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



                 DEPARTMENTS OF LABOR, HEALTH AND HUMAN

               SERVICES, EDUCATION, AND RELATED AGENCIES

                        APPROPRIATIONS FOR 2003

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS
                             SECOND SESSION
                                ________
  SUBCOMMITTEE ON THE DEPARTMENTS OF LABOR, HEALTH AND HUMAN SERVICES, 
                    EDUCATION, AND RELATED AGENCIES
                      RALPH REGULA, Ohio, Chairman
 C. W. BILL YOUNG, Florida           DAVID R. OBEY, Wisconsin
 ERNEST J. ISTOOK, Jr., Oklahoma     STENY H. HOYER, Maryland
 DAN MILLER, Florida                 NANCY PELOSI, California
 ROGER F. WICKER, Mississippi        NITA M. LOWEY, New York
 ANNE M. NORTHUP, Kentucky           ROSA L. DeLAURO, Connecticut
 RANDY ``DUKE'' CUNNINGHAM,          JESSE L. JACKSON, Jr., Illinois
California                           PATRICK J. KENNEDY, Rhode Island
 KAY GRANGER, Texas
 JOHN E. PETERSON, Pennsylvania
 DON SHERWOOD, Pennsylvania         
                   
 NOTE: Under Committee Rules, Mr. Young, as Chairman of the Full 
Committee, and Mr. Obey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
       Craig Higgins, Sue Quantius, Susan Ross Firth, Meg Snyder,
             and Francine Mack-Salvador, Subcommittee Staff
                                ________
                                 PART 1

                           DEPARTMENT OF LABOR
                                                                   Page
 Secretary of Labor...............................................    1
 Worker Protection Agencies Panel (OSHA, MSHA, PWBA, ESA, and 
ILAB).............................................................  117
 Employment Assistance and Training Activities Panel (WIA, SUIESO, 
and VETS).........................................................  237
 Inspectors General Panel (Labor, HHS, and Education).............  327
 Bureau of Labor Statistics.......................................  415
                                ________
         Printed for the use of the Committee on Appropriations
                                ________
                     U.S. GOVERNMENT PRINTING OFFICE
 80-459                     WASHINGTON : 2002





                       COMMITTEE ON APPROPRIATIONS

                   C. W. BILL YOUNG, Florida, Chairman

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

                                  (ii)

 
DEPARTMENTS OF LABOR, HEALTH AND HUMAN SERVICES, EDUCATION, AND RELATED 
                    AGENCIES APPROPRIATIONS FOR 2003

                              ----------                              

                                      Wednesday, February 13, 2002.

                          DEPARTMENT OF LABOR

                                WITNESS

ELAINE L. CHAO, SECRETARY OF LABOR

                        Introduction of Witness

    Mr. Regula. We will get started. Good morning, Madam 
Secretary. We are pleased to have you join us this morning. You 
have a lot of significant responsibilities, particularly in the 
time when there is an economic slowdown, people look to your 
department for help in many different ways. And I am pleased 
that the President's proposals include extending 13 weeks of 
unemployment benefits and giving $4 billion for national 
emergency grants and enhancing the support for Job Corps. But 
these are things that challenge all of us, and I am sure the 
members will have a number of questions.
    I see Mr. Obey isn't here. So Madam Secretary, we will 
listen for your opening statement.

                   Secretary Chao's Opening Statement

    Secretary Chao. Thank you very much. Good morning Chairman 
Regula. I am pleased to be here to address the members of the 
Subcommittee. I appreciate the opportunity to present the 
President's Fiscal Year 2003 request for the Department of 
Labor.


                       EFFECTS OF SEPTEMBER 11TH


    For our Nation, and for our department, the world changed 
on September 11th, 2001. Just hours after the terrorist attacks 
on our country, inspectors from our regional OSHA, Occupational 
Safety and Health Administration office, were on the scene at 
Ground Zero, risking their own lives to ensure the safety of 
rescue workers at the site. Our Office of Worker Compensation 
Programs immediately set up operations to provide services to 
Federal employees and their families who were impacted by the 
attacks on the World Trade Center and on the Pentagon.
    One week after the attacks the Department of Labor approved 
a $25 million National Emergency Grant to the State of New York 
to help dislocated workers in the region. A month later, we 
provided a $10 million National Emergency Grant to Virginia, to 
deal with the effects of the temporary closing of the Ronald 
Reagan National Airport.


                        OSHA RESPONSE TO ANTHRAX


    When the Nation's postal system was threatened by anthrax 
mailings, OSHA reached out to the postal unions and forged an 
innovative partnership with the Laborers International Union to 
create a new program to emphasize biohazard abatement training.
    And even before a month had passed since September 11th, we 
worked with the President to unveil a ``Back to Work'' plan 
that would extend income and health care support to laid-off 
workers, and reconnect them to the work force.
    I mention all of these things to express how proud I am of 
this Department of Labor, and the contributions that so many of 
our career and non-career professionals have made to serving 
our Nation in a time of crisis. And because these events reveal 
how our department, in fact, our entire Federal Government has 
had to change and adapt to the new realities we face.
    The President's budget responds to these new realities by 
setting the very highest priorities on winning the war against 
terrorism, defending our homeland, and renewing our economy.


                         ``BACK TO WORK'' PLAN


    The President's top legislative priority for the Department 
of Labor is passage of the Back to Work plan. This legislation, 
which has already passed the House, would increase funding for 
National Emergency Grants by $4 billion. It would also 
distribute an additional $9 billion in Reed Act funds to State 
unemployment insurance accounts, to be used for higher 
unemployment benefits, reemployment services, and payroll tax 
cuts.
    The dislocated worker support funding proposed by the 
President's ``Back to Work'' plan is more than our entire job-
training programs combined.


                               JOB CORPS


    Our commitment to strengthening the economy and creating 
jobs is reflected in other ways as well. We have increased 
funding for the Job Corps by $73 million, because we know that 
for every dollar invested in this time-tested program, we get 
two back from productive Job Corps graduates. In this budget, 
we have also consolidated some job training programs, giving 
States the discretion to fund specialized or targeted 
activities out of their Workforce Investment Act allocations.


               WORKFORCE INVESTMENT ACT CARRY-OVER FUNDS


    As the chart alongside of me shows, there is more than 
enough money, currently in our Workforce Investment Act system 
to fund job training programs without any reduction in 
services. If you take a look, you will see the green is budget 
authority figures combined with the carryovers from the 
previous year as contrasted with the red, which is the 
estimated expenditures. And it is our estimation that we will 
have more than enough.
    At a time when we are counting every penny to fight the war 
on terrorism and defend our homeland, we must make every effort 
to spend down the $1.7 billion carryover in State Workforce 
Investment Act accounts rather than pour additional budget 
dollars into the system.
    Even in these uncertain economic times, this budget 
provides the funding we need for training and reemployment 
activities. We will not short-change America's workers.


                                  OSHA


    This budget also reaffirms our Department's commitment to 
enforcing vital worker protection laws. In order to concentrate 
funding on the front lines, we are reducing unnecessary non-
enforcement overhead in some of our worker protection programs. 
This will allow us to increase spending on targeted worker 
protection activities and programs by $13 million at OSHA, and 
$10 million at MSHA in Fiscal Year 2003. These are real 
increases that will make a real difference in the day-to-day 
safety and health of hardworking Americans.
    For example, if you look at our next chart, we have set a 
goal of pursuing more OSHA enforcement actions in 2003 thanin 
recent history and in recent memory. The chart shows that our goal, in 
fact, is to pursue approximately 38,000 new enforcement actions in 
2003, which is an increase from fewer than 36,000 in the current year.

                       RETIREMENT SECURITY--PWBA

    And long before a company named Enron began to dominate our 
Nation's pension plans and headlines, we at the Department of 
Labor were preparing a budget that increases our commitment to 
defending Americans' retirement security.
    As you know, the President has set forth a plan that will 
give workers more choice, more confidence, and control over 
their retirement savings. This plan gives workers the right to 
make their own investment decisions. It gives them access to 
the same professional investment assistance that rich people 
have. And it creates a level playing field of control over 
workers' investment holdings, whether they work on the top 
floor or on the shop floor.
    I would like to work closely with Congress to pass this 
timely plan. At the same time, even these powerful safeguards 
will not guarantee the security of workers' retirement benefits 
without aggressive enforcement of ERISA pension protections.
    That is why our 2003 budget increases enforcement and 
compliance funding by $7.8 million for the Pension and Welfare 
Benefits Administration, and by $2.5 million for the Office of 
the Inspector General.
    Both PWBA and the Office of the Inspector General are on 
the front lines defending workers' retirement savings from 
mismanagement and fraud. While companies like Enron have 
received the lion's share of press attention, the reality is 
that retirement security is a concern for every worker, whether 
they have a 401(k) program, a company pension, or a union 
pension. It is our job to protect their rights and their 
property and their security and these funding increases will 
help us do just that.
    Overall, we are requesting more than $37.4 million in 
targeted funding for worker protection activities over last 
year's budget. That is a significant increase.

                         NEW FREEDOM INITIATIVE

    Going beyond our enforcement responsibilities, we also have 
commitments to expand opportunities for workers with 
disabilities and our nation's veterans. To follow through on 
the President's New Freedom Initiative, we are requesting an 
additional $9 million for the Office of Disability Employment 
Policy, which will target community-based employment and 
specialized youth training for those with disabilities.

                VETERANS EMPLOYMENT AND TRAINING SERVICE

    We also stand ready to transfer the Veterans Employment and 
Training Service to the Department of Veterans Affairs, as the 
Principi Commission has recommended. This is a structural 
matter, concentrating veterans services in one place, and does 
not entail any net reductions in services, funding or 
personnel.
    We are committed to making this transfer as smooth and 
seamless as possible. And even with this consolidation, we will 
continue to vigorously enforce veterans' employment rights 
under the veterans preference law and the Uniformed Service 
Employment and Reemployment Rights Act, which as you well know, 
is known as USERRA.
    In closing, the Department's 2003 budget will fully support 
our responsibilities, from training a workforce that is able to 
compete in today's global, speed-of-light economy, to securing 
the pensions of hard-working Americans. It will meet the day-
to-day needs of the workforce as well as the longer term goals 
of overcoming the bin Laden recession and revitalizing our 
economy. Our budget will also drive efficiencies and make our 
agencies more accountable. It is a win-win solution for the 
American worker and taxpayer.
    Mr. Chairman, I thank you for the opportunity to allow me 
to make that statement and I will be happy to answer any 
questions that you may have.
    Mr. Regula. Thank you for your statement.
    [The prepared statement and biography of Elaine L. Chao, 
Secretary of Labor, follows:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



                      TRADE ADJUSTMENT ASSISTANCE

    Mr. Regula. You have a lot of challenges this year as you 
have already identified. TAA, you are responsible for 
administering that, correct? At least in our experience, it has 
been slow in getting responses. Of course that is important 
because people who are out of work as a result of imports need 
that help rather quickly. Is there any effort being made to 
speed up the approval process?
    Secretary Chao. Mr. Chairman, I am very much aware of the 
lengthy time that it takes to process a TAA petition. It is 
supposed to take 2 months, but on average, I think it takes 
about 4. It is a very fact-based, investigatory process. So we 
are doing all that we can to push it along. But a lot of times 
our answers in the investigation depend on responses provided 
by competitors, and provided by market conditions.
    I think a good thing to emphasize is that this is one 
reason why the Administration is focusing so much on National 
Emergency Grants. As can be seen through the aftermath of 
September 11th, we can get National Emergency Grants out very 
quickly. In fact, in the State of New York, we got those grants 
out in 9 days. The application process is simpler with a 
National Emergency Grant. The application itself is only three 
pages. Again, we can act very quickly on that. But the 
processing of TAA petitions is a continuous problem. I 
understand that. We are trying to push it along, but our 
response is very oftendependent upon information we need from 
the company and others on the ground concerning competitive conditions.

                       NATIONAL EMERGENCY GRANTS

    Mr. Regula. I assume you have to establish that this 
unemployment resulted from foreign competition or trade issues, 
and that may be delayed somewhat. Tell me a little bit about 
the National Emergency Grant program. How does it work?
    Secretary Chao. Well, National Emergency Grants are an 
enormously flexible, targeted, and responsive tool. It is, as I 
mentioned, a very simple application. It is only about three 
pages. It is a page requesting money for the governor, and then 
two supporting pages.
    Mr. Regula. Does this go to the individuals or to the 
governors?
    Secretary Chao. It goes through the States. The governor 
requests it; it goes through the States, but it ultimately goes 
to individuals.
    Mr. Regula. The governors make the judgments as to whether 
the individual is an eligible recipient; is that correct?
    Secretary Chao. Basically, under the Workforce Investment 
Act, funds can be administered through the boards, or whomever 
would be the designated bodies. But most of the time, a 
National Emergency Grant is requested because of a national 
emergency of some sort, maybe a plant closing or a flood that 
goes through a town. So it is again, people oriented. It is for 
a specific, very targeted event, but very flexible.
    Mr. Regula. Designed to help them, a family to sustain 
itself and until----
    Secretary Chao. Provides income support. It provides 
commuting expenses if the person is linked into the WIA 
process. It also provides health care, provides child care 
reimbursement, and out-of-pocket expenses connected with job 
training. The President, in his Economic Security Package, is 
requesting that the National Emergency Grants be allowed to be 
used to help individuals, people, workers pay for their health 
care insurance also.

