us some indication for the 
record and at the same time indicate where we need to turn to 
get a further status report.
    Ms. Lazar. To really make sure that this is working well 
and that we are making progress.
    Mr. Price. This is not just a freestanding project. This is 
designed to influence the kind of eligibility for the secondary 
market and on a much larger scale.
    Ms. Widener. I feel totally confident HUD will offer a 
design, but their schedule didn't call for that being provided 
to us during phase one, which just ended in December.
    Mr. Price. Well, if you could give us your best assessment 
of that, that would be helpful.
    Mr. Chairman, I know you are overdue. So let me ask for the 
record that----
    Ms. Lazar. We will take care of that.
    Mr. Price [continuing]. That I submit a couple of 
additional questions, again, kind of status questions on the 
financial literacy initiative and on your multi-family 
initiative that was part of the Fiscal 2002 bill.
    Ms. Lazar. Great.
    Mr. Price. We would appreciate being updated on this. Thank 
you very much.
    Ms. Lazar. Thank you.
    Mr. Walsh. Thank you very much for you testimony. There may 
be additional questions submitted for the record, and we would 
appreciate it if you would respond and get those back to us 
right away.
    Ms. Lazar. We will do it.
    Mr. Walsh. Thank you for your testimony and congratulations 
on how things are going.
    Ms. Lazar. Thank you. Thanks for all your help.
    Mr. Walsh. The meeting is adjourned.
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                                         Wednesday, March 13, 2002.

                OFFICE OF SCIENCE AND TECHNOLOGY POLICY

                                WITNESS

DR. JOHN H. MARBURGER, III, DIRECTOR
    Mr. Walsh. The subcommittee will come to order.
    Good morning. This morning we will hear testimony from the 
Office of Science and Technology Policy and Department of 
Defense Civil and Cemeterial Expenses, not all at once.
    First will be Office of Science and Technology Policy. This 
year the Administration has submitted a plan to consolidate the 
Executive Office of the President into a single appropriation. 
This plan directly impacts upon the Office of Science and 
Technology Policy as well as the Council on Environment 
Quality, both under this subcommittee's jurisdiction.
    Within this proposal, the budget estimated for OSTP is 
$5,368,000, a 1.9 percent increase over Fiscal Year 2002.
    I would like to welcome Dr. John Marburger, Director of the 
Office of Science and Technology Policy in his first appearance 
before the subcommittee. Dr. Marburger had been the Director of 
U.S. Department of Energy's Brookhaven National Laboratory 
since 1998. Prior to his tenure at Brookhaven, Dr. Marburger 
served as a professor of physics and electrical engineering and 
as dean as president of Stoneybrook University.
    At Stoneybrook, Dr. Marburger led the university to a 
number of accomplishments, but I note several that appear very 
relevant to our bill: Federally-sponsored scientific research 
at Stoneybrook grew to exceed that of any other public 
university in the northeast (that would encompass the National 
Science Foundation); the creation of the on-campus Long Island 
State Veterans Nursing Home, (Veterans Affairs); construction 
of a campus sewage plant and co-generation complex, (EPA); and 
revitalization of the campus center and establishment of the 
Long Island Technology Incubator, which I visited a couple 
years ago, which closely resembles our economic development 
initiatives.
    So we look forward to working with you, sir.
    As you know, this subcommittee has a strong interest 
science and technology policy. We also have jurisdiction over 
NSF, NASA, EPA, and a number of other agencies whose success is 
heavily dependent on emerging technologies and research. We are 
interested in hearing some of ideas that you bring to your 
position and where you would like to see perhaps more Federal 
investment in science or technology, or where, perhaps, we 
should prioritize funding.
    Normally at this time I would call upon my colleague Alan 
Mollohan, who will be a little bit delayed this morning. I will 
give Mr. Frelinghuysen the opportunity, if he would like, to 
make an opening comment.
    Mr. Frelinghuysen. I will reserve my comments for my 
questions, Mr. Chairman.
    Mr. Walsh. All right. In that case, then, if you would like 
to highlight your remarks, we will include your entire 
statement with the record.
    Dr. Marburger. Good. Thank you very much, Mr. Chairman. I 
am very happy to appear before you today. There is a written 
statement for the record, and I would be glad to answer 
questions in writing and, of course, orally today.
    As you well know, the terrorist attacks on September 11th 
dramatically changed the context of this budget. They laid bear 
vulnerabilities in our physical security and exacerbated 
weaknesses in our economy. The priorities of the Nation today 
drastically changed in the matter of a few hours.
    The fiscal year 2003 budget proposal reflects these changes 
in priorities, and it has three primary goals: winning the war 
on terrorism, protecting the homeland, and reviving our 
economy. Recognizing that science must play a role in these 
priorities, the President provides for an unprecedented level 
of investment in Federal R&D, marking the first time in history 
that a president has requested an R&D budget greater than $100 
billion. Precisely, the figure is $111.8 billion, up eight 
percent overall from FY 2002, which is the largest requested 
increase for R&D in over a decade.
    The Administration is committed to working with this 
committee, with you, to see this budget enacted.
    Mr. Chairman, I know that all of us want to maintain 
America's world leadership in science and technology. Over the 
years, OSTP had played an important role in leveraging the 
Government's science and technology investments for broad 
national goals. Our small staff advises the President and other 
White House staff on fast-breaking science and technology 
developments. It coordinates the work of the R&D agencies to 
optimize our expenditures in this area, and it promotes 
strategic partnerships among the entire spectrum of science and 
technology stakeholders: state and local governments, industry, 
academia, and various international players as well. These 
functions are all embedded in the 1976 legislation that created 
OSTP.
    In my oral testimony, I would like to describe two examples 
that give a sense of how OSTP is operating today. First, I 
would like to talk about the Administration's initiative on 
nanotechnology. Then, I would like to talk just briefly about 
our response to Homeland Security's request for technical 
assistance on mail security following the anthrax contamination 
incidents last fall.
    As you well know, Mr. Chairman, OSTP was critical to the 
formation of the multi-agency national nanotechnology 
initiative, and your help was essential to its implementation. 
I am quite aware of the history of that.
    OSTP convened an interagency working group under the 
National Science and Technology Council to look into the 
feasibility of nanotechnology initiatives in FY 2001. This 
subcommittee continues to provide the important interagency 
coordination and long-range planning for Federal research in 
nanoscale science, engineering, and technology. The President 
continues to support this important research and has provided 
the initiative with a 17 percent increase in funding this year, 
bringing the total effort to $679 million distributed among 
nine Federal agencies.
    This $100 million increase over last year's budget will 
accelerate long-term research in the manipulation of matter at 
the atomic and molecular levels, increasing our ability to 
create new functional materials and devices atom by atom, 
something that excites me personally. Research at the nanoscale 
promises revolutionary advances in pharmaceuticals, more 
efficient manufacturing, higher performance materials, faster 
computers and networks, and a cleaner environment.
    Priority research areas for this year will range from 
research to enable efficient nanoscale manufacturing to 
innovative nanotechnology solutions for detection and 
prevention from biochemical and radiological explosion agents. 
About 70 percent of the funding proposed under this initiative 
continues to go to university-based research. It is an 
important aspect of this field. These investment will help 
provide the education and training of a new generation of 
workers for future industries and partnerships to enhance 
industrial participation in the nanotechnology revolution.
    I could talk for a day about nanotechology.
    Mr. Walsh. We will give you an opportunity later.
    Dr. Marburger. The other example that illustrates OSTP's 
work in support of homeland security is our response to the 
bioterrorist exploitation of the mail system. At the request of 
the Office of Homeland Security late last fall, OSTP assembled 
an irradiation technical team with experts from the Armed 
Forces Radiobiology Research Institute, otherwise known as 
AFRRI, the National Institute of Standards in Technology, the 
Food and Drug Administration, Department of Agriculture, 
National Labs, and the U.S. Postal Service.
    Within days of the call from Homeland Security, this team 
created and performed experiments at the Lima, Ohio and 
Bridgeport, New Jersey electron accelerator facilities to 
optimize the proper configuration of mail and to ensure the 
proper dosage of sterilizing radiation, basically verifying the 
technology and providing critical technical support and advice 
to the U.S. Postal Service. This team still updates us 
bimonthly and advises the Postal Service on refinement of the 
irradiation process.
    With the addition of experts from the Centers for Disease 
Control and Prevention, ongoing experiments have helped to 
eliminate some of the negative side effects of irradiation. It 
includes out-gassing of compounds that were created during the 
irradiation process and the browning of the paper, of the 
letters.
    The ability of OSTP to coordinate rapidly the many Federal 
agencies involved in this issue allowed the generation of 
scientific data for which recommendations were made to the 
Postal Service within about 30 days from the original 
contamination incidents, a very rapid response.
    While irradiation of letters and the flat mail solves one 
set of problems, irradiation may not be the answer for parcels 
and packages due to irregularities in thickness and density. 
So, OSTP has formed an ethylene oxide technical team with 
support from the Department of Justice. Experts from FDA, EPA, 
AFRRI, CIA, OSHA, and the U.S. Postal Service have designed and 
are conducting experiments to test the ability of ethylene 
oxide gas to sterilize packages. Recommendations from this 
technical team will be presented to the Postal Service and will 
include guidelines and parameters by which to document the 
sterility of the packages and protect critical contents from 
harm.
    These are just two examples. Nanotechnology, a big national 
program with interagency coordination and mail irradiation, a 
small-focused rapid response program of responding to a 
national need, are just two examples of the outstanding work 
that OSTP performs for the Nation. Over the past year, OSTP has 
also played a critical role in developing coordinated 
interagency budgets and policies in homeland security, plant 
genome, food safety, networking and information technology, 
education and research, and many other areas.
    So, today I asked for your continued support of OSTP's role 
in coordinating science and technology policy for the Executive 
Branch and for our nation at large. OSTP's budget request of 
$5.37 million and 40 FTEs for Fiscal Year 2003 represents no 
increase in the FTE level, but an increase in the budget 
authority of 1.9 percent, as you referenced in your opening 
remarks.
    These additional resources are essential for us to continue 
to provide the highest quality of work across our broad 
spectrum of responsibilities. While I hope, Mr. Chairman, that 
this brief overview combined with my written statement convey 
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, I ask not only 
for your support for this Fiscal Year 2003 budget, but I would 
also like to express my appreciation on behalf of the office 
and the Administration to this committee for OSTP and the 
science and technology research enterprise. I really am very 
optimistic that this successful partnership will continue in 
the future.
    So, I would be pleased to respond to specific questions.
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    Mr. Walsh. Thank you very much for your testimony, and I am 
sure we will have lots of good questions, and I am looking 
forward to the answers.
    I would like to call upon Mr. Mollohan, the ranking member 
of the subcommittee for an opportunity to make an opening 
statement.
    Mr. Mollohan. Thank you, Mr. Chairman. I just welcome the 
witness to the hearing today and look forward to the testimony.
    Thank you.
    Dr. Marburger. Thank you.
    Mr. Walsh. All right. I expect other members will join us.

