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



                               before the


                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                             APRIL 24, 2001

                           Serial No. 107-68

       Printed for the use of the Committee on Government Reform

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

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                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut       MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             PAUL E. KANJORSKI, Pennsylvania
STEPHEN HORN, California             PATSY T. MINK, Hawaii
JOHN L. MICA, Florida                CAROLYN B. MALONEY, New York
THOMAS M. DAVIS, Virginia            ELEANOR HOLMES NORTON, Washington, 
MARK E. SOUDER, Indiana                  DC
JOE SCARBOROUGH, Florida             ELIJAH E. CUMMINGS, Maryland
BOB BARR, Georgia                    ROD R. BLAGOJEVICH, Illinois
DAN MILLER, Florida                  DANNY K. DAVIS, Illinois
DOUG OSE, California                 JOHN F. TIERNEY, Massachusetts
RON LEWIS, Kentucky                  JIM TURNER, Texas
JO ANN DAVIS, Virginia               THOMAS H. ALLEN, Maine
DAVE WELDON, Florida                 WM. LACY CLAY, Missouri
CHRIS CANNON, Utah                   ------ ------
ADAM H. PUTNAM, Florida              ------ ------
C.L. ``BUTCH'' OTTER, Idaho                      ------
EDWARD L. SCHROCK, Virginia          BERNARD SANDERS, Vermont 
------ ------                            (Independent)

                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
                     James C. Wilson, Chief Counsel
                     Robert A. Briggs, Chief Clerk
                 Phil Schiliro, Minority Staff Director

Subcommittee on Energy Policy, Natural Resources and Regulatory Affairs

                     DOUG OSE, California, Chairman
C.L. ``BUTCH'' OTTER, Idaho          JOHN F. TIERNEY, Massachusetts
CHRISTOPHER SHAYS, Connecticut       TOM LANTOS, California
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
STEVEN C. LaTOURETTE, Ohio           PATSY T. MINK, Hawaii
CHRIS CANNON, Utah                   DENNIS J. KUCINICH, Ohio
------ ------                        ROD R. BLAGOJEVICH, Illinois
------ ------

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
                       Dan Skopec, Staff Director
                Barbara F. Kahlow, Deputy Staff Director
                        Regina McAllister, Clerk
                 Elizabeth Mundinger, Minority Counsel

                            C O N T E N T S

Hearing held on April 24, 2001...................................     1
Statement of:
    LaGrande, Ken, vice president, Sun Valley Rice, Colusa, CA; 
      James M. Knott, president and CEO, Riverdale Mills Corp., 
      Northbridge, MA; John Nicholson, owner, Company Flowers, 
      Arlington, VA; and John L. Bobis, director of regulatory 
      affairs, Aerojet, Rancho Murieta, CA.......................    75
    Rossotti, Charles O., Commissioner, Internal Revenue Service; 
      J. Christopher Mihm, Governmentwide Management Issues 
      Director, General Accounting Office; and Austin Smythe, 
      Executive Associate Director, Office of Management and 
      Budget.....................................................     6
Letters, statements, etc., submitted for the record by:
    Bobis, John L., director of regulatory affairs, Aerojet, 
      Rancho Murieta, CA, prepared statement of..................   104
    Knott, James M., president and CEO, Riverdale Mills Corp., 
      Northbridge, MA, prepared statement of.....................    84
    LaGrande, Ken, vice president, Sun Valley Rice, Colusa, CA, 
      prepared statement of......................................    78
    Mihm, Christopher, Governmentwide Management Issues Director, 
      General Accounting Office, prepared statement of...........    25
    Nicholson, John, owner, Company Flowers, Arlington, VA, 
      prepared statement of......................................    95
    O'Keefe, Sean, Deputy Director, Office of Management and 
      Budget, prepared statement of..............................    44
    Ose, Hon. Doug, a Representative in Congress from the State 
      of California, prepared statement of.......................     3
    Rossotti, Charles O., Commissioner, Internal Revenue Service:
        Information concerning alternative minimum tax...........    62
        Information concerning labels............................    64
        Prepared statement of....................................     9
    Smythe, Austin, Executive Associate Director, Office of 
      Management and Budget:
        Information concerning complying with procedural 
          guidelines.............................................    57
        Information concerning expired collection requests.......    55
        Information concerning the Paperwork Reduction Act.......    50



                        TUESDAY, APRIL 24, 2001

                  House of Representatives,
  Subcommittee on Energy Policy, Natural Resources 
                            and Regulatory Affairs,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:03 a.m., in 
room 2154, Rayburn House Office Building, Hon. Doug Ose 
(chairman of the subcommittee) presiding.
    Present: Representatives Ose, Otter, and Shays.
    Staff present: Dan Skopec, staff director; Barbara Kahlow, 
deputy staff director; Jonathan Tolman, professional staff 
member; Regina McAllister, clerk; Elizabeth Mundinger, minority 
counsel; and Jean Gosa, minority assistant clerk.
    Mr. Ose. I will now call this meeting of the Government 
Reform Subcommittee on Energy Policy, Natural Resources and 
Regulatory Affairs to order.
    Every year during tax season, this subcommittee turns its 
attention to paperwork, as does the rest of the country. Last 
week, as people all over the country prepared to file their tax 
returns, they again saw firsthand the kind of paperwork and red 
tape the government imposes on the public. The Office of 
Management and Budget estimates the Federal paperwork at nearly 
7.6 billion hours. That means it would take 3.6 million people, 
working 40 hours a week, 52 weeks of the year to simply fill 
out all the forms the Federal Government requires each year. 
The price tag for all that paperwork, according to OMB, is $190 
billion per year.
    Now, much of the information that is gathered from this 
paperwork is important, sometimes even crucial, for the 
government to function. However, much is duplicative and 
unnecessary. In 1995, Congress passed amendments to the 
Paperwork Reduction Act [PRA]. The goal of the act was to 
reduce red tape each year. These annual reductions in 
paperwork, however, have not been achieved. Instead, paperwork 
burdens have increased in each of the last 5 years.
    Under the PRA, the Office of Management and Budget is 
supposed to be the watchdog on paperwork. In the last 
administration, OMB failed to push the IRS and other Federal 
agencies to cut existing paperwork. Even worse, according to 
the GAO--and I apologize for all these acronyms--according to 
the General Accounting Office, OMB included some paperwork 
adjustments as paperwork reduction accomplishments. The point 
of the Paperwork Reduction Act is to reduce the actual burden 
on the American public, not to simply make it look like the 
burden has gone down through accounting gimmicks.
    As it relates to OMB's actions, instead of a watchdog it 
seems like we have a lapdog. Although many Federal agencies 
impose paperwork burdens, the IRS imposes by far the most, 
accounting for 82 percent of all paperwork. The IRS has had a 
dismal record during the last 8 years, showing few paperwork 
reduction initiatives and virtually no accomplishments. 
According to OMB data, the burden imposed by the IRS last year 
rose by nearly 250 million hours.
    IRS Commissioner Rossotti testified before this 
subcommittee in April 1999 and April 2000, promising more 
initiatives this year. We do look forward to his testimony 
    In addition to increasing burdens by the IRS, numerous 
other Federal agencies promulgated major regulations that 
increased the paperwork burden on the American public. Some of 
these regulations were finalized in the waning hours of the 
Clinton administration. For example, on the very last day of 
the previous administration, the Department of Labor finalized 
a rule changing occupational injury and illness reporting 
requirements. This rule added over 1 million paperwork hours. 
Two days prior to that, the EPA lowered the reporting threshold 
for lead under its toxic release inventory program, increasing 
paperwork by 9 million hours. And, late last December, the 
three principal procurement agencies changed their rules on 
contract responsibility, increasing paperwork by over one-half 
million hours.
    In the 1999 and 2000 hearings, administration witnesses 
testified that much of the paperwork burden was not able to be 
reduced because it was statutorily required; that is, not 
discretionary. As a result, discretionary paperwork requires 
special review by OMB. On January 19, 2001, the Department of 
Labor issued a final rule entitled Occupational Injury and 
Illness Recordkeeping and Reporting Requirements. It added over 
1 million discretionary paperwork hours. It added requirements 
for reporting injuries and illnesses that have no, or 
insufficient, relationships to the workplace, including those 
occurring in home work offices.
    In addition, this rule removed protections for the privacy 
of individual employees by requiring disclosure of the names of 
employees and their injuries. Much of the new paperwork has no 
practical utility, since Department of Labor is precluded from 
regulating home offices.
    These are but a few examples of the new discretionary 
paperwork. Such burdens should necessitate close scrutiny by 
OMB before they are imposed on the public. Federal agencies 
must be forced to find less burdensome ways to collect their 
information. Reducing government red tape and paperwork is not 
a partisan issue. With the technology available today, there is 
no reason why the burden on the American public cannot be 
    I am going to recognize Mr. Otter now for purposes of an 
opening statement.
    [The prepared statement of Hon. Doug Ose follows:]
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    Mr. Otter. Thank you, Mr. Chairman. I really do not have an 
opening statement, but I did notice that throughout your 
opening statement one of the areas that we have neglected in 
paying some attention to is the suffering that States and State 
governments and State agencies go through in reporting to 
Federal agencies as well. That has always been one of the areas 
I have been the most concerned about, along with business and 
industry, having been a graduate of both. So I look forward to 
our panel and their statements and their responses to some of 
our questions.
    Thank you, Mr. Chairman.
    Mr. Ose. Thank you, Congressman Otter. If and when other 
members show up, we will enter their statements in the record. 
This committee requires all testimony to be under oath, and so 
I will swear in our witnesses now.
    [Witnesses sworn.]
    Mr. Ose. Let the record show the witnesses all answered in 
the affirmative.
    Mr. Ose. On our first panel today we are joined by three 
individuals: We have Commissioner Charles Rossotti from the 
Internal Revenue Service; J. Christopher Mihm, Governmentwide 
Management Issues Director from the General Accounting Office; 
and Mr. Austin Smythe, Executive Associate Director, Office of 
Management and Budget.
    Gentlemen, we have a lot of questions. I am going to hold 
you to the 5-minute rule, so, Mr. Rossotti, you are first for 5 
minutes with an opening statement.