                   WORKFORCE INVESTMENT ACT CARRYOVER

    Mr. Regula. In your statement, you mention that there is a 
reduction in the employment and training budget and a carry 
over to meet the needs. The governors contest that assertion in 
saying that if they want to start new programs, this money 
won't fit for that purpose. Is that a valid objection?
    Secretary Chao. There are $1.7 billion in unspent carryover 
funds from the previous year. This is after new allocations 
have been given out and expenditures and obligations have 
occurred. And we still wind up with an excess of $1.7 billion. 
In fact, no State is in a deficit position. We want people to 
spend that money. These are block grants. I only control the 
first 20 percent.
    Mr. Regula. You are saying they have flexibility.
    Secretary Chao. They have flexibility.
    Mr. Regula. That their assertions are inaccurate?
    Secretary Chao. Right.

               VETERANS EMPLOYMENT AND TRAINING SERVICES

    Mr. Regula. Transfer the veterans program. Will this 
improve services to veterans?
    Secretary Chao. The Principi Commission, which was very 
popular with the veterans community, thought that it would be 
much, much better, that the veterans would be better served if 
more services were consolidated in their Department, the 
Veterans Administration. So, one of the more popular 
recommendations by the Principi Commission was to move the 
employment training services so that it would be linked with 
the other services that veterans are receiving through the 
Veterans Administration. I have had personal discussions of 
this with Secretary Principi. And I am committed to ensuring a 
smooth transfer. There will be no change--no compromise at all, 
in fact, with FTEs, programs or activities.
    Mr. Regula. Would it still be----
    Secretary Chao. In fact, it is a plus.
    Mr. Regula [continuing]. Part of the One-Stop service that 
many communities try to develop.
    Secretary Chao. Yes. We will keep the One-Stop career 
service as a resource for the veterans. There will be a 
veterans person at the One-Stop career centers who can provide 
assistance to veterans. That will still be there, of course.

                       RETIREMENT SECURITY--PWBA

    Mr. Regula. I assume you will be offering legislation to 
deal with pension retirement security as a fallout of Enron. 
Will that soon be before the authorizing committees?
    Secretary Chao. The President is very eager to move this 
issue along. So I hope so, yes.
    Mr. Regula. Thank you. I have some additional questions, 
but I want to get around to the members. The three that were 
here at 10:00, we will start with them.
    Mr. Kennedy, you were the first.

                     WORKFORCE INVESTMENT ACT FUNDS

    Mr. Kennedy. Thank you, Mr. Chairman. And welcome, Madam 
Secretary. These are very difficult times for constituents in 
my State of Rhode Island. We have had our unemployment rate go 
up 33 percent over what it was last year. Unemployment 
insurance claims in Rhode Island have doubled between November 
and December. And many workers who aren't even reflected in 
that have been forced to switch to part-time jobs. So according 
to our Rhode Island Department of Employment and Training, a 
one-job stop center, they have received 16,000 calls this month 
as opposed to 8,000 last February. We have doubled the number 
of calls coming in.
    So I appreciate your explanation about the carryover funds 
for dislocated workers, but the word that I am getting, having 
visited the people up there, from my Department ofEmployment 
and training is that they are suggesting that the idea that the need 
this year meets the need from last year will ultimately be the same. 
They disagree with that. They say that the carryover funds will not be 
enough. Your budget says that you will have the same level of 
dislocated workers and you will serve the same level, despite the fact 
that the programs are cut $165 million and combined with this lower 
funding, you have increased global trade and we are looking at maybe 
having a trade bill come up, and you are having the recession that you 
talked about.
    So it just seems to me you have got a confluence of events 
that make it very difficult to really absorb, that we are going 
to actually serve the same number. In anecdotal terms, my 
director of employment and training said, a couple months ago, 
that your regional office was telling them to push through 
workers into the workforce, push, push, push, and now, the word 
is ``hold back,'' because there is not enough money. That is 
from my director of employment and training. I might add my 
director of employment and training belongs to the opposite 
party of me.
    Secretary Chao. I think helping dislocated workers is a 
bipartisan issue. We all want to help workers. I am distressed 
to hear your director is receiving that indication of funding 
availability, that should not be the case. So I would be more 
than pleased to work with you. According to my chart here, 
Rhode Island has an unexpended WIA balance of about $11 
million. We want this money to be used. And if people are going 
to use this money, that is good.
    Mr. Kennedy. But what's going to happen after they exhaust 
it. Because they are pulling it down now twice the rate they 
did before. And what is coming after that. If you don't 
appropriate for money after that, you are going to spend that 
money down and there will be zero.
    Secretary Chao. I think it is also--go ahead.
    Mr. Kennedy. I am sorry.
    Secretary Chao. I think it is also important to break out 
what the various different programs are. In terms of 
unemployment insurance, that is automatic and that is a 
mandatory program so that will continue.

                       UNEMPLOYMENT INSURANCE TAX

    Mr. Kennedy. I might add in addition to that, that is 
taxed. Unemployment insurance is taxed, which is outrageous 
that this Administration is talking about cutting taxes and yet 
has the tax on unemployment insurance remain. What an insult to 
workers who have been laid off because of this recession or get 
dislocated because of global trade and then have their 
unemployment insurance taxed on top of that.
    Mr. Regula. If I could interject, is there legislation 
pending to exempt it from tax, to your knowledge?
    Mr. Kennedy. To my knowledge there isn't. But I hope that 
the Tax Committee would look at ending that. I would encourage 
them to do that.
    Secretary Chao. Why don't you and I work together and solve 
these problems in your State?

                 BUREAU OF INTERNATIONAL LABOR AFFAIRS

    Mr. Kennedy. Let me conclude by saying I had the 
opportunity of visiting with the President of the World Bank, 
Jim Wolfensen, last week. He outlined that the biggest threat 
to our global security in the next 20 years will be 
international poverty. The booming population growth coupled 
with the fact that two-thirds of it will be taking place in the 
developing world where income is less than a dollar a day. He 
said that is a situation that is simply untenable for national 
security. We can buy all the bombs, bullets, guns we want, but 
ultimately if we don't address this global poverty, and it is 
our vested interest to do it, in long term, our country will 
never be safe.
    So given that scenario, what sense does it make for your 
budget to also call for a major cut in the International Labor 
Organization, which monitors the disparity in wealth, which he 
says is a market signal of this international phenomena and the 
confluence of that with child labor which, is on the rise in 
many of these countries that are suffering from such 
disparities in poverty?
    Secretary Chao. Our commitment to maintain increasing core 
labor standards, and our commitment to helping combat child 
labor abuses abroad, and child labor itself abroad, is 
unmitigated. This budget is still a $55 million budget for 
International Labor Affairs Bureau. This is for an agency that 
in 1996 had a budget of $9 million. So to increase from $9 
million to even $55 million, and it was higher than that, we 
need to first, bring activities back to the core activities of 
monitoring and improving core labor standards, and second, of 
helping combat child care abuses.
    The rest I think strays from our basic core mission. And 
there are other agencies that are involved with these other 
activities.
    Mr. Kennedy. Madam Secretary, in that regard, will the 
Northern Mariana Islands be brought under the Federal minimum 
wage law?
    Secretary Chao. We have a major investigation ongoing there 
and that continues to be the case. So we are very active in 
working on that.

                   MINIMUM WAGE IN NORTHERN MARIANAS

    Mr. Kennedy. Will ``Made in the U.S.A.'' still be permitted 
to be put on products that are made in the Northern Mariana 
Islands?
    Secretary Chao. That is part of the investigation we are 
trying to work out. I know how some members feel, so I amvery 
sensitive to that.
    Mr. Kennedy. Thank you, Madam Secretary.
    Mr. Regula. Mrs. Lowey.

                   NEW YORK NATIONAL EMERGENCY GRANT

    Mrs. Lowey. Thank you, Mr. Chairman and welcome, Madam 
Secretary. Madam Secretary, in the New York package that passed 
last year, there was a set-aside of $32.5 million for worker 
training in New York State. The grant fee consortium for worker 
education met with the administration budget officials and were 
told that the money would be dispersed at $10 million this year 
and 22.5 in 2003. It seems to me this is truly unacceptable. We 
understand that New York took the hit, we understand there are 
problems everywhere. But the damage in New York is 
incomprehensible, as you well know, and as your parents know. 
There are 100,000 people in New York who lost their jobs in the 
last 6 months. They need help to recover. CWE has already made 
obligations based on receiving funding this fiscal year. Could 
you possibly explain the reason for this delay in disbursement?
    Secretary Chao. We issued a $25 million National Emergency 
Grant within 9 days after the attack of September 11th. And we 
also had allocated another $10 million. You are right, that 
money has not gone out. And my understanding is that it is 
stuck in New York State. In terms of the funds that were 
appropriated through the emergency supplemental, those have yet 
been spent. So the money is there, but somehow it is not 
getting through.
    Mrs. Lowey. That is very strange because the information--
--
    Secretary Chao. Very sad.
    Mrs. Lowey [continuing]. We got, and we will be happy to 
check on this, was that it was the administration, the budget 
officials here that told us the money was delayed. But if the 
information I got, I am not sure if I see behind you shaking 
this way or this way.
    Secretary Chao. We have basically----
    Mrs. Lowey. You understand it is stuck in New York State 
by----
    Secretary Chao. Of the $25 million in National Emergency 
Grants, for example, we understand that has not yet been used 
within New York.
    Mrs. Lowey. If we could continue this conversation because 
perhaps the information is a little confused somewhere in 
between.
    Secretary Chao. Let's find out because I think we need to 
get that money out.

                WORKFORCE INVESTMENT ACT CARRYOVER FUNDS

    Mrs. Lowey. I appreciate your commitment, and I look 
forward to working with you on that.
    Again, following up on my colleague, Patrick Kennedy, the 
President's budget again includes substantial cuts in job 
training programs. And the justification for these cuts is also 
the same as last year. You testified just now that there is a 
significant amount of unused funding for these programs and 
that these unused sums would be used in place of new budget 
authority.
    Last year I raised concerns about this practice. I want to 
raise them again, because this funding was supposed to be 
available for 3 years. And many States as it was explained to 
me, including New York, relied on these funds being available. 
States, as I understand it, are still dealing with the 
transition from JTPA to WIA and with the current economic 
downturn and the effects of September 11th still be felt, more 
workers than ever before are seeking these services.
    If you could tell us again why the administration is 
recommending these cuts in job training programs, when 
unemployment is rising, why does the administration propose 
funding that will only cover current demand when you 
acknowledge that demand for these programs is on the rise? I 
just don't understand it. So I would like to continue that 
discussion with you, if you could respond again.
    Secretary Chao. You are correct in saying that last year I 
cited the carryover funds as well. And it is important to note 
that the amounts of carryover that we have are new carryovers. 
So when I was here last year, we talked about the 
Administration's funding, the carryovers over the last year. 
Those carryover funds have been spent, new allocations were 
made, and we still have an excess in carryover. Obviously, as I 
mentioned, I would like to see the spending--these balances 
spent down. That is what they are legislated for, that is what 
the budget goals are. But there seems to be transition from 
JPTA to the Workforce Investment Act. Some of the boards are 
still transitioning.
    We have not compromised at all our delivery of programs nor 
services over this past year. As that chart showed that was up 
previously, the obligated funds have been included in our 
assessment as to what was needed going forward. And we still 
apparently have quite a lot of surplus. The system is very 
decentralized. As I mentioned, 80 percent of the funding goes 
in a block grant manner to the States. So as we talk about 
reauthorization of WIA, let's take a look as to why these 
excess balances are there.
    And maybe we need to get better information. There are 
other ways maybe we can explore in terms of encouraging these 
Workforce Investment Boards in local communities to spend their 
funding. I am not saying that this is the case, but I do hear 
that maybe there is just more money than they are able to 
absorb at this point. This doesn't seem real to me because 
there are lots of workers who need help. So our mission and our 
goal is to push that money out. Right now there seems to be 
thisslowness in getting the funds out.
    Mrs. Lowey. I see a red light, Madam Secretary. Is that for 
me?
    Mr. Regula. It is not working.

                WORKFORCE INVESTMENT ACT CARRYOVER FUNDS

    Mrs. Lowey. Let me conclude--I am not sure if the red light 
is on or not on, but let me just conclude by saying if there 
are workers that desperately need this help, and the money is 
sometimes clogged someplace, I would appreciate knowing what 
your agency is doing to ensure that the money is being spent 
and the money is pushing at where the problem is. If it is the 
State level, we should know about it. If there is more 
technical assistance needed at the Federal level, we should do 
something about that as well. But we know that there are people 
suffering, we know that there are people out of work. The 
unemployment rate is climbing. And to decrease the money in a 
3-year program because of the bottleneck, I think, we would be 
happy to work with you. I know my colleagues would be happy to 
work with you to fix it, to figure out what is happening. So if 
we can continue that dialogue, I would be most appreciative. 
Thank you, Mr. Chairman.
    Secretary Chao. I might also mention again we do not see 
any reduction of services or the quality of programs going 
forward. We believe that the funding will be there.
    Mrs. Lowey. Except we know there are people who need the 
help that are not getting the help. So the question is, if 
there is money in the pipeline, and they are not getting the 
help, something is wrong someplace. And we would like to work 
with you to correct that. I thank you so much.
    Mr. Regula. Mr. Peterson.