                            COUNTERTERRORISM

    Let me begin with counterterrorism. Your statement 
identifies a number of ways OSTP is involved in the war on 
terrorism and homeland security. My friend and counterpart, 
Senate Appropriations Subcommittee Chair, Senator Mikulski, 
invited you to testify on mail security in November. The House 
Science Committee also held a hearing on bioterrorism at which 
you testified. You have had a number of opportunities to talk 
on this issue, but I wonder if you could share with the 
subcommittee how you are going about composing an interagency 
plan for developing and refining research and technologies for 
battling this war on terrorism.
    In the budget transmitted to the Congress, I note that 
research and development funding for homeland security and 
combatting terrorism will rise from nearly $1 billion in 2002 
to $3 billion in 2003. The bulk of this funding is geared 
towards HHS and DOD, $2.4 billion for confronting weapons of 
mass destruction. Certainly no one would diminish the 
importance of this area of research. I will note, however, that 
basic research accounts for only $27 million of the R&D Federal 
investment.
    Do you believe that there is more we should be doing in the 
area of basic research that would support the efforts of HHS 
and DOD?
    Dr. Marburger. Mr. Chairman, I believe that the budget 
proposal provides for the immediate needs of the Office of 
Homeland Security and their recommendations for response to the 
terrorist incidents at this time. No one doubts that basic 
research will be a necessary component for an adequate response 
in the long term, but much of the technology and a good deal of 
the basic research also that is required for an appropriate 
response has been done as a result of the substantial 
investments that have been made in the past. We are in an 
enviable position, having a technology infrastructure that 
enables rapid responses, even within existing programs, to some 
of the most challenging aspects of the war against terrorism.
    So, for example, within the Department of Defense, a 
procurement has already been constructed last fall within about 
a month of the terrorist attacks on 9-11 in which short, 
intermediate, and long-term priorities for DOD were identified, 
required for the response to terrorism, and a list of critical 
technologies was published and an interagency group, the 
Technical Support Working Group, TSWG--I am not sure of the 
exact words that that acronym stands for, but it has been very 
effective in identifying and funding short-term projects.
    Much of the basic research that I believe will be necessary 
for response to these issues will be in the bio area, and the 
substantial increases the President has recommended for that 
area do suffice, in my opinion, to get started in a very 
substantial way in the research, which includes understanding 
the mechanisms of these terrorist pathogens and trying to 
provide some new vaccines for them.
    So, I do believe that the budget addresses the right 
priorities for the immediate response, and we can look forward 
to continuing requests in subsequent years that emphasize 
longer-term issues that may be required.

                         BASIC RESEARCH FUNDING

    Mr. Walsh. Let me ask you this: Congress and the President 
committed to doubling the size of the budget of NIH, and we are 
well on our way to doing that. But I think most would agree 
that by doing that without funding basic research through the 
National Science Foundation, you do not gain all the ground 
that you could gain. You have to do the basic math and physics. 
I suspect that you would agree with that.
    Last year OMB sent a request for a one percent increase for 
NSF. We went, I believe, to about an eight percent increase. 
This year, the request is for about a five percent increase, 
and Director Daniels said that they would do better this year. 
The problem with the five percent increase is about half of 
that, as I understand it, is made up of programs that have been 
shifted over to NSF. So it is not really new money. So we are 
talking again about a two and a half percent increase.
    I would like to hear your thoughts on the commitment of the 
Administration to basic science.
    Dr. Marburger. We can straighten out the numbers on the 
record, but the way I count it, it is about a 3.4 percent 
increase if you take away those transfers for NSF, and given 
the very large increase in NIH, the fact that we have a war 
against terrorism going on and a softness that it looks like we 
are coming out of in the economy, apart from the expenditures 
for NIH and DOD in this area, the average for all the rest of 
the expenditures is about two percent.
    So, I measure the priority that the President sets for 
science against the two percent funding level. 3.4 percent is 
definitely over that. So it is a signal.
    I do believe that we have to establish priorities, and 
within the NSF recommended increase there are some notable 
priorities, and there are programs that are getting 
substantially more than the 3.4 percent on the average, such as 
the nanotechnology initiative. There is an interagency 
information technology initiative that is receiving additional 
funding. The funding for the mathematics program in NSF has 
doubled, and there are other important areas that have received 
some emphasis.
    So, I believe that as time goes on and the economy improves 
and the ability to establish priorities and good management 
practice in the agencies continues to improve, that we will see 
strong and appropriate increases for those areas that deserve 
them.
    Mr. Walsh. We had this discussion last year. We had eminent 
professors and Nobel laureates in the basic sciences, math, 
physics, and others, and they made it very clear that the gains 
that we made in biotechnology could not have been made without 
the basic underlying knowledge of math and physics, and I do 
not think we are putting the cart before the horse, but I think 
that the 17 percent increase proposed in the National 
Institutes of Health and 3.4 percent increase in National 
Science Foundation, things seem to be out of whack a little 
bit.
    I think most members of the subcommittee feel that way, and 
we hope that in your position of leadership at the White House 
that you could help them set those priorities and balance that 
a little bit.

                             NANOTECHNOLOGY

    I would like to give you a chance to discuss 
nanotechnology, because obviously it is an interest of yours. 
Somebody told me a long time ago that a definition of genius 
was a person with the ability to distill very complex things 
and explain them to people who did not have that knowledge. 
Maybe you could do that for us today.
    Dr. Marburger. If I were a genius, maybe I could do it.
    Mr. Walsh. If you can give us an idea of how nanotechnology 
will start to affect our lives, I guess is the best way to ask 
that.
    Dr. Marburger. What is happening is very exciting, and you 
know because I have read the testimony that Neal Lane presented 
last time on the President's budget for--I think it might have 
been 2001, that the increases, the improvements in technology 
and in powerful computing have made it possible for us to 
visualize and manipulate matter at the atomic level atom by 
atom. Up until just literally a few years ago, the concept that 
everything was made of atoms was nice, but it did not do us lot 
of good because we could not build things atom by atom. But we 
know nature does, and particularly in biological substances, we 
are gaining an understanding of how nature puts together the 
substances that make up our bodies and provide for the process 
of life.
    But the same thing is possible now on the inorganic as well 
as the organic side. We can take advantage of the mechanisms 
that nature uses to make microstructures. We call it 
microbiology or structural biology. But now with new tools, we 
have the ability to build new kinds of inorganic materials atom 
by atom, just the way nature does in our bodies.
    By these new methods with microscopy, synchrotron light 
sources, nuclear magnetic resonance, and powerful computing, it 
is possible to make materials that have properties that nature 
does not provide for us, for example, lasers that would operate 
at new wave lengths and not just being at the mercy of whatever 
crystal nature happens to be able to make. We can now make 
structures within solid materials that resonate at different 
frequencies that nature does not automatically provide, and we 
can understand the properties of catalysts, for example, that 
are very important for the chemical industry, exactly what goes 
on atom by atom on those surfaces. We can create things at the 
molecular scale that have properties that address the needs of 
society, rather than being at the mercy of nature, as it were, 
having to sift through using the kind of alchemy that we have 
today.
    Mr. Walsh. Use a couple of applications of this.
    Dr. Marburger. Ultimately, the applications of 
nanotechnology range across the entire spectrum of technology. 
For example, strength of materials can be dramatically improved 
by just affecting the molecular layers at the surface of the 
material, so that you can make materials that do not corrode, 
that do not develop cracks and fatigue as easily as the ones 
that we have had in the past. That is one example.
    Another, as I mentioned, is in optical properties. We have 
the possibility of making--for example, nature does not provide 
us with a substance that provides laser light at a frequency 
that would penetrate water easily, moisture in the air. So the 
idea of linking homes to internet with lasers, let's say we put 
a little semiconductor laser on the side of your house and have 
another laser on the telephone pole somewhere, it would be nice 
to send light in between them so you did not have to string 
wire or bury cable.
    Nature does not provide us with a laser that operates at 
the frequency that would do that in the rain or the fog or a 
mist, but there is a frequency that would work, and there is a 
potential of making a laser using nanotechnology techniques 
that would do that. So there is a potential example of great 
importance to our technology, but there are many others.
    I mentioned catalysis, the possibility of improving the 
efficiency of chemical reactions in commercial scale, chemical 
reactions reducing the number of waste products, for example, 
or skipping steps in the chemical synthesis process that might 
lead to side effects, toxic materials, or that might endanger 
factory employees or the environment.
    So it is really quite remarkable how many things could be 
affected by this. Many people, when they think about 
nanotechnology, think of small machines, sort of the 
counterparts of the machines in ourselves that make proteins, 
and we could, indeed, make small machines that could be used in 
prosthetic devices, for example, and this is a potential 
application; but it is important to understand that 
nanotechnology is not just about making these tiny machines. It 
is about affecting all of the materials that show up in 
everything that we do, all our physical environment.
    I like to think of nanotechology as the inorganic 
counterpart of biotechnology. So if you do not know what 
nanotechnology is, think of it as inorganic biotechnology; or 
if you do not know what biotechnology is, think of it as 
organic nanotechnology. They are both two sides of the same 
coin.
    So that is sort of a high-level discussion of 
nanotechnology. There is much more in the literature.
    Mr. Walsh. All right. Mr. Mollohan.