    Mr. Rossotti. Thank you, Mr. Chairman.
    Mr. Chairman and Mr. Otter, I am pleased to report on the 
Internal Revenue Service's efforts and initiatives to reduce 
the paperwork and administrative burdens faced by America's 
    Through a dual approach of both short-term and longer-term 
improvements, we are working to provide taxpayers both 
immediate and longer far-reaching burden relief. Our short-term 
efforts include reducing the number of taxpayers required to 
file specific forms, simplifying or eliminating forms and 
notices altogether, and making it easier through electronic 
means to file and pay. So let me provide some examples of this 
    Through our efforts, millions of taxpayers are no longer 
required to file the 54-line Schedule D, Capital Gains and 
Losses. They can now use the short and simpler form, which 
greatly reduces their burden in this area. And, by next filing 
season, only 650,000 taxpayers will have to use the long form.
    Last year, I announced the IRS had increased the threshold 
from $500 to $1,000 for required tax deposits. That change 
meant that about one-third of the Nation's 6.2 million small 
business employers would not have to deposit employment taxes. 
This year, to go even further in this area, we have raised the 
threshold yet again from $1,000 to $2,499 in quarterly 
employment taxes. This affects the payment requirements for 
about 1 million small businesses. Through this effort, we are 
estimating now that 78 percent of small businesses can be 
relieved of the burden of making as many as 12 deposits 
annually. This is the most frequent transaction small 
businesses have with the IRS.
    Further, with respect to small business, in April 2000, the 
IRS and the Treasury Department issued a revenue procedure that 
permits qualifying small business taxpayers, with average 
annual gross receipts of $1 million or less to use the cash 
method of accounting. The new procedure has tremendous impact 
on lessening the recordkeeping and tax-cutting burden for small 
businesses. We estimate now that the overwhelming majority of 
small business taxpayers who otherwise would have been required 
to use the accrual method are now allowed to use the much 
simpler and easier to understand cash method.
    Another area reflecting individual taxpayers, due to an 
agreement between the IRS and the Postal Service, as well as 
some internal systems improvements, taxpayers who move after 
filing their tax returns will now have their addresses 
automatically updated, even if they don't notify us. We 
estimate that this initiative will substantially reduce about 5 
million pieces of undelivered mail we get back each year.
    Again, in terms of saving trips to the post office, we are 
estimating that 100 million taxpayers will be downloading forms 
this year from our Web site, saving them trips to the post 
office. I mentioned that another fruitful area is providing 
electronic options, including the Internet to conduct 
transactions with the IRS rather than the more time-consuming 
process of filling out and mailing in forms, letters and 
payments. We, this year and next year, are eliminating the 
paper signature requirement for e-filing and are adding more 
schedules to our 1040 programs. So next year, 99.1 percent of 
all taxpayers will be able to file electronically with no 
paper. And, for the first time ever, even taxpayers who need an 
extension this season can do so with just a simple phone call, 
no paper.
    Still another area we are testing are electronic tax 
payment systems. So for those small businesses that do have to 
make tax deposits, they will be able to do that again over the 
Internet with no paper.
    I think these are significant short-term steps, but there 
is obviously more work to be done. And, through our long-term 
modernization efforts, we are working through our business 
systems improvements and our work with customer groups in 
figuring out how to reduce burden for all types of taxpayers 
beyond what we have so far accomplished. As a matter of fact, 
we recently completed our strategic plan that was approved by 
the IRS Oversight Board, and one of the key strategies in that 
plan, in fact, is reducing taxpayer burden. This can be done in 
a variety of ways, such as the ones I have mentioned, which 
includes not only redesigning of forms but most especially 
eliminating them completely, using electronic approaches where 
possible, and even where filings are required reducing the 
amount of errors that exist in these forms and filings so that 
they will not have further burdens after they file.
    While we continue to focus aggressively on reducing burdens 
both in the short term and long term, I do want to note for the 
committee that our efforts at paperwork and burden reduction 
are limited by the requirements of the tax code and its 
inherent complexity. We are issuing a report, as required by 
law, we issued one last year and will be issuing another one 
this year, on key sources of complexity in the tax code, and 
that will identify some areas that we believe are fruitful for 
    In addition, we have a whole new model that we are 
developing on how to measure burdens which we think will be 
helpful in identifying future areas.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Rossotti follows:]
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    Mr. Ose. Thank you, Mr. Rossotti. Next will be Director 
Mihm from the GAO. Mr. Mihm for 5 minutes.
    Mr. Mihm. It is a pleasure and honor to be here today, and, 
Mr. Chairman, I will take your guidance and just hit the 
    Obviously, Federal data information collection is one of 
the ways that will help Federal agencies carry out their 
missions. Notwithstanding the importance of information to 
Federal efforts, however, under the Paperwork Reduction Act, 
Federal agencies are required to minimize the burden that they 
impose upon the public. In this regard, the Paperwork Reduction 
Act set ambitious goals to help minimize the burden.
    As shown in figure 1 on page 4 of my written statement, and 
on the screens in front of you, these goals are far from being 
met. As you can see, if we had reduced Federal paperwork at the 
schedule anticipated in the Paperwork Reduction Act, the 
current level would be about 4.9 billion burden-hours per year. 
However, we have not met that goal and are now up to 7.4 
billion burden-hours per year.
    As you mentioned in your opening statement, Mr. Ose, the 
increase over the last year is largely attributable to the IRS. 
In fact, for the rest of the government, they actually 
decreased its burden estimate by about 70 million burden-hours 
during the last fiscal year.
    As you also mentioned, Mr. Ose, the IRS accounted for the 
lion's share of the governmentwide burden estimate. In fact, 
about 95 percent of the Department of the Treasury's estimated 
burden increase during fiscal year 2000 was attributable to two 
IRS forms, the 1040 and the 1040A, and the accompanying 
schedules with those forms.
    Therefore, although all agencies must ensure that their 
information collections impose the least amount of burden 
possible, it is clear the key to controlling Federal paperwork 
governmentwide lies in understanding and controlling the 
increases at the Internal Revenue Service. As Commissioner 
Rossotti detailed, IRS has a large number of initiatives under 
way to help reduce the taxpayers' burden, and many of these 
initiatives appear to be quite favorable.
    In terms of other Federal agencies, on table 1 of my 
prepared statement, it is actually on pages 6 and 7, the 
situation is far more mixed. Some were successful in reducing 
their paperwork burden estimates, while others increased their 
estimates. Also, and that is a point I would underscore, some 
of the reported reductions in agencies' estimates were not 
attributable to specific agency actions to reduce those 
burdens. Rather, they were, for example, reestimates, in this 
case obviously reduced estimates, of the burden associated with 
the particular data collection. In other cases the reported 
reduction was the result of actions outside of the agency, such 
as a reduction in the number of individuals applying for a 
particular benefit.
    In regards to violations of the Paperwork Reduction Act, 
another topic you asked us to cover, the agencies identified 
for OMB a total of 487 violations of the act during fiscal year 
2000. Now, this is a significant reduction over the 710 
violations that they identified during fiscal year 1999, and in 
that sense that is good news. However, even though the number 
of violations went down, we do not think there is cause for 
celebration when there are still 487 violations of the 
Paperwork Reduction Act over a 1-year period. Some of these 
violations have been going on for years and they collectively 
represent substantial opportunity costs, as detailed in my 
prepared statement.
    OMB has taken some steps to encourage agencies to comply 
with the Paperwork Reduction Act, and those steps appear to be 
paying off in terms of the fewer reported violations. For 
example, OMB has added information about recently expired 
approvals to its Internet homepage. This allows the potential 
respondents to be informed about those data collection efforts 
that may be in violation.
    Nonetheless, as we have said for the last 2 years, we 
believe that OMB can do more to ensure that agencies are not 
conducting information collections without proper clearance. 
For example, OMB could better identify information collections 
for which authorizations are about to expire, contact the 
collecting agency to see if the collection is still needed and, 
if so, work with that agency to get collection reauthorized 
    In cases where data collections are found to be in 
violation, OMB could take any of a number of actions, which we 
have outlined, such as placing a notice in the Federal Register 
notifying the public it does not need to provide the agency 
with information requested in the expired collection.
    In summary, Mr. Chairman and Mr. Otter, the need for 
agencies to collect information to accomplish their missions 
and protect and enhance the well-being of the American people 
does not need to be inconsistent with the Paperwork Reduction 
Act's requirements that all data collections be authorized. In 
fact, we believe the more clearly agencies can demonstrate the 
value of those collections, the easier it should be for them to 
obtain OMB approval and public support.
    This concludes my statement. I am happy to respond to any 
questions you may have.
    [The prepared statement of Mr. Mihm follows:]
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    Mr. Ose. Thank you, Mr. Mihm. Our third witness on the 
first panel is Mr. Austin Smythe, who is the Executive 
Associate Director for the Office of Management and Budget, 
recognized for 5 minutes.
    Mr. Smythe. Mr. Chairman, Sean O'Keefe was originally 
scheduled to testify. He cannot be here because he has been 
asked to meet with the President.
    Our past practice is that only Senate-confirmed officials 
appear. I am not a Senate-confirmed official, I am a political 
appointee in the Bush administration, but the Director and the 
Deputy Director wanted to be responsive to the subcommittee's 
need to hear from OMB, so they asked me to appear on OMB's 
    Mr. Ose. We welcome you.
    Mr. Smythe. Thank you. We still have four more Senate-
confirmed positions at OMB to fill. Two of those in this area 
that are particularly important are John Graham, the OIRA 
Administrator. We hope to get him confirmed in the Senate 
shortly. The other is the Deputy Director for Management. The 
President has not nominated anyone yet for that position, but 
we hope to find an individual for that spot and to get that 
slot filled.
    While we are a bit shorthanded now, we hope to have a 
quality team in place to meet all of OMB's responsibilities, 
including a vigorous effort to minimize the paperwork burden. I 
am not an expert on the Paperwork Reduction Act, but I have had 
a chance to study up on it and I just want to sort of provide 
an overview today.
    I would start by saying we very much applaud the objectives 
of the act, and that is to minimize the paperwork burden on the 
public and to maximize the usefulness of data that is 
collected. Actual experience with paperwork reduction shows 
that both Republican and Democratic administrations have 
struggled on trying to meet the paperwork reduction goals 
called for in the Paperwork Reduction Act.
    If you look at the overall experience of the past 2 
decades, the Congress has set a reduction of 5 to 10 percent in 
paperwork. If you look at that total period, it works out to be 
an 85 percent reduction between 1981 and 2001. We estimate that 
the total annual burden of Federal information collections 
actually went up by over 50 percent during this period.
    In our minds, unless Congress and the administration are 
willing to make some dramatic changes to the laws and 
administrative procedures that generate a lot of these 
requirements, these goals are going to be very difficult, if 
not impossible, to achieve. But, we feel that we should reduce 
the paperwork burden in a responsible manner, form by form, 
regulatory requirement by regulatory requirement. However, 
making blanket reductions under these requirements that we 
currently face does not make sense to us at this stage.
    Since 1981, looking at past experience, Americans answering 
Federal questionnaires went up by roughly 24 percent, national 
economic activity tripled, Federal agencies issued nearly 
100,000 regulations, and Congress enacted over 5,000 laws. 
Based on statutory direction given by Congress, Federal 
agencies provide the American people with an array of 
protections and services, from health and safety to collecting 
taxes necessary to finance all these activities. To carry out 
these and other responsibilities, the Federal Government 
collects information, lots of information, from grant 
applications to tax forms, from medical reports to monitoring 
job opportunities for foreign nationals.
    Whenever Congress enacts new legislation, it frequently 
expands upon this burden. I could go through a number of 
statutes. I will not do that, but Gramm-Leach-Bliley expanded 
on this burden, the Taxpayer Relief Act expanded on this 
burden, and so forth.
    In addition to passing laws increasing the level of 
paperwork burden, Congress also imposes its own reporting 
requirements on the Federal agencies. Last year's omnibus 
appropriations bill included requirements for 75 reports to 
Congress. It had 25 separate provisions calling for information 
to be collected from the public. Even when Congress seeks to 
eliminate reporting requirements, there is a tendency to 
restore certain reports. Congress should be applauded that in 
1995 it passed a statute calling for the elimination of a 
number of reports. But, since then, Congress has reimposed over 
250 of those reports.
    The Federal agencies and OMB can do a lot more in reducing 
the paperwork burden and recordkeeping requirements. The 
Paperwork Reduction Act requires agency CIOs to certify the 
need for information collection and the burden it imposes. OMB 
must review information collection activities to assure that 
CIOs are meeting their responsibilities. But the Bush 
administration and OMB and OIRA cannot solve this problem 
alone. Congress must be part of the solution.
    In the case of budget legislation, I am familiar with the 
budget process, the law requires an assessment of the budget 
cost of legislation. Something Congress may want to consider is 
to assess more thoroughly the paperwork burdens for legislation 
as it is enacted. We ought to minimize reports that agencies 
must send to Congress, and I think we ought to work together to 
identify and correct provisions of existing laws and proposals 
in new legislation to correct burdensome paperwork 
    While I am not an expert on the Paperwork Reduction Act, I 
urge that we work together to assure the Federal Government 
minimizes the burden on the public as it collects needed 
information. Thank you very much, Mr. Chairman.
    [The prepared statement of Mr. O'Keefe, as delivered by Mr. 
Smythe follows:]