                     STATE UNEXPENDED WIA BALANCES

    Mr. Peterson. Thank you, Mr. Chairman. And welcome, 
Secretary Chao. I would first like to compliment you on the 
competence and high energy level and the good spirit you bring 
to a tough job. It has certainly been a pleasure to work with 
you. I want, I guess, stay on the same issue here. Do you have 
an inventory of where the 1.7 billion is what States have it, 
where it is at? Because----
    Secretary Chao. It wasn't easy getting that, but yes, we 
have it.
    Mr. Peterson. I guess I would like from you privately, if 
you could get me what Pennsylvania has, where it is at. Because 
I have an area that is having a lot of plant closings, a lot of 
layoffs and people aren't getting trained.
    Secretary Chao. New York, for the benefit of Congresswoman 
Lowey, has about $500 million unspent. Pennsylvania has 
approximately $140 million unspent.
    Mr. Peterson. That would still be at the State level where 
it is not out at one of the boards.
    Secretary Chao. These are State unexpended WIA balances.
    Mr. Peterson. What worries me is the State going to take it 
away from one WIA and give it to another. Is that easy to do? 
That is politically not simple. That is politically difficult 
to take it from one part of the State and give it to another. 
Because I am sure the layoffs and plant closings are not equal 
across any State. There are certain areas hit very hard. Does 
the system, is it user friendly at getting money to where it is 
needed? I think that is a question we have to determine. I 
would appreciate your help.
    What do you think the--this is a new law that has just been 
in place in the second year work for investment. What do you 
think the primary mission is? What word would you use?
    Secretary Chao. Jobs.
    Mr. Peterson. How do we get to these jobs? Is it training?
    Secretary Chao. Yes. And apprenticeship programs, I think, 
are also very important.

                           WORKFORCE TRAINING

    Mr. Peterson. Let me read to you a letter I received from 
my local WIA. First we need to dispel a common misconception 
regarding the Workforce Investment Act reform legislation. That 
the purpose of available funding for adult and dislocated 
workers is to provide training. A misconception. This is 
probably a carryover perception from the JPTA era by training 
and retraining. The primary focus of WIA is to provide services 
which lead to self-sufficient employment.
    They told me that it is not about training. And it is 
obviously from the one in northwestern Pennsylvania because 
only 238 people received any kind of training in the first 
year. Most areas it should have been thousands. They are not 
about training. They are about polishing people, whether they 
have skills or not. You know, I am not opposed to conferences 
and interviewing skills and personal resume writing, but if you 
don't have skills, you are never going to get a decent job. If 
you lost the one you had where you had particular skills that 
you learned over 10 or 15 years, you need those skills 
replaced, if we don't put those people in training, they will 
never again have a job that they can support their families.
    I think there is an inherent whether it is Pennsylvania's 
problem--I hear it is a national problem. This is a complicated 
bureaucratic problem again. It has always been difficult to get 
job training money to the street. I don't know why, but it 
always has been. And it appears to me that this last law is a 
failure, at least it is a failure in my district.
    Secretary Chao. I don't think our Department deemphasizes 
training. In fact, when we talk aboutemployment, we talk a 
great deal about the skills gap, how important it is to close the 
skills gap, and how people do need to have skills before they can get a 
job.
    Mr. Peterson. Does that statement bother you?
    Secretary Chao. Yes, it does.
    Mr. Peterson. I will share this letter with you because it 
is from the people that are supposed to be delivering the 
services. I guess I just find it very problematic that we are, 
because I have more layoffs coming.

                     Adult Education Training Funds

    Mr. Kennedy. Will the gentlemen yield? In the budget we 
flat-funded Adult Basic Education Grants and Vocational 
Education State Grants, which are in demand, great demand, 
because that is what complicates WIA is that they have some 
place to go when WIA says go over here and get this training. 
Yet that training, even though demand is exorbitant, is flat 
funded, which means it won't be able to meet the demand.
    Mr. Peterson. Remind my friend that has been historic every 
year since I have been here. It was flat funded many years 
before I came here. That is a misconception in this country. We 
are so academically oriented that we forgot the people who are 
at the bottom of the ladder. Without funding, my gentleman 
friend from new England just mentioned, poor people don't get 
on the ladder. I agree with you. Last year we were unsuccessful 
in upgrading that. And I will be able to join you in getting 
adequate funding there. It shows you the inherent 
misunderstanding in this country.
    What used to happen in America that doesn't happen today 
was the military trained the poor people, especially poor young 
men. They went into the military. When they got out of boot 
camp they then got a skill. Most everybody that works in a 
telephone company learned in the military. Most everybody that 
works in a power plant learned in the military. Everybody that 
flies a plane. Most of our skill in this country to poor 
people, poor people who got on the American ladder got on it 
through their military training. When we no longer had the 
mandatory draft, poor people don't get into the military, they 
can't get in, and we have never replaced--in my view, we have 
never replaced--the States that have replaced it are the States 
that are electing new Congressmen next time.
    If you will just look at the records, the States that are 
adding Congressmen are doing an excellent job at skill training 
and helping adults rebuild their skills. They have the 
technical skills. They have the community colleges. The States 
that are all academic-oriented like mine are losing 
Congressmen. That is the evidence I give. Look forward to 
working with you.
    Mr. Regula. Mr. Wicker.

                  Workforce Investment Carryover Funds

    Mr. Wicker. Thank you, Mr. Chairman. Let me ask a question 
about the chart and then I will get to my second question. Do 
you have that broken down into years, Madam Secretary? What are 
the four columns there?
    Secretary Chao. That is years.
    Mr. Wicker. Okay. Are my eyes deceiving me or are they just 
not on there.
    Secretary Chao. No, they are not on there. You are correct. 
They should be.
    Mr. Wicker. Is this carryover, this huge carryover 
something that we need to address? Is this going to be a 
current problem that you have a solution to? I guess it is good 
that we have the carryover, but it does seem to be an 
accounting anomaly there.
    Secretary Chao. Right. I understand that if you look at the 
purple bar on the left-most group of bars, that carryover was 
in the previous administration. And so carryover is an issue.
    Mr. Wicker. Do you have a plan for straightening that out 
and making it----
    Secretary Chao. It is a very decentralized system. So as I 
mentioned, 80 percent goes straight to the States. As we talk 
about WIA reauthorization, this is an issue that needs to be 
addressed. It takes us a great deal of time to even get 
information from the states because 80 percent of it goes in a 
block grant to the States.

                         Apprenticeship Program

    Mr. Wicker. Okay. Let me get to just the one question I 
want to talk about today, and that is, the apprenticeship 
approval process. As you know, I have spoken with you 
previously about this issue. I have legislation which I am 
cosponsoring with--it is bipartisan legislation with Mr. 
Hinojosa, which would speed up the approval process. And I just 
wanted to ask you where we are on that.
    As you know, I do not want to change the standards for 
apprenticeship programs. But I think I have pointed out to you 
and to the members of this subcommittee also that there is a 
backlog in the approval process. Sometimes it can take not just 
months, but years and sometimes decades, for an application for 
apprenticeship program to be approved. And sometimes it just 
sits there with no action. And it just seems to me that we 
ought to have some process where there is an approval within a 
certain time period or a denial, tell the applicant what is 
wrong with their proposal, send it back for work or tell them 
it is no good. But at least get it off the dime.
    So I just wonder, since I have a chance to ask you about 
that, and since I made my legislation available to you, for 
your comments, if you had a chance to look at that and if you 
have any plans perhaps within the Department to fix this 
problem without legislation?
    Secretary Chao. I do remember the discussions that we have 
had, and staff has been working on this. I don't have a good 
answer for you at this point. We do understand your concern. We 
are working on it.
    Mr. Wicker. Let me reiterate that to you then, and tell you 
that there is a bipartisan group that is serious about this. 
And I think the United States work force is well served by 
apprenticeship programs, by excellent on the job training 
apprenticeship training programs. So I hope that you will agree 
to work with me and perhaps get back to me and Mr. Hinojosa in 
a very short order. I think at this point I will just yield 
back my time. Thank you, Mr. Chairman.
    Mr. Regula. Mr. Miller.

           Training for Nurses and Health Care Professionals

    Mr. Miller. Pleasure to have you here today. As you said in 
your opening statement this is a wartime budget, so I 
compliment you for making some tough choices. It has always 
been easy in past years to keep increasing programs. You 
mentioned one, at any rate, about international organizations, 
and this 15 percent increase. So I admire you and your 
department for making tough decisions because of this need for 
homeland security and increased needs of defense that we have 
to look at all parts of our budget.
    One area that--my area of service is Bradenton, Florida, 
lots of old people. Biggest industry is taking care of elderly 
people. And the question is getting enough people to take care 
of the elderly, nursing homes, home health agencies. That is 
really my biggest industry overall because we got so many 
senior citizens. And we are facing greater challenges on this 
issue of finding people to work in these facilities, whether it 
is the educated registered nurses or the nursing assistants. It 
is a huge challenge.
    What can you tell me we are doing for helping hospitals, 
nursing homes, home health agencies and the home health care 
industry to help address that growing need, just like we are 
facing a challenge in education for teachers, but this is--
really health care fits into your department more?
    Secretary Chao. We have done a number of things. We have a 
number of initiatives that we have just recently announced. One 
was with a health care company for a matching grant training 
program to entice more people to enter the nursing field. Every 
month we have unemployment numbers that are announced and we 
use that opportunity to promote the fact that the health care 
industry is looking for new workers. Secretary Paige and 
Secretary Thompson and I are also working on a new initiative 
to try to address this nursing shortage.
    And we have also been in discussion with community 
colleges, many of whom offer nursing programs. One of the 
things that we have found is that it is not even so much trying 
to recruit nurses, but trying to increase the number of 
faculty, for example, so that people can train more nurses. So 
we have, again, this matching grant program with an existing 
company. We have new programs, and we have ongoing programs to 
promote the health care industry as a field of opportunity, 
especially as some other sectors and industries may experience 
unemployment. Finally, as I mentioned, Secretaries Paige and 
Thompson and I are working on an initiative that we hope to 
unveil soon.
    Mr. Miller. Thank you. As you go through this process over 
the next year, too, it is a growing challenge, a problem for 
taking care of the elderly. As they become a higher percentage 
of the population, the workforce needed is a huge challenge. 
But I won't ask you more questions, but I do want to commend 
you for making some tough decisions in a wartime budget where 
you don't have all the money just to throw at every program. 
And just because we have spent money in the past doesn't mean 
we have to continue doing that.

           English Proficiency for Health Care Professionals

    Mr. Kennedy. Will the gentleman yield? I have a problem 
with the number of CNAs that we can get into our nursing homes 
too. They tell me part of the problem is that these 
applications and tests that they have to pass with the number 
of them that are limited English proficient. They may know 
this, they may have done the job for years, but because of this 
new requirement, many of them are precluded from actually 
working in the nursing homes because of the limited English 
proficiency. Am I correct? Can you talk about that a little 
bit?
    Secretary Chao. I am very much aware of that. We are 
working on it.
    Mr. Kennedy. What is it that is the problem?
    Secretary Chao. Isn't there a notice of proposed rule-
making that is coming out? We have been working on the limited 
English proficiency aspect. We are going to obviously have more 
aggressive outreach and make it simpler. But again, there is a 
notice of proposed rule-making that is coming out on that. I 
will fill you in more on that afterwards if you want.
    Mr. Kennedy. That would be great. This is what my nursing 
homes are telling me is a big, big issue.
    Mr. Miller. Our State of Florida raised the standards of 
the number of nursing assistants that they needed. And the 
problem is going to get worse before it gets better. So I hope 
we can find ways to encourage people to enter, not only the 
nursing profession, but the CNA program, which is even more 
critical in nursing homes. Thank you, Mr. Chairman.

                       Community College Outreach

    Mr. Regula. I want to interject, you raised an interesting 
point. This week there are about 1,000 presidents of community 
colleges and technical institutesin town. I think you spoke to 
them.
    Secretary Chao. I spoke with them yesterday.
    Mr. Regula. Does your department cooperate, reach out to 
them? Because it seems to me that the community college, and 
particularly the technical side is a very fruitful place to 
meet these needs like nurses and paraprofessionals.
    Secretary Chao. Thank you for bringing that up. In fact, I 
did address the group yesterday. It included over 600 community 
college officials. We talked about the need, how we can work 
together, increase our partnership, and what a vital role they 
fill in terms of work force development and training.
    Mr. Regula. Even though they are in education you are 
reaching out to them to utilize those facilities as part of 
your Department's goal of meeting the needs of society. You 
told them that you want them to help.
    Secretary Chao. Absolutely. In fact, they provide wonderful 
technical training, information technology training 
particularly. They are very good at that.
    Mr. Regula. Thank you.
    Mr. Istook.

                          JOB CORPS EVALUATION

    Mr. Istook. Thank you, Mr. Chairman. Secretary Chao, thank 
you for taking time with us. I have two things that I want to 
discuss with you. Actually be more if time permitted, but two 
right now. One is Job Corps and the other is limited English 
proficiency. I noted in your testimony you mentioned a report 
that was done last year saying that Job Corps return $2 in 
benefits for every one dollar that we spend. This is the report 
I believe that you were citing.
    Secretary Chao. Right.
    Mr. Istook. And looking at the summary of the report, and I 
notice the report is long on conclusions, for example they tell 
us Job Corps is cost effective, benefits should continue, Job 
Corps is a good investment, not kind of the scholarly approach 
I would think of. But when you get to the details, for example, 
they say that it costs us about $14,000 per participant. And 
the benefit is an increased income of $31,000 over a youth's 
lifetime.
    You are talking about young people coming into a program 
typically in their early 20's with 40 to 50 years in the job 
market, and a $14,000 investment yields $31,000 of lifetime 
benefits on that. In fact, the States that compared to the 
control group that they had, the control group in their fourth 
follow-up year were making $7.33 an hour and participants in 
the Job Corps were making $7.55. So we spend $14,000, so that 4 
years later, they would be making 22 cents more an hour?
    I have got to tell you, I question the methodology of the 
report, one trying to tell us what conclusions to reach, and 
secondly, giving us a measurement of $31,000 over an entire 40- 
or 50-year working lifetime as something that therefore 
justifies a $14,000 investment. I mean, if you put $14,000 in 
the bank and it earned compounded interest, I think it would 
benefit a lot more than $31,000.
    Can you tell me how much did we spent for this and similar 
studies and are we really doing the kind of analysis that we 
need to have of the effectiveness of Job Corps or other 
employment programs?
    Secretary Chao. I am not aware of how much the study cost. 
I will look into it and get back to you. I might also add that 
Job Corps is a very popular program with Congress.
    [The information follows:]

                        Cost of Job Corps Study

    The final, total cost of the study will be $21,587,202, which 
includes $2,847,152 given to Job Corps outreach and screening agencies 
to cover the costs of additional recruiting for the control group and 
some data collection for the study.