               SCIENCE ADVISOR ROLE IN BUDGET FORMULATION

    Mr. Mollohan. Thank you, Mr. Chairman. Doctor, you were 
confirmed last October and probably did not have a lot of input 
into the 2003 budget, I would imagine, since you were at the 
tail end of that curve.
    In the 2004 budget, do you anticipate playing any 
significant role in developing the science and technology 
budget?
    Dr. Marburger. Yes. Let me tell you what my role was in the 
2003 budget, and then I can add to that for 2004. Although I 
had just arrived in Washington, the budget director, Mitch 
Daniels did invite me to all of the meetings that he had with 
his staff where the details of the science budgets were 
reviewed. He invited me to sit at the table and comment and ask 
questions. I was just learning at that time, but I did have 
that opportunity as the process went on, and subsequently, I 
continued to meet with his staff to get briefings, and whenever 
my office has briefings now, we make it a practice to invite 
the OMB examiners so that they can hear the same things we 
hear, hear how we discuss issues. And we have continued to work 
together since then to try to educate each other about our 
mutual issues looking forward to FY 2004.
    Last year, unfortunately there was no guidance letter to 
agencies on expectations on the science budget proposals. In 
the past, the OSTP director and the budget director have co-
signed a letter of guidance to science agencies, setting forth 
their expectations. That did not happen. It will happen this 
year, and I expect that some of the work that we have done 
together on addressing the science community on issues of 
management and performance evaluation and that sort of thing, 
consistent with the President's management agenda, will show up 
in the proposals that we get from the agencies, and I think 
that will help the process along.
    So we have been asked for input at the stages of budget 
preparation for 2003, and we certainly expect to have 
substantial input to the FY 2004 budget.

              PERFORMANCE MATRIX FOR R&D FUNDING DECISIONS

    Mr. Mollohan. The Administration used a performance matrix 
on a limited basis, I understand, in 2003 in deciding funding 
levels for certain science programs, and according to the 
budget, you plan to use them more extensively in the 2004 
process. The budget described the pilot project for applied 
research programs in the Department of Energy that was used as 
a model for a performance matrix.
    Would you tell us a little bit about that pilot project?
    Dr. Marburger. The idea of the pilot project is to use the 
applied programs at the Department of Energy to develop a 
methodology for performance evaluation, and of course the 
principle is that in an applied program, you have more well-
defined milestones; you have an objective for the research that 
you expect to achieve in a certain time frame, or understand 
why you do not achieve it, unlike basic research where there is 
a discovery process that is very difficult to predict.
    So it should be easier to assess performance in the pilot 
program. Of course, the idea in all these things is that you 
set some expectations through planning, you execute the 
experiments, you see if you get what you thought you would and 
then you change to try to improve your performance the next 
time around. And these planning and assessment parts of this 
cycle need to be strengthened in many programs according to the 
analyses by the Office of Management and Budget. We hope that 
that cycle can be identified in the applied programs and used 
to evaluate the progress that is being made.
    I believe that a similar process is appropriate for basic 
programs, and both the Budget Director and myself have been 
talking with the science community, higher education community, 
through the National Academies of Sciences who have convened 
groups to study how we might do this better, and I think that 
many agencies already have methods for assessing the quality 
and effectiveness of the work that they do; the peer review 
process itself that NSF uses extensively is an example of a 
component of that assessment process.
    So, I think that it should be possible for us to do a 
better job of explaining to the taxpayer exactly how to 
determine whether the money is being used effectively.
    Mr. Mollohan. Yes, that is what we spend a lot of time 
doing through this process. We appreciate your good help.
    Was this pilot program conducted in the Department of 
Energy already?
    Dr. Marburger. Yes. There have certainly been exercises of 
the pilot program. I have not seen a report on the program. I 
am aware that the Department of Energy is attempting to 
implement it.
    Mr. Mollohan. Was that last year or are they in the process 
of beginning the implementation now?
    Dr. Marburger. The Department of Energy has actually had 
evaluation processes for its programs for some time.
    Mr. Mollohan. I know. I am talking about this pilot 
project.
    Dr. Marburger. That particular one, I do not know the 
details of that, how extensively it was implemented in 2002, 
but I do know that the department had plans to do that. They 
were aware of the requirement in 2002.
    Mr. Mollohan. Do you plan on examining that?
    Dr. Marburger. I certainly will, yes.
    Mr. Mollohan. No, I am not asking you to, I was asking if 
you were planning on it.
    Dr. Marburger. Yes. Yes. Absolutely. I am actually very 
interested in this process, and I am watching it very closely.
    Mr. Mollohan. I can tell. Does it have applicability to 
basic research?
    Dr. Marburger. In some respects, yes. The choices that are 
made in basic research are also informed by expert panels, peer 
review panels, but nearly all agencies and research operations 
have some way of assessing the quality of the work that is 
being done. It is not always made explicit, and the results are 
not always recorded in a way that is open to public views.
    Mr. Mollohan. Would you anticipate an effort to do a pilot 
project attempting to develop some matrix evaluation in basic 
research, as this evidently was an effort to look at with 
regard to applied?
    Dr. Marburger. Yes. It is too soon to tell exactly what 
form the application to the basic research will take, but I am 
sure--I expect there to be language in the 2004 budget that 
will lay out some principles for this. There is language the 
2003 budget already in the narrative that gives some indication 
of the areas that might be looked at, but this is subject to an 
ongoing interaction with the science community and with the 
agencies.
    Mr. Mollohan. Well, there is language in the 2003 budget 
which indicate, that the Administration plans to use this 
process matrix in the 2004 budget cycle. It would be 
interesting to have that expounded upon for the record if you 
would do that.
    Dr. Marburger. Well, I feel that the details are still so 
much in process that I am reluctant to say too much about it 
for the record without having OMB here to help explain it, 
because it is their responsibility to implement it. But I do 
believe that a systematic approach to evaluation of basic 
science programs is an important component of managing those 
programs effectively.
    Mr. Mollohan. Let me ask you, then, would you for the 
record provide a more detailed explanation from your 
perspective--not OMB's perspective. We can ask OMB for that--
but just as you look at it and evaluate it and how it is 
applicable to applied as well as basic research also, to what 
extent you would anticipate it being used to develop the 
science accounts in 2004 for the record.
    Dr. Marburger. Yes. I would be glad to provide that.
    Mr. Mollohan. From your perspective.
    Dr. Marburger. From our perspective, yes, and it would be 
in a form that is appropriate for this stage of this 
development.
    [The information follows:]

             Performance Criteria for Research Investments

    I do believe that criteria can and should be established to 
evaluate and prioritize research investments. Scientists make 
judgements all the time about promising lines of research. It makes 
sense for the world's largest sponsor of research, the U.S. Government, 
to want to make such choices as wisely as the most productive 
scientists do. By making explicit the valid processes and criteria by 
which program managers currently evaluate science, I think the entire 
process becomes more credible.
    Directly to your question, OSTP has actively engaged with OMB to 
develop and implement investment criteria to ensure the best 
information is made available to maximize research and development 
opportunities. To this end, OMB and OSTP will shortly issue joint 
guidance to agencies which officially kicks off the process of 
establishing research criteria for the Fiscal year 2004 budget process. 
In short, we will be asking agencies to evaluate their R&D programs 
using the criteria of: Quality, Relevance, and Performance. Agencies 
will be asked to: (1) identify their priorities and opportunities and 
describe how they arrived at them, (2) describe how they will award 
funds and conduct research, (3) self-identify and report progress on 
the milestones that are most critical for making progress, and (4) 
perform retrospective reviews to evaluate whether past opportunities--
both those planned for and those arising unexpectedly--were seized and 
impacts realized. Led by an OSTP-chaired working group, the agencies 
are currently undertaking-exercises to test these criteria and develop 
more detailed implementation strategy as the budget process moves 
forward.
    Although they have been treated separately in the past, there is no 
need to arbitrarily separate basic and applied programs when it comes 
to requiring good management and good decision-making. The investment 
criteria OMB and OSTP are developing recognize that although the goals 
of these types of programs may differ, the information we would want to 
know about agencies' priorities, their performance, and the impacts of 
their programs is largely the same.