    Mr. Ose. Thank you, Mr. Smythe. I thank the witnesses for 
the brevity of their remarks. We will go to questions now on 
this first panel. I will start. I see Mr. Shays has joined us. 
He will be back.
    I want to ask Mr. Smythe, at OMB, as it relates to the 
Paperwork Reduction Act, does the administration support or not 
support the Paperwork Reduction Act?
    Mr. Smythe. It supports the Paperwork Reduction Act.
    Mr. Ose. So there are requirements within that act for OMB 
to look at, if you will, requests for discretionary 
information; the difference between statutory and 
discretionary? OMB is required to look at agency requests for 
discretionary information. Am I correct on that?
    Mr. Smythe. That's correct.
    Mr. Ose. In terms of submittals, is OMB receiving any such 
submittals that you are aware of, and what is OMB doing with 
those submittals?
    Mr. Smythe. I would have to go back and get back to you on 
the specifics of that. I have only had a chance to review it 
    I think one of the problems we face is that we get requests 
on a piecemeal basis. We don't look at an entire program. We 
get a form or a reporting requirement that we are asked to 
approve and it puts us in a situation where we could reject on 
a piecemeal fashion some of these discretionary requests. On 
the other hand, it may make sense for us to sort of step back 
and look at the overall requirement to try to see how this fits 
into the overall demands.
    But I want to stress, I think if there has not been a 
strenuous effort on paperwork reduction, we want to do more. We 
want to scale back on these reports where they are not 
necessary. We need to get the agencies more involved. The 
statute calls for the agencies to be more involved. We want to 
get them more involved in reducing these burdens instead of 
landing them at OMB. They ought to start in their houses in 
reducing this. But, Mr. Chairman, we want to work with you all 
to address this problem.
    [The information referred to follows:]
    [GRAPHIC] [TIFF OMITTED] T9868.040
    Mr. Ose. In terms of the different agencies, like 
Agriculture or Defense, or HHS, or any of that, and I actually 
read Mr. O'Keefe's prepared testimony, but I didn't see any 
specific suggestions. I saw some generalities that Congress is 
passing laws that require reporting of information, but how 
about some specifics in terms of how we go about reducing 
paperwork within some of these agencies?
    Mr. Smythe. I think it is a bit premature for us to try to 
get into those specifics. I think we are not equipped at this 
stage. I think we need to get the OIRA Administrator confirmed 
and get him involved in this process. I do not want to make it 
sound like we are trying to shirk our duties here. We are not 
trying to do that. We have been a little busy. We have been in 
office now for 3 months. There are a lot of things on our desks 
we are trying to deal with.
    So what I would like to suggest is that we get back to you 
with some proposals in terms of areas where we can make some 
    [Note.--The information referred to was not provided.]
    Mr. Ose. Actually, Mr. Smythe, I am on your side here. I 
want to be clear about that. But there are some issues here 
that trouble me, and one is that we were supposed to have the 
2001 ICB, the information collection budget and we did not get 
that. When can we expect that?
    Mr. Smythe. Well, I think we have two reports in the works. 
We did not want to just simply take what we had, put a cover on 
it, and send it up to Congress. We have tried to take a look at 
those things.
    My recollection is there is a regulatory budget that's 
normally required to be submitted with the President's budget 
and it usually comes up with the President's budget. My 
understanding is that should have been sent to the Federal 
Register, or should shortly be submitted to the Federal 
Register for comment.
    The separate report you talked about, the ICB, is still 
under OMB review. I cannot give you an exact date, but we are 
going to deliver that report to the Congress.
    Mr. Ose. There is a report due on July 1st from OMB 
regarding the extent to which the PRA has reduced burden. It is 
supposed to evaluate the extent by which the PRA has reduced 
the burden imposed by each major rule with more than 10 million 
hours of paperwork burden, and it is supposed to identify 
specific expected reductions in fiscal year 2001 and fiscal 
year 2002.
    Is that report that is supposed to be here by July 1 going 
to be here by July 1?
    Mr. Smythe. Yes.
    Mr. Ose. I want to recognize Mr. Otter for 5 minutes.
    Mr. Otter. Thank you, Mr. Chairman. I am going to begin 
with Mr. Rossotti, if I might. And this is sort of a three-
phase question, so bear with me, if you will, Commissioner.
    Does the Internet application of your reporting 
responsibilities actually reduce the amount of paperwork that 
is required, and paperwork here let us say is synonymous with 
time spent in front of the machine clicking on various options; 
and are the forms the same, will they appear the same on the 
screen for the computer; and, finally, is the only difference 
really that I have got to put a stamp on it and go to the 
mailbox instead of clicking on send?
    Mr. Rossotti. Let me try to explain a little bit because 
there is more than one way to do this.
    In terms of the Internet, the Web site that the IRS has 
right now, the thing that you can do that is most directly 
related to forms is simply get the forms. That is just 
downloading a form, and we had 100 million of those. So the 
time that is saved with that has nothing to do with filling out 
the form, it has to do with getting the form.
    That is not an insignificant point, because people often 
find they need a certain schedule or a certain form that they 
did not have, and you hear stories about I had to go to the 
post office to try to find that or write in. So the time saved 
on just that one kind of thing is simply getting a form. It 
does not change the form.
    The other big part, though, the actual preparation of, say, 
the 1040 form is done in today's world primarily by taxpayers 
either buying software from private vendors that prepare their, 
say their 1040 form and then filing it with us, or signing onto 
a private sector Web site that provides this service. That is 
not software that is provided by the IRS. In fact, the IRS is 
precluded from being in that business based on provisions that 
have been attached to various appropriation bills and through 
the Restructuring Act. So the role of the IRS is to work with 
the private software industry to provide those various products 
that allow taxpayers to prepare their software on their home 
computers through the Internet.
    This is a rapidly growing part of the population, where we 
are estimating that about 13 million to 15 million taxpayers 
this year actually did their returns that way, at home, through 
that software.
    Mr. Otter. Do you have an estimate of the time saved?
    Mr. Rossotti. Well, we do not have the estimate for the 
time saved yet.
    Mr. Otter. How many did you have last year?
    Mr. Rossotti. What's that?
    Mr. Otter. How many did you have last year?
    Mr. Rossotti. I do not have the numbers that we had. We had 
about a 35 percent increase this year in the number that were 
filed. There are some people that prepare them and then send 
them in by paper, so there is another variety of options there.
    But I think the reason this is growing so fast is that it 
makes the whole process easier for the taxpayer. Whether it 
actually saves time is something we are getting measurements 
on. And it may be that it does not actually save the amount of 
time that it takes to do the whole process in terms of 
preparing it, but what it does----
    Mr. Otter. You have hit on the essence of my question, 
because I know before I can click on go there is probably an 
awful lot of paperwork that I do not have on the computer 
screen. But eventually what I am clicking to you is the answers 
that may have taken hours and hours and hours to ascertain.
    I do not want to beg the question, but on the other hand, 
it seems to me that simply shifting the venue by which I use, 
in order to send the master copy to the IRS, if ultimately the 
paperwork reduction has not been achieved according to the 
request of the PRA, then we really have not, I think as has 
been testified to by both Mr. Smythe and Mr. Mihm, we really 
have not achieved the goal of the PRA. So subsequently we are 
still filling out paperwork and we are not plowing the fields. 
We are not doing the work.
    Mr. Rossotti. There is no question that the requirements to 
provide the information are the driving factor, whether you do 
it through a computer or you do it through paper, although 
there are some significant benefits in terms of use of the 
computer. But I do not disagree with your point.
    The underlying driver is the need to collect the 
information, and the use of the computer has certain benefits 
in terms of doing that. But the underlying requirement is the 
requirement that is imposed by the statutes and then as 
interpreted by us through these different forms.
    Mr. Otter. Thank you, sir. Mr. Smythe and Mr. Mihm, I will 
ask you both this question because I am running out of time. It 
seems to me that rather than within the bureaucracies you both 
operate within, you only 90 days, and I do not know how long 
you have been here.
    Mr. Mihm. Substantially more than 90 days.
    Mr. Otter. All right, substantially more than 90 days. 
Other than operating within those agencies themselves, and 
perhaps going through a certain amount of bureaucratic incest 
in the process of trying to reach goals for the PRA, have you 
ever sought to go out into the marketplace itself and say, 
geez, here you, small businesses, like the small independent 
business group, where is the burden? You tell us. Here is the 
mission; here is what we need to know for OSHA, for EPA, for 
IRS, for the whole alphabetic group. Here is what we need to 
know. Now, why do you folks not sit down together and design a 
simple form that will do that?
    Have you ever done that with farmers, with small business 
groups, with anybody that has these reporting responsibilities? 
And if not, why not?
    Mr. Mihm. I can go first. Do you want to?
    Mr. Smythe. Well, I have not done it in the 90 days I have 
been there. The President has an Interagency Working Group on 
federalism and feels very strongly about working with States 
and localities. In my mind, that would be one area we might 
want to look at, to try to find out how they might view some of 
these burdens and get their feedback there.
    Again, I would want to defer to the OIRA Administrator, 
when we get somebody confirmed in that spot, to really pursue 
that, but I think it is an excellent suggestion.
    Mr. Mihm. At the request of Congress, we have attempted to 
look at the cumulative burden that is put on businesses and 
local governments, this is in a study a number of years ago, 
and found, as I think Mr. Smythe was alluding to in his opening 
statement, that a lot of these burdens are just put on, as you 
put it, sir, by individual agency incest; each agency is 
putting on its own burdens unaware of how that may interact or 
how that may be duplicative of other burdens imposed by 
    We did not go, and we were not asked to go to the next step 
to see concretely what sort of opportunities were there to 
start with business and then work back into the Federal 
regulatory process.
    Mr. Otter. Thank you.
    Mr. Ose. Mr. Mihm, on page 13 of your written testimony, 
you have an example of violations that would probably fall in 
the egregious category. Six of USDA's collections have been in 
violation for over 2 years of OMB approval, four have been in 
violation for 3 years. The Department of the Interior indicated 
that four of their collections have been in violation for more 
than 5 years, but no action has been taken to correct.
    I want to make sure I understand what you are driving at 
there. As I understand your point, the agency has put out a 
request or a form to provide certain information. It has not 
gone to OMB and had the procedural sign-off accordingly.
    Mr. Mihm. Yes, sir. Most typically these are where they had 
gotten an initial authorization, and OMB under the Paperwork 
Reduction Act can give a 3-year authorization for data 
collection. That authorization has expired and then the agency 
has not returned to OMB for this extended period of time.
    What makes this particularly troublesome from our 
perspective is that the vast majority of cases where there is a 
violation it is for a relatively short term, weeks or even a 
few months. These types of cases that go on for years and years 
are ones that need to be attacked, or looked at rather.
    Mr. Ose. Mr. Smythe, what about that? If OMB does not track 
the expired collection requests, how do we know when they have 
expired and how do we know when they're applicable? My point 
being is that before asking our citizens for something that we 
can't procedurally ask for, it seems to me like we are creating 
a culture of almost disrespect.
    I am just trying to strike at that. If we are asking for 
something, we at least ought to have the procedural ``I's'' 
dotted and the procedural ``T's'' crossed.
    Mr. Smythe. I am not aware of the specifics on the 
Agriculture example or the Department of the Interior example. 
What we can do is look into it for you, Mr. Chairman, and find 
out what the past experience has been and get back to you in 
terms of how we would propose to address it. But I just can't 
speak to the individual cases that GAO has just referred to.
    [The information referred to follows:]
    [GRAPHIC] [TIFF OMITTED] T9868.041
    Mr. Ose. Well, again on Mr. Mihm's testimony, on page 12, 
there is a table that shows the 487 reported violations that he 
referenced, and I imagine we could get an item-by-item list 
from GAO and perhaps we could send you a letter and ask you for 
a response.
    I just have a hard time understanding when we set up the 
law that says we will have these procedural hurdles met before 
we put this burden on our citizenry, why it is that we aren't 
complying with the procedural guidelines.
    Mr. Smythe. Well, we will review it and get back to you, 
Mr. Chairman.
    [The information referred to follows:]
    [GRAPHIC] [TIFF OMITTED] T9868.042
    Mr. Ose. All right. I appreciate that.
    In terms of OMB's actual latitude in dealing with this, do 
you have any sense of what options exist for you? I mean, 
obviously, you can put something in abeyance, you can reject 
it, you can approve it, you can take it under advisement. As it 
relates to these 487, in general what options exist at OMB for 
dealing with this?
    Mr. Smythe. Again, I am not going to try to get into each 
of the agencies' violations and how we respond to this 
particular matter. I think in general the President has a great 
desire for better management of Federal agencies. If we have a 
situation where agencies are not complying with the law, that 
is something we want to change, and we are going to look into 
    I would go back to the beginning of my testimony, that we 
need to get the DDM confirmed. He's a key official on the issue 
of chief information officers. The OIRA Administrator, in terms 
of the day-to-day activities, will be a key official. But, I 
can make the statement if there are these violations, we want 
to address them.
    Mr. Ose. I do recall the first time I met Mr. Daniels, I 
had the opportunity to ask them who is your OIRA person, and at 
that time Graham had not been identified. I guess that was 45 
days ago. So I know your comments earlier that you had not been 
Senate confirmed, perhaps we have found some of the impediment 
    I do want to go back to Mr. Rossotti. Mr. Otter was talking 
about the preparatory paperwork before you click through on 
your submittal. One of the issues that comes to mind in that 
regard has to do with the alternative minimum tax. I'd be 
curious what the IRS is doing or considering relative to easing 
the paperwork burden of that particular calculation.
    Mr. Rossotti. Well, first let me just say that the 
alternative minimum tax is a significant complex portion of the 
tax code, and it is going to get a lot worse if it continues in 
place because more people will be affected by the alternative 
minimum tax. And, of course, there frankly is limited--we are 
looking at this, but there is relatively limited flexibility 
that we have to simplify this by redesigning forms. I mean, 
unfortunately, the complexity is largely built into the 
statutory requirements.
    I will give you some numbers, though, because I think you 
are pointing in a direction where if you want to really talk 
about increasing burdens, this could be measured. In tax year 
1997, which was filed in 1998, we have very complete 
statistics, and we had about 618,000 taxpayers who filed Form 
6251, which was the particular form for the alternative mimimum 
tax. But what is interesting is about seven times that many 
that actually paid, about seven times that many taxpayers had 
to fill out the form to calculate whether they needed to pay. 
So you have almost a worst case here, seven times as many 
people have to go through this exercise in order to find out if 
they have to pay.
    But, what is I think more alarming is that our estimates 
are that this number is going up over 1 million during the past 
year, actual payers, not the ones that calculate, and it could 
go up to, in 5 years, as high as 6 million that would actually 
be paying. If you multiply that by how many would have to be 
completing the form, you could be talking about tens of 
millions of taxpayers that would have to be completing this 
    So, I think in terms of burden and the issues of going 
through the process of calculating your tax forms, this is 
definitely a significant item. I am not going to say there's 
nothing the IRS can do about it. We are certainly looking at 
it. But, frankly, up until now we have not found any highly 
fruitful area to simplify just the forms process. You get back 
to the underlying statute.
    I will say that in the complexity report that the IRS is 
required to produce each year for the Congress, this is one 
area that we are going to be reporting on in more detail. This 
report will be coming out with the support of the Treasury 
Department in the next couple of months, and it will lay out 
even more some additional data in this area.
    Mr. Ose. My time has expired. I will come back to this 
question on the second round. Mr. Otter.
    Mr. Otter. Thank you very much, Mr. Chairman. Mr. Rossotti, 
in the first round I asked the GAO and OMB if they had gone to 
the victims, so to speak, and said here is our mission, this is 
what we need to achieve. Has the IRS done that?
    Mr. Rossotti. As a matter of fact, we not only have, we do 
it every year.
    Mr. Otter. Which groups have you gone to?
    Mr. Rossotti. I have a list of nine groups here we go to on 
a regular basis. Most of these are practitioner groups that 
represent business, like the National Association of Enrolled 
Agents, the National Farm Income Tax Extension Committee. These 
are committees who are representatives of people that generally 
are involved in tax preparation services. We also had a special 
conference last year in conjunction with OMB with small 
business representatives.
    We meet with these groups on a regular basis and go over 
specific items with them for the very purpose that you are 
talking about. We also vet all of our draft forms, our new 
forms, by sending them to these groups, posting them on our Web 
site, getting comments back and so forth.
    So, we have a regular process we use to try to solicit 
comments from interested groups that are involved with tax 
    Mr. Otter. Let me ask this question in a different way. I 