    Mr. Istook. I understand. But I am not talking about 
popularity; I am talking about effectiveness for the taxpayer 
and for the young people who are involved in it. We understand 
the desire to help people to have greater earnings. My question 
is, are we really doing the type of analysis that we ought to 
be doing of these employment programs if this is the kind of 
money we are spending on research for that kind of simplistic 
and misleading conclusion?
    Secretary Chao. I am open to suggestions as to how we can 
better determine the effectiveness of Job Corps. Based on my 
contacts with Job Corps administrators and Members of Congress, 
again there seems to be a great deal of support for this 
program. And as I mentioned, an anecdotal basis there seems to 
be a great deal of positive benefits to individuals. But your 
concern is one that I understand.

                          JOB CORPS EVALUATION

    Mr. Istook. I think, with all due respect, Madam Secretary, 
I think that is what we expect you to do, to design the type of 
critical analysis that ought to be made of this and other 
programs rather than just say we can't look at it because it is 
popular with Congress.
    Secretary Chao. We will take a look at it.
    Mr. Istook. I appreciate that. If we are not taking a hard 
look, we are following ourselves, we are not helping the kids, 
we are not helping the taxpayers.

                      LIMITED ENGLISH PROFICIENCY

    What I wanted to ask regarding limited English proficiency 
you are aware, of course, that under the Bush administration 
issuance through the Justice Department, there was a reopening 
of the comment period regarding limited English proficiency, I 
think it expires next week or something.
    I know previously there were a number of State Labor 
Departments who had responded to the Department of Labor saying 
that the LEP, Limited English Proficiency regulation, should 
not go into effect talking about an extremely high cost of 
those. And I realize you have not gotten through this reopened 
comment period yet. But can you give us an idea of what sort of 
feedback you are getting from those who would be required to 
finance the cost of translation and interpreting services, the 
ones who would bear the experience, what sort of feedback you 
are now getting from those and who in the Department of Labor 
is in charge of evaluating the merit of those complaints? Does 
it rise to your level or is it being handled in your office?
    Secretary Chao. The Justice Department is taking the lead 
overall from an administration-wide perspective. You asked a 
number of questions. We will try to get that to you. Within the 
Labor Department, it is a combination, but primarily it is in 
the Civil Rights Office, which is in the Office of 
Administration and Management.
    Mr. Istook. I understand. I would just express my hope that 
review of the impact of those regulations would be something 
that would involve you personally, not just asking the office 
that sought the regulations in the first place to be the one 
that is asked to judge the merit of the people who think they 
were going down the wrong road. That is asking someone to be 
the proponent as well as the judge of something. I don't think 
that works very well.
    So I certainly hope that you will be directly involved in 
reviewing the comments and what steps need to be taken.
    Secretary Chao. We will get the answers to your questions.
    [The information follows:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
                         JOB CORPS EVALUATIONS

    Mr. Regula. Mr. Istook raises an interesting question. And 
that is, do you do follow up with questionnaires with your Job 
Corps or do the people administer a year or two later to see 
whether it has enhanced their employability? Because those 
numbers are very shocking if you invest 14,000, and only get 31 
back over a lifetime, something is not working.
    Secretary Chao. We do keep studies as to how the graduates 
do. We can get that to you as well.
    Mr. Regula. Do you send them a questionnaire and ask them?
    Secretary Chao. There are ongoing surveys.
    Mr. Regula. And if so, they ought to perhaps take a new 
approach to it, because not a very encouraging program under 
those circumstances.
    Secretary Chao. What I am hearing is that you want to know 
how effective these programs are.
    Mr. Regula. Absolutely. I would hope for the record and 
perhaps to Mr. Istook and myself and other interested members, 
any documentation that questions the validity of those 
statistics.
    Secretary Chao. I will do so.
    [The information follows:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    Mr. Regula. Mrs. Northup.

                            WORKER TRAINING

    Mrs. Northup. Thank you, Mr. Chairman. Welcome Madam 
Secretary. We hail from the same city, and we are proud tohave 
you. And I am delighted to have a chance to share something that we are 
all interested in and focused on. Following up on the workforce 
training issues, you know it seems to me, like for all the concern that 
exists in this room, and I think that it is right that we should be 
very focused on how we train people for work, after all, getting on the 
bottom rung of the ladder, having the tools to climb the ladder is what 
the American dream is all about.
    If you can't do those things you can't get ahead. And there 
has been a lot of criticism of the programs that the Job Corps, 
I think what I am interested in knowing is are some Job Corps 
doing an excellent job and are other Job Corps maybe not doing 
such a good job? It has always been my impression that we 
continue funding them all without regard to some that seem like 
they are doing a very good job, and others that aren't. But the 
most important criteria, it seems to me, in terms of job 
training being successful, is whether it is connected to a job.
    The gentleman from Rhode Island that talked about whether 
or not we are training people so that they can speak to work in 
nursing homes, it may be unique in your area, I may have the 
same sort of problem, but you know, just having lots of job 
training money going out for English proficiency, if that is 
not the critical need that helps associate people with a job 
that is actually there waiting for them is an expenditure of 
money that is not particularly helpful.
    I have to say in my district, as I have talked to a number 
of the people that are involved in job training, there is a big 
discouragement in getting people to come to job training out of 
the context of a job. It is maybe too conceptual, it is too 
unrelated to what they think they would be good at or to where 
they think the good job is down the street, their friend that 
is employed somewhere or jobs that they hear about or read 
about.
    And you know, when we try to go from our past programs to a 
whole new program, the idea was to make job training more 
relevant. More relevant to where the good jobs uniquely are in 
that area. And to be honest, I don't care whether the money 
goes to helping somebody polish their skills, whether it is 
personal development, whether developing a resume, whether it 
is getting from the third rung on the ladder to the fourth or 
from the 10th to the 11th or getting on the bottom rung. All of 
those steps are important and critical in a person's life.
    And I still hear too many people that have access to job 
training money that, quite frankly, don't feel that they have 
access to workers or don't feel that workers are coming to the 
programs they offer. And so what they do is they start lobbying 
me and others for more programs. You know, give us more 
programs.
    I am suspicious at what that we what we ought to be doing 
is looking at the nursing homes that are desperate for workers, 
looking at who is desperate for workers and having them be able 
to collaborate to draw down these dollars, and know that there 
is a job associated with the training. I guess what I am saying 
is----
    Secretary Chao. We are in total agreement.

                            WORKER TRAINING

    Mrs. Northup. We need a new paradigm here. This isn't for 
government or against government, it is just government being 
in the right place at the right time. And today, it seems to me 
like we might not be in the right place at the right time with 
our job training efforts. I appreciate you trying to push this 
money out. But the reason it is not going out is because there 
are not enough programs that have people demanding their 
services to use the money.
    Secretary Chao. You make a very good point. We are in total 
agreement on that. If someone is going to invest a year or 2 
years of their time, of their life, they need to connect with a 
real job at the end of that experience.
    Mrs. Northup. I have talked before about allowing or having 
some sort of whether it is a tax plan, whether it follows the 
worker, I don't want to get into theoretical disagreements we 
have, as much as to say if a worker is, in the sense, under the 
arm of an employer, and an employer would have some sort of 
financial incentive to send that employee to get the skills 
they need, to upgrade, to, if they use Microsoft systems, and 
we know Microsoft is putting out their own credentialing, allow 
them to not own, take it as a deduction on expense, but 
actually give that worker, have the incentive to give that 
worker a better chance at getting those skills that will follow 
them wherever they go.
    Secretary Chao. Thank you.

                         JOB CORPS EVALUATIONS

    Mr. Regula. I think my colleagues are touching on a tender 
nerve here on the efficacy of Job Corps. Do you supervise 
these?
    Secretary Chao. They are contracted out.
    Mr. Regula. Are they on their own?
    Secretary Chao. They are contracted out. And we do track 
their performance. We do monitor their track record as to how 
effective they are. These are contracted for a certain period 
of time, so current contractors have to compete for renewal of 
their contracts.
    Mrs. Northup. Mr. Chairman, let me clarify because I don't 
want that to go unanswered. I think there are some really 
fabulous Job Corps out there. I think they are very connected 
to skills that are needed in the community where they exist and 
so forth. I think there are others that aren't as effective. 
But I don't--I happen to have a lot of faith in Job Corps as a 
concept and what some of them actually accomplish, not just the 
concept. But I am also questioning the WIA and the other 
programs that just haven'tseemed to hit home and meet the 
workers' needs.
    I think that as Mr. Kennedy spoke about the increase in 
unemployment in his district, many districts across this 
country that could speak to the same statistics. But I bet if 
you go and you actually meet with some of the places where the 
money is going, there aren't workers showing up at those. They 
are really scrounging for people to come to their program and 
take advantage of it.

                WORKFORCE INVESTMENT ACT REAUTHORIZATION

    Secretary Chao. I think a lot of the comments offered today 
about workforce investment really underscore the importance of 
some thoughtful consideration of the reauthorization of WIA. I 
look forward to having that discussion with you. We obviously 
need to talk about the better flow of funds; we have to talk 
about better control and accountability at the State than we 
currently have. It is a very decentralized system at this 
point. We should allow more flexibility for States to fund 
their priorities.

                           LITERACY TRAINING

    Mr. Kennedy. If I could just interject. Because I think the 
one area that we definitely need is literacy, though, as we 
know, this country is growing in its immigrant community. We 
only have, as I see it, 10 percent of those who need literacy 
skills being served by these job programs or adult literacy 
grants and the like. And that is such a basic thing. If people 
don't have the basic literacy skills they can't even get WIA. 
Am I right Madam Secretary? They can't even qualify for WIA 
money if they can't even fill out the applications for it.
    Mr. Regula. I think, Mr. Kennedy, as we look at the 
education budget, we have to be very critical as to whether or 
not we are meeting it because our committee has that 
responsibility to make those dollars accomplish that goal.
    Ms. DeLauro.

            UNEMPLOYMENT INSURANCE/EMPLOYMENT SERVICE REFORM

    Ms. DeLauro. Thank you, Mr. Chairman. Madam Secretary 
welcome. I am going to submit some questions for the record 
which have to do with the equal pay enforcement and the equal 
pay initiative. On the issues of pensions, I would like to ask 
you some questions. I know you are doing some things with 
regard to Enron and other organizations who are having 
difficulty with maintaining the pension programs. Let me 
express a concern that I have, with what appears to be a 
reduction in the Federal role in responding to unemployment.
    Specifically, this has to do with the Federal Unemployment 
Tax Act. It is my understanding that the administration 
proposes to phase down the Federal FUTA tax by 75 percent the 
next 5 years. It would shift the responsibility for 
unemployment insurance and Unemployment Service Administrative 
Financing to the States over the next 5 years.
    That would then leave the payments to the States to cover 
administrative expenses of their unemployment insurance and 
employment services, the cost of providing extended UI benefits 
during recessions and loans to States' unemployment systems 
that are facing insolvency. It would seem if we move in this 
direction that the proposal would leave States with three 
options to make up for the loss of administrative payments that 
they now receive from the Federal Government: they can raise 
taxes, they can cut benefits, or they can reduce the solvency 
of their UI trust funds.
    Quite frankly, there are a lot of unanswered details. After 
2007, States would receive no Federal money for administrative 
costs except for small States, which will receive an undefined 
subsidy. There is a past history here of States cutting 
benefits, cutting employer taxes, instead of trying to maintain 
adequate worker benefits. We are looking at a number of States 
which are insolvent on the issue of unemployment insurance 
benefits. Why would we not expect States to cut benefits in 
order to shoulder their additional responsibility?
    In addition, are you visioning any kind of maintenance of 
effort to ensure that States will build new systems or continue 
to support existing administrative reforms rather than phasing 
out Federal funding for UI administration? Why didn't we 
request that Congress appropriate a higher level of 
administrative funding? Funding is now paid to the States based 
on their workload, which means if your unemployment rises, then 
the States must do more work to provide benefits and receive 
more funding. But this proposal, again, as I understand it, 
eliminates the connection between funding and need. That is 
going to be particularly difficult and damaging to the States 
with high UI recipiency for unemployment workers.
    We have a number of States mentioned in testimony today 
which have seen their unemployment numbers rise. In addition we 
were heading into a recession before September 11th and are now 
in a recession. With high unemployment rates it seems to me 
that we are, by this kind of action, making a bad situation 
worse.