       BALANCE OF OVERALL FEDERAL SCIENCE AND TECHNOLOGY FUNDING

    Mr. Mollohan. All right. A lot of people seem to be quite 
concerned about the imbalance of funding for science in the 
2003 budget. I think the chairman certainly expressed some of 
that.
    Budget levels for NIH continue to grow while other non-
defense science programs are flat. Many people have expressed 
concern about that, yet you have stated that you believe the 
opposite. I will give you a chance to expound on that; but, 
quote: That given the new atomic level capabilities, the life 
sciences may still be underfunded relative to the physical 
sciences.
    Dr. Marburger. Yes. That is possible.
    Mr. Mollohan. What is possible?
    Dr. Marburger. Well, first let me say----
    Mr. Mollohan. It is possible that you said it or it is 
possible that it----
    Dr. Marburger. No. I definitely said it, and let me 
explain.
    Mr. Mollohan. Okay.
    Dr. Marburger. First of all, there are two more sentences 
in the paragraph.
    Mr. Mollohan. I bet there were.
    Dr. Marburger. In the paragraph from which that was 
extracted, the remaining two sentences refer to the need to add 
money for the physical sciences because there are also 
opportunities in the inorganic side of this as well.
    But I was trying to make a point there, and the point I was 
trying to make is that the consequences and the implications 
for public policy and quality of life of medical research based 
on new molecular level knowledge could be immensely greater 
than the advantages that would come from a similar application 
of the knowledge on the inorganic side. And the reason for that 
is, first of all, quality of life includes the word ``life'', 
and life is an extremely complicated phenomenon, worthy of 
great respect, and the complexity of the life phenomenon in all 
its mystery and glory is something that may well require much 
greater investments in order to make substantial improvements 
than the corresponding investments in the inorganic side of our 
physical environment.
    So we have a biological environment that is hugely complex, 
then the physical environment that is also complex, but it does 
not reveal the same degree of complexity as life does, which is 
the most complex phenomenon.
    My view of how to fund science is that you should look at 
science and ask what science itself tells you about what the 
priorities are, and so a big complicated phenomenon is 
obviously going to require more study than a simple phenomenon, 
and the imbalances that people perceive should not be based on 
some historical accidents of funding. They should be based on 
the actual opportunities that exist and the costs that are 
necessary.
    So, I am rather suspicious of arbitrary funding, double 
this and triple that. We really should be asking science and 
the science community to tell us how much they need. I am not 
saying that the balance is right at this point. I am not saying 
that the investments that we make in different areas are right 
at this point, but I am saying that we should look to science 
itself and the science community to ask how to make these 
decisions.
    Mr. Mollohan. Thank you, Mr. Chairman.
    Mr. Frelinghuysen. Thank you, Mr. Chairman.
    Welcome, Dr. Marburger. My belated congratulations on your 
appointment. I had the opportunity to visit the Brookhaven lab 
when you were still there. That was an interesting opportunity.
    And I think it has been quite a hiatus between your 
appearance here and when Dr. Lane was here, and there has been, 
I think, quite appropriate hand-wringing and anxiety that 
perhaps there would not be anybody filling your position. We 
are glad you are where you are. You have a good reputation. I 
had breakfast with the new president of Princeton today and one 
of your DOE lab colleagues, Rob Goldston. They both said to 
give you their very best.

                             R&D PRIORITIES

    As a nation at war, and even if we were not at war, we are 
counting on you to be a true advocate for science and 
technology. We understand that your first loyalty is to the 
President and the Administration, but what we are about here to 
my mind, and maybe this is not a politically correct way of 
seeing it, this is a $100 billion enterprise with a lot of 
leaders that are bright and quick, doing the Nation's work. And 
there has been, I think, a considerable vacuum here, and a lot 
of members of Congress, members of this committee have been 
concerned that there has not been somebody out there basically 
countervailing for us to what both the ranking member and the 
chairman have talked about, which is sort of the growth and 
favored status of the National Institutes of Health, and nobody 
here is desirous of setting up competition, but we are glad you 
are where you are.
    And we understand that the National Institutes of Health 
have their advocacy groups, many of whom are our constituents. 
There are not a lot of our constituents who are working to 
support the work of science and technology other than maybe the 
scientific community.
    Having said all that, I want to refocus and re-ask what 
both the chairman and the ranking member have commented on, and 
that is that portion of your budget, and I quote: ``The 
President's Fiscal Year 2003 budget includes principles 
intended to improve the management of the Nation's science and 
technology enterprise, taking advantage of best practices and 
emphasizing the importance of good planning, execution, 
reinforcement of good performance, and changing poor 
performance.''
    Now, I do not think I took that out of context, but to a 
layperson, it sort of makes you wonder whether, in fact, 
everybody is living up to their expectations. I know the nature 
of the beast is that you have to tread carefully because 
everybody has their own turf and responsibilities and their own 
mission. But if we are a nation at war, I would assume we would 
have to the expedite the process and go more full throttle.
    The ranking member mentioned the pilot project, but I 
assume that you and OMB are seized with the notion that we can 
do a better job. I just wonder whether you are committed and 
involved in expediting what some of us would say is the 
necessary focus. A lot of things are happening simultaneously, 
but in reality, if we have the three basic missions, fighting 
the war on terrorism, homeland defense, and economic security, 
somebody needs to be stepping up to the plate and pulling these 
parties together.
    Dr. Marburger. First, the President does not want to go 
backwards in science. While we are fighting the war on 
terrorism, we want to maintain our scientific and technology 
leadership in the world. On the other hand, we cannot do 
everything at once, and there have to be priorities. So 
programs that seem to be most productive and hold the most 
promise should funded more favorably, and we have to have ways 
of finding that out. So, I am committed to the notion of 
improving the quality of management.
    To be concrete about this, one of the practices that OMB 
likes is peer-reviewed, open competition for funding, and one 
of the reasons that OMB likes NSF as an agency and gave it 
pretty good marks is that nearly all of NSF's resources 
available for science funding is awarded through a competitive 
grant process, peer-reviewed competitive grant process, which 
creates in a way a market approach to validating the quality of 
the work that is being performed.
    And all those grants are given with finite lifetimes. So 
there is no permanent entitlement commitment. They are all 
reviewed after a period of time. They all have objectives, and 
so I am sure that that aspect of the NSF operation is one that 
OMB would like to see implemented throughout the spectrum of 
science funding.
    That particular approach that NSF uses for its extramural 
grant program does not apply automatically to all the science 
that the Federal Government supports. There are national 
laboratories and there are other special kinds of programs that 
may require something other than a market mechanism to justify 
their support, and I believe that that is one of the reasons 
why the Department of Energy was chosen for a pilot project, 
because it has in-house work and has an extramural program as 
well. And perhaps the complexity of the way science is done in 
our nation can be explored through this pilot program at the 
Department of Energy.
    So those are some comments that I hope are responsive to 
your question.
    Mr. Frelinghuysen. What I am suggesting is that I know 
there is an issue of management and there is an issue of 
resources available. The process has to be followed, peer 
review and we know that there is NASA and EPA and D0E, but in 
reality, if we are a nation at war, there ought to be an added 
sense of urgency that whatever resources we are outlaying, that 
we get more end product and more basic research and 
identifiable things that we can measure through some sort of 
performance matrix.
    Dr. Marburger. Indeed there is an added sense of urgency, 
and I think that comes through in the budget narrative, and I 
personally have carried this message to the science community 
in my remarks. That may be one reason there is discomfort about 
it.
    Mr. Frelinghuysen. Good. Make them uncomfortable.
    Thank you, Mr. Chairman.
    Mr. Walsh. Thank you. Mrs. Meek.

                       MANAGEMENT AND LEADERSHIP

    Mrs. Meek. Good morning, Dr. Marburger. Welcome to the 
committee.
    I have been listening this morning and I read your 
statement, and you have got to really be a super manager to do 
what you are supposed do. You are pretty much the manager of 
all these various initiatives, and having witnessed the Federal 
Government now for many, many years, it is very difficult to 
coordinate. You have a lot of initiatives that you call multi-
agency efforts, and it is going to take a great job on your 
part and your agency's part to set the kind of policy that is 
going in the direction which my co-members here have talked 
about.
    I am just wondering what are you thinking about. What are 
you dreaming about in terms of how you are going to lead this 
hierarchy you have here. Many of these agencies, one will not 
speak to the other and one will not know what the other one is 
doing. What do you have in mind? You are new. You are coming in 
and have a chance to set tone. What are you thinking about?
    Dr. Marburger. Well, my office does have access to a 
mechanism that I believe is a good one, and that is the 
National Science and Technology Council, which is a set of 
cabinet officers of the science agencies. And under their 
general guidance, we formed these interagency committees that 
know that their bosses have gotten together and agreed what 
needs to be done. We bring in people at the appropriate level 
within the agencies to talk with each other and, under our 
staffing guidance, to work out an agenda so that when they make 
their budget proposals, they will fit together in their 
programs.
    I plan to continue to use that mechanism as much as I can, 
because I think it has a good track record for some programs 
like the nanotechnology initiative and the information 
technology initiative, which are good programs. So that is one 
thing that I plan to do.
    But in addition, I supplemented that mechanism with another 
one which is a little unusual for our office, and that is sort 
of a rapid response mechanism that we use to provide technical 
support for Homeland Security. Ordinarily, we do not play such 
an active role in bringing a product to bear out of OSTP, as it 
were, but because of the needs of the war against terrorism and 
the need for the Office of Homeland Security to grow rapidly 
and to be effective right away, we have used the technical 
expertise in our office and the interagency knowledge that we 
have to put together a rapid response team under the NSTC 
mechanism that actually brings, in most cases Federal, and 
potentially non-Federal science together to actually do 
something, to do a project on behalf of homeland security.
    That is a new mechanism. It is a new thing for OSTP. It is 
not specifically spelled out in the initial charter, but I 
believe it is important during this era of war against 
terrorism.
    Beyond that, I try to bring management practice to the 
office to get us a little organized. We had a management 
retreat, planning treat. I am going to try to improve the 
planning and make better use of information technology in the 
operation of the office and of the interagency committees that 
we staff.
    It is difficult to be a coordinator, but I have the support 
of the President. I have a good working relationship with OMB, 
and the communications with cabinet-level officials are good, 
and in this Administration, there is I think an unusual degree 
of cooperation and agreement about what the objectives are. So, 
I am hoping with my fingers crossed, but I am hoping that we 
can be effective in getting the agencies to work toward these 
very important ends.

                             CLIMATE CHANGE

    Mrs. Meek. This administration was pretty much pushed into 
the climate change debate. Two years ago, if you mentioned 
global warming around here and climate change, you would expect 
to be hammered in the head with a mallet, but I noticed that 
President Bush has stepped up to the plate, and in the budget 
you have come out with some attention to climate change.
    It is going to be hard, though. So I do hope that you can 
do something credible in the area of climate change.
    Dr. Marburger. I hope so too, and I am confident that we 
can.
    Mrs. Meek. Thank you. I will see you next year then.
    Dr. Marburger. Okay. Thank you.
    Mr. Walsh. Are there any other questions of the witness? 
Alan, do you?
    Mr. Mollohan. I have a couple for the record.
    Mr. Walsh. I have a couple I would like to submit for the 
record also.
    We have a vote. We will take a break, and you are free to 
go, and we will bring in the next group when we return.
    Dr. Marburger. Thank you very much.
    Mr. Walsh. Thank you very much for your testimony.
    The committee is in recess.
    [Recess.]
    [The information follows:]

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                                         Wednesday, March 13, 2002.