do not mean to cut you off, but I think I already got the gist 
of your answer. I am not interested in going to the accountants 
and saying, how much more work do you want or how much of the 
work you now do for me do you want me to cut out. What I am 
interested in doing is going directly to the farmer. Now, if he 
has an intermediary that converts what he's done into your 
language, I am not interested in getting a response from that 
person, because it would seem to me it would be in their best 
interest to keep those rules and regulations coming.
    I want to know if you have actually gone to the payor and 
said to the farmer, how much of this stuff is really necessary 
in order to arrive at the information that I need to assess the 
level of taxes that your government has sought to inflict on 
you? To the small businessperson. To the large businessperson.
    Mr. Rossotti. We have to work with their representatives in 
some form. We have no way of going--except through the Web 
site, where we do get individual comments from taxpayers, but 
generally speaking we work through various associations and 
industry groups. They are not all accountants. There are 
various industry groups. For example, this Farm Income 
Extension Committee is a group of people that are, I think, 
based out of the University of Oklahoma that involve various 
farmers, actually. In fact, I spoke to one of them in Oklahoma 
last week.
    Last year we did have this open house where we invited not 
only these practitioners groups, but also people from different 
small business associations to participate. So, I think we have 
tried as best we can. We are actually going to be doing more of 
this. We have beefed up our partnership outreach, as we call 
it, to actually go out to talk to particular small business 
    I will say to you, though, that some of these 
practitioners, especially people like the enrolled agents that 
represent a lot of small business groups, if you were to meet 
with them, they're very vocal about trying to reduce the 
complexity of the forms that they file. They take the position 
of trying to represent their clients, I think.
    Mr. Otter. The nine groups which you met with last year, 
what was the total reduction they came up with, and did you 
affect that?
    Mr. Rossotti. I think the No. 1 thing they recommended we 
work on was the capital gains form. We have had 3 years where 
we have done some improvements to the capital gains forms.
    Mr. Otter. How much have you reduced it? What are the 
actual hours?
    Mr. Rossotti. I can tell you that.
    Mr. Otter. Sheets of paper.
    Mr. Rossotti. I can give you that in a second here. We have 
reduced capital gains. We have done three things. The first 
thing we did was to eliminate the need for people with mutual 
funds to fill out the capital gains form and put it directly on 
the 1040. That was 23 million hours reduced for 6 million 
taxpayers. In the 2001 filing season, we did the same thing for 
1040A filers. That's about 2.2 million hours. In the next 
season what we are doing is, actually for the remaining people 
who still have to fill out Schedule D, we are reducing it from 
54 lines to 40 lines, which we estimate is going to save about 
6 million hours and means that basically only about 650 filers 
will have to fill out the full form.
    So that is one, that was viewed as the No. 1 problem area 
or complaint area, so we focused on that one.
    Mr. Otter. Mr. Mihm, 31 million hours, Mr. Rossotti said 
that they have reduced. Do you agree with that?
    Mr. Mihm. Well, we have not looked exactly at what the IRS 
has done in terms of Schedule D. I would note, though, that 
overall for IRS that was a sizable increase last year. So 
notwithstanding any reductions in streamlining and real ones 
they took on for the Schedule D that we all benefited from, 
overall there was a 180 million or so hour increase in regards 
to IRS.
    Mr. Ose. Mr. Rossotti, I want to go back on the AMT issue. 
If we have a million people now who actually have to file that 
form and you are expecting it, I think your testimony was 
possibly seven times that many in the near future.
    Mr. Rossotti. Up to six times, yes.
    Mr. Ose. OK, 6 million people. Does the Service have any 
sense of the amount of time required in preparing that form per 
    Mr. Rossotti. I do not have that with me this morning, but 
that is a number I could get for you and get back to you on. We 
just need to take these numbers--I just did not have it 
available this morning, but we could make that estimate for 
    [The information referred to follows:]
    [GRAPHIC] [TIFF OMITTED] T9868.043
    Mr. Ose. What generically is it? Is it an hour, or is it 5 
hours? Do you have any recollection?
    Mr. Rossotti. I don't have a personal recollection. I might 
have some staff that can give me that during the hearing.
    Mr. Ose. If you will provide that, that will be very 
    Second item, on the actual forms, and I am looking at this 
on a comparative basis, between someone who files a paper-based 
return versus someone who files an electronic return. When you 
file an electronic return, I presume you fill in your basic 
personal data once, whereas on a paper return, depending on 
what forms you have to use, you end up inserting your name and 
the personal data over and over and over.
    I am curious whether or not the Service has looked at, for 
instance, when I receive my personal form every year in the 
mail, it has the little peel-on, stick-on label, but the 
interior is not filled out. It does not have any of the 
personal information. Is it possible when you send, for 
instance, to Doug Ose in Sacramento, his return, to take that 
basic information and embed it in the forms?
    Mr. Rossotti. I don't know. I could find out. I could check 
into that and get back to you. That is a thought.
    Mr. Ose. I mean, to put your name and address and Social 
Security number over and over and over.
    Mr. Rossotti. Just, really, your Social Security number and 
your name is generally enough to repeat the address. But the 
question is could we put the name and Social Security number, 
which are really the two pieces of identifying information that 
you need, and I do not know the answer to that. But it's an 
interesting thought, and I'd like to be able to investigate 
that and get back to you.
    [The information referred to follows:]
    [GRAPHIC] [TIFF OMITTED] T9868.044
    Mr. Ose. It would seem to me that, based on prior-year 
returns, at whatever point you can get the current data from a 
final basis, the Service technologically ought to be able to 
embed in the new returns being mailed out for a future 
submittal of that base data.
    Mr. Rossotti. Let me look into that for the attachments and 
see if that is a possibility.
    [Note.--The information referred to was not provided.]
    Mr. Ose. I would appreciate that. The other question I have 
relates to the incentives that IRS uses in its Senior Executive 
Service in terms of identifying paperwork reduction as a 
measurable performance standard.
    Does the current SES performance standard include paperwork 
reduction thresholds or objectives? If it does, is there a way 
to improve them or increase their importance, what have you?
    Mr. Rossotti. What we have been moving to, and I think 
there is a possibility of going in that direction, because what 
we have been doing is with our new reorganization of the IRS we 
have identified, for both individual taxpayers and small 
business taxpayers, which is where most of the paperwork 
problem is, and not just the paperwork, but the overall burden 
of complying with the tax system, individuals within those 
units that are responsible for the taxpayer education, 
communication, basically the forms and everything that has to 
do with the filing and prefiling area. I think what we have 
done with those people is basically make them the accountable 
executives, if you will, for trying to make the whole process 
of complying with the tax system easier.
    That includes more than just the paperwork, but it does 
include all the burden that is involved with applying the 
system. So, I think it would be possible to take your concept 
and embed that as part of the goals and objectives for those 
particular executives.
    Mr. Ose. I do not know quite the structure it would take, 
but I certainly understand the cause and effect of making a 
specific performance standard be a reduction of paperwork 
    Mr. Rossotti. Yes. I would only want to make sure that it 
was considered broadly enough, because as we know, the current 
methodology for strictly dealing with forms is a bit limited. 
But let me take that concept under advisement. I think there is 
a good concept there.
    Mr. Ose. I am tempted to ask you what the manager's 
performance standards are, but I really don't want to put that 
in the public domain, because then we will have the internal 
code completely gamed, but I would appreciate your review of 
that. And I want to make sure that I understand that--is that a 
commitment on your part to look at it?
    Mr. Rossotti. Yes, I will.
    Mr. Ose. I like to use that word, ``commitment.''
    Mr. Rossotti. Well, actually, we call them commitments 
internally. So I will. As long as we can interpret it broadly 
enough, I think it is a good concept.
    Mr. Ose. All right. Mr. Smythe, if I might, one of my 
favorite--I say that somewhat facetiously. Not entirely, but 
somewhat. One of my most interesting agencies in my district is 
the Bureau of Reclamation, and we are going to hear testimony 
from one of my constituents later today about, if you will, the 
statutory versus the discretionary information requests.
    I would commend to you his testimony for review. Because 
having represented this district now for more than one term, 
actually more than 3 days, if you are the member from the Third 
District of California it takes you 3 days to get a clear 
understanding of this, the overwhelming requests for 
information absolutely unrelated to bureau operation or need is 
ridiculous. It is Mr. LeGrande's testimony.
    I just think OMB needs to look at this stuff. These 
requests for information are imposing a huge burden on my 
farmers. We would all be far better off if they were out in the 
field working than in the office filing paperwork for which 
there is no statutorily approved basis for the collection of 
the information therein.
    So I just offer that to you for your evening reading, if 
you will.
    Mr. Smythe. I will review it.
    Mr. Ose. Mr. Otter, for 5 minutes.
    Mr. Otter. Thank you, Mr. Chairman.
    Mr. Mihm, is Congress part of the--I'm the new kid on the 
block here. I'm 90 days, too, Mr. Smythe, 90-day wonders. Are 
we part of the problem?
    Mr. Mihm. Well, it depends on how you define ``problem.'' 
Clearly there are statutes that Congress passes, and many of 
these--or more recent ones are detailed in Mr. Smythe's 
testimony, which entail in their implementation additional 
paperwork burdens put on the American people. The question in 
each case, though, has to be a careful balancing as to, is that 
additional burden that's placed on the people worth the value 
that we're getting from that information. So, in that sense, 
Congress is the source of a lot of this paperwork burden.
    It's also agency actions, though, that are also the source. 
I would underscore what Mr. Smythe said. There's plenty in the 
sense of blame to go around, or I guess in a more positive way, 
there's a lot that all of us can do to attack the paperwork 
    Mr. Otter. Let me ask both the General Accounting Office 
and the Office of Management and Budget. At the same time, 
then, how do we red-flag this? How do we say--you see, because 
we can't have it both ways, really. I mean, if we think the 
risk--the labor that has to go through is worth the benefit 
that we're going to receive so that we can, ``plan the 
economy,'' make adjustments for the future where we need to in 
order to be the leaders--provide the leadership that we're 
supposed to for this country, how do we red-flag that?
    Do we say, look, we want this great, marvelous idea. How 
many hours is that going to take for each citizen to comply 
with this? How do we red-flag this? Give me an idea.
    Mr. Smythe. I think there are two ways. One is I think we 
ought to look at existing law and existing programs, an 
inventory of what's going on. I know the President has made--in 
working on the budget, one of our priorities was to eliminate 
duplication in Federal programs. Well, if there's duplication 
in paperwork, that's an area we ought to look at, make sure 
people aren't producing the same report to a multitude of 
    So I would--the one thing would be to look at existing 
programs and what's going on. The other would be to review--to 
review legislation that comes along. My impression is 
legislation is developed--is it's developed without a sense of 
what's going on in other programs. Committees tend to have a 
fairly narrow jurisdiction when you look at the entire 
government as an enterprise, and there ought to be a better 
assessment of what the burden is going to be on--when you add 
it to everything else the government is doing.
    Mr. Otter. Have you thought, Mr. Smythe, about----
    Mr. Ose. Will the gentleman yield?
    Mr. Otter. The gentleman yields.
    Mr. Ose. Mr. Smythe, your comment about having the 
government look at duplicative requests for information, isn't 
that within OMB's jurisdiction right now, and if it is, why--I 
mean, just do it.
    Mr. Smythe. We plan on looking at those things. We've 
started on that in terms of--I'm more familiar initially with 
what we did with the budget. One of the areas we did when we 
went through the budget is try to identify cases of duplicative 
    Mr. Ose. Have you found any?
    Mr. Smythe. Yes, we found some, and we've tried to 
consolidate--in education we tried to consolidate a number of 
programs. We've proposed that in the President's budget. We've 
looked in other areas where you have programs trying to address 
the same problem. We found cases where more than one program 
does the same thing. We looked at the one that didn't work as 
well. There's a drug treatment program for public housing that 
we felt didn't work as well, that the government had other 
efforts going on, and we should steer resources to where 
programs work better.
    Mr. Ose. How about on the--you're talking about actually 
the program and the implementation. Have those investigative 
efforts extended to the paperwork side of any program?
    Mr. Smythe. I think that's an area where we need to do some 
more work on.
    Mr. Ose. I thank the gentleman for yielding.
    Mr. Otter. Thank you, Mr. Chairman. Getting back to that 
question, has either OMB or GAO ever thought about putting a 
solicitor general for paperwork reduction in these agencies?
    Mr. Mihm. I guess in--from our perspective, that would be 
the responsibility of the chief information officer, which was 
established under previous legislation. In fact, what made that 
decision wise, in our view, is it brings together 
responsibilities for paperwork reduction and technology. And, 
in response to your earlier question about how we red-flag 
these things, that would be--one of the points that I would 
make is that when we look at Federal technology programs, we 
find that the transformational aspects of technology are not 
being nearly as exploited as they could. I mean, the jargon 
here is e-government. We need to do a much better job at the 
Federal and at all levels of government in using technology not 
just to do things differently and a little bit faster, but to 
fundamentally do things in a completely different way.
    If you saw the chart earlier, sir, that's where we will 
begin to have a hope of beginning to close that gap between 
goals and where we actually are. Other than that, we really--
using current procedures, we may be able to get some 
incremental improvements, but we're not going to be able to 
fundamentally close the gap.
    Mr. Otter. Let me just ask all three of you in general, 
this question, and it would have to do with the people who are 
filling out these forms. Do you make an appreciable assessment 
of what is the original information given, and that's worth so 
many hours, and then the secondary information that's asked 
for, and that's worth so many hours? And perhaps the IRS is 
best suited to answer that question, and I hate--I don't want 
to pick on any one person here, but I'm familiar with phase 1, 
phase 2 and phase 3.
    When the information originally comes in, they say, no, we 
need more information than that. So another form goes back out 
saying--or the same form saying, no. You didn't sufficiently 
answer this information. The initial information that comes in, 
it seems to me, is probably required. It is probably something 
in the mission which Congress gave you, whether it's to gather 
the information or collect taxes or submit to the rules and 
regulations by an agency. But if the form is sufficiently 
nondescriptive in the information that it wants, then 
simplification would help us. Then, it seems to me, by the 
amount of secondary information that's asked for, we should be 
able to assess to ourselves, geez, our form maybe isn't asking 
the right information in the first place. So do we break this 
information down phase 1, phase 2, phase 3?
    Mr. Rossotti. Well, just speaking for the IRS, I mean, 
essentially for any given tax filing, we--our goal, and it's, I 
think, achieved in almost all cases, is that if the particular 
form--take the 1040 form, with the schedules that are 
required--is completed accurately, there will be no followup 
requirement. The only time there would be a followup 
requirement would be if there was an audit initiated in which 
the IRS had a reason to question a particular item, and then 
there might be, for example, additional documentation submitted 
to substantiate, say, a particular item on a return, a 
particular deduction or a particular dependent that might be 
claimed and so forth. And those are a very small percentage of 
the returns that are filed. I mean, most of them are just 
accepted as filed. So at least----
    Mr. Otter. Is that the occasion, believe everybody else, or 
is that just because you suspect one or two?
    Mr. Rossotti. Well, I think it's basically--it's a question 
of--well, first of all, I think most people actually do file, 
quite accurately. Fortunately in this country, it's remarkable, 
but people do the best job that they can. We do send out a lot 
of notices to people for potential small errors, like, their 
Social Security number might not match, and then we, send them 
a notice back, and then if they have a problem, they correct 
it. That we could do with computers, but in terms of audits, 
it's a fairly small percentage. One of the problems is it's 
basically limited by resources and the number of audits that 
have been going down over the past 10 years, but even when it 
was higher, it was still a relatively small percentage.
    Mr. Otter. Mr. Smythe, in your case, do you think it's a 
good idea for your agency to break this down between phase 1 
and phase 2; then we'll understand the clarity of the initial 
request for information?
    Mr. Smythe. The only comment I would make is my 
understanding is that OIRA is put into a situation where it 
never has a chance to look back and look at the whole thing. 
It's asked to approve this form or this report, sort of in 
isolation. I think what you're getting at is maybe a sense of 
staging these things, get a better idea where we want to end 
    Mr. Otter. Well, I'm concerned. But I'm really concerned, 
because, for instance, in the little State of Idaho, we get 
roughly 6 percent of our entire budget in education comes 
through the Department of Education on the Federal level, and 
yet the head of our education system in the State of Idaho, 
which is an elected position, superintendent of public 