            UNEMPLOYMENT INSURANCE/EMPLOYMENT SERVICE REFORM

    Secretary Chao. Let me make a couple of comments. I think 
number one, the Federal Government is going to continue to have 
a large role. And I think what everyone can agree upon is that 
this program doesn't work the way it should. We are in the 
process of looking at UI/ES reform, and we welcome your input 
and want to work with you on it. But it is clear the governors 
want more money, and I think the States want more flexibility.
    Ms. DeLauro. I agree it would be great to enter into a 
conversation as to what ought to be done, but we are in a 
situation where, in fact, a number of the States have not gone 
to employers for that employer tax,which feeds the funds. That 
is putting the system in jeopardy. It would seem to me that we then are 
going to rely on those people who have weakened the system to then take 
it on and to administer it as well. Is it true that after 2007--is the 
Federal Government involved in the administrative financing of this 
effort after the year 2007?
    Secretary Chao. Yes, it is.
    Ms. DeLauro. Is that only for small States?
    Secretary Chao. It is for all States.
    Ms. DeLauro. Then----
    Secretary Chao. The Reed Act distribution has nearly $10 
billion that is going to be paid out. That is part of our 
proposal too.
    Ms. DeLauro. The Reed Act distribution would be allocated 
to the States according to their share of FUTA tax revenue 
instead of workload need. Currently we are not dealing with the 
rising costs in some areas because it is no longer going to be 
predicated on workload need. A second round of Reed Act 
transfers would occur in 2004, 2005, $2.5 billion in each year. 
After 2007, States would receive no Federal money for 
administrative costs.
    Secretary Chao. Administrative cost. The rationale there is 
that the States would have more flexibility. They are going to 
control it more. Hopefully, they will have more incentive to 
administer their program more efficiently.
    Ms. DeLauro. I know my time is up. I will go back to what 
my colleagues are talking about with regards to Job Corps. What 
evidence do we have today from the States, that says they are 
going to address this issue in a better way than they currently 
have when we have about 18 or 19 States that are insolvent with 
regard to their unemployment insurance benefits?

            UNEMPLOYMENT INSURANCE/EMPLOYMENT SERVICE REFORM

    Ms. DeLauro. I do not see how we can build on this 
foundation. It seems to me it is a very, very weak foundation 
and one that is designed to fail. I know that several of us 
would be happy to have the conversation, but we are going to 
have to deal with this budget and have to make some difficult 
decisions in the very short term. This again seems to me that 
we are throwing good money after bad. This is a problem as we 
have it now, and this increases its opportunity for failure.
    I have gone over my time.
    Secretary Chao. It has always been a Federal-State 
partnership.
    Ms. DeLauro. Precisely, and the Federal Government is 
abdicating its role based on what comes out of this document. 
These words in this proposal is abdicating its responsibility 
as it concerns administrative financing of this very critical, 
very important program.
    Thank you.
    Secretary Chao. I want to have some discussion. Let me make 
two points. First, a lot of State governors support this; and 
second, there is going to have to be State legislation and we 
want to work with the States on that, too.
    Mr. Regula. Mr. Sherwood.

                                  MSHA

    Mr. Sherwood. Thank you, Mr. Chairman. I would like to 
thank the Department and MSHA for working with us to alleviate 
some of the concerns of the blue stone industry and I would 
like to say that we are making pretty good progress towards 
promoting safe blue stone harvesting practices without all the 
paperwork and administrative burdens that we have had. We thank 
you for that.

                     WORKFORCE INVESTMENT ACT FUNDS

    I came prepared to talk to you about the same thing 
everyone else did, WIA, so I won't go through all of that 
again. But we have two basic concerns. We are concerned because 
the economy is not like it ought to be, so we have more need 
for those services. We are concerned about the budgeting. But 
you have also heard today that we are all concerned about how 
the program works, and that the inefficiency of government is 
what I think we have talked about here and nobody has said it 
that way. But we all agree that it needs a lot of attention.
    And I am also a little concerned that there is a disconnect 
between using expenditures rather than obligations to fund 
this. So I will not go through all of that again. It is just we 
are all concerned.
    Secretary Chao. Obligated funds are included and there is 
an excess.
    Mr. Sherwood. The funds you gave for Pennsylvania do not 
jibe with mine.
    Secretary Chao. Then let's talk. Let me point out once 
again, this is a real issue with WIA. 80 percent of the money 
goes to the States and I have no control over it. So in terms 
of getting information, I need some help on that. Also, 
encouraging the WIA boards to spend the money on programs that 
we want, I have no control over that. So I can only encourage 
and entice. So that is one of the things that I would like to 
address during the WIA reauthorization.
    Mr. Sherwood. Well, we know that you have plenty of skills 
in that area.
    Secretary Chao. Thank you for your trust and confidence.

                       RETIREMENT SECURITY--PWBA

    Mr. Sherwood. The other thing is retirement security. It is 
really on the country's mind, and Enron is just the example of 
the day. But that has got to be a debate that we have to 
resolve.
    Secretary Chao. Well, the President is very concerned about 
advancing his proposal to protect workers' retirement security 
and his program promotes pension parity. If a worker in the 
company cannot sell his or her stock, then no executive will be 
able to either. And secondly, workers should have the right to 
diversify after 3 years, and that is the most aggressive time 
schedule of all the proposals that are out there.
    The President also wants people to be able to have outside 
professional assistance. Rich people have it. We do not want to 
forbid companies from offering outside professional assistance. 
We want to make sure that the workers have the information with 
which to make wise decisions. We need your help on that, too.
    Mr. Sherwood. Has he addressed the diversification issue?
    Secretary Chao. Yes.
    Mr. Sherwood. In other words, there have been some very 
successful examples. Procter & Gamble is a wonderful example of 
how everybody has their 401(k) in their stock and have done 
very well.
    Secretary Chao. We do not have a cap. We do not have a cap 
because we believe it is a right. We are dealing with 401(k) 
plans. They are not like defined benefit plans. They are self-
directed, long-term pension plans. So the worker has the right 
to determine how he or she wants to invest their own savings. 
But we want them to make wise decisions, which is why we want 
to equip them with access to the right and accurate financial 
information.
    A lot of companies nowadays are forbidden from hiring 
outside professional assistance for their workers. We want to 
take away that ban so individuals may access professional 
advice just like rich people do. Rich people have lots of 
financial advisors, so we want to make that available to 
workers as well.
    Mr. Sherwood. Thank you very much.

                       RETIREMENT SECURITY--PWBA

    Mr. Regula. I think Mr. Sherwood makes a very important 
point. There is a great concern on the part of the public about 
security of their retirement money, particularly in light of 
Enron. It has brought a lot of focus on it. But many others, 
LTV, for example, those people are going to be left high and 
dry if the company, as it apparently will, breaks up. And that 
is happening in a lot of areas, so I hope you will focus on 
that.
    Mr. Cunningham.
    Secretary Chao. I can assure you, Mr. Chairman, that 
retirement security is a major priority for us this year.
    Mr. Cunningham. Thank you. Madam Secretary, when you are 
hot, you are hot; when you are not, you are last. So here goes.

                         WIA FUND DISTRIBUTIONS

    I also was going to ask some WIA questions but you have 
already answered most of the questions, including how do we get 
Governor Gray Davis to improve the release the money in 
California. There are significant dollars in the WIA system 
that have not been expended. And another issue is that of the 
states' distribution of funds to local WIA boards. For example, 
San Diego is trying to aggressively implement programs and yet 
on the other hand Imperial County and some others have not. I 
would like to know who is responsible for distribution and 
reallocation of those funds and obligations, if that is a 
Federal responsibility or actually a responsibility down at the 
State level, or if you have any control over that.
    Secretary Chao. That is a State level issue, yes.

                     UNEMPLOYMENT BENEFIT EXTENSION

    Mr. Cunningham. Okay. Since you have answered most of my 
WIA questions I would like to address two other issues. This 
country entered a recession long before your watch and long 
before September 11th. But I think my colleagues would agree 
that September 11th exacerbated many problems, especially 
unemployment. During debate on welfare reform, President 
Clinton lauded it because it aimed to put people back to work, 
rather than just handing out Federal dollars. I believe that we 
should attempt to address the current recession much in the 
same way.
    The House twice, in a bipartisan way, passed an economic 
stimulus package. Yet Senator Daschle on the Senate side has 
decided, in my opinion, to play politics instead of helping to 
put people back to work. I would hope that when Senator Daschle 
sends over a package to just extend unemployment benefits, the 
Administration and this Member will reject that, unless it 
accompanies job-creating incentives like in the economic 
stimulus package, because I feel that people on welfare or 
without a job need help now and that there is money in the 
pipeline to do that.
    Mr. Kennedy said there is $13 million in his State that has 
not been spent yet. I really believe, after talking to 
constituents, some without jobs, that they want their jobs 
back. They do not just want dollars, and I would hope that they 
would reject that.

                           21ST CENTURY BILL

    And I would also like to address an issue for which I 
gained bipartisan support on this committee, and it was called 
the 21st Century Classrooms Act. I don't think you know about 
it yet, but it was a bill that Ways and Means had jurisdiction 
over. For many years schools were receiving computers and they 
couldn't use them because they were outdated. And we discussed, 
how are we going to give these schools computers? Because, A, 
they can't use them. And B, after 6 months, they are out of 
date.
    So we passed legislation that allows a nonprofit to accept 
donated computers from businesses, as long as the computer is 
no more than 3 years old. The nonprofit will take those 
computers to a prison, and the prisoners upgrade those 
computers. So business wins because they get a tax incentive. 
The prison system wins because prisoners learn a trade, and the 
schools win because that nonprofit hands over those computers 
to the school ready to use, and they go primarily to minority 
schools that normally do not have access to that type of 
technology. I would like to extend that, program to our 
libraries.
    You take a single mom--and we are talking about 
jobperformance--where does she go to get her skills upgraded? We do not 
have enough money in job training. Where does that young woman or man 
go to acquire new job skills? Many do not have access to computers. But 
in our libraries, you see children from age 2, as well as senior 
citizens and people who are unemployed. That is where they have access 
to technology and job training, and I would like to see that 21st 
Century Classrooms Act include our libraries across the country. It is 
something I would like for you to take a look at and get your support 
on.

                       NATIONAL EMERGENCY GRANTS

    Secretary Chao. I would like to look at that. You are 
absolutely right. The President has included $4 billion in 
National Emergency Grants and his Economic Security Package. I 
emphasize again to members of this committee, National 
Emergency Grants are a very flexible and responsive and 
targeted tool, much better than TAA grants.
    Mr. Cunningham. Thank you.
    Mr. Regula. What components in the various economic 
stimulus packages would be in your Department? I assume the 4 
billion----
    Secretary Chao. The 4 billion in National Emergency Grants, 
which would also be allowed to help people in emergencies pay 
for their health care.
    Mr. Regula. What other programs would be in that package?
    Secretary Chao. That is primarily the major part of it. Of 
course, an additional 13 weeks extension of unemployment 
insurance.
    Mr. Regula. Any further questions, Mr. Kennedy?

                               ERGONOMICS

    Mr. Kennedy. Yes, please. Mr. Chairman, I would like to 
follow up with a question that was asked last year about the 
ergonomics plan. As you know--I don't know if I need to go any 
further, but there have been a couple of times when you said 
you had a plan ready and we do not have a proposed date yet 
when you think you will have the plan ready. So I wanted to ask 
that and see if you have any response.
    Secretary Chao. I know that I have given a deadline in the 
past, or a timetable, that I would have liked to keep. I think 
the events of September 11th have shifted all of our priorities 
and especially after September 11th, we have been very busy 
obviously trying to respond to the unemployment situation, 
anthrax and other bioterrorism challenges in the workplace. 
But, nevertheless, I am very hopeful that it would be out soon. 
I know it is a priority. It is a priority with me. No other 
Secretary of Labor has spent more time on this issue than I 
have.

                 NATIONAL EMERGENCY GRANTS--CHILD CARE

    Mr. Kennedy. Thank you, Madam Secretary. If I could go on 
to another issue. Part of the problem with so many of these 
dislocated workers being able to access some of this money is 
also the fact they have family needs. And obviously to pay for 
child care while they are unemployed is impossible. If they are 
getting unemployment benefits and if all they are getting is 
job training dollars, how do they access those if there are no 
dollars to take care of middle income folks so they can keep 
their children in day care so they can get the training? Has 
the Department come up with any proposals to address that?
    Secretary Chao. We are hoping to take care of that through 
the National Emergency Grants. Those are funds that could have 
been used for that purpose. We are still promoting it and still 
hopeful that it will be resurrected in some way, and we are 
continuing to advance it.

                   DISABLED WORKER TRAINING PROGRAMS

    Mr. Kennedy. One of the issues that we have in a slower 
economy, in all economies, is the fact that the number of 
people with disabilities who are unemployed is 70 percent, and 
yet we find there are a lot of programs out there that help 
people get back into the workforce by giving them a 
comprehensive set of services and training so that they can get 
those skills they need to work, and then they become productive 
members of the workforce.
    What is the Department doing to help expand the services 
for those with disabilities?

                         NEW FREEDOM INITIATIVE

    Secretary Chao. Well, the President, as you know, is very 
much concerned about Americans with disabilities. In fact, he 
has initiated the New Freedom Initiative to demonstrate his 
concern and his commitment. We have increased funding in that 
area. We have a new Disabilities Advisory Committee with young 
people that we are reaching out to.
    We are also requesting an additional $3 million for 
projects to provide training and education to disabled youth 14 
and older. I think we have a good story to tell there.
    Mr. Kennedy. Maybe we could work together. I was at 
Goodwill Industries and they do great work, but a lot of their 
facilities are in tough shape. They have a complement of 
services to help people and it looks to me like they are doing 
a good job. Maybe we could work together to see how the 
President's new Freedom Initiative can help in that regard.
    Secretary Chao. I think these partnerships are very good 
ideas. We can leverage all of each other's strengths. Terrific.