         DEPARTMENT OF DEFENSE CIVIL, CEMETERIAL EXPENSES, ARMY

                               WITNESSES

LES BROWNLEE, UNDER SECRETARY OF THE ARMY
JOHN C. METZLER, JR., DIRECTOR, ARLINGTON NATIONAL CEMETERY
    Mr. Walsh. The subcommittee will come to order.
    Let us begin. We will now conclude this morning's hearing 
by taking testimony for the Fiscal Year 2003 budget submission 
for the Department of Army and specifically Arlington National 
Cemetery and the U.S. Soldiers' and Airmen's National 
Cemeteries.

                                Welcome

    We welcome the Under Secretary of the Army, Les Brownlee, 
to testify on behalf of the cemeteries.
    The Fiscal Year 2003 budget request is $24.4 million, an 
increase $1.9 million over last year's funding level. I have to 
say that we are quite pleased that OMB decided to build off the 
appropriations increase the Subcommittee provided in Fiscal 
Year 2002 when formulating the 2003 budget.
    As our nation's armed services are engaged in active 
battle, we find ourselves in the unfortunate situation of 
burying young service members who have bravely fought and died 
for our country. The importance of Arlington National Cemetery 
and the healing process of those affected families and the 
Nation cannot be underestimated. We have a responsibility to 
ensure that America's national cemeteries are fully 
operational, meticulously maintained, and ready for the future 
as memorials as we need them.
    Mr. Brownlee, we welcome you to the committee. In a moment, 
I will ask you to introduce your colleagues and briefly present 
your testimony. Before doing so, I would like to recognize my 
colleague Mr. Mollohan for his opening comments.
    Mr. Mollohan. Mr. Chairman, I welcome Mr. Brownlee to the 
hearing today and look forward to his testimony.
    Mr. Walsh. Thank you. Sir, go ahead.

                            OPENING REMARKS

    Mr. Brownlee. Thank you, sir.
    Thank you, Mr. Chairman and members of the subcommittee. It 
is indeed an honor for me to be here today to represent the two 
national treasures and national cemeteries, Arlington and the 
cemetery at the Soldiers' and Airmen's Home.
    I will take the opportunity to introduce those who have 
accompanied me here: Mr. Jack Metzler, the superintendent of 
Arlington National Cemetery; Ms. Claudia Tornblom, the Deputy 
Assistant Secretary for Management and Budget; Mr. John Parez; 
Ms. Jennifer Watkins of my staff; and Mr. Rory Smith, the 
budget officer for the Arlington National Cemetery.
    Sir, again, let me tell you what an honor it is for me to 
come and appear before this subcommittee on this particular 
issue. My son served in the Third Infantry--the Old Guard at 
one time. He served in the unit that we are so proud of and 
does such a good service in honoring our Nation's fallen 
heroes. For so many reasons that place has a special place in a 
lot of our hearts.
    With your permission, sir, I will summarize my complete 
statement.
    Mr. Walsh. Please do.
    Mr. Brownlee. And ask that it be entered into the record.
    Mr. Walsh. Without objection.

                             BUDGET REQUEST

    Mr. Brownlee. Thank you.
    Sir, the Fiscal Year 2003 budget which is before us totals 
$24,445,000, which is $1.9 million or 8.5 percent more than the 
Fiscal Year 2002 appropriation. This budget will permit 
Arlington National Cemetery to improve its infrastructure and 
work toward implementing its ten-year capital investment plan. 
The budget also includes funds to pursue expansion efforts 
needed to ensure that Arlington National Cemetery remains an 
active burial place for our service men and women. It is very 
important to pursue expansion efforts so there will be no 
disruption in services for deceased veterans.
    This budget is made up of three programs: Operation and 
Maintenance, Administration, and Construction. I will briefly 
summarize each one.
    The O and M program is $13,507,000 and funds the cost of 
conducting an average of 23 funeral services per day, 
accommodating four million visitors each year and maintaining 
652 acres of land and associated infrastructure.
    The Administration program is $1,123,000. It provides for 
management and administrative functions, including staff 
supervision at both cemeteries.
    The Construction program is $9.8 million, and I would like 
to highlight three projects in the Construction program that 
are particularly important to the long-term viability of 
Arlington National Cemetery. Project 90 Land Development is 
critical to alleviate crowding of funeral services and to 
extend the cemetery's useful life through the year 2025. It 
consists of developing the remaining 40 acres of open land 
within its current boundaries. Approximately 26,000 additional 
grave sites and 5,000 niches for cremated remains will be 
provided by this development. Project 90 is fully designed and 
construction of phase one is included in the Fiscal Year 2003 
budget for $8.4 million.

                             TEN YEAR PLAN

    By our letter of February 5, 2002--and we have copies of 
that available if need be for the members--we provided this 
subcommittee with a plan that identifies the cemetery's new 
construction, major rehabilitation, major maintenance, and 
study proposals for the next 10 years. It also serves as a 
guide for annually recurring maintenance needs of the cemetery. 
The Fiscal Year 2003 budget includes $50,000 to continue 
developing and refining this multi-year plan for funding 
projects in a technically sound and financially efficient 
manner.

                         LAND UTILIZATION PLAN

    In October of 2000, the Army provided this subcommittee 
with a plan that identifies the requirements for developing 
adjacent land for future expansion. The budget includes 
$200,000 to continue this planning effort. The first site in 
the plan to be developed is the Millennium Project which 
consists of 36 acres. A significant milestone in moving forward 
with the Millennium Project was reached on January 28, 2002 
when the Department of the Interior transferred 12 acres of 
land to the Department of the Army pursuant to the authority 
contained in the National Defense Authorization Act for Fiscal 
Year 2002. This land is now included in the cemetery and will 
be developed as a part of the Millennium Project.
    A preliminary estimate of additional capacity to be 
generated by the Millennium Project is 26,000 grave sites and 
15,000 niches. Actual yields could change significantly 
depending on the final design. The Millennium Project would 
extend the useful life of the cemetery beyond 2025 to somewhere 
between 2038 and 2047, depending on the final layout of the 
land.
    Mr. Chairman, again, it is an honor for me to represent 
these two cemeteries. I look forward to working with your 
subcommittee in support of our collective efforts to provide 
high quality standards befitting our service men and women.
    Mr. Chairman, you mentioned the global war on terrorism 
that is ongoing, and we have taken casualties in that war, some 
of whom have recently been laid to rest in Arlington National 
Cemetery. I had the good fortune of visiting at Christmas time 
some of those troops, and I went over with the intent of 
visiting those who could not be home for Christmas. So I went 
to Germany and Italy, to Bosnia, Kosovo, Kuwait, into Pakistan, 
Uzbekistan, and I had the good fortune to spend Christmas Eve 
and Christmas Day in Afghanistan. Originally, I had been told I 
could only stay for one hour. Fortunately, we got fogged in. It 
was Christmas Eve, so we had the good fortune and got to spend 
longer time than we planned on. So I felt quite fortunate in 
that respect.
    These young men and women in our armed forces today, as you 
well know, sir, are the best and we owe them the best. That is 
our intention with this plan that we have put before you today.
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                        TENTH MOUNTAIN DIVISION

    Mr. Walsh. Thank you. I thank you for your testimony.
    I just spent a few minutes with Congressman John McHugh 
from Upstate New York, and Fort Drum is within his district. 
The Tenth Mountain Division is encamped there, and had just 
been at Walter Reed Hospital visiting some of the wounded, and 
they really have done a marvelous job, marvelous job. It is 
great to see that the training and the equipment and all those 
things come together and stand behind their courage and make 
them an invincible force. It is remarkable what they have 
accomplished there.
    I cannot imagine what it would be like to fight at 10 or 12 
thousand feet above sea level.
    Mr. Brownlee. What the troops have done there has been 
almost incredible--in some cases. There was one company that 
had to move to assist another company. The distance they 
traveled and the time in which they did it at that altitude was 
almost unbelievable.
    Mr. Walsh. Its hurts moving quickly at that level. It 
hurts.
    Mr. Brownlee. You mentioned the Tenth Mountain Division. I 
told you all the places that I visited and everywhere I went I 
ran into soldiers from the Tenth Mountain Division--Bosnia, 
Kosovo, Uzbekistan, and Afghanistan. I did not go to visit the 
battalion in the Sinai that patrols between Israel and Egypt.
    The Tenth Mountain Division is a small division. It is only 
six or seven battalions, and they have been deployed 
extensively and stretched pretty thin. I kept running into 
them, and I finally told the soldiers that either this is the 
biggest division in the Army or they were spread mighty thin. 
They loved that, of course.

                               BODY ARMOR

    Mr. Walsh. One of the interesting things that John said was 
that because of the body armor that they are all wearing now, 
most of the wounds are now leg wounds.
    Mr. Brownlee. That is absolutely true.
    Mr. Walsh. Which is pretty amazing when you think about it.
    Mr. Brownlee. They wear body armor with ceramic plates that 
are inserted at the front and back. With the plates, the armor 
provides protection against 7.62 millimeters bullets, which are 
fired by AK-47's. It truly saves lives by preventing thoracic 
injuries. Most of the wounds that we have observed in these 
soldiers that were evacuated were leg and arm wounds and one 
shoulder wound.
    Mr. Walsh. Less business for Arlington, fortunately.
    Mr. Brownlee. Fortunately, yes, sir.