instruction, tells me it accounts for 67 percent of her 
paperwork at the State level. So we get 67 percent of the 
money. We get to a point finally where we say, we can't afford 
to take the money. We can't afford to take the money. Of 
course, then we don't have all the rules and regulations that I 
guess we'd have to put up with.
    But, my question still comes back to, there's got to be 
something wrong, and it's got to be pretty obvious that there's 
something wrong when you have those kind of differences between 
the actual benefit received and the reporting that's necessary 
to receive the benefit.
    Mr. Smythe. Well, I think the President's budget, attempts 
to address the issue you raise. You can't just come in and 
change the reporting requirements if you don't change the 
programs. In the education area we have a number of categorical 
grants that generate a lot of this. The President has proposed 
to consolidate a number of those programs to loosen up some of 
the strings. Those strings end up generating a great deal of 
reporting requirements on localities, and I think the whole 
thrust of his education proposal is to give the States more 
latitude, to demand some accountability, and to demand some 
results. I would hope that in terms of implementing it, we can 
also reduce that 67 percent burden that you mentioned. It seems 
to me that goes hand in hand.
    Mr. Otter. In pursuit of the objectives of this committee, 
it would really be a help to this committee if a lot more 
expression of the consolidation of these--and I'd like to see 
that, Mr. Smythe, I really would. We're going to consolidate 
these five agencies, and it's going to require a 31-million-
hour reduction in paperwork. I think that would be very 
beneficial, not only to the work of this committee and its 
intent in this meeting today and your being here today, but I 
think it would also be a benefit to the American people and 
whoever has to fill out these papers.
    What concerns me as much as filling out these papers is 
think how many people we've got to have to read them. That's 
what's really scary.
    Thank you, Mr. Chairman.
    Mr. Ose. Thank you, Congressman Otter.
    Mr. Mihm, I want to explore something with you. Your 
statement on page 7 talks about program changes versus 
adjustments in terms of the calculation on the paperwork 
    Mr. Mihm. Yes, sir.
    Mr. Ose. I think I understand. I just want to hear from you 
the difference between program changes and/or adjustments.
    Mr. Mihm. The program changes are those changes that result 
in a different estimate of burden that are the result of direct 
government action, and so it would be things that--we would 
break it out by three categories; for example, new statutes, 
reinstatement of expired authorizations or agency actions that 
lead to streamlining.
    Adjustments are generally those things that are outside--
are still changes in the estimated burden, but those things 
that are outside the control of the agency. In some cases, it 
can be just a reestimate, and often downward--I shouldn't say 
often--downward or upward of what the original burden is, in 
which case there's no change to the people that are filling out 
the forms. It's just the government is getting a better idea of 
what that burden was.
    Or it could be just--an adjustment--another example of an 
adjustment would be more or fewer beneficiaries applying for a 
benefit, filling out forms, and that then would influence the 
total burden hours.
    Mr. Ose. Let me just explore something in table 1, then, 
with you.
    Mr. Mihm. Yes, sir.
    Mr. Ose. Let me find one that offers interest. On the 
transportation line item, there's an adjustment of 50 million 
hours and a total change of 22 million hours; a downward 
adjustment in the burden of 50 million hours and total change 
of 22 million hours.
    Mr. Mihm. Yes, sir.
    Mr. Ose. Which indicates to me that somehow or another, the 
formulation--or the algorithm that generated the number in the 
first place, the basic structure was changed. How do you get to 
an adjustment of 50 million hours downward, but a total change 
of only 22 million?
    Mr. Mihm. Well, this is the--in the case of IRS--I'm sorry, 
in the case of DOT, you're exactly on the right issue there, is 
that DOT's estimated burden would have increased by more than 
28 million hours due to the reinstated collections, without the 
more than 50 million hours in adjustments downward. And so, I 
mean, this is--and the precise nature of those adjustments is 
something that at least to us was--we're working off of the--
the collection budget that has come in from the agencies that 
OMB will be rolling up from their budget that we could get 
behind, but I don't have that readily available for me right 
    But, the point there is--or at least the point that we use 
in breaking this out for the table is to show it's important to 
get behind each individual agency's claimed reductions or 
increases to better understand the sources of those.
    In some cases it can just be an agency action. In other 
cases it can just be merely the agency recalculating or 
reestimating an existing burden that's already felt by the 
people and saying, hey, we now have a better handle on what 
that burden actually is.
    I should state, sir--and this gets back, if I may, just to 
Mr. Otter's question right before it turned. You were asking 
about the different phases. Mr. Otter, it wasn't until last 
year as a result of the bipartisan urging of this subcommittee 
over several years that this type of breakout was even 
available. Before then it was all rolled up as to changes, and 
we didn't have a handle--or the collective ``we'' didn't have a 
handle on whether or not these changes were due to adjustments 
or program changes or new statutes. That's something that this 
subcommittee had to work--on a bipartisan basis, had to work 
with OMB over a couple of years in order to get them to make 
that change.
    Last year was the first year, and we're happy to see that 
they're obviously continuing it this year. So we're quite a 
ways from the three-phased approach that you were talking 
    Mr. Ose. On your Defense line item, you have a total change 
of 18 million hours.
    Mr. Mihm. Yes, sir.
    Mr. Ose. Now, how do you--I guess my question is, where 
does the intersection between OMB's analysis and, say, DOD come 
in terms of calculating those hours? Maybe that's a question 
for Mr. Smythe.
    Mr. Mihm. Well, I can take the first shot at it. I mean, 
all of the information that we have here is information that we 
received from OIRA over at OMB. These are from the individual 
agency submissions that go into OMB, and then OMB, therefore, 
rolls up into this summary document that becomes the 
executive--the Federal Government's information collection 
    The important thing to note here, sir, is that obviously 
you're dealing with a huge executive branch. OMB only has 20, 
22 people, I think, in the entire OIRA office that are taking a 
look at this stuff. In fact, there's one--if I understand 
correctly, person responsible for IRS on a part-time basis, and 
even accounting for the normal heroic abilities of our 
colleagues over at OMB, that does seem like a substantial 
workload. So there is two--the point I'm making is that there 
isn't an awful lot of opportunity for OMB to step back and 
really get in a very serious way behind these numbers. They'd 
really have to pick targets of opportunity and prioritize where 
they want to get behind the numbers.
    Mr. Ose. Mr. Mihm, you beat me to my question.
    Mr. Mihm. Sorry, sir.
    Mr. Ose. That's OK. Pleased to see somebody ahead of me.
    Mr. Smythe, that brings me to my basic question, is that if 
we have most of the change in the burden of hours for paperwork 
placed--or coming or originating from one agency, Mr. Mihm 
cited a part--or a half-time--full-time equivalent of a half a 
position being committed to IRS review of paperwork, why 
wouldn't we take some of our resources that we might be 
spending somewhere where there's little, if any, expected or 
actual change in paperwork burden and shifting it over where 
we're getting a whole bunch of change in paperwork burden?
    Mr. Smythe. I'd like to defer to the OIRA Administrator on 
that. I think you raise a good point, but that's something for 
John Graham if he gets confirmed, that's something that he 
needs to look at and figure out how he best wants to deploy the 
people under him to address his responsibilities.
    We've not made any changes yet. What we have is the 
structure and the way people are deployed or the way they were 
deployed when we arrived.
    Mr. Ose. You understand my point, though.
    Mr. Smythe. Yes, sir.
    Mr. Ose. Put your resources where you can get the big bang 
for the buck, so to speak?
    Mr. Smythe. Yes, sir.
    Mr. Ose. It's your understanding that OMB has no current 
plans to change staffing in terms of the 22 or 25 people on 
staff right now as to whether they're going to be focusing, as 
they have historically, or refocused to where the problems seem 
to be?
    Mr. Smythe. I think it's something that's going to involve, 
first of all, getting the various positions filled, getting the 
OIRA Administrator confirmed. I think it would be inappropriate 
for us to start moving around people within OIRA before he's 
confirmed. The DDM is another issue. In all of this, the 
Director needs to make an assessment of where resources can be 
best deployed for OMB's mission.
    Mr. Ose. I think that's the basic thrust of my question 
here, so I appreciate your recognizing that.
    I want to come back to Mr. Rossotti. In your opening 
remarks, you talked about the strategic plan, having identified 
key strategies, one of which was reducing taxpayer burden. I 
can't help but think that whether we're talking about the AMT 
filings that are on--at present a million, projected to go to 6 
million, or small business tax submittals, or have you--I can't 
help but think asking the senior managers--or requiring the 
senior managers to factor into their performance evaluations 
some means of paperwork reduction to a greater degree than we 
have, whether it's in a narrow sense or a broader sense, as you 
suggested, I can't help but think that redounds to the benefit 
of every taxpayer who's otherwise got this burden.
    Mr. Rossotti. I would agree with that.
    Mr. Ose. My tax return was this big this year, and I'm 
just--I find that an amazing consequence, and I'd really love 
to reduce it.
    I understand your point about Congress changing the law 
every 6 months. I think it's valid. I would commend it to every 
single Member of Congress. I mean, we have to have some 
stability here. Stability will lead to simplicity, but somehow 
or another we've got to get the managers recognizing it's in 
their best interest, not only in the taxpayers' best interest, 
but in the managers' best interest, to work toward reducing the 
paperwork burden.
    Mr. Rossotti. Well, I agree with that. That's why we've 
identified it as one of our key strategies. We now have with 
our new structure, some people positioned to exercise 
responsibility on that. I do have to point out that the IRS 
does not have much of a role with respect to the tax code.
    Mr. Ose. That I understand. I understand that. I'm not 
quibbling over that. I mean, I'll take that responsibility as a 
Member of Congress.
    Mr. Rossotti. We do what we can to point out things like 
the alternative minimum tax, the capital gains. They're very 
consistent in terms of complexity, but in the end all we can do 
is point them out. We can't change the world.
    Mr. Ose. I understand, and I don't quibble over that. Mr. 
Otter, I don't have anything else.
    Mr. Otter. I just have a couple of questions, if I might, 
Mr. Chairman.
    No. 1, Mr. Rossotti, have you held field hearings on this, 
gone out and had people come in and testify as to the 
complexity and perhaps some simplification efforts?
    Mr. Rossotti. We don't actually have hearings, but we have 
    Mr. Otter. Do you have the power? Do you have the authority 
to have hearings?
    Mr. Rossotti. You know, I've never thought--I don't know. I 
mean, we can certainly hold open meetings. I mean, I don't know 
whether they would be considered hearings, but we do have 
meetings, and we have a variety of adviser groups that meet 
with us regularly on these kinds of things.
    Mr. Otter. Let me put it a little bit differently. If you 
had the authority, would you have hearings and I happen to 
believe that you do have the authority.
    Mr. Rossotti. Yeah.
    Mr. Otter. Don't you think that kind of input would be 
useful? And if you find out that you do have the authority to 
have hearings, would you hold them?
    Mr. Rossotti. Well, I guess the--I don't know what exactly 
the difference is between hearings and meetings. I mean, we do 
have a lot of meetings with different kinds of groups, and we 
intend to have more of them, and they focus on topics like 
this. And, we had a whole series of them last year in 
conjunction with OMB, specifically with self-employed and small 
business taxpayers. So I'm not sure whether there's something 
specific about a hearing that's different than a meeting, but 
we do have a great number of those. And, actually, we--part of 
our strategy is to hold more of them, to get more input, 
especially on the small business side, because actually a lot 
of the--a lot of the burden actually that is some of the more 
significant is actually on small businesses.
    Mr. Otter. Well, as a matter of fact, you and I probably 
could have had a cup of coffee this morning and exchanged all 
the information that we have right here, but the fact that it 
is a public forum, the fact that you are on record, the fact 
that there is an expectation at the end of the hearing that 
something is going to happen, sometimes good, sometimes bad, I 
think that when the IRS would go out and hold a hearing, or any 
government agency would go out and hold a hearing, it sends a 
very clear and precise message to the public who submit all 
this information to you that we do care, and how can we lessen 
your burden. I think that's important, not only from the 
political aspects, but as you said so clearly earlier, it's 
amazing to you how much information people voluntarily give to 
the Internal Revenue Service. I've never quite felt that mine 
was voluntarily, because I suspected there was going to be an 
action taken if I didn't. So I hardly consider that 
    Let me commend a name in Idaho to you. The name is Dewey 
Hammond. Dewey Hammond happens to be the head of the Idaho Tax 
Commission. Mr. Hammond, I charged him when I was Lieutenant 
Governor with responsibility--I became familiar, after working 
for a large manufacturing company for 30 years, with a form 
that was 14 pages long and said, Dewey, I'd like you to see 
what you can do in order to reduce this down. He now has a 1\1/
2\-page form that four agencies of the State use. I recognize 
the tax sensitivity, the number sensitivity and that sort of 
thing, but the general information that's given on that is now 
used by four agencies. It took him 2 years to do it. But he 
took that and he reduced it down to 15 percent--less than 15 
percent of what it was.
    Mr. Rossotti. We'll get in touch with him.
    Mr. Otter. And I think that sort of action is really 
    Mr. Mihm, I would wonder if under the PRA, the Paper 
Reduction Act, did Congress put themselves on notice as well?
    Mr. Mihm. Not--in a statutory sense, I don't think so, sir, 
that Congress usually exempts itself from those types of 
requirements. Clearly, the language surrounding the act in the 
floor debate, without being intimately familiar with it, I'm 
sure that there was a recognition, as we have expressed here 
today, that it's joint responsibilities if we want to attack 
the paperwork problem. It's not all on the agencies. It's not 
all OMB, and it's not all Congress. There's plenty of work for 
everyone to do.
    Mr. Otter. I understand that, but a few years ago we 
decided we were going to walk the walk. Well, Congress then 
decided it was going to walk the walk and talk the talk, and so 
we subjected ourselves, I thought, to all of those other 
burdens and responsibilities that we put on the agencies and 
business and the general public. So we now have all the ADA 
requirements, all the OSHA requirements, all the affirmative 
action requirements, all the other rules and regulations that 
we force on the IRS and the OMB and the GAO and all the 
businesses and industries.
    I would like to know how to do that. I would like to know 
how we could submit to Congress and say to them, look, if 
you're going to insist on this--we should add an assessment, 
for instance, in the last tax bill that we passed in the House. 
The $1.6 trillion, we should add an assessment and say, how 
much paperwork is this going to add to the burden and then 
decide for ourselves--well, take a look in that mirror and say 
to ourselves, do we really want to do this, or do we want to 
simplify it in the process as well?
    Mr. Mihm. I agree--or rather, sir, I think that's the point 
that Mr. Smythe was making in his opening statement, is that 
there needs to be more of a consideration in the part where 
we're considering legislation upfront on what's going to be the 
end-stream paperwork burden that's associated with this.
    Mr. Otter. Mr. Smythe, this fellow is going to seem like 
the second coming to us for all the expectation that you've 
given me this morning on what he's going to do to the paperwork 
in government. Thank you.
    Mr. Ose. Thank you, Mr. Otter.
    I do want to--I want to end on somewhat of a positive note, 
recognizing--not meaning to lessen the importance of all we've 
talked about, but, Mr. Rossotti, I do want to compliment the 
Service on the change they've made for qualifying small 
business corporations in terms of allowing them to go to a cash 
method as opposed to previously requiring an accrual method. I 
think that's a marvelous step forward, and small business in 
America appreciates that. That's a great first building block, 
if you catch the drift of my comments.
    Mr. Rossotti. Thank you.
    Mr. Ose Mr. Mihm, I appreciate what GAO does in terms of 
analyzing these things for the benefit of Congress and the 
agencies throughout the Federal Government.
    And, Mr. Smythe, I have to applaud your courage in coming 
here today. It's impressive.
    I do think we have some work to do. I want you to 
understand that this committee is ready, willing and able to 
work with OMB, with Mr. Daniels, yourself, Mr. O'Keefe, the 
fellow who's coming on at OIRA to try and bring these things to 
a head and make some progress on this. I just think that's 
something that you're interested in. I know we are, and I look 
forward to doing it. So I want to thank you all for coming 
today. We have work to do. We need to get on with it.
    Mr. Smythe. Thank you, Mr. Chairman.
    Mr. Mihm. Thank you, Mr. Chairman.
    Mr. Rossotti. Thank you, Mr. Chairman.
    Mr. Ose. I want to call the second panel up at this point. 
That would be Mr. LaGrande, Mr. Knott, Mr. Nicholson and Mr. 
Bobis--excuse me, Dr. Bobis.
    OK. Before we start, I want to make sure we've got--it's 
Mr. LaGrande, Mr. Knott, Mr. Nicholson, and is it Dr. Bobis, 
Bobis or Bobis?
    Mr. Bobis. B-O-B-I----
    Mr. Ose. Bobis, long O. Right?
    Mr. Bobis. Yes.
    Mr. Ose. Gentlemen, we do swear in our witnesses here. If 
you'll rise.
    [Witnesses sworn.]
    Mr. Ose. Let the record show the witnesses answered in the 
    Mr. Otter and I have already provided our opening 
statements. We're going to provide each of you with 5 minutes 
for your opening statements. We have a heavy hammer here on the 
clock, so please be brief.
    We're going to first go to Mr. Ken LaGrande, who's the vice 
president of Sun Valley Rice in Colusa, CA. Mr. LaGrande, 
you're recognized for 5 minutes.