                            ADULT ILLITERACY

    Mr. Kennedy. Finally, let me underscore the adult 
illiteracy issue. I mentioned it a couple of times already, but 
we have such an enormous problem in my State, and I know many 
other States, with illiteracy. They have even stopped making a 
list of people who want English as a second language skills 
because there is no plausible way they can fit them into the 
ESL classes. These are people that are industrious, hard 
working, can be great contributors to our economy, just 
handicapped because of the fact of their language barrier, and 
it seemsto me we are really short sighted in our economy not to 
be investing more in some basic literacy skills.
    And I know the Chairman just mentioned that we should work 
on that in the other part of our budget as well. But in terms 
of WIA money and others, if you could keep that in mind and 
know that only 10 percent of those that are needing literacy 
skills are getting them under the current amalgam of job 
training programs, that would be very helpful. A lot of the 
dislocated workers that are getting laid off in my State have 
as a basic problem literacy, and so it is not just a matter of 
them getting the dislocated money. When they get it they cannot 
even utilize it because they are so far behind the 8 ball in 
terms of their literacy skills.

                      LIMITED ENGLISH PROFICIENCY

    Secretary Chao. I think English literacy is very important, 
and also it falls into worker safety issues. We have a lot of 
worker safety issues involving people that do not speak 
English. It is a major issue, and I appreciate your bringing it 
up.

                          PROGRAM EVALUATIONS

    Mr. Regula. Just a couple of comments. I hope, Madam 
Secretary, that in the year ahead you will develop some greater 
techniques to evaluate whether programs work.
    Secretary Chao. Right. I think GPRA is going to help us 
with that, but it bears reminding.
    Mr. Regula. In my experience in the Federal Government, we 
spend the money out. The programs sound good and the words 
sound good, but we do not know whether it works or not and are 
we getting value received for the expenditure of dollars.
    Secretary Chao. I will pay more attention to that issue.
    Mr. Regula. I hope that you will have an opportunity to do 
that, and we appreciate your testimony and we appreciate your 
leadership at the Department. The members may submit questions 
for the record and also we may want you to come back in case we 
have additional issues.

                NATIONAL EMERGENCY GRANT FUNDING REQUEST

    One last one: if the stimulus package for some unknown 
reason did not make it, would you request the $4 billion as 
part of a supplemental? You may not want to get on the record 
yet on that.
    Secretary Chao. Right, I hadn't anticipated that question, 
but clearly National Emergency Grants are the preferred 
vehicle. They are so much more flexible. I emphasize that again 
and again.
    Mr. Regula. You may give a little thought as to whether or 
not you want to at least be in line because I am not totally 
confident that the so-called program will make it.
    Mr. Kennedy. Hopefully the unemployment extension will make 
it, Mr. Chairman.
    Mr. Regula. I think there are components of it that are 
probably more critical than others, but everybody has their own 
idea.
    I want to welcome our student, Alonzo. He is the only 
student we have today. I am always happy to have students come 
to our hearing, and if you need an excuse to be out of school 
today, I would be happy to write one for you. It would probably 
be more valuable, what you have heard today, than what you 
would have learned in school. What grade are you in? Eighth? 
That is a stepping off point. Next year high school and then 
off to college, and perhaps some day you can be sitting here 
testifying instead of just listening or being up here asking 
the questions. But we are pleased that you came to visit with 
us today.
    Any further comments or questions?
    Secretary Chao. Thank you, Mr. Chairman.
    Mr. Regula. Thank you. The hearing is adjourned.

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
                                       Thursday, February 14, 2002.

                          DEPARTMENT OF LABOR

                               WITNESSES

TAMMY McCUTCHEN, ADMINISTRATOR, WAGE AND HOUR DIVISION, EMPLOYMENT 
    STANDARDS ADMINISTRATION
ANN COMBS, ASSISTANT SECRETARY, PENSION AND WELFARE BENEFITS 
    ADMINISTRATION
JOHN HENSHAW, ASSISTANT SECRETARY, OCCUPATIONAL SAFETY AND HEALTH 
    ADMINISTRATION
DAVE LAURISKI, ASSISTANT SECRETARY, MINE SAFETY AND HEALTH 
    ADMINISTRATION
THOMAS MOORHEAD, DEPUTY UNDER SECRETARY, BUREAU OF INTERNATIONAL 
    AFFAIRS

                       Introduction of Witnesses

    Mr. Regula. We will get started this morning. We may get 
some interruptions. We have a stimulus package on the floor, 
and I have an airplane later today, and most of the other 
members do, too.
    As you can see, we had a long night last night. We are not 
exactly overwhelmed with committee members. We adjourned around 
2:45 a.m., so that is the way it goes.

                          RETIREMENT SECURITY

    But I am happy to welcome all of you, and I look forward to 
your testimony. I think retirement security is a very hot topic 
these days because of Enron. I come from a steel community, and 
steelworkers are really uneasy because as the steel companies 
go out of business, the workers are stranded because of the 
legacy costs on both their pensions and their health care.
    So I think retirement security is something that is in the 
minds of people, and you do have an important mission; and of 
course, all the other missions, ILAB, OSHA MSHA and ESA. So we 
are looking forward to your testimony.
    How do you want to handle it? I will let you decide. Who 
wants to present the statement?
    Mr. Henshaw. Mr. Chairman, I will present the overall 
statement for the Department of Labor.
    Mr. Regula. The Secretary did a great job yesterday. It is 
evident to me that she is getting a handle on this. It is 
always a challenge in a new mission.

                        Joint Opening Statement

    Mr. Henshaw. Good morning, Mr. Chairman. I appreciate your 
being here after a long session last night.
    I am John Henshaw, Assistant Secretary of Labor for 
Occupational Safety and Health, and I appreciate the 
opportunity to be before you today.
    Joining me today at the table----
    Mr. Regula. Excuse me, if I might interrupt. I think the 
Secretary said yesterday that you are going to expand OSHA, is 
that correct?
    Mr. Henshaw. Expand OSHA?
    Mr. Regula. Your involvement. Is that not one of your 
missions?
    Mr. Henshaw. One of our missions is to maintain strong, 
fair, and effective enforcement, and, with our compliance 
assistance efforts, we will be effective in reducing injuries 
and illnesses.
    Mr. Regula. Okay. Well, I will have some questions, but go 
ahead.
    Mr. Henshaw. What I am going to do is read the statements 
for all of us, and then you will be able to ask questions.
    Joining me today at the table are Ann Combs, Assistant 
Secretary of Labor for Pension and Welfare Benefits; Tammy 
McCutchen, Administrator for the Wage and Hour Division of the 
Employment Standards Administration; David Lauriski, the 
Assistant Secretary for Labor for Mine Safety and Health; and 
Thomas Moorhead, Deputy Under Secretary for International Labor 
Affairs.
    We will discuss the Labor Department's Fiscal Year 2003 
budget as it relates to specific agencies, and you will have an 
opportunity to ask questions of each one of us. We have 
submitted our separate written statements for the record, and 
appreciate the opportunity to do so.

                           WORKER PROTECTION

    As Secretary Chao indicated in her testimony before the 
subcommittee yesterday, Fiscal Year 2003 is a wartime budget, 
and the Department of Labor's initiatives were designed with 
that reality in mind. But the overall outlook remains 
unchanged. The Department's primary mission, in addition to 
workforce preparation, is worker protection: their workplaces, 
their pension, their wallets, and their rights.

              PENSION AND WELFARE BENEFITS ADMINISTRATION

    I want to first highlight the Department's Pension and 
Welfare Benefits Administration, PWBA, which remains at the 
forefront of the administration's effort to protect workers' 
retirement security.
    PWBA promotes and protects the pension, health, and other 
benefits of over 150 million participants and beneficiaries in 
more than 6 million private sector employee benefit plans, 
holding nearly $4.8 trillion in assets. The continued increase 
in the number of employee benefit plans and the number of 
people covered, and the importance of retirementplan assets to 
our capital markets, and the proliferation of new benefit arrangements 
has, over the years, greatly expanded the scope and complexity of 
PWBA's responsibilities.
    As you know, President Bush recently released a package of 
legislative proposals that would give workers more choice, 
confidence, and control over their retirement savings in 401(k) 
plans.
    To address this need and to further support PWBA's 
enforcement responsibilities in Fiscal Year 2003, the 
President's request for PWBA is $121 million, with 861 FTEs. 
This is a $7 million increase over Fiscal Year 2002.
    I should note that the PWBA request is further complemented 
by the request for additional resources in the Office of 
Inspector General to further protect pension funds from labor 
racketeering.

                  EMPLOYMENT STANDARDS ADMINISTRATION

    As you know, Mr. Chairman, the Employment Standards 
Administration enforces and administers a wide variety of labor 
laws and benefit programs that protect and serve over 100 
million workers. It is composed of four major programs: the 
Wage and Hour Division, the Office of Federal Contract 
Compliance Programs; the Office of Workers Compensation 
Programs; and the Office of Labor-Management Standards.
    Together, these four programs administer over 100 laws and 
executive orders that provide workers' compensation benefits, 
ensure equal employment opportunities at Federal contractors, 
protect the rights of union members, and enforce minimum wage, 
child labor, and overtime pay standards, as well as family and 
medical leave protection.
    The request before the committee for ESA in Fiscal Year 
2003 is $589 million, with 4,315 FTEs. One of the enforcement 
highlights of ESA for Fiscal Year 2003 is the Office of Labor-
Management Standards.
    The Department is requesting an increase of $3.5 million 
and 40 FTEs for OLMS to carry out its responsibilities related 
to improving compliance with the reporting requirements of the 
Labor-Management Reporting and Disclosure Act, and to advance 
LMRDA safeguards for union financial integrity. This increase 
would only partially restore the significant budget cuts that 
OLMS went through in 1993 and 1994, and the requested resources 
would substantially bolster the agency's streamlined union 
audit programs, as well as improve outreach and enforcement 
efforts to secure better reporting compliance.
    The increase would also enable OLMS to better protect union 
member funds, fight labor racketeering, and promote union 
democracy.

                 MINE SAFETY AND HEALTH ADMINISTRATION

    The Fiscal Year 2003 budget for the Department is $264 
million and 2,264 FTEs for the Mine Safety and Health 
Administration. While this reflects an overall decrease from 
the agency's Fiscal Year 2002 level, targeted increases of $10 
million are directed to MSHA's enforcement responsibilities.
    Part of the overall decrease from 2002 reflects the 
proposed realignment of MSHA's workforce to reflect changes in 
the mining industry itself; specifically, the decline in the 
coal mine industry. In recent years, the number of coal mines 
and miners have declined, but MSHA has not adjusted its 
workforce to correspond to those reductions.
    While the coal mine industry is declining, mining at metal 
and non-metal mines is increasing. Therefore, MSHA's 
enforcement in the metal-non-metal arena will increase by 
nearly $3 million in Fiscal year 2003. And, as I indicated at 
the beginning of my statement, the Department's Fiscal Year 
2003 budget was developed with the goal of serving the needs of 
the 21st century workforce.
    The Department is requesting $2 million for MSHA to 
implement an electronic government to improve customer service. 
The mining industry relies on statistical data compiled by 
MSHA, and this 21st century initiative will meet the growing 
demands for timely, accurate, and accessible information, 
information designed to protect the mining work force.

                 BUREAU OF INTERNATIONAL LABOR AFFAIRS

    As you know, Mr. Chairman, the Bureau of International 
Labor Affairs carries out the Secretary of Labor's 
international responsibilities to help shape U.S. foreign 
policy so it furthers the well-being of the American workforce, 
and to provide expert support for the administration's 
international labor activities.
    For Fiscal Year 2003, the ILAB budget request is $54.6 
million and 85 FTEs. This request represents a significant 
decrease over the agency's Fiscal Year 2002 levels, but will 
allow ILAB to continue its core mission to provide technical 
assistance that promotes core worker rights, and to continue 
its efforts to reduce child labor abuse abroad.
    Seen in the context, the Fiscal Year 2003 request 
stabilizes recent ILAB budgets, which jumped 1,005 percent 
between Fiscal Years 1995 and 2001. The heart of the Bureau's 
mission is assisting in the formulation of U.S. international 
policy and programs that affect U.S. Workers.
    The Bureau supports the President's free and open trade 
agenda while strengthening the capacity of our trading partners 
to provide respect for internationally-accepted core labor 
standards.
    In 2003, ILAB intends to continue to support programs to 
reduce child labor abuses abroad through the ILO's 
International Program on the Elimination of Child Labor, or 
IPEC. The Bureau will continue to support ongoing IPEC efforts 
in countries that are committed to addressing the problem of 
child labor, helping reduce the incidence of child labor around 
the world, educating the public and policymakersabout the 
issue, and advocating and enhancing the worldwide movement against 
abusive child labor.
    Moreover, through the child labor education initiative, 
ILAB will continue to support innovative projects in foreign 
countries that provide access to basic education as a means to 
combat child labor.