                               WATER BILL

    Mr. Walsh. At a more mundane level, last year Arlington 
National Cemetery got caught in the middle of a payment dispute 
between the Pentagon and the District of Columbia Water and 
Sewer Authority. I used to referee these disputes between the 
City of Syracuse Water Authority and the county zoo.
    Some things just do not change, but as the former chairman 
of the D.C. subcommittee, I am very familiar with the problems 
the D.C. agencies have in collecting money from the Federal 
Government for services rendered. DOD did not handle the 
situation well, and the Congress included language in the 
Fiscal 2001 supplemental directing DOD to fully fund the water 
bill and refrain from charging the cemetery unfair amounts that 
were estimated by Pentagon engineers.
    How are the Pentagon and the cemetery resolving the issue 
now?
    Mr. Brownlee. Sir, it is my understanding now that the 
water meters have been installed. The city water authority has 
agreed that they are appropriate and compatible. I believe the 
estimated cost for usage in 2003 is a little over $200,000.
    Mr. Walsh. What was the bill prior to installing the 
meters?
    Mr. Brownlee. I do not know what the previous bill was.
    Mr. Metzler. We had estimated billings in the prior years 
of around $65,000, but the dispute last year encompassed a past 
due bill which was close to a million dollars. So without the 
meters in place, it was only an estimate at that point.
    Mr. Walsh. Do you anticipate Congress having to get 
involved in this dispute again?
    Mr. Brownlee. I certainly hope not, sir. It would not be my 
intent that Congress would have to get involved in this. I 
think the meters, since the D.C. Water Authority has indicated 
that they agree they are appropriate and compatible, we will 
keep an eye on it, sir. If it does look like there is going to 
be a problem, then we will let you know. We do not expect to 
get you involved in that.

                            EXPANSION PLANS

    Mr. Walsh. You talked about land utilization a little bit. 
I think we are all in agreement that there are a few options 
for the cemetery to expand and still keep the current 
eligibility criteria; however, as time moves along, and DOD 
finds itself thinking greater ideas, operations or memorials 
for the Navy Annex or excess land at Fort Myer, who is watching 
out for the needs of Arlington National Cemetery as DOD 
formulates its land management plan, and what are DOD's land 
priorities?
    Mr. Brownlee. Sir, as you know, there is some support in 
Congress in that interest, to protect the land that is there 
for burial. There are, of course, other interests, and you 
mentioned, the Air Force Memorial which will be, I understand, 
by law placed on the land where the last section of the Navy 
Annex is now located. The timing on that, I do not believe has 
been decided yet because there is some discussion as to how 
long the Ballistic Missile Defense Organization needs to remain 
in those facilities. That will have to be worked out.
    But I assure you that Mr. Metzler and I have a strong 
interest in ensuring that actions are not taken that displace 
eligible veterans from being buried at Arlington.
    Mr. Walsh. Will you have a place at the table when they are 
making these plans?
    Mr. Brownlee. We will certainly have a place at the table 
when plans are being made within the Administration. Sometimes 
we are consulted when plans are being made by Congress, and as 
you know better that I do, sir, some of these ideas for other 
programs and projects that might displace burial land originate 
in other places, some of it over here, some of it in other 
Services and places like that.
    My personal view, sir, if I might----
    Mr. Walsh. Please.
    Mr. Brownlee. I think we always ought to look to other 
places for some of these memorials and projects rather than 
land that is at Arlington or contiguous to Arlington where 
expansion might be possible, because there is a finite limit to 
that, and at some point in time, there will not be any land 
available that is contiguous to Arlington National Cemetery. It 
is a national treasure and ought to be preserved, and we ought 
to try to extend its life for burial of deceased veterans in 
the military as far in the future as we can.
    I also think that there may be a need at some point in time 
to rethink eligibility criteria, but I think that should be 
done in conjunction with the members of Congress who may have 
an interest in jurisdiction over here, and right now, I do not 
see any move to do that. But at some point in time, that may be 
necessary.
    Mr. Walsh. Thank you. Mr. Mollohan.

                        OTHER PLANS AND OPTIONS

    Mr. Mollohan. Thank you. You are really testifying at a 
important time in our history, and you have a very important 
mission.
    Following up a little bit on the chairman's questions, are 
there other plans and options to acquire surrounding lands at 
this time?
    Mr. Brownlee. Sir, the only other lands that I am aware of 
that are available that are contiguous to Arlington National 
Cemetery have been looked at. Some of it is land on which the 
Navy Annex sits on now, and at some point in time, I understand 
that the Navy Annex will be torn down and that land will be 
become available. There are other competing interests for some 
of that property.
    Mr. Mollohan. I am sure there are.
    Mr. Brownlee. One of those, I understand, has to do with a 
historical Civil War-related or slavery-related museum.
    Mr. Metzler. There is a Black heritage----
    Mr. Brownlee. Black heritage. I am sorry. Black heritage, 
if I could correct myself.
    There is an interest to put that kind of a museum somewhere 
in that vicinity, and of course, the Air Force Memorial, as you 
know, has been identified to go into that area.
    Mr. Mollohan. In an existing structure, would the Black 
heritage museum go into an existing structure as well?
    Mr. Brownlee. No, sir. There would have to be a structure 
constructed for it.
    Mr. Mollohan. So you are identifying possibilities?
    Mr. Brownlee. I am just indicating to you, sir, in response 
to your question what I have heard about other interests that 
might like to compete for some of that land that is available. 
As I indicated earlier, there is a limit to land that is 
immediately available that is contiguous to the cemetery.
    Mr. Mollohan. So that is the answer to the question 
regarding plans or options to acquire surrounding lands.
    Mr. Brownlee. Yes, sir. We have a master plan which 
indicates that that land where the Navy Annex sits now would be 
taken over by the cemetery in time. There is a road which I 
understand is the property of Arlington County, and that would 
have to be worked out.
    Mr. Mollohan. How many acres is that?
    Mr. Metzler. The roadway is 3.5 acres. The Navy Annex is 
somewhere in the neighborhood of 36 to 42 acres. We have not 
done a complete study on that yet.
    Mr. Mollohan. That is a pretty significant piece of ground.
    Mr. Metzler. It is, and that also includes the parking lots 
and the actual land the buildings sit on, and of course the Air 
Force Memorial would be incorporated into that land as well.

                         FUNDING LEVEL INCREASE

    Mr. Mollohan. Last year, congress appropriated an increase 
of $5.3 million over your 2001 funding level. Was that 
adequate, and what were you able to accomplish with that?
    Mr. Brownlee. I am going to defer to Jack on that.
    Mr. Metzler. Yes, it was, and the money is going be used 
this year for a construction project for our next Columbarium 
and to start Project 90, by first looking at the drainage 
issues in that area as we get ready for construction next year. 
The big project is the next Columbarium building.
    Mr. Mollohan. All right. Thank you, Mr. Chairman.
    Mr. Walsh. Thank you. Mr. Goode.

                           CERAMIC BODY ARMOR

    Mr. Goode. Thank you, Mr. Chairman.
    I did not catch what you said about the body armor that the 
troops had on. It is not related to this hearing, but you 
mentioned it.
    Did you say that the ceramic body armor will stop or will 
not stop an AK-47 bullet?
    Mr. Brownlee. It is designed to withstand a hit from 7.62, 
which is the standard round for an AK-47. It is designed to 
stop that. Now, with repeated hits, it might cause it to fail, 
and if you are hit too close to the edge, sometimes you might 
get something that gets in, but the armor is designed to stop 
that. Apparently it was successful in all the cases we know 
about so far.
    Mr. Goode. In Afghanistan?
    Mr. Brownlee. Yes, sir.
    Mr. Walsh. If I could just interject, the reason it came up 
was I was just talking to John McHugh upstairs, and he 
represents Fort Drum in Watertown, New York where the Tenth 
Mountain Division is encamped, and he was over at Walter Reed 
and he met with some of the soldiers, and he said most of the 
wounds were leg wounds because of this body armor, that the 
upper body, the thoracic region, was very well protected. So it 
is pretty remarkable stuff.
    Mr. Brownlee. Yes. Secretary White was over there earlier 
this week to pin Purple Hearts on some of those lads. He gave 
me exactly the same observation--that the absence of major 
thoracic wounds certainly contributed to just wounds and not 
KIAs that we suffered there.
    Mr. Goode. The forces in Afghanistan that we are opposing 
do not have anything like this?
    Mr. Brownlee. Not to my knowledge, sir.

                           BURIAL ELIGIBILITY

    Mr. Goode. To refresh my memory a little, what are the 
standards for burial in Arlington? I know it is not simply 
being a veteran.
    Mr. Brownlee. Yes, sir. And if I miss something here, Jack, 
please correct me.
    If you are retired veteran, in other words, if you serve 
more than 20 years in the military and retire, you are 
eligible. If you are killed or deceased while on active duty, 
you are eligible. If you are a veteran who has been awarded the 
Silver Star or Purple Heart or higher--let me qualify that. It 
is the Purple Heart or the Silver Star or higher. Then you are 
eligible.
    Mr. Metzler. If you are a veteran and a former prisoner of 
war, if you are a veteran and during the time of World War II 
or before received a disability of 30 percent or higher, you 
are eligible for ground burial as well.
    Mr. Goode. That is World War II or before?
    Mr. Metzler. World War II or before. After World War II, 
the award system would afford a Purple Heart with the 
recognition for a disability. Any veteran, their spouses, and 
dependent children, as well, can be buried there, and then any 
veteran who goes on to hold a high office, such as Vice 
President, Congress, Senate, Associate Justice of the Supreme 
Court, and Ambassadors at a Level One mission. The President 
does not have to be a veteran. There is a line that affords the 
President or former Presidents status at Arlington Cemetery, 
and of course I do not want to forget that all veterans who 
have one period of active-duty military service are entitled to 
have their cremated remains placed into the Columbarium at 
Arlington National Cemetery.
    Mr. Goode. Now, you mentioned to the Chairman that that 
issue is not going to be visited this year, but it might be 
looked at sometime in the future. Is it all statutory?
    Mr. Metzler. No, it is not all statutory. Some of it is in 
Army regulation. Some of it is in the Federal Code of 
Regulations, and there are plans to review all of the 
eligibility requirements every five years, and we have been 
asked to start looking at a draft this summer.
    Mr. Goode. I take from what you said, none of it is 
statutory. It is all, you said, Federal Code Regulations, or 
did you mean Federal statute?
    Mr. Metzler. It is in the CFR, the Federal Code of 
Regulation and in the Army policy.
    Mr. Goode. Okay. It is all policy.
    Mr. Metzler. It is all policy.
    Mr. Brownlee. It is not statutory.
    [The information follows:]

    [Agency Note: Almost all eligibility requirements at 
Arlington National Cemetery are specified in Title 33 of the 
Code of Federal Regulations, Part 553 and Army regulation 290-
5. There have been some rare instances when laws were enacted 
to cover specific situations, such as including former 
Prisoners of War, setting aside memorial areas for veterans 
missing in action, designating an area for the unmarked burial 
of cremated remains, and prohibiting the burial of persons who 
committed capital crimes.]