    Mr. LaGrande. Chairman Ose and members of the subcommittee, 
thank you for the opportunity to testify on behalf of my fellow 
farmers on the Paperwork Reduction Act and the nearly 
unbearable burden that paperwork and recordkeeping requirements 
place on us. My name is Ken LaGrande, and I farm about 900 
acres of rice in Colusa County, CA. When I came home to begin 
farming with my father several years ago, I quickly discovered 
that knowing about cropping patterns, fertilizer rates, and 
seed germination were neither more important nor time-consuming 
than having a desk and an adding machine and a full supply of 
U.S. Government forms.
    My days were spent managing operations on the ranch; my 
evenings, weekends and, literally, my rainy days were spent at 
the computer and at the filing cabinet. I had to buy a copy 
machine and a second filing cabinet. Almost immediately I was 
forced to hire a professional accountant to prepare my taxes, 
as I couldn't afford to take the chance of inadvertently 
missing some calculation and, thus, invoking the wrath and the 
penalties of the Internal Revenue Service.
    The forms that I file with the IRS each year have a little 
box on them that indicates, pursuant to the Paperwork Reduction 
Act, the estimated average time of preparation. I added these 
little boxes up the other day, and I discovered with no great 
surprise, that the IRS estimates that I spend 542 hours and 38 
minutes each year on their behalf.
    So I hired a part-time bookkeeper. I burdened my bookkeeper 
with OSHA compliance regulations, Federal payroll tax 
reporting, bookkeeping and tax preparation, filing, 
recordkeeping, W-2s, I-9s, 1099s, the Employer's Annual Tax 
Return for Agricultural Employees, the Employer's Annual 
Federal Unemployment Tax Return, forms for the U.S. Department 
of Agriculture, the Commodity Credit Corporation, the Farm 
Services Agency, Reclamation Reform Act reporting for the 
Bureau of Reclamation and the like.
    After we think we're in compliance with all of the Federal 
mandates, we start in with the State and then the county. It 
was not long before 2 days a week--the 2 days a week that I 
employ my bookkeeper became insufficient, and so I was forced 
to hire a second part-time employee to deal with the overflow, 
and I had to rent a self-storage unit in town to store the 
dozens and dozens of boxes of records that I'm required to keep 
by Federal law in physical form, and I have on hand for years 
on end.
    Each spring I find myself at the local office of the FSA 
completing new and yet usually unchanged versions of exactly 
the same paperwork that I completed the year before. Especially 
problematic is that there is no published handbook or set of 
rules or regulations available to producers with respect to FSA 
    In terms of redundant bureaucratic paperwork, however, the 
worst of them seems to be when we arrived for our appointments 
at the water district. The U.S. Bureau of Reclamation requires 
that each farmer submit paperwork under the Reclamation Reform 
Act as part of his or her water application. These forms fly in 
the face of the notion of paperwork reduction and seem to serve 
the sole purpose of ensuring the continued employment of 
Federal employees.
    This debacle has been compounded tenfold, however, by the 
promulgation just this year of a new set of rules that require 
farm operators to file reporting forms. Farm operators are not 
farmers. They're independent contractors that we hire to 
perform certain tasks on our farms, such as crop dusters, truck 
haulers or custom harvesters. Why the Bureau of Reclamation has 
any need to know who is applying my fertilizer or who is 
hauling my harvested rice to the elevator is beyond my 
comprehension. It seems to be an invasion of privacy, and it is 
as yet unjustified by Bureau staff.
    So far as I know, the Bureau has provided no information or 
instructions to any of these potential operators, and they have 
not amended the instructions on the farmers' forms to indicate 
the existence of the new rules. So unless you retain the 
services of an attorney to follow unpublicized rule changes, 
you must depend on word of mouth at the coffee shop to continue 
to be able to receive Federal water.
    More galling is this: Anyone I hire as a contractor must 
ensure his or her own compliance with the Bureau's river of 
regulatory muck, and I am required to police their compliance.
    Mr. Chairman, farmers across our Nation fight costs every 
day, and we are faced with the specter of having to hire 
professional accountants, consultants and attorneys to ensure 
our compliance with Federal regulations and paperwork 
requirements. The cost of farmers to comply is enormous, both 
in time and real dollars.
    In light of depressed markets, low commodity prices and an 
overall increased cost of doing business, an excellent manner 
by which Congress could provide immediate assistance to our 
Nation's farmers would be to reduce the paperwork burden and 
simplify the compliance requirements imposed upon them. This 
assistance would add little or no cost to the Federal budget, I 
would imagine.
    Mr. Chairman and members of the committee, I urge you to 
provide critical relief to your farmers. We are drowning under 
the sea of paperwork promulgated by the Federal Government.
    I'd be happy to answer any of your questions. Thank you.
    Mr. Ose. Thank you, Mr. LaGrande.
    [The prepared statement of Mr. LaGrande follows:]
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    Mr. Ose. Now I recognize Mr. James Knott, who's president 
and chief executive officer of Riverdale Mills Corp. in 
Northbridge, MA. You're recognized for 5 minutes.
    Mr. Knott. Good morning, Mr. Chairman, and good morning, 
Mr. Otter.
    I started my first business in 1956 immediately after 
getting out of the Army, and I have been familiar with OSHA 
since 1970 when they came into being. I bought its book, which 
was the Federal Register, and it was about the size of a city 
of Boston white pages. Now it's many, many times thicker.
    The business that I started in 1956 was in an abandoned 
mill building, and, because there were no employees except 
myself in the very beginning, I had to do every single job in 
that business, and I did the same thing again in 1978 when I 
started my second career out in Northbridge, MA.
    What I do in that business is I make a plastic-coated 
welded wire mesh that was originally intended to be used for 
lobster traps in the New England fishery. Today, that product 
is used for many, many other things, and we're shipping it all 
over the world.
    This business of OSHA reaching out beyond the occupational 
area, which I consider to be the four walls of the factory, and 
becoming interested in pain that people might bring to work, to 
me, is an overreaching of its authority. OSHA really shouldn't 
be going out that far.
    The first--or the second business, rather, that I started, 
as I said, we make the wire for lobster traps, but it's also 
going all over the world. The building was a 20,000-square-foot 
building. Today it's 265,000 square feet, and we've set up a 
program to achieve zero accidents in the business. We have a 
safety committee, consisting of about 30 people, and those 30 
people rotate regularly. Thirty people is approximately 25 
percent of the total employment. They meet, and they come up 
with suggestions for making things safer, and we have no budget 
limitations on what it takes to make things safer in that 
business because people are the base of the business.
    In the first quarter of this year, we had a zero accident 
rate with one minor exception. We're members of the National 
Association of Manufacturers that I joined about 3 years ago, 
and I'm now serving on its board of directors, and I never 
realized before I met them how important they are to this 
manufacturing business in the United States of America. We 
spend--last year we spent about $41,000 working on OSHA 
problems, and we, as I say, have the committee that works on 
this all the time.
    One of the interesting things in talking about 
overburdening not only with respect to paperwork, but also with 
time spent dealing with agencies such as OSHA, was an event 
that took place 1 day in 1996. We had a flood at the Riverdale 
Mill, which is on the Blackstone River, and a hole had opened 
up in the street. One of my maintenance men, who's been with me 
for many years, had put a ladder down into the hole, and he 
stepped down a few rungs to measure the hole to see what it 
would take to fill it.
    Well, there were some OSHA people there that day on an 
entirely unrelated matter, and one of them happened to walk out 
into the street. And he said to the man, ``get out of that 
trench.'' Well, my maintenance man, who is a year older than I 
am and has had a lot of experience, said, ``this isn't a 
trench.'' ``This is a hole, and I'm going to fill it.'' So the 
OSHA man said, ``get out of that trench right now.''
    Well, my maintenance man felt that there wasn't any sense 
in talking to him, so he did his calculations and left. I got a 
thing in the mail a few weeks later, and what it said was that 
I had endangered a man's life by putting him into a trench and 
that I should pay a fine. Well, a trench does not have a poured 
concrete wall, and it's more than 5 feet deep, and this was 
neither of those things. So I called the OSHA office. I went 
through the procedure, and the procedure, of course, is to call 
a local office. I told them I wanted to appeal, and the fellow 
who I spoke to, said, look, this is going to cost you a lot of 
time and money. I can cut the fine in half. I said, well, the 
time and money isn't what bothers me. What bothers me is that 
you have people out here like this damaging the economy of the 
United States. They're taking a lot of my time, and I just want 
this sort of thing exposed. So he said, very well. I'll see you 
in court.
    Well, next call I got was from an OSHA attorney in Boston. 
I had filed my appeal, which was about a half an inch thick, 
and he said, Mr. Knott, I've read your appeal, and I can 
understand where you're coming from. Look, I can cut the fine 
in half again. I said, that's not what I'm interested in. What 
I'm interested in is exposing these people. I'd like to get 
this young man up on a stand in front of the media and let him 
explain why he thinks a hole is a trench and why I should pay 
fines for it. Well, the attorney said, I'll see you in court.
    The next thing I got was a letter in the mail, and the 
letter was from the court. What it said was the joint motion to 
dismiss has been granted. I called my attorney. I said, what is 
this business about a joint motion? He said, well, that's what 
they said the--that's what they told the court. And, I said, I 
don't want this case to be dismissed.
    My attorney said, Jim, there's nothing we can do. The judge 
has made his ruling.
    So that's been some of my other experiences with OSHA, 
    Mr. Ose. Mr. Knott, we'll enter your statement in the 
record, but you're over your 5 minutes.
    Mr. Knott. Oh, I'm sorry.
    Mr. Ose. That's OK. I appreciated the story. I wanted to 
get to the end of it before I cut you off. But we'll enter your 
statement in the record. I need to go on to Mr. Nicholson at 
this point.
    [The prepared statement of Mr. Knott follows:]
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    Mr. Ose. Mr. Nicholson for 5 minutes joins us. I appreciate 
your taking the time. Mr. Nicholson is the owner of a company 
called Company Flowers in Arlington, VA. You're recognized for 
5 minutes.
    Mr. Nicholson. I'm honored to appear before you today to 
talk about some of the problems posed to small business by the 
Internal Revenue Service. My wife and I operate a small flower 
shop in Arlington, VA, sometimes described as the ``best 'lil' 
flower shop in all of Washington.'' I can't afford national 
promotions--I need advertising--so thank you!
    I have joined the Government Relations Committees of NFIB 
and the FTD because I feel strongly that we should try to do 
something about some of the problems, not just complain about 
them. So, I am pleased to appear before you today as a 
representative of both organizations.
    Let me--in an effort to cut down on the amount of time 
here, let me turn to page 2 and point out that there are really 
three things I'd like to suggest that we focus on. Let's one, 
simplify the tax code; two, make it as equitable as possible 
across the board; and, three, perhaps give taxpayers a method 
to right the balance so that the IRS auditors don't always have 
the upper hand.
    First, we need to simplify the code, but simplicity will 
have a cost. Those who are engaged in arcane or unusual 
endeavors may very well lose their special, if perhaps valid 
arguments. Simplicity will encourage most of us to abide by the 
law, because then we'll understand it. Right now I cannot grasp 
what the tax code wants from me, other than money. I must hire 
an expert, a CPA or a tax lawyer. Other than fear of arrest, I 
have no incentive to abide by the code, because I don't 
understand it.
    Some of my equals know better how to work the tax code than 
I do. Equality of treatment under the code doesn't seem to be 
taking place, and while, comparisons are difficult because of 
direct concerns about privacy, nonetheless there are enough 
anecdotal instances to certainly raise strong suspicion that 
only the clever get rewarded. And, of course, those who are 
wealthy have both the reason and the wherewithal to hire the 
experts to improve their position under the code. That is 
hardly fair, but maybe life is not supposed to be fair.
    Those first two solutions, the request for a simplification 
and for an equitable treatment, are really going to require 
legislation, and that's at your doorstep more than at the 
    The third idea that I'm suggesting is that there might be a 
way to improve the administration. Several years ago when I was 
audited, I approached the IRS with much fear and trembling, for 
I didn't know what to expect. I found an auditor who was each 
time concerned mostly with finding enough additional revenue to 
check off the box labeled ``get more money for his or her 
    There ought to be a well-recognized way to reassure the 
average taxpayer that upon audit, there is a method by which to 
balance the discussion. Fortunately, I've been able to hire a 
CPA who would accompany me today, but for small business owners 
who cannot afford or do not want to hire a CPA or a tax lawyer, 
perhaps there could be some sort of a preliminary step 
undertaken with an advocate, maybe a retired auditor, someone 
who can be available to help the taxpayer before they meet with 
the auditor. Why must the average Joe or Josephine be made to 
feel helpless when sitting across the table from a skilled, 
knowledgable IRS auditor? What we need is a conference before 
meeting the auditor and an ``assemble of records'' session so 
that the conference with the IRS auditor can be expedited, as 
well as more balanced.
    In sum, it's clear to me, and I hope to you, that we need 
to simplify our tax code, and we need to make it more 
equitable. We cannot do just that by patchwork. We have to 
resume the national debate over a major revision of the entire 
tax concept such as a flat tax and the other ideas. The debate 
seems to have gone off the front pages. I'd like to see it 
return, because I think that the time is now for change while 
we have a White House dominated by concern for reducing the tax 
burden. So that's one of our major compelling reasons to revise 
the code. Let's get to it. Thank you.
    Mr. Ose. Thank you, Mr. Nicholson.
    [The prepared statement of Mr. Nicholson follows:]
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    Mr. Ose. Finally, our fourth witness on this panel is Dr. 
John Bobis, who's the director of regulatory affairs for 
Aerojet, from Rancho Murieta, CA. Welcome. You're recognized 
for 5 minutes.
    Mr. Bobis. Good morning, Mr. Chairman, Honorable 
subcommittee members. I am employed by Aerojet General Corp., 
which is wholly owned by GenCorp. I am the director of 
regulatory affairs, among other things, and I am delighted to 
have the opportunity to testify in front of you today. Due to 
the short time that I had to prepare for this hearing, I am 
only going to attack--or, rather, address one governmental 
agency. That's the Occupational Safety and Health 
Administration [OSHA].
    I am not here to talk about--I am not going to, rather, 
talk about the general duty clause that OSHA uses in the 
enforcement toward--specifically in areas where appropriate 
occupational safety and health regulations have not been 
promulgated. Also, I am not going to talk about OSHA's 
egregious penalty assessment policy, nor am I going to discuss 
OSHA's multiemployer citation policy. All of these are not only 
unreasonably burdensome and costly, but, in my opinion, may 
even be unconstitutional.
    My company manufactures rockets, and we are heavily 
regulated by all the regulatory agencies that you can think of. 
Focusing on OSHA, its authority is granted by the Occupational 
Safety and Health Act of 1970. The act, in itself, intended by 
Congress was to assure safe and healthy working conditions for 
working men and women. The act itself does not state that 
Congress intended OSHA and its enforcement mechanism to be used 
as a revenue-generating scheme.
    Now I'm going to focus on two particular interests at hand. 
One is about paperwork burden and the other being the 
recordkeeping requirements imposed on businesses by many of the 
regulations promulgated by OSHA. The regulatory burden that 
OSHA standards impose upon the regulated community can be 
attributed largely to OSHA's rulemaking process. Since the 
enactment of the act, Federal OSHA has undertaken the concept 
of adopting general standards and vertical standards for 
certain industries, such as construction, agriculture, what 
have you.
    The general industry safety standards contain hazard-
specific requirements, and they do not apply to construction, 
agriculture or other exempted industries unless they are 
reprinted specifically for that industry. Adoption of vertical 
standards results in an absolute standard duplication or the 
use of the general duty clause. The duplication causes 
potential conflicts and misunderstandings and an increased 
compliance burden upon the regulated industry. Many of these 
regulations have numerous recordkeeping requirements.
    Other areas of concern in the general industry standard 
promulgation pertains to occupational health standards. OSHA 
over the years has promulgated 22 substance-specific standards. 
The practice of adopting substance-specific standards is an 
enormous duplication of the voluminous, almost identical 
requirements. Many of the requirements deal with definitions, 
exposure monitoring, recordkeeping, what have you. All of these 
could be simplified by developing one standard or a generic set 
of regulations with appropriate, charts and references.
    As long as I have this opportunity to address you, I would 
also like to address another important area of the rulemaking 
process that directly affects the quality of the standards OSHA 
adopts. This process is called negotiated rulemaking, or the 
advisory committee consensus approach, that has been used in 
California successfully for decades. In fact, this process has 
been so successful in California that none of the safety 
standards have ever been challenged in court. This method 
permits labor, management, technical experts and other 
interested parties to deliberate in an informal forum and agree 
upon a consensus performance standard. The result of this 
process is having industry and labor, the regulated community, 
writing its own regulations, improving the quality and intent 
of the regulations and thereby enhancing compliance. Once a 
consensus standard has been developed, then it is ready for the 
agency to go through the normal rulemaking process, pursuant to 
the procedures of the Administrative Procedure Act.
    Now, I want to spend a little time on the recordkeeping 
requirement of Federal OSHA. It has not been an unusual 
occurrence during the last couple of decades to read the 
morning headline news that a company has been cited by OSHA and 
received well-publicized egregious penalties amounting to 
millions of dollars. A closer look at these alleged violations 
disclosed that the employers were accused of improper 
recordkeeping practices particularly involving ergonomic-
related issues, such as cumulative trauma disorders, muscular 
skeletal disorders, what have you.
    As you may recall, Congress in its wisdom recently voided 
the new ergonomic regulations promulgated in the last hour by 
the previous administration. This may be, however, a double-
edged sword, because, in the absence of specific regulations, 
OSHA will continue to enforce the provision of the so-called 
general duty clause to cite employers in situations where 
standards have not been promulgated. Each alleged violation of 
the general duty clause carries a maximum fine, and under the 
egregious penalty policy, the penalties are assessed on a 
violation-by-violation basis, which can result in enormous 
    The obvious question one can raise with respect to 
assessment of these large fines due to recordkeeping violations 
is how the requirements and associated fines enhance work 
safety. In my opinion, recordkeeping requirements and their 
associated fines for improper recordkeeping provide nothing 
more than a revenue-generating means for the agency. It has 
absolutely no effect on the quality or the safety in the 
workplace. Its sole purpose is to provide means for the agency 
to get the data for the alleged purpose of establishing trends 
and allocating resources.
    About 27 years ago, I was the first technical person that 
Cal OSHA Standards Board hired in 1974 at the beginning of the 
Cal OSHA program. I was intimately involved in the standard 
development process for many years before moving to the private 
sector. Based on my knowledge and experience, I think a change 
at the Federal level is way overdue. The health regulation 
recordkeeping requirements are especially a maze. I feel very 
sorry for small employers. I urge OSHA and all of the agencies 
to make every effort to simplify.
    My written comments contain suggested remedial solutions 