             OCCUPATIONAL SAFETY AND HEALTH ADMINISTRATION

    Lastly, Mr. Chairman, I will address my home agency, the 
Occupational Safety and Health Administration. The request for 
OSHA for the Fiscal Year 2003 is $437 million, with 2,233 FTEs. 
While this represents an overall reduction from Fiscal Year 
2002 levels, targeted increases in OSHA's enforcement and 
compliance assistance effort will rise by $13 million in Fiscal 
Year 2003.
    There will actually be more OSHA enforcement actions in 
2003, rising 1,300, from less than 36,000 inspections in 2001 
to nearly 38,000 in 2003. This will result in safer workplaces 
and better worker protection.
    As OSHA has risen to meet our expanded responsibilities for 
homeland security, my agency has also worked with employers and 
employees to improve the safety and health of American workers. 
Our country now has the lowest occupational injury and illness 
rate on record, 6.1 cases per 100 workers. This latest drop in 
the injury and illness rate was the eighth in a row. Injury and 
illness rates in more dangerous occupations also continued to 
drop.
    In an effort to continue this trend, I have worked with 
Secretary Chao to establish four priorities for meeting OSHA's 
mission of protecting workers' safety and health. The fiscal 
year 2003 budget request reflects these priorities, and 
includes building OSHA's capacity for leadership in safety and 
health as exemplified by, one, our work at the World Trade 
Center, our response to bioterrorism, and to decrease the 
injury and illness rate; number two, continuing our committment 
to strong, effective, and fair enforcement; number three, 
expanding our outreach, education, and compliance assistance; 
and number four, encouraging and improving voluntary efforts 
with partnerships and voluntary programs.
    In closing, Mr. Chairman, this is an overview of where 
PWBA, ESA, OSHA, MSHA, and ILAB are headed in Fiscal Year 2003. 
As indicated earlier, further details of our agencies are 
provided in our written statements.
    Again, we appreciate the opportunity to appear before you 
today, and will be happy to answer any questions you may have. 
Thank you.
    [The prepared statements of the witnesses follow:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    Mr. Regula. Thank you. It is interesting to me. As an 
attorney, I represented a mining company and I represented a 
trucking company, and I represented a small manufacturer, so I 
have heard people on the other end of the line from the 
activities that you are responsible for, not always in a 
pleasant way, historically.
    But I am pleased to note in the information about each of 
you that you have been in the private sector, without 
exception, so you understand that government should not be an 
enemy, but rather, a partner in ensuring that the workers are 
protected, but at the same time, that it is not an unfair 
impediment to a company.

             OCCUPATIONAL SAFETY AND HEALTH ADMINISTRATION

    Let's start with OSHA. Do you look for staff that has had 
some experience in the private sector, so that your OSHA people 
can go into an industry and say, ``We are here to help you, as 
well as to ensure that you enforce the existing standards''?
    Mr. Henshaw. Mr. Chairman, as you know, I, too, am from the 
private sector.
    Mr. Regula. I notice that.
    Mr. Henshaw. I have had over 26 years experience in the 
private sector. My role in that activity with those companies 
is selling the value of safety and health. The way to be 
effective, and the way to sustain the impact or sustain the 
performance is to sell it, incorporate it into the culture, and 
then it is sustaining.

                         COMPLIANCE ASSISTANCE

    So we will be spending a lot of time on promoting. We still 
maintain strong, fair, and effective enforcement; that is a 
fundamental principle that we have to maintain. But our 
increases in compliance assistance, I believe, will deliver 
much more benefit, for those companies who really want to 
comply. Compliance assistance will give them the tools, the 
guidance to get there. Then they will own it, and then they 
will be responsible companies and maintain safe workplaces.
    Mr. Regula. You are doing them a favor in a way, because 
they avoid worker's compensation problems in the States because 
of injury, loss of time, and a whole host of things.
    In your experience, looking back over some several years, 
do you find more of the employers in compliance, or in a 
situation where there is less need to enforce it through legal 
action?
    Mr. Henshaw. My experience is that there is a percentage of 
employers that, because of capital investments, because of the 
nature of the competitive environment, will need enforcement to 
provide the incentive to comply. We will have to maintain that 
strong and effective enforcement.
    There is a large percentage of employers who want to do the 
right thing and may not know how to do it because our laws and 
rules are too complicated. We need toprovide the assistance so 
they can get on board and comply. That is a large percentage of the 
employers. That is where our compliance assistance efforts will come 
in.
    Mr. Regula. Do you look for staff people who have had 
experience--if it is going to be for mining, that have had some 
involvement with mining, so they are not--you do not have a 
college professor from the political science department 
becoming an enforcement inspector for OSHA?
    Mr. Henshaw. Exactly right. Part of our effort, in what I 
call strong and effective enforcement, is making sure that our 
compliance staff has some experience with the industries they 
are dealing with so they can communicate on a one-to-one basis 
in a language that the employer knows, and again, to sell the 
value of what we are saying.
    Mr. Regula. I think that is really important, because that 
is one of the criticisms I used to pick up from my clients, is 
that somebody comes into their place of business as an 
enforcement inspector and really does not understand the 
business, and they are in a ``gotcha'' frame of mind rather 
than a helpful frame of mind. And I hope you go from that 
direction.
    Mr. Henshaw. That is precisely where we are headed.
    Mr. Regula. Because in the end, the employer is well served 
by benefits, perhaps, from the experience of your compliance 
people saying, `` This will be helpful to you in reducing 
worker accidents or injuries,'' and so on.
    Mr. Henshaw. We are interested in one thing, and that is 
injury and illness reduction. That adds a value to business, 
and we need to sell it.
    Mr. Regula. Absolutely. I think that is the right approach 
to it. We have a vote on. I have a number of questions, but I 
think what I will do is just go over and vote and be right 
back.
    The committee will suspend for a couple of minutes.
    [Recess.]

                             NON-COMPLIANCE

    Mr. Regula. We will reconvene. We are going to have more 
votes, so we will try to move along here.
    In your experience, do you think that there are less 
violations now? Has the effort to get compliance and be a 
constructive force working with employers resulted in fewer 
violations, looking at, say, a historic period of time, 10, 20 
years?
    Mr. Henshaw. Certainly historically over 10, 20 years, 
there probably is a decline in the degree of non-compliance, 
and that would translate into violations. I do believe, 
primarily because of my background, that we have more people--
we have thousands of people out there in industry who are 
striving to do similar things which we are striving to do, 
reduce injuries and illnesses. We have more and more of those 
people around. So they and their influence in American industry 
are reducing injuries and illnesses. From that standpoint, 
there is a reduction in non-compliance.
    Now, as far as the agency is concerned, we continue to 
focus on the high hazard industries and the industries that 
have the higher number of injuries and illnesses. In that 
focus, we will continue to find violations and continue to 
exercise our enforcement responsibilities.
    Mr. Regula. Do you work with or communicate with the State 
worker's compensation agencies? It seems to me they could 
identify, since they end up paying on injuries, some of the 
potential sources of problems in different types of industries.

                      STATE WORKER'S COMP AGENCIES

    Mr. Henshaw. We don't work specifically with State 
workmen's comp. We use whatever data we can determine and 
gather to assess where the risks, and hazards are and where the 
money is being spent to deal with hazards.
    So we are spending time looking at various sources of data 
to, again, focus our efforts, whether it is compliance 
enforcement or compliance assistance.

                     SUSAN HARWOOD TRAINING PROGRAM

    Mr. Regula. What is the history of the Susan Harwood 
training grant program?
    Mr. Henshaw. The Susan Harwood training grant program has 
been around for a number of years, and it is focused on 
providing training to workers.
    What we have decided to do this year, given our fiscal 
responsibility, given the fact that this is wartime and that we 
are recovering from a recession, we have determined that the 
best way to deliver--I am coming from the private sector, and 
we are confronted with new circumstances, new requirements, new 
problems. We have to redefine ourselves on a regular basis.
    What we have done on the grant issue is to redefine 
ourselves, to try to make a determination as to how best to use 
the money that we are given to get results.
    So the Susan Harwood program has a history and has done an 
excellent job. What we need to do now is find a different way 
of doing even better job. That is the focus on the $4 million 
that we have in this budget, to redefine how we do training; 
focus on training, focus on investing in the training process, 
as opposed to pay to train.
    The old program, in my view, was pay-to-train. What we are 
doing now is investing in the training process, so we can reach 
more people and leverage the $4 million that we are given to 
have a greater impact than the previous program.
    Mr. Regula. I am very pleased, in looking at your bios, 
that you all have had a lot of private sector experience. I 
think that is valuable.

                             PENSION PLANS

    On the pension issue, from listening to your testimony, it 
seems like you get into a different--it is not just oneset of 
responsibilities, but it ranges over different types of pensions. You 
mentioned there are a lot of different configurations of pensions.
    Is that a challenge, to have a program--sort of a one-size-
fits-all program?
    Mr. Henshaw. Mr. Chairman, I would like to defer that to 
Ann Combs, Assistant Secretary for PWBA.
    Ms. Combs. Good morning, Mr. Chairman.
    Mr. Regula. Good morning.
    Ms. Combs. It is a challenge. Our pension system is a 
voluntary system, and one of its strengths is, I believe, that 
employers are able to design benefit programs that make sense 
for their particular workforce.
    There are traditional defined benefit plans that play a 
very important role, 401(k) plans and employee stock ownership 
plans. There are many different varieties.
    Mr. Regula. You have the ability to respond in terms of the 
individuals to the variety of plans? I know the Enron thing is 
overworked at this stage, but that is a 401(k), if I am not 
mistaken. Will there be help for those people in terms of 
pension?
    Ms. Combs. Yes. We are able to deal with the different 
benefit arrangements. Our investigations are very similar, 
regardless of the type of benefit program. The facts may be 
different, but the process that our investigators go through is 
very similar.
    In fact, in the Enron situation, we are investigating all 
of the retirement plans. They have a defined benefit plan, they 
have a 401(k) plan, and they have an employee stock ownership 
plan. We are looking at all of those arrangements.
    The 401(k) plan has received the most attention because of 
the drop in the value of the stock, but we are also looking to 
make sure that there were--if there were any fiduciary 
violations.
    Mr. Regula. I noted in the testimony that there was $100-
plus million requested for this, which must mean that the 
amount of employer contributions to the pension guarantee fund 
is not adequate to pay benefits; is that a correct 
understanding?
    Ms. Combs. I think you are referring to the Pension Benefit 
Guaranty Corporation, which is the insurance, the Federal 
insurance system for defined benefit plans.
    Mr. Regula. Your program is different?
    Ms. Combs. Yes. The Pension and Welfare Benefits 
Administration is the enforcement agency that looks at health 
and retirement plans.
    Mr. Regula. You are a watchdog, if you will. But could you 
have anticipated Enron and the chaos it is causing for workers?

                                 ENRON

    Ms. Combs. It is difficult. The Enron situation is 
obviously a tragedy for the workers involved. We have been very 
involved, and I am very proud of our staff for the work they 
have done.
    The Enron situation resulted from a massive corporate 
failure that allegedly was due to accounting and other 
corporate practices that our agency does not oversee. We are 
responsible for the Employee Retirement Income Security Act, 
ERISA. So we are dealing with the fallout of problems that 
came----
    Mr. Regula. The money you request is for administration or 
staffing, not for any kind of benefit?
    Ms. Combs. Yes. Our budget request is for staff. We are 
primarily an enforcement agency. Eighty-five percent of our 
resources are used for investigators who are out in the field.
    We opened an investigation into Enron on November 16, 
before they declared bankruptcy. Our Dallas office opened an 
investigation and went in. We are reviewing the plan documents 
and interviewing people. We just this week took a step to reach 
an agreement to remove the Enron administrative committee and 
replace them with an independent fiduciary who will represent 
the interests of the workers in the bankruptcy court, and work 
with us to recover the maximum amount we can for the workers in 
the retirement plans.
    Mr. Regula. A couple of questions, and then I will go to 
the other members.

                 Mine Safety and Health Administration

    Mining, is it safer today? There are fewer mines, they are 
probably more sophisticated, more highly automated, for sure. 
Is it a safer industry?
    Mr. Lauriski. Mr. Chairman, I am pleased to announce that 
both our last Fiscal Year and calendar year were the safest on 
record in this industry, both from a fatality perspective and 
from an incident rate perspective of injury. We are very happy 
to report that we reduced, in 1 year, the fatalities from 85 to 
72. We are under a very rigorous program to do that again this 
fiscal year.
    Mr. Regula. Do you give mining companies consulting advice 
on how to be a safer workplace?
    Mr. Lauriski. We are moving more and more in that 
direction. This agency, in its history, has been principally an 
enforcement agency. We are trying to change that culture to 
move to a balanced approach of being not only an enforcement 
agency, but an agency that provides education and training, 
compliance assistance, and technical services. I think we are 
making some good progress in that regard.
    Attached to my testimony is a chart that shows, I think, 
some fairly significant information relative to our outreach 
efforts over the past year. We have been able to reduce the 
number of injuries that are occurring in this industry by about 
20 percent. It is a short period of time, and it is probably 
not yet statistically validated, butwe are hoping that that is 
as a direct result of the outreach efforts we are putting into this.

                 Bureau of International Labor Affairs

    Mr. Regula. Mr. Moorhead, you spoke mostly in the opening 
testimony about child labor, but coming from the steel 
industry--one of the things the President is going to be 
confronted with is this question of the 40 percent tariff, and 
the allegations of those who are concerned is that labor is so 
much cheaper in the countries that export to the United States.
    Going beyond child labor, which I'm sure is, in 
underdeveloped countries, a significant problem, do you get 
into the issue of trying to encourage these countries to have 
standards that are somewhat comparable to us? Otherwise, it 
gives a huge competitive advantage to them.
    Mr. Moorhead. Mr. Chairman, part of our program is to 
encourage the development of core labor standards around the 
world.
    As you know, the International Labor Organization, in its 
1998 conference, adopted the Declaration on Principles and 
Rights at Work. These are binding on all the 175 member states 
of the ILO, and commit them to the implementation of core labor 
standards.