    Mr. Goode. Thank you, Mr. Chairman.
    Mr. Walsh. Thank you, Virgil. Mrs. Meek.
    Mrs. Meek. Thank you, Mr. Chairman.
    Welcome to our subcommittee.
    Mr. Brownlee. Thank you.

                        HISTORICAL SIGNIFICANCE

    Mrs. Meek. I am interested in your expansion plans to 
expand the Cemetery, and I can understand the need to do so. 
This is my fifth year sitting in the subcommittee.
    I note that you are expanding. Have you taken into 
consideration the historical significance of where you are 
going when you expand? And I am saying that because you are in 
the D.C. area, Washington area, and Virginia area, and it is 
really bordering on African American history, some of the 
sites.
    Mr. Brownlee. I understand.
    Mrs. Meek. And I hope that you will keep in consideration 
that even though you do need to expand, that there is a strong 
historical significance to places where you plan to go. Just as 
Congress is looking at the contribution of slave labor in 
building the Capitol, I hope you will look at that in your 
consideration of expanding the National Cemetery. Congress has 
paid significant attention to the work of slaves, particularly 
President Bush, in terms of the contribution they made and what 
will happen as a result of it, and the mansion where you are 
looking at is a place where slave quarters were in Arlington 
where some of your sites are going, as I understand it.
    Particularly down here where the Navy Annex is near that 
river that flows through there, there are a lot of historical 
sites down there. It was part of what we call Freedman's 
Village where the slaves came to that section because that was 
an area where they could become educated and get away from 
slavery. And I do not know exactly what you plan to do near the 
Navy Annex, but I wish you would pay close attention to the 
preservation of some of those historical sites in your 
expansion.
    Mr. Brownlee. Yes, ma'am. We are aware of them. I was not 
as aware of them, but having looked at this, I am more aware of 
them now, and I appreciate your furthering my education on 
that.
    Mrs. Meek. Yes. And I would appreciate it if you would send 
me your plans for the expansion of those sites and what 
historical significance your expansion is going to have in 
terms of those sites. Suffice it to say, I am saying in your 
expansion, I know it is necessary, but please pay attention to 
the preservation of those historical sites.
    Mr. Brownlee. Yes, ma'am. I understand.
    Mrs. Meek. That was my one question, Mr. Chairman.
    Mr. Walsh. Thank you very much.
    Are there any other questions of the witness? Alan?
    Mr. Mollohan. No.

                            ASSISTING THE VA

    Mrs. Meek. I forgot my other one. It has to do with the 
South Florida Cemetery. It is a big, big project for South 
Florida. This veterans cemetery--we had only one--it was in 
Bushnell. It was a long way away from every place else, and it 
is going to be put now by the VA, and I would like to know if 
you are consulting with the VA on this project, because you 
have been in this business a long time.
    Mr. Brownlee. Yes, ma'am.
    Mrs. Meek. To share your expertise with the VA in Florida 
in terms of what has been some of the problems you have seen 
and pass down some of your knowledge to them. This, I am sure 
will help the VA.
    Mr. Brownlee. Yes, ma'am. Ma'am, we would be more than 
anxious to consult with them in any way that we could, 
providing the assistance to Mr. Principi and his people in that 
regard. That, of course as you well know, is not under the 
jurisdiction of the Army, but we would be happy to help in any 
way we could for the preservation, expansion, and enhancement 
of that cemetery.
    Mrs. Meek. Good, because you have established quite a bit 
of expertise in the needs and wants of veterans in your 
capacity. It would be good if you could share that expertise.
    Mr. Brownlee. Mr. Metzler has great expertise in that area 
and we will make him available.
    Mr. Metzler. One of the items that I as the superintendent 
of Arlington Cemetery get to do is to sit on the Department of 
Veterans Affairs National Cemetery Advisory Council. So I do 
meet with them at least twice a year, and I have been talking 
with the leadership of the Department of Veterans Affairs on 
the expansion of cemeteries. So we are able to share ideas back 
and forth.
    Mrs. Meek. Thank you.
    Mr. Metzler. Yes, ma'am.
    Mr. Brownlee. Thank you, ma'am.
    Mr. Walsh. Thank you, Mrs. Meek.
    Anyone else? If not, the hearing is concluded. We thank you 
very much for your testimony. We will submit additional 
questions for the record, and we would appreciate your prompt 
response.
    Mr. Brownlee. Thank you very much for your consideration of 
this important issue.
    Mr. Walsh. You are very welcome.
    Mr. Brownlee. It was a pleasure to meet you, sir.
    Mr. Walsh. Nice to meet you too.
    The subcommittee hearing is closed.
    [The information follows:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]





                           W I T N E S S E S

                              ----------                              
                                                                   Page
Brown, T.T.......................................................   391
Brownlee, Les....................................................   353
Connaughton, J.L.................................................   535
Cooper, F.C......................................................   391
Dollar, Dennis...................................................  1035
Falk, Henry......................................................     1
Gianni, G.L., Jr.................................................   991
Herrling, Maj. Gen. J.P..........................................   597
Hughes, J.T., Jr.................................................   481
Jones, Owen......................................................   391
Kramer, K.B......................................................  1149
Lazar, Ellen.....................................................   127
Marburger, Dr. J.H., III.........................................   295
McCumiskey, Peter................................................     1
Metzler, J.C., Jr................................................   353
Nasif, Teresa....................................................   929
Olden, Kenneth...................................................   481
Poje, Dr. Gerald.................................................   813
Rascon, Alfred...................................................  1193
Rosenthal, Dr. Irv...............................................   813
Sassaman, A.P....................................................   481
Suk, W.A.........................................................   481
Taylor, Dr. A.K..................................................   813