for OSHA, and that concludes my testimony. I will be happy to 
answer any questions you may have.
    Mr. Ose. Thank you, Dr. Bobis.
    [The prepared statement of Mr. Bobis follows:]
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    Mr. Ose. I'm going to recognize Congressman Otter for 5 
    Mr. Otter. Thank you very much, Mr. Chairman. And I thank 
the panel for being here.
    I have shared, in one form or another, most of your horror 
stories. I worked for a food processing, fertilizer processing 
and large cattle feeding operation for 30 years before I 
retired in 1993, and I went through all those from 1971 on with 
OSHA and many of the others. And, so I can see now that, since 
my retirement, nothing has gotten better.
    So, I am particularly interested. Mr. LaGrande, have you 
ever broken down your cost of regulation per acre? Water is 
going to be probably in your area, $120 an acre; fertilizer, 
$80; plowing, $14. What is--have you ever broken it down? You 
farm, 900 acres, as I understand.
    Mr. LaGrande. I do.
    Mr. Otter. If you were to put a cost per acre on that, 
could you give me a swag or some kind of an idea?
    Mr. LaGrande. I would say it's probably in the neighborhood 
of approaching $20 an acre.
    Mr. Otter. So $20 an acre, which would be $18,000----
    Mr. LaGrande. Yes.
    Mr. Otter [continuing]. Wouldn't that be right?
    Mr. LaGrande. Yes.
    Mr. Otter. That would be $18,000 a year?
    Mr. LaGrande. Yes.
    Mr. Otter. Would you say that would be the same for all 
folks in the California area? Are you in the San Joaquin 
    Mr. LaGrande. I'm in the Sacramento Valley.
    Mr. Otter. I see.
    Mr. LaGrande. I would guess that would be an average. I'm 
guessing that is my cost of compliance with all the 
recordkeeping types of paperwork, and I would say I'm fairly 
average in that respect.
    Mr. Otter. Do you belong to any--in fact, I think you did 
say in your testimony, and I apologize, sir, that you did 
belong to a couple of national organizations, farm 
    Mr. LaGrande. Yes. That's right. The Farm Bureau.
    Mr. Otter. The National Farm Bureau--is that one of them?
    Mr. LaGrande. Yes, sir.
    Mr. Otter. I apologize. I don't know if you were here 
earlier when we had----
    Mr. LaGrande. I was.
    Mr. Otter [continuing]. The IRS, the OMB and the GAO. But 
during the inquiries to that panel, they were asked if they 
would hold--or had held field hearings to get the input from 
the victim--or from the folks that were required to fill out 
all this information and everything. Do you think that the Farm 
Bureau would be interested in providing information to those 
    Mr. LaGrande. I would suppose that they would be very 
interested in testifying before such a hearing.
    Mr. Otter. Now, there was just three agencies, as I recall, 
that most of your testimony spoke to. How many other agencies--
how many total agencies, in one way or another, require a 
report or demand information or input from your 900 acres?
    Mr. LaGrande. Well, I would suppose on the Federal level, 
there are probably 8 to 12, and then you have to start in with 
the State, and you probably have as many there.
    Mr. Otter. And is it true that the State reports are 
different than the Federal reports?
    Mr. LaGrande. Oh, absolutely.
    Mr. Otter. Is it a different language?
    Mr. LaGrande. Absolutely.
    Mr. Otter. I see.
    Mr. Knott, I'm interested in a couple of things in your 
situation with OSHA. Do you have any idea what the cost, your 
legal costs, your costs involved in administrative time and 
that sort of thing with OSHA, which was eventually, I guess, 
    Mr. Knott. Well, actually, they requested that it be 
dismissed, but I had another interesting one recently involving 
a young man who fractured three fingers by putting them up 
against some rolls, and the penalty for that was $4,500. What 
had happened was the inspector from the OSHA said that his arm 
had gone between the rolls up to the elbow. Well, interestingly 
enough, the space between the rolls was 15/16ths of an inch. So 
had his arm gone in there, it would have been 18 inches wide. 
And when we asked the inspector under oath during depositions 
how she knew, she said, I saw it right after the accident. 
Well, she apparently didn't notice it was 18 inches wide. So 
the--as I say, the fine was $4,500, and the----
    Mr. Ose. Did you pay that?
    Mr. Knott. No, I probably spent $45,000, not paying $4,500.
    The OSHA prosecuting attorney said to me, ``Mr. Knott, why 
do you let a minuscule little thing like this bother you? Just 
pay the fine.'' I said, ``I don't want to do that. I can't live 
with these people inventing and making up noncompliant systems 
and saying things happened when they didn't happen. I want to 
take this thing to court.'' He said, ``Well, I'll tell you, 
it's going to cost you a lot of time and money.''
    And, he made good on his word. He deposed 10 people. We 
went to trial for 2 days, and he took 10 people up there 
sitting in the courtroom for 2 days. So, as I say, probably 
around $45,000. But I don't think it's right to let these 
things get away.
    We had another experience with OSHA in a place called the 
Whiten Community Center, which is a community center in this 
town I live in, and they were remodeling the place. The 
building was built in 1923. OSHA came in and fined them $9,000 
for having receptacles in the wall without three-pronged 
receptacles. Well, in 1923, they didn't have three-pronged 
receptacles. It was $9,000.
    And they had another interesting one. They fined $750 for 
having an IBM typewriter without a three-pronged plug. There's 
never been an IBM typewriter with a three-prong plug. Some of 
the directors of the community center went up to Springfield 
and made an arrangement with OSHA without my knowledge, I 
didn't know this was even going on, and OSHA cut the fine in 
half. It was only $4,500. And the director said, ``Well, we 
don't have any money,'' so OSHA let them pay it for over three 
payments of $1,500.
    When I learned about this, I said, ``Why in the world did 
you pay that fine? You don't have to have three-pronged plugs. 
You are not required to have three-hole receptacles any more 
than I have to have a catalytic converter on my Model A. Why 
did you do that?'' They said, ``Well, we knew if we didn't, 
they'd come back and do it to us again.''
    Mr. Otter. Mr. Chairman--excuse me, Mr. Knott--I realize my 
time is up. It's too bad perhaps OSHA isn't as grounded as they 
would like all our electricity to be, no matter when it was 
    Thank you very much, Mr. Knott.
    Are we going to have another round?
    Mr. Ose. Yes.
    Mr. Otter. Thank you, Mr. Chairman.
    Thank you, Mr. Knott.
    Mr. Ose. Thank you, Congressman Otter.
    Dr. Bobis, I want to turn first to you. Mr. LaGrande, Mr. 
Knott, Mr. Nicholson are business owners, and they do not have 
nearly the experience that you have, I presume, from the 
procedural side of the regulatory world.
    I read your written statement carefully. One of the things 
that jumps off the pages is the many of the rules that are 
promulgated, particularly with respect to OSHA, have not been 
through the Administrative Procedure Act. I'm curious, from the 
concept of certainty versus uncertainty or enforceability 
versus lack thereof, if something hasn't been through the 
Administrative Procedure Act, in other words it has not been 
lawfully promulgated, what are the consequences to businesses? 
For instance, Aerojet, in this case, in terms of an agency 
coming out and attempting to enforce such regulatory rulings?
    Mr. Bobis. A good example, of course, are the two major 
ones I mentioned. One is the egregious penalty citation policy. 
Basically what that does, if you have an ungrounded plug, for 
example, and it is a $4,000 fine and you have 10 of those, it 
automatically becomes a $40,000 fine. You just multiply it by 
the number of instances, which is ludicrous, as far as I'm 
    The egregious penalty policy has not gone through the 
Administrative Procedure Act as far as a rulemaking is 
concerned. It is strictly nothing more than a policy.
    Mr. Ose. Before you leave that, there is an issue of 
significant rules versus nonsignificant rules versus guidance 
    Mr. Bobis. Yes.
    Mr. Ose. Is the egregious penalty a guidance document?
    Mr. Bobis. It is a guidance document for OSHA to assess 
their penalties.
    Mr. Ose. So it has not been through the formal rulemaking 
    Mr. Bobis. Absolutely not.
    Mr. Ose. And the reason that we require a formal rulemaking 
process--and I'm trying to think back to my civics class--is 
that, without a formal rulemaking process those who might be 
affected in the future prospectively by a rule are not given 
any opportunity to comment on the rule itself. In effect, it 
becomes almost a star chamber proceeding, if you will.
    Mr. Bobis. Basically--simply put, we were denied due 
    Mr. Ose. You are far more eloquent than I am on that. So 
these guidance documents have no basis in procedural 
applicability because they have no basis in law.
    Mr. Bobis. That's right.
    Another example, of course, is a multi-employee work site 
citation policy, that's very, very bothersome to me especially. 
On a daily basis, we have hundreds of contractors or 
subcontractors at our facility. Basically what it does, it puts 
us on notice that a subcontractor, or the sub of a sub, if they 
make a mistake, we can be held responsible and liable and co-
cited for unsafe acts that they may perform. This particular 
policy also has not gone through the Administrative Procedure 
    But, let me tell you the real horror story of what happened 
in California. Labor filed a CASP, which is a Complaint Against 
State Plan, and Federal OSHA made a determination that the 
State program, the State plan, was not at least as effective as 
the Federal program. Therefore, it was deficient, and it was 
forced to adopt a particular policy. In California, however, 
you cannot enforce a policy unless you go through the 
Administrative Procedure Act.
    So, the enforcement agency, which is the Division of 
Occupational Safety and Health, in fact held a public hearing 
and adopted the regulations effecting a policy, regardless of 
my testimony against it, indicating that in fact it is not a 
standard pursuant to the provision of section 6 of the act and 
it should not be construed to be considered as such. My 
comments were absolutely disregarded, and the regulation went 
into effect.
    Now, in 2000, the legislature in California, basically what 
it did was it revised the labor code and by operation of law 
they adopted into the statutes the regulations that CAL OSHA 
adopted, because it was already law, and they didn't have to 
take any testimony on it. So now it's in the statutes.
    Mr. Ose. My time is about to expire.
    Mr. Otter for 5 minutes. Thank you, Mr. Bobis.
    Mr. Otter. Yes, thank you, Mr. Chairman.
    Mr. Bobis, is it?
    Mr. Bobis. Yes.
    Mr. Otter. Mr. Bobis, you heard Mr. Knott's testimony on 
the OSHA regulation and the process that he went through. Have 
you gone through that process of taking an OSHA fine through 
the court system?
    Mr. Bobis. Yes, we have. We have been quite successful, and 
for a very simple reason. We have a very complex manufacturing 
facility. We deal with explosives, and when OSHA people show 
up, they don't know anything about explosives, so they usually 
cite the wrong section and we usually go and fight them and win 
every one of them.
    Mr. Otter. Too bad French fries weren't that difficult. I 
want you to take us through the process. The first level is, 
you're cited by a field agent; is that right?
    Mr. Bobis. Yes.
    Mr. Otter. Somebody cites you and says you did this wrong.
    Mr. Bobis. Yes.
    Mr. Otter. Then, what's the first level of appeal?
    Mr. Bobis. First level of appeal is usually to call up the 
district manager and appeal the citation, basically have an 
informal conference with them. All you are doing is asking a 
supervisor to overrule one of his lieutenants, and basically 
that's a waste of money; a waste of effort.
    Mr. Otter. Is this a judicial proceeding?
    Mr. Bobis. Yes. It's an informal proceeding. It's not a 
judicial proceeding.
    Mr. Otter. What is the next level?
    Mr. Bobis. The next level is you formally appeal within 15 
working days.
    Mr. Otter. To whom?
    Mr. Bobis. To the CAL OSHA appeals board, which is an 
independent agency.
    Mr. Otter. All right. So now let's go to the third level. 
And, they say, no, you're still guilty. What is the third 
    Mr. Bobis. The third level, they have a telephone 
conference with an assigned administrative law judge.
    Mr. Otter. Who appoints the administrative law judge?
    Mr. Bobis. The appeals board.
    Mr. Otter. OSHA.
    Mr. Bobis. Yes.
    Mr. Otter. OK.
    Mr. Bobis. Then, if you don't settle that, you actually go 
through a formal hearing and another administrative law judge 
presides over that.
    Mr. Otter. Who appoints that administrative law judge?
    Mr. Bobis. Same appeals board.
    Mr. Otter. OK, so we have four strata here so far, and 
we're not out of OSHA yet.
    Mr. Bobis. Oh, no, you're not yet.
    Mr. Otter. OK, keep going.
    Mr. Bobis. Then, of course, you'll want to get legal 
counsel to assist you throughout the process, and you can go 
through the--just like the gentleman said, you can take 
depositions of the compliance officers, and then you try to 
impeach them and whatever, and eventually you present your case 
and hope to win it.
    Mr. Otter. OK. How many hearings and administrative rulings 
and appeals do you go through before you finally get out of 
OSHA and into the criminal or civil proceedings of the judicial 
    Mr. Bobis. If the appeal is granted, then the proceeding 
    Mr. Otter. But let's----
    Mr. Bobis. Or they may not stop, however, because the 
enforcement agency----
    Mr. Otter. Let's say this is one rule that they understood.
    Mr. Bobis. OK.
    Mr. Otter. What I want to know is how many appeals and how 
much time and how many legal fees and how much testimony is 
given before you finally get to an independent party that isn't 
hired by OSHA?
    Mr. Bobis. That would be the Superior Court.
    Mr. Otter. What level is that? How many times have you gone 
through the hearings and the processes and appeals and 
    Mr. Bobis. That would be--the next step after the 
administrative law judge's decision would be appealed to the 
CAL OSHA appeals board, and then you go to Superior Court.
    Mr. Otter. So it is no different than EPA?
    Mr. Bobis. Oh, no.
    Mr. Otter. Or Army Corps of Engineers?
    Mr. Bobis. Oh, no.
    Mr. Otter. Or IRS?
    Mr. Bobis. No.
    Mr. Otter. Or almost any other government agency?
    Mr. Bobis. No.
    Mr. Otter. King George III never had it so good, did he?
    Mr. Bobis. That's right.
    Mr. Otter. That's what I thought. Seems to me we resisted 
that once before.
    OK. Let's say when you get to the Superior Court and you 
finally won--let's say you won. You were found innocent. The 
rule that was permitted or the rules that were cited were 
wrong. What happens to that agent that brought that charge 
against you?
    Mr. Bobis. In California, we do have some recovery. We can 
recover up to $5,000 in damages and legal fees.
    Mr. Otter. Seven levels.
    Mr. Bobis. Yes.
    Mr. Otter. Seven levels, and if Mr. Knott's even close, 
$45,000 for two levels before he finally got his remedy. So if 
we go to seven levels, that's a pretty expensive $5,000; isn't 
    Mr. Bobis. Yes. I think the gentleman is on the light side, 
on the conservative side when we talk about legal fees.
    Mr. Otter. If you were writing the law--let's say you went 
from Aerojet, or you ran for Congress.
    Mr. Ose. Someone else's district, Dr. Bobis.
    Mr. Otter. If you ran for Congress, would you be interested 
in a law which actually pursued--allowed you, as a private 
individual, to pursue civil penalties against a government 
agent that brought wrong charges against you?
    Mr. Bobis. Oh, absolutely. Absolutely. Not only that, I 
would be very much in favor of also issuing citations to 
employees who willfully disregard company laws and rules.
    Mr. Otter. Or overstepped their boundaries?
    Mr. Bobis. Absolutely.
    Mr. Otter. Or exceeded their authority?
    Mr. Bobis. You bet.
    Mr. Otter. You see, I'm reminded that if you, as the 
compliance officer for Aerojet, disobeyed any of those rules, 
and you told somebody, no, don't do that; don't do that safety 
thing; no, don't hire that person because I don't like them; 
for whatever reason, so you went against affirmative action, 
any of those Federal laws, that you personally could be held 
criminally and civilly liable, isn't that right?
    Mr. Bobis. That's right.
    Mr. Otter. Don't you think it would be fair if the 
regulators operated under the same rules and regulations and 
constraints, constraining themselves to the rule of law?
    Mr. Bobis. You bet. Equal protection under the law.
    Mr. Otter. So you would introduce that law?
    Mr. Bobis. I would have done it yesterday.
    Mr. Otter. Thank you, Mr. Chairman. I appreciate your 
    Mr. Ose. Thank you, Mr. Otter.
    I want to go back to something. Dr. Bobis, you are a wealth 
of information. Don't worry, I have questions for the other 
three, but I want to make sure I get through with Dr. Bobis.
    The vertical standard concept. I'm not quite sure I 
understand that. Could you just take us through that one more 
    Mr. Bobis. Oh, very simply, Federal OSHA has exempted some 
special interest groups, such as agriculture, such as 
construction, such as telecommunications, and basically only 
one set of regulations apply in that industry. But, that's 
really a misnomer because what happens, for example, if you dig 
a trench on a farm, even though there are no trenching 
regulations and if there's an injury, they are going to come in 
and cite you under the general duty clause, and it carries an 
automatic $70,000 fine for every one of those.
    So, what we have here is we basically have no regulation, 
written regulation. It is kind of like driving on the freeway 
and there are no speed limits posted, but they pull you over to 
the side and issue you a ticket for violating the speed limit 
which has not been posted. That is what is wrong with that.
    Now, on the other hand, if they elect to adopt, for 
example, lead, there's regulations for lead in the general 
industry, and there's identical regulation in construction. 
Absolutely duplicated. There's no reason for that.
    Mr. Ose. Now your point is that these unposted mileage 
markers, or whatever, these have been issued actually not in 
compliance with the Administrative Procedure Act. They are 
guidance documents.
    Mr. Bobis. That's right.
    Mr. Ose. Now, it's my understanding--and I want to be sure 
I'm clear on it. It is my understanding that case law is that 
guidance documents are unenforceable, is that correct?
    Mr. Bobis. The State law?
    Mr. Ose. No, Federal guidance documents are unenforceable.
    Mr. Bobis. They should be unenforceable.
    Mr. Ose. Again, getting back to the due process issue.
    Mr. Bobis. That's right.
    Mr. Ose. All right. Thank you, Dr. Bobis. I am very 
appreciative of your input.
    Mr. Bobis. Thank you for inviting me.
    Mr. Ose. I want to go on to a couple other questions I 
    Mr. Knott, in your written testimony you cite the example 
of OSHA's attempt to enter our homes in terms of an employee 
working at home. Now, it's my understanding that--and I can't 
remember what it was, he was secretary of something or other--
this guy Charles Jeffress, he's the Administrator of OSHA, now 
he stated very specifically in front of a Senate committee that 
OSHA will not hold employers liable for work activities in 
employee home offices. That was about a year and 3 months ago.
    Now, the question I have is that the new rule that has been 
promulgated by OSHA, in effect, says that OSHA can go into 
people's homes to analyze in-home injuries. I'm trying to 
understand, when was the rule put through the Administrative 
Procedure Act that allows that?
    Mr. Knott. That allows them not to go into homes?
    Mr. Ose. No, that allows OSHA to go into homes.
    Mr. Knott. Well, they can't do it now. They can't go into 
homes now. But an employee can bring something from home to the 
business. If he has been hurt at home and he comes in to work 
and that hurt is aggravated, then it becomes reportable and 
documentable as a business-related injury. This is the problem. 
They have reached out far beyond the workplace.
    Mr. Ose. I think the phrase you used was ``the reporting 
trigger has been greatly expanded.''
    Mr. Knott. Exactly.
    Mr. Ose. Now, what is the basis under which OSHA has 
expanded that recording trigger?
    Mr. Knott. What is the basis?
    Mr. Ose. Yes.
    Mr. Knott. Merely expansion of their empire. They are 
looking for more business.
    Mr. Ose. Is there a statutory underpinning to their 
expansion of the recording trigger?
    Mr. Knott. Of the recording--yes, that was the ergonomics 
thing. Ergonomics, of course, was defeated.
    Mr. Ose. We defeated that.
    Mr. Knott. Right, but the reporting paperwork burden 
remains in place, and that, too, needs to be erased.
    Mr. Ose. Well, I'm suffering from confusion. Either I'm 
confused or you're confused. If there is no rule, how can you 
have a reporting trigger?
    Mr. Knott. Oh no, they do have that rule. If there's a 
problem with the employee at home and that problem creates a 
problem for him or her at work, then it must be reported.
    Mr. Ose. But I'm not aware of any statutory basis for 
OSHA's requirement to report.
    Mr. Knott. No, OSHA doesn't report. We have to report.
    Mr. Ose. For OSHA to require that employers report that 
situation, what is the statutory basis by which OSHA puts that 
burden on you to report that?
    Mr. Knott. That was what was left over from the ergonomics 
statute. That reporting requirement was part of that.
    Mr. Ose. Well, this is where I got confused. Because Mr. 
Jeffress' comment last January was very clear----
    Mr. Knott. Yes.
    Mr. Ose [continuing]. That OSHA would not be holding 
employers liable for work activities in the employees' home 
offices. So there's a logical disconnection here. Because, if 
OSHA's authority does not extend to the home office, and the 
injury does not occur onsite at the business, how can the 