                               I N D E X

                              ----------                              
                                                                   Page
Agency for Toxic Substances and Disease Registry.................     1
    Budget.......................................................27, 31
    Budget Development: Work with OMB............................    27
    Budget Justification.........................................    56
    Chemical Terrorism...........................................    35
    Children's Health Plans......................................    41
        Libby, Montana and Fallon, Nevada........................    43
    Emergency Response...........................................29, 36
        Chemical Emergency Response..............................    38
    Great Lakes Human Effects Program: Status....................    52
    Great Lakes Program:
        Plan.....................................................    46
        Funding Source and Projections...........................    46
    Hazardous Substances Emergency Event Surveillance............    47
    Homeland Security....................................28, 34, 39, 40
    Libby, Montana: ATSDR work...................................    33
    Management Reform and Savings............................32, 40, 41
    Michigan Fish Consumption Pilot Program Proposal: Status.....    53
    Michigan Fish Report vs. Great Lakes Program.................    53
    National Environmental Surveillance:
        Status...................................................    44
        Future Plans.............................................    44
        State Role...............................................    45
        Role of States and Universities..........................    45
        Progress.................................................    45
    Nuclear Facility Terrorism...................................    28
    Opening Statement............................................     2
    Questions for the Record.....................................    39
    Reimbursement................................................    30
    Relationship with FEMA and Other Agencies in Emergency 
      Planning...................................................    48
    Risk Communication in Great Lakes Region.....................    52
    Substance-Specific Applied Research Program..................    55
    Terrorist Response/Preparedness Activities Relationships.....    49
    Toms River Study.............................................    35
    Work for Other Governmental Agencies.........................    50
    World Trade Center Events....................................    37
American Battle Monuments Commission.............................   597
    35 Hour Work Week............................................   616
    AMBC Visitors................................................   608
    Annual Report................................................   608
    Budget Justification.........................................   623
    Burial on Foreign Soil.......................................   610
    Corozal American Cemetery....................................   609
    Foreign Currency Fluctuation.................................   614
    FTE..........................................................   616
    Headstone Replacement........................................   609
    Infrastructure Modernization...............................605, 611
    Maintenance Backlog..........................................   605
    Normandy Visitor Center....................................606, 615
    Opening Statement............................................   598
    Productivity Enhancement.....................................   611
    Questions for the Record.....................................   611
    Reduction of Workforce.......................................   613
    Rent and Utility Costs.......................................   608
    World War II Memorial........................................   618
    Written Statement............................................   599
Department of Defense--Civil, Cemeterial Expenses, Army..........   353
    Assisting the VA.............................................   368
    Budget Justification.........................................   373
    Budget Request...............................................   354
    Burial Eligibility...........................................   367
    Ceramic Body Armor.........................................363, 366
    Development of Section 90....................................   372
    Expansion Plans..............................................   364
    Funding Level Increase.......................................   366
    Historical Significance......................................   368
    Land Utilization Plan........................................   355
    Opening Remarks..............................................   353
    Other Plans and Options......................................   365
    Questions for the Record.....................................   370
    Ten Year Plan..............................................354, 370
    Tenth Mountain Division......................................   363
    Water Bill...................................................   363
    Written Statement............................................   356
Chemical Safety Hazard and Investigation Board...................   813
    Board Members' Roles and Responsibilities..................888, 896
    Board/Staff Relationship.....................................   902
    Budget.......................................................   886
    Budget Justification.........................................   910
    Carryover Funds............................................882, 894
    Chairman Walsh's Opening Remarks.............................   813
    Closing Remarks..............................................   890
    Coordination with Other Agencies.............................   905
    CSB Role in Counter-Terrorism..............................900, 906
    CSB Statement................................................   864
    Hiring of Investigators....................................884, 902
    Hiring of Technical Staff....................................   895
    Hiring Practices.............................................   898
    Office of Inspector General Report: Issues Regarding 
      Management Accountability, Control, and Direction Have Not 
      Been Resolved..............................................   815
    Office of Prevention, Outreach and Policy....................   881
    Outreach Efforts...........................................880, 892
    Prioritization of Investigations.............................   903
    Procurement Practices........................................   889
    Public and Private Partnerships..............................   908
    Reprogramming Funds..........................................   883
    Strategic Outreach Program Review............................   908
Community Development Financial Institutions Fund................   391
    Accomplishments of CDFI......................................   394
    Biography of Tony T. Brown, Director.........................   392
    Budget Justification.........................................   430
    Budget Request...............................................   420
    Community Development Entities...............................   421
    Competitive Grant Program....................................   429
    Demand for CDFI Funding......................................   415
    Impact and Evaluation CDFI Programs..........................   425
    Leveraged Investments........................................   411
    Leveraging Funds.............................................   419
    New Markets Tax Credit Program.........412, 420, 424, 428, 429, 430
    Overlapping Federal Programs.................................   418
    Performance Measures.........................................   422
    Questions for the Record.....................................   420
    Reduced Funding Request and Impact....................412, 413, 425
    Rural Lending................................................   415
    Small and Emerging CDFIs...................................427, 428
    Uses of CDFI Funds...........................................   417
    Written Testimony............................................   396
Consumer Product Safety Commission...............................   645
    Budget.....................................................646, 658
    Budget Justification.........................................   705
    Budget Shortfall.............................................   669
    Chromated Copper Arsenate (CCA)..............................   704
        Wood...................................................698, 701
    Commission Work Continues....................................   647
    Contracts....................................................   665
    Critical Investments Deferred................................   671
    Daisy Manufacturing Company--Administrative Complaint........   693
    Damaging Businesses..........................................   678
    Experts....................................................689, 692
    Funding......................................................   699
    Grandparents Guide...........................................   685
    Highlighting Funding Issues..................................   672
    Information Technology.....................................681, 702
        Status...................................................   700
    Lab Modernization Plan.....................................671, 681
    Litigation Travel Language............................648, 667, 702
    Mandatory Standards..........................................   702
    National Electronic Injury Surveillance System...............   683
        CDC Reimbursement Funding................................   701
    Oral Statement from Acting Chairman Thomas H. Moore..........   646
    Oral Statement from Commissioner Mary Sheila Gall............   658
    Outside Consultants..........................................   675
    Privacy Issues in Enforcement Matters........................   674
    Purchasing Powers............................................   670
    Recall Effectiveness.........................................   678
    Release of a Complaint Prior a Commission Vote...............   692
    Reopening Cases............................................676, 686
    Research Authorization.......................................   666
    Research Budget..............................................   666
    Segway Jurisdiction..........................................   673
    Small Business Ombudsman.....................................   685
    Staffing.....................................................   700
    Travel Ceiling...............................................   658
    Voluntary Standards........................................687, 691
    Written Testimony from Commissioner Mary Sheila Gall.........   660
    Written Testimony of Acting Chairman Thomas H. Moore.........   650
Council on Environmental Quality.................................   535
    Administration's Perceived Role for CEQ....................555, 565
    Budget Justification.........................................   574
    CFC-free Metered Dose Inhalers (MDIs)........................   572
    Clean Air Cap-and-Trade......................................   554
    Clean Air Policy.............................................   553
    Clear Skies and Technology...................................   557
    Clear Skies Initiative.......................................   556
    Climate Change and Global Research...........................   563
    Combined Sewer Overflows--Sanitary Sewer Overflows...........   561
    Deep Well Injection..........................................   563
    Everglades Restoration.......................................   562
    Fossil Energy Program Funding................................   559
    GSA Rent Costs...............................................   570
    National Environmental Policy Act and Response to September 
      11.........................................................   566
    NEPAnet......................................................   568
    Nuclear Power................................................   560
    Opening Statement............................................   535
    Questions for the Record.....................................   565
    U.S. Institute for Environmental Conflict Resolution.........   567
    Water Security in Rural Areas................................   573
    Written Testimony............................................   540
Court of Appeals for Veterans Claims.............................  1149
    Budget Justification.........................................  1165
    Written Testimony............................................  1149
Federal Consumer Information Center..............................   929
    Budget Justification.........................................   951
    FCIC Services................................................   943
    Federal Consumer Information Center Fund.....................   939
    National Contact Center......................................   949
        Enhancements...........................................933, 944
    Office of Citizen Services Proposal..........................   937
    Outreach.....................................................   941
    Publications.................................................   940
    Questions for the Record.....................................   933
    Reimbursables................................................   947
    Written Testimony............................................   929
Federal Deposit Insurance Corporation, Office of the Inspector 
  General........................................................   991
    Applicable Statutes and Regulations..........................  1018
    Budget Justification.........................................  1021
    Continuing Effects of Financial Modernization................  1018
    Other Risks Posed to the Insurance Funds by Financial 
      Modernization..............................................  1020
    Questions for the Record.....................................  1018
    State Bank Real Estate Investment Activities.................  1019
    Written Testimony............................................   991
National Credit Union Administration.............................  1035
    Administering funds..........................................  1052
    Budget Justification.........................................  1059
    Community Development Revolving Loan Fund....................  1048
        As Compared to CDFI......................................  1045
        Technical Assistance Grant Program.............1048, 1050, 1052
    Low- and Moderate-Income Credit Unions.............1049, 1050, 1051
    Questions for the Record.....................................  1045
    Written Testimony............................................  1035
National Institute of Environmental Health Sciences..............   481
    Agent Orange and Dioxin......................................   505
    Arsenic......................................................   483
    Bioremediation........................................492, 502, 514
    Bioterrorism.................................................   500
    Budget Increase..............................................   498
    Budget Justification.........................................   517
    Collaborations...............................................   485
    Coordination.................................................   499
    Downward Negotiations........................................   503
    Environmental Exposures......................................   482
    Homeland Security............................................   496
    Lessons Learned..............................................   493
    Minority Worker Training Program.............................   516
    PCBs.........................................................   484
    Questions For the Record.....................................   508
    Small Business Innovative Research.........................500, 504
    Superfund Basic Research Program......................496, 501, 508
    Superfund Site...............................................   497
    Supplemental Funds.........................................494, 495
    Terrorism Supplemental and Homeland Security.................   508
    Worker Training Program......................................   509
    World Trade Center Activities..............................481, 484
    Written Testimony............................................   486
Neighborhood Reinvestment Corporation............................   127
    Budget Justification.........................................   180
    Changing Marketplace.........................................   146
    Chartering New NeighborWorks' Organizations.......   165
    Community Development Laboratory.............................   128
    Continued Support............................................   129
    Demonstration for Low Wealth Buyers..........................   148
    Detroit Neighborhood Housing Services........................   169
    Distribution of Resources....................................   153
    Economic Development.........................................   163
    Financial Literacy...........................................   178
    Graduation of NeighborWorks' Organizations........   146
    Growth of Neighborhood Reinvestment and the Network..........   142
    Measuring Success............................................   147
    Miami Neighborhood Housing Services..........................   170
    Multifamily Initiative.......................................   176
    Neighborhood Revitalization..................................   161
    Performance of Loans.........................................   149
    PHA Response to Section 8 Homeownership......................   143
    Pontiac Neighborhood Housing Service.........................   168
    Predatory Lending............................................   171
    Questions for the Record.....................................   153
    Resource Development.........................................   147
    Risk Management..............................................   158
    Rural Initiatives..........................................156, 166
    Section 8 Homeownership......................................   143
    Section 8 Homeownership Initiative.........................153, 154
    Solutions to a Range of Challenges...........................   129
    Steward of Federal Resources.................................   128
    Successes and Challenges.....................................   145
    Using Section 8 for Homeownership............................   173
    Written Testimony of Ellen Lazar, Executive Director.........   131
Office of Science and Technology Policy..........................   295
    Basic Research Funding.......................................   307
    Budget Justification.........................................   340
    Climate Change...............................................   316
    Commission Membership........................................   332
    Counterterrorism.............................................   306
    Executive Office of the President Proposed Consolidation.....   322
    Indoor Air Quality Research..................................   325
    International Traffic in Arms Regulations (ITAR).............   328
    Management and Leadership....................................   315
    Modernization of Federal Lab Facilities and Equipment........   326
    Nanotechnology...............................................   308
    National Nanotechnology Initiative...........................   324
    National Science and Technology Council......................   332
    Overall Federal Science and Technology Funding.............312, 318
    Performance Criteria for Research Investments................   312
    Performance Matrix for R&D Funding Decisions.................   310
    Performance of Metrics for Basic Research....................   337
    Photonics....................................................   329
    Positions....................................................   330
    President's Council of Advisors on Science and Technology....   332
    President's Management Agenda................................   320
    Questions for the Record.....................................   318
    R&D Priorities...............................................   314
    Rental Payments to GSA.......................................   335
    Science Advisor Role in Budget Formulation...................   309
    Science Vacancies throughout Federal Government..............   331
    Written Testimony............................................   299
Selective Service System.........................................  1193
    Written Testimony............................................  1193
    Budget Justification.........................................  1198

                                
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