business be held accountable for the injury?
    Mr. Knott. Because they say that it was aggravated by the 
business. In other words, if the person was hurt at home, say 
he slid into third base and hurt his leg and now he's got to 
walk around the plant, the plant is aggravating a problem that 
happened outside. So, therefore, it has to be reported, and the 
employer becomes responsible.
    Mr. Ose. Even though the action causing the injury did not 
    Mr. Knott. Exactly.
    Mr. Ose [continuing]. Under your control?
    Mr. Knott. Exactly.
    Mr. Ose. So what's the purpose of that?
    Mr. Knott. I can't tell you. I don't know. It's just, as I 
said earlier----
    Mr. Ose. You can't tell me or you don't know? That's two 
different answers.
    Mr. Knott. Both. As I said earlier, to me it is merely an 
expansion of the OSHA empire, the reach beyond the workplace to 
have some more paperwork.
    Mr. Ose. Well, it seems to me that OSHA has clearly--I'm 
going to put this in the record--OSHA Directive CPL 2-0.125--
home-based work sites, published February 25, 2000, 
stipulates--OSHA stipulates, the OSHA act, the Occupational 
Safety and Health Act, neither applies to an employee's house 
nor to a home office. The provisions in the final rule that 
require the recordation of injuries and illnesses occurring in 
an employee's home office where an employer has no control over 
the office's layout or the equipment used exceed OSHA's 
statutory authority. I'm trying to get the connection between 
that particular stipulation and this rule that--it just seems 
like they are going this way.
    Mr. Knott. Well, it certainly does, but that is what OSHA 
is still hanging on to, is that if someone has a problem at 
home or outside of the workplace and that problem is aggravated 
by work in the workplace, then it becomes the responsibility of 
the employer. You're perfectly correct in saying it is 
illogical, but it exists.
    Mr. Ose. Is that the standard used by any State workers' 
compensation plan?
    Mr. Knott. No, it is not, not in any State that I know, at 
    Mr. Ose. I'm not aware--I think that's something we ought 
to followup in California in terms of--I mean, Massachusetts 
doesn't have it, California doesn't. We don't know if 
California has it. But, again, what is the basis for the 
recording trigger is what I'm trying to get at and what are the 
related requirements at the State level. What I hear you saying 
is Massachusetts recognizes that this is not something the 
workers' compensation would compensate for.
    Mr. Knott. Correct. Massachusetts Department of Labor will, 
if you request, perform an OSHA inspection on your facility. I 
requested the Commonwealth of Massachusetts Department of Labor 
to do that, and they spent several days going through the 
place. I'm always looking for suggestions and ideas.
    When the OSHA inspector came in to do a wall-to-wall, as he 
said, I said, well, we just had one from the Commonwealth of 
Massachusetts, would you like to see that? He said, ``They 
don't know what they're doing.''
    Mr. Ose. My time is way over. I apologize.
    Mr. Otter, for 5 minutes.
    Mr. Otter. Mr. Chairman, I apologize to not only you but 
also the panel, because I think this could go on a long time 
and we could find out a great deal more, but I have a 12:30 
p.m. appointment that I am going to have to get to.
    But I don't want to leave Mr. Nicholson out. I think he 
deserves an opportunity to respond. Does Virginia have an 
OSHA--a State correspondent to OSHA?
    Mr. Nicholson. Yes, sir.
    Mr. Otter. Do you think they care any less about the 
accident and health rate in the workplace than, say, does the 
Federal OSHA?
    Mr. Nicholson. I don't think so. I think they do a fine 
    Mr. Otter. In your estimation, is the Federal Government 
any more qualified than your State OSHA to guide the 
responsibilities of employment to less accidents and better 
    Mr. Nicholson. It is my belief that most of the Federal 
OSHA enforcement is left to the Virginia group because the 
State is so effective in what they're doing.
    Mr. Otter. Do you find that when you are dealing with the 
State you are kind of dealing with a neighbor and when you are 
dealing with the Federal OSHA you are dealing with an 
enforcement policeman?
    Mr. Nicholson. Absolutely. I think the Federal personnel 
have a quite different perspective. They don't understand that 
there are local conditions that can have a significance.
    Mr. Otter. How many bouquets do you sell a year?
    Mr. Nicholson. Gee, I've never counted the number of 
    Mr. Otter. Well, I like to be able to always reflect on 
these things, so that I can tell the next girlfriend that I 
give a bouquet to, or my mother, that $2 of this bouquet is 
government regulation. That what I wanted to get down to, 
because I want to know what it costs you in your business to 
comply with the reporting responsibilities, whether it's the 
IRS, OSHA, or anybody else, probably USDA, because you are 
dealing with live flowers in some cases.
    Mr. Nicholson. Actually, we are a significantly small 
business, so we are exempt from Federal regulation on purpose.
    Mr. Otter. I see. In other words, hoof and mouth is only 
for the big guys?
    Mr. Nicholson. That's right. But, we figure I pay probably 
$100 a week for outside contractors, CPA, and bookkeeping and 
that kind of thing; and then I also have about 10 to 15 hours 
per week of my time devoted to a whole series of bookkeeping 
stuff. Although, as I pointed out, in order to do a good job in 
managing my business, I ought to be doing most of that 
bookkeeping already anyway.
    Mr. Otter. I see.
    Well, Mr. Chairman, members of the panel, as I began, I 
apologize once again for having to rush, but I would like each 
of you to consider whenever you express in terms of government 
reporting and government regulation, to do it in unit cost 
terms. Because I found out--and I sold McDonald's a lot of 
French fries; and when people started complaining about $1.35 
for an order of French fries, I said I just want you to know 
that 38 cents of that is government regulation.
    We care about our customers, because we know the first time 
we sell them a French fry is not where we make the profit. It 
is when they come back and buy it again and again and again. 
So, we really care about them--where the government would have 
you think that we don't care about them.
    I would hope that, no matter what your product is, no 
matter how many acres you have, no matter how many pieces of 
netting you sell for crab traps, that if you could express that 
in a per-unit cost and when your customers come in you could 
say, you know, I'm sorry it could be a lot cheaper, the only 
thing is it is your government cost.
    Not only that, but the national organizations that you 
belong to, have them break it down to per-unit cost, and pretty 
soon we are getting somewhere with the real cost of government, 
the hidden costs, the hidden taxes that we have.
    Thank you, Mr. Chairman.
    Mr. Ose. Thank you.
    Mr. Otter, I want to tell you, if it's 38 cents per $1.35 
of French fires, over the spring break I think I spent $217 on 
government regulation for French fries. They were good, though.
    Mr. Otter. Would the gentleman yield? I would just have you 
know that I one time figured out how many taxes and regulations 
there were on two all-beef patties, special sauce, onions, 
lettuce, pickles, cheese on a sesame seed bun, and it's $2.54.
    Mr. Ose. Wow.
    I need to ask a couple other questions. I want to thank Mr. 
Otter for coming.
    This hearing is about paperwork, and every time we get back 
to what is the required paperwork under the results from these 
statutory, discretionary or guidance document requests. Dr. 
Bobis, on the guidance document requests, things that are not 
binding, relative to your overall expense for paperwork, how 
much do you think you are spending? Twenty percent? Fifty 
    Mr. Bobis. It's very difficult to quantify, and I--just a 
wild guess, between 10 and 20 percent.
    Mr. Ose. For guidance document compliance?
    Mr. Bobis. Yes.
    Mr. Ose. Mr. Nicholson, you said you were exempted from 
most of the provisions. Any feedback here?
    Mr. Nicholson. Well, I don't know exactly what you mean by 
feedback. It certainly has crossed my mind that the expansion 
and growth of our business might reach a level where I'm not 
sure I want to grow much longer because I'll go beyond all the 
limits, the thresholds. As a result, I am sort of looking at if 
I can continue to expand and use the same number of employees, 
I might continue, but I'm not sure I want to hire a bunch of 
additional people. Because right then and there I'm off into a 
whole different realm than I am as a mom and pop.
    Mr. Ose. As a mom and pop, how much do you think you spend 
in complying with IRS reporting requirements each year?
    Mr. Nicholson. Well, I've got probably $100 a week, as I 
say, for outside bookkeeping-type, combination CPA and the 
bookkeeper and that sort of thing. I'd say for Federal income 
tax purposes, probably more than half of that is used to 
compile the Federal income tax, the 940's and all the rest of 
the Federal reporting.
    Mr. Ose. So you are somewhere around $5,000 to $7,000 a 
year in your business?
    Mr. Nicholson. Yes.
    Mr. Ose. Mr. Knott, on the requirement to comply with what 
appears to be a reporting requirement that has not followed the 
Administrative Procedure Act, that being the home-based 
occupational and safety health issue, and I'm characterizing 
this in my words, how much do you spend or expect to spend 
complying with that requirement?
    Mr. Knott. My human relations manager estimates that it's 
going to take about 25 percent of an assistant's time, which is 
about, say, $10,000.
    Mr. Ose. OK. And you have about 125 employees?
    Mr. Knott. Yes. I estimate that I spend about 80 percent of 
my time dealing with OSHA, the EPA and the FAA. Having started 
the business with my own two hands and worked out in the plant, 
that's quite a switch, to spend 80 percent of my time dealing 
with bureaucracies.
    Mr. Ose. You bring me back to one of the points. I was 
reading your written statement last night, and I just want to--
if I can find it--you have a comment in here that I thought was 
particularly telling. Here it is, on page 4. This is your 
statement, which I thought was very, very good. ``People who 
make things in America have to divert their attention from 
productivity and quality goals to deal with bureaucracies, 
inspectors, complainants, lawyers and courts, a diversion with 
which people who make things in America have had to deal with 
time and again.''
    And your point, if I understand the prefacing comments in 
your testimony, is that you are a producer; you make things. 
You are not interested in the paperwork. It is not your reason 
for being. Your reason for being is that you want to produce 
something, to create jobs and revenue and all the different 
things that result.
    Mr. Knott. Make those profits to send those tax dollars 
down to Washington.
    Mr. Ose. I understand. I almost slipped there and said the 
same thing. But my point is, you are a producer; you're not a 
consumer here.
    Mr. Knott. That's right.
    Mr. Ose. I don't understand why we are promulgating upon 
you guidance documents ad infinitum, or ad nauseam, which takes 
you away from your productive time. That's the thing that just 
strikes me here. So I want to thank you for coming. I 
appreciate that.
    Mr. LaGrande, I want to go through your testimony somewhat 
at length, so if the other witnesses will be patient. I am 
particularly interested in the impact on agricultural 
production from Bureau of Reclamation efforts to collect this, 
that or the other piece of information, which your testimony 
indicates--I think your phrase was ``finds no basis in law,'' 
on page 3.
    One of your suggestions is that when your operating 
entities file on a new year or annual basis, if you could have 
a spot on the forms that you file that says ``no change from 
previous year,'' that would save you an enormous amount of time 
and effort. You've got 900 acres. How many of those 900 acres 
from year to year change in terms of operator or operating 
entity or crop or water use?
    Mr. LaGrande. None of them.
    Mr. Ose. Zero.
    Mr. LaGrande. Yes, that's correct.
    Mr. Ose. So, in effect, you could take almost a Xerox of a 
previous year's filing, in terms of the basic data. You would 
have to change the date, of course, but----
    Mr. LaGrande. You could, but the forms they provide you 
have on the top of them the year. So this is a form for 2000, 
and you can't turn in the 2001 form. You can't turn this in in 
place of the 2001 form, although the form hasn't changed nor 
has any of the information or the data that I'm going to fill 
    Mr. Ose. Are you able to file that information 
electronically with the Bureau?
    Mr. LaGrande. No.
    Mr. Ose. They cannot take it electronically or they will 
not take it electronically?
    Mr. LaGrande. I'm not sure if they cannot, but they will 
    Mr. Ose. All right. So maybe one of the things we need to 
do legislatively is at least discuss with the Interior 
Department and the Bureau of Reclamation, if the circumstances 
of any one person's water use have not changed from year to 
year, for what purpose are we requiring a whole new set of 
documents? We should put that little line item in there.
    Mr. LaGrande. I think that would be appreciated.
    Mr. Ose. If that option were available to you on that 
particular form, how much time would it save you?
    Mr. LaGrande. Oh, it would save hours. I don't have a good 
sense of how many hours, but probably 20 to 25 hours in the 
spring each year.
    Mr. Ose. And, that's on your 900 acres?
    Mr. LaGrande. Yes, something like that.
    Mr. Ose. In my district, and I'm just talking about rice, 
there are 550,000 acres of rice grown in my district. So, if 
all 900 acres of yours is rice, that's 1/600th of the total, so 
it would be 600 times whatever time you would be saving, and 
then we could just replicate that for every programmed crop 
throughout the State.
    Mr. LaGrande. That's right.
    Mr. Ose. Just by putting a box that says ``no change from 
previous year.''
    Mr. LaGrande. For those that have no changes.
    Mr. Ose. I understand.
    Mr. LaGrande. Absolutely.
    Mr. Ose. As far as the information that the Bureau requests 
for who your fertilizer applicator is, who hauls your product 
to market, who drives your rice, who provides natural gas to 
dry your rice, who works in your field with your custom 
harvester, what possible purpose could the Bureau have for 
asking for that information?
    Mr. LaGrande. Well, it seems to find its origins in efforts 
that were made under the Clinton Interior Department to placate 
a few environmentalists, namely the NRDC, who really tried to 
stretch the rules as they applied to the word lease.
    When the Reclamation Reform Act was originally considered 
by Congress in the early 1980's, they wanted to limit the size 
of farms that could be the recipient of Federal water. So the 
basis on which that limitation was derived was on ownership. 
Because everyone could clearly agree on who owned the land, and 
then you had the case of lease, and that was not quite so 
clear, but there are relatively clear definitions available. So 
the one they decided on is someone who has an economic interest 
in the crop. If you have control of the property and you have 
an economic interest in the crop, you are a lessor.
    But, then there were objections raised by environmental 
organizations that, hey, there are a few organizations that try 
to get around that by leasing out their property and then, in 
fact, they're farming different people's entities and acreage 
for them and charging a fee for that, and so we should go after 
    Well, that died out in the late 1980's. They made those 
arguments to Congress, Congress overruled that, and so 12 years 
later the Bureau of Reclamation put forth rules chasing down 
that lead as a result of a settlement that the Department of 
the Interior made with the NRDC under the Department of 
Justice. And one of the terms of the settlement was that they 
would put forth rules that would cause farmers to identify 
their farm operators and notify the Bureau of Reclamation as to 
the identity of their farm operators.
    Mr. Ose. Are those rules being promulgated now?
    Mr. LaGrande. Yes, this year.
    Mr. Ose. They have been issued?
    Mr. LaGrande. Yes, but not publicized. None of us have 
received any notification.
    Mr. Ose. Have they been through the Administrative 
Procedure Act?
    Mr. LaGrande. I have no idea.
    Mr. Ose. I think that's something we will inquire about.
    Now, the Reclamation Reporting Act has not changed since 
    Mr. LaGrande. That's correct.
    Mr. Ose. If I understand correctly, the Reclamation 
Reporting Act does not require the reporting of all these 
people who work for a farmer.
    Mr. LaGrande. That's correct. It's also public information. 
So someone who, say, is a crop duster and wants to go and, 
under a Freedom of Information Act request, look at who their 
competitor's customers are, they can do that. So suddenly there 
are confidential customer lists, and information such as that 
is public information.
    Mr. Ose. Now, one of the things, if I might expand this a 
little bit from, say, the Bureau. I want to go over to the Farm 
Service Agency. The FSA each year meets with the growers in an 
area, collects data as they relate to program crops and the 
like, your base acres, all the stuff. Do the reports at FSA 
allow a farmer to check a box that says he or she is just going 
to do what they did last year?
    Mr. LaGrande. Yes.
    Mr. Ose. They do?
    Mr. LaGrande. The FSA's process is quite a bit more 
streamlined. They don't actually----
    Mr. Ose. Wait. Wait a minute. So one agency says that--the 
agency at the top of the food chain, so to speak, the FSA, says 
you can check off a box that says no change from last year, but 
an agency lower down on the food chain doesn't?
    Mr. LaGrande. Correct.
    Mr. Ose. Why?
    Mr. LaGrande. I don't know.
    Mr. Ose. Actually, why not?
    Mr. LaGrande. That's a good question, and it is a source of 
frustration for all of us.
    Mr. Ose. So on a comparative basis you can turn in your 
forms to FSA literally with the flick of a wrist. Whereas over 
here at Bureau, where you are using what they provide as an 
input to which you report to FSA, it requires a rather onerous 
drill, if you will?
    Mr. LaGrande. That's right.
    Mr. Ose. Is the information you're reporting to the Bureau 
any different than the information you're reporting to the FSA? 
Excuse me, is the information being required to be reported to 
the Bureau different from the information you're required to 
report to the FSA?
    Mr. LaGrande. Slightly, particularly under these new rules. 
The FSA doesn't require any information about who your 
providers are of any services and that sort of thing. The FSA 
does require--they both have in common the requirement that you 
have to indicate the land, identify the land that you are 
farming and identify whether you own that land or you lease 
that land. They both require that, and they both require 
evidence of the lease. So the majority of the information is 
    Mr. Ose. Duplicative in nature.
    Mr. LaGrande. Correct.
    Mr. Ose. Why? I mean, I understand why it's duplicative. I 
don't understand why it's being asked for twice. I don't 
understand that.
    Mr. LaGrande. I would imagine that the Farm Service Agency 
and the Bureau of Reclamation staffs have not found a way to 
get together and utilize a common form.
    Mr. Ose. But, again, it gets back to your point under the 
Reclamation Act this information is not required anyway, from 
the Bureau of Reclamation standpoint.
    Mr. LaGrande. That's right.
    Mr. Ose. So the differences between FSA's form and the 
Bureau's form boils down to that which the Bureau requests is 
not being authorized to collect under law?
    Mr. LaGrande. In substance, I would say that's the 
difference. The forms are, of course, set up differently, and 
you get to a little bit different arrangement of the data.
    Mr. Ose. How many boxes per year of paperwork do you end up 
having to accumulate for this stuff?
    Mr. LaGrande. You can accumulate more boxes than for which 
you have storage capability in your office very quickly.
    Mr. Ose. So you end up renting a mini-storage unit to put 
your paperwork in.
    Mr. LaGrande. Yes.
    Mr. Ose. And, then you have to hold it for 7 years?
    Mr. LaGrande. Some of it 3, some of it 5, some of it 7, 
some of it indefinitely.
    Mr. Ose. Have you ever had anybody come back and look at 
your paperwork?
    Mr. LaGrande. Never.
    Mr. Ose. Your family has been farming out there for how 
    Mr. LaGrande. I'm the fifth generation.
    Mr. Ose. So, what, 1875? Early 1900's?
    Mr. LaGrande. That's right, late 1800's, early 1900's.
    Mr. Ose. And, no one has ever been in your storage unit to 
look at your files? No one from the Bureau?
    Mr. LaGrande. Not in mine.
    Mr. Ose. I want to thank the witnesses for coming. You have 
given us significant input in terms of the paperwork burdens 
that you bear. I am particularly concerned about the manner in 
which information is requested for which there is no statutory 
authority to ask for in the first place; and it clearly ranges 
from corporate America, where Dr. Bobis works, to where Mr. 
Nicholson, Mr. Knott, and Mr. LaGrande work. It is across all 
industries and in all States and, clearly, in virtually every 
possible nook or cranny where such information might exist.
    It is all-encompassing and, clearly, some of the 
information is statutory. To the extent that it's statutory 
information, I don't think any of us object to its collection. 
But when it's discretionary, and there is no clear 
understanding or reason or basis for the collection, I have to 
admit to some confusion as to why we burden our people with 
    I want to thank our witnesses for coming today. I 
appreciate it. This committee will be following up on these 
items, and your testimony today has been very helpful.
    We are adjourned.
    [Whereupon, at 12:48 p.m., the subcommittee was adjourned.]
    [Additional information submitted for the hearing record