                        WAGE BENEFITS AND RATES

    Mr. Regula. Are they getting their wage benefits and rates 
up for the workers?
    Mr. Moorhead. The wages and benefits may be unrelated to 
the core labor standards because that is a supply and demand 
issue in each country. But if they are engaging in freedom of 
association and are not having forced labor, they are complying 
with the declaration. But the wages are going to be an economic 
benefit that we have no control over.
    Mr. Regula. Ms. McCutchen, on employment standards, are 
there less violations in today's world?
    Ms. McCutchen. I do not have the data to support that. I 
know when we do compliance assessment, we do have reduced 
violations. What we do is go in and do surveys and 
investigations and supply compliance assistance. Then, we will 
come back in 2 years and look at an industry or segment again, 
or a particular type of violation.
    Our enforcement numbers show that compliance assistance 
does have an impact and increases the amount of compliance 
among the employers.
    Mr. Regula. What triggers an investigation, a worker 
complaint, a competitor complaint?
    Ms. McCutchen. We do two types. Seventy percent of our work 
is responding to employee complaints. Last year, we had about 
38,000 cases that we resolved, and we anticipate the same 
amount in Fiscal Years 2002 and 2003.
    The other 30 percent of the work is what we call targeted 
enforcement initiatives. That is when we look at the data that 
we gather in our complaint-based investigations. We have all of 
the data in a computer system, and we look at that data to 
analyze the number of violations. We look for trends in 
industries. When we see a trend, we target an industry or 
geographic area for more enforcement.
    The national enforcement initiatives we have right now are 
for the garment industry, long-term health care, and for 
agriculture and child labor.
    Mr. Regula. Mrs. Northup.

             Occupational Safety and Health Administration

    Mrs. Northup. Yes, thank you. Welcome. I am looking forward 
to working with you over the next several years.
    I want to raise a very specific case that happened in my 
district and ask you about future regulations. This, in this 
case, was not a regulation, it was more of an advisory, but it 
was interpreted by the states that independently do OSHA 
regulating within their state as a regulation.
    This concerns the American Bakers Association, and in 
particular, there was a baker in my district that does a lot of 
the muffins. Apparently what happened, Mr. Chairman, was that 
an independent organization, the American Conference of 
Governmental Industrial Hygienists, set a standard or a 
recommendation of a standard that lowered how much flour could 
be in the air from the current 4 that was being used to a .5. 
In fact, OSHA does not even say you are out of compliance until 
you are much higher than that.
    This is an organization that is independent. They have no 
responsibilities, they have no requirements to go through any 
of the regulatory steps. They do not have to take any testimony 
from any outside groups or anything else. They set this new 
level, despite the fact that the bakers were very eagerly 
trying to find out if they could testify, present evidence, or 
anything else.
    They lowered it. The OSHA people in my state came in and 
cited this company for being out of compliance because they are 
a state that is self-regulated, and they are required to have 
at, or better than, Federal requirements. So the only thing 
they can go on is OSHA's advisory. So even though you did not 
actually mandate that this be set, it was the advisory, and 
they have nothing else to use. This group had arbitrarily set 
this standard, and the bakery was cited. It has since been 
withdrawn.
    All the evidence is, as I understand it, that this level 
was picked arbitrarily without any scientific basis for it, and 
without any evidence that it was a correct standard. So the 
company is okay, never mind that they spent literally tens of 
thousands of dollars trying to defend themselves before it was 
withdrawn.
    I think my concern is, how often do you use these 
independent organizations? Do you expect this administration to 
continue that practice, to adopt these? Are you going to change 
the procedures they have to go through so they have toaccept 
outside information, as you would if you went through a regulatory 
process?
    Can you give me any idea whether the process this 
administration is going to take will be changed, based on this 
case and maybe others?

                         STATE OSHA COMPLIANCE

    Mr. Henshaw. Madam Congresswoman, that certainly is a 
troubling circumstance and a troubling case. I am aware of 
that. I am aware of what other professional societies and 
groups may generate as far as the information. You are correct, 
it varies. It depends on who is developing it and what the 
basis for that development is.
    I can tell you here that this administration will use the 
best available data, use the best science and peer review 
process we possibly can muster to come up with some guidance or 
standards using the rules and procedures that we have in place 
in setting standards. We will not take numbers from 
organizations when we do not know the basis for their 
information. We will not incorporate those data into our 
standards. We will exercise our own responsibilities in 
evaluating the data and make sure it is properly evaluated in 
respect to its impact, and make our own determinations.
    So I know the ACGA circumstance.
    Mrs. Northup. Have you withdrawn that standard or that TVL, 
I think it is called?
    Mr. Henshaw. You mean PEL? I don't know----
    Mrs. Northup. As I understand it, now, the states of maybe 
Ohio and Michigan or a couple of other ones--their OSHAs are 
sort of in the same boat. It is the only standard they have to 
base it on, and then some of the companies in those states are 
anticipating--not because the states want to necessarily cite 
them, but because they are going to feel like they are forced 
to.
    Mr. Henshaw. As you know, we have 26 State programs as part 
of the OSHA family. They are funded by about 50 percent of 
their cost. We have, to some degree, some responsibility and 
some control over those State programs. As you mentioned, their 
compliance standards have to be at least as equivalent to the 
Federal OSHA compliance standards.
    We are negotiating with the State programs. In fact, 2 days 
ago, I met with the State plans, all the members and the heads 
of the various plans, including the States you are referring 
to.
    We talked about consistency across-the-board. We talked 
about the burdens we put on employers, large and small. The 
intent was to make sure that we have developed the proper 
standardization so we do not put employers in some States at a 
higher risk or held to higher requirements than in other 
States.
    Mrs. Northup. But I am asking the question if you all--I 
think it is called the TLV. I am asking if you all have 
withdrawn that TLV?
    Mr. Henshaw. We have not adopted that TLV.
    Mrs. Northup. So the fact that you have not adopted it will 
influence the OSHA programs, say, in Ohio and Michigan, where 
they are caught in the middle ground?
    Mr. Henshaw. That is correct. We do not adopt TLVs. We have 
our own permissible exposure limits, which are the PELs. These 
are the OSHA numbers. As we generate new OSHA numbers, we look 
at the best available science, and we do not at all exercise 
the procedure that ACGH does in developing their TLV.
    Mrs. Northup. Did you pay them to develop those standards?
    Mr. Henshaw. No.
    Mrs. Northup. They developed them on their own?
    Mr. Henshaw. That is correct.
    Mrs. Northup. Again, I think all of us want to make sure 
that if there is something in the air or anything else that is 
going to challenge the health of workers, that we get that out 
there, and we want companies spending money on effective 
improvement of health in the workplace.
    The problem is, if a company spends hundreds of thousands 
of dollars to live up to a limit that is just not sustained by 
any sort of scientific basis that it improves the health, it 
actually takes away from other investments that they can make 
in terms of everything from health to long-term job security.
    Mr. Henshaw. Madam Congresswoman, I am coming from the 
private sector, and I know that very well. I only had a limited 
amount of resources to spend in my previous life, and I did not 
appreciate----
    Mrs. Northup. Let me just say, I hope in this life you 
think you just have limited resources, too. There are a lot of 
people that have preceded you that did not think that way.
    Thank you, Mr. Chairman.
    Mr. Henshaw. I fully acknowledge that. Thank you.
    Mr. Regula. I have the second-largest independent bakery in 
the United States in my hometown. It does make the town smell 
good, but I don't know if that is doing injury to people, all 
that material.
    Mr. Peterson.

                 MINE SAFETY AND HEALTH ADMINISTRATION

    Mr. Peterson. Good morning. I apologize for not being here 
for your testimony, but welcome, all of you. I wish you the 
best in the work you do. It is not easy.
    My first question deals with mining. As I looked at the 
chart here, I see the numbers going down. I guess the question 
I would ask, because this chart is not weighted, is mining 
going down? Do we have less mining being done or less tons per 
year? Where is mining going overall in the country?
    Mr. Lauriski. In the coal sector, we have seen a decrease 
over the last 10 years of about 8 percent. However,over the 
last year, we are seeing some of that come back.
    On the metal-non-metal side, however, we have seen a 
significant increase over the past few years where mines have 
increased by 19 percent. So overall, we are seeing more 
operations coming into business. That is principally created by 
the Transportation Equity Act, with a lot of aggregate 
companies coming online.
    The other side of that equation, however, is that there are 
fewer miners, even with the increasing number of mines in 
metal-non-metal and the decreasing number of mines with coal.
    Mr. Peterson. With our mining methods we use less people, 
is that right, especially in coal?
    Mr. Lauriski. Especially in coal.
    Mr. Peterson. So this chart may not mean we are really 
safer, but we just have less people in a dangerous position?
    Mr. Lauriski. I think it tells a good story, because the 
decrease is only over the period of a year. Obviously, in that 
year we have seen an increase--a significant increase in the 
number of metal-non-metal mines, which has brought on more 
miners, and also an increase in the number of coal mines over 
the past year.
    It is not statistically valid yet, but we thought it was 
worthy to note that we have spent a significant amount of time 
on outreach and compliance assistance. We hope that after 
another year we can weigh that chart and validate it showing 
that what we are doing is the right thing.
    Mr. Peterson. I appreciate that.

                            PENSION SECURITY

    Ann, do we have adequate laws to protect people's pensions? 
Let me preface that. I am always from the position, do no harm 
as a legislator, and we do lots of harm, here, in my view, in 
overreaction and not always going in the right direction.
    So I say, do we have laws that can be utilized to protect? 
Because that is a huge concern out there.
    Ms. Combs. It is a concern of many people, and it is a 
great concern of this Administration.
    ERISA, the Employment Retirement Income Security Act, which 
is the basis of worker protection for retirement plans, I think 
is a strong and good base, but there are things that can be 
improved.
    The President has announced a package of proposals to 
strengthen worker protections in the 401(k) type plans to 
allow--to give people the right to choose to diversify out of 
employer stock, for instance, after they have been in a plan 
for 3 years. The proposal would establish fairness between 
corporate executives and rank and file workers, so that when 
workers are prohibited from selling their stock for a temporary 
period of time during a blackout or lockdown period, corporate 
executives could not sell stock or options that they may have 
during that period of time.
    It is a package that we believe would restore people's 
choice, give them control over their accounts, and restore 
confidence in the system, which I think is very important.
    Another important component is legislation that passed the 
House last year sponsored by Representative Boehner to give 
people access to professional investment advice. We think that 
is very important, that people have better information so they 
can make wise choices with respect to their plans.
    So we are anxious to move that package of proposals that we 
believe will strengthen what is a good system.
    Mr. Peterson. I guess the other question would be, how do 
we educate? We have a lot of inexperienced investors getting in 
401(k)s who have a lot of their own control over their plan, so 
they do not significantly have any experience in investing, and 
concerning what is safe and what is not.
    I just had a close friend who--it stunned me--did not have 
a lot of money, but they both just retired. They took all of 
their retirement and invested it in Enron. I mean everything; 
they took everything from both of their pension plans, the cash 
available, and put it in Enron. I am just stunned that they did 
that, but one of their friends told them this was the place to 
make money, so they invested it all in Enron.
    I guess one of the basics is you do not ever invest all 
your money in any one thing. But the basic fundamentals, we 
have a lot of people--the majority of Americans today are 
involved in some kind of an investment plan. That was not true 
10 or 15 years ago. There has been a huge shift.
    Somehow I think we all have to collectively make sure 
people understand some of the basic fundamentals of investment 
security.

                            PENSION SECURITY

    Ms. Combs. You are absolutely right, there has been a huge 
shift. We have given much more responsibility, and much more 
freedom to individuals, to be able to control their retirement 
investments. But with that, we believe very strongly that 
people need information. They should not be relying on their 
neighbor or friend. They need access to professional investment 
advice from qualified individuals.
    Another component of the President's plan would require 
quarterly benefit statements. Those statements would include 
information about basic investment principles, including how 
important it is to diversify.
    So we think we can work with you and with employers who 
also have an interest in getting this information out, and 
making it easier for them to offer investment education and 
investment advice.
    The Department has also recently issued some guidance 
tomake it clear that employers who want to offer independent investment 
advice can do so without going through a burdensome regulatory process 
in order to get approval. We are taking what steps we can to make sure 
people have the tools they need to manage these funds wisely.
    Mr. Peterson. I will make one comment to all of you. I come 
from a business background and a State government background 
before I came to Congress, but I still believe--our economy is 
changing. The majority of our growing employers are small 
employers.

                         COMPLIANCE ASSISTANCE

    I guess I urge all agencies to be educators. New people 
getting into business the first time do not know all the rules, 
and you are not the agency that comes to my mind, but I can 
think of one agency that just absolutely delights when people 
self-report and gives them huge fines. That kills the 
entrepreneurial spirit in this country when you self-report and 
have huge fines.
    I encourage all of you--some of you talked about growing. 
New employers need to learn how to do it right. Most of them 
want to do it right. There are exceptions, and when you have 
those exceptions, nail them. But do not have that philosophy 
with the general public, the entrepreneurs of today, because 
you will kill our future if you do.
    Ms. Combs. If I may say for the panel, compliance 
assistance is one of the Secretary's highest priorities for 
that reason. We believe we can accomplish a lot by encouraging 
employers, getting them familiar with the laws, helping them 
comply, and then follow that up with tough enforcement for 
people who do not comply.
    Mr. Peterson. It being Valentine's Day, we can all be 
enticed by a Hershey's kiss more than a kick. Thank you.
    Mr. Regula. Mr. Sherwood?
    Do you have Hershey's in your district?
    Mr. Peterson. It is not in ours, but it is in our State, 
and we are proud of it.
    Mr. Regula. You are sweet guys. Go ahead.
    Mr. Sherwood. I cannot follow up on that one, Mr. Chairman.

                     RETIREMENT SECURITY--PENSIONS

    Ms. Combs, I would like to go a little further with that. I 
think we need to learn from this Enron deal, and it is so easy 
to overreact.
    I do not want to overregulate or overreact, but it appears 
to me that the biggest mistake an unsophisticated investor can 
make is the old cliche about putting all their eggs in one 
basket. I have not heard anything that you have said as to 
whether the President's rules are going to limit the amount or 
the percentage that an individual worker's total retirement 
401(k) could be in their own company stock.
    It seems to me that if we do not encourage that 
diversification process--I mean, any advisor to a sophisticated 
investor would tell him that he needs to diversify the 
portfolio that is going to provide for his retirement.
    We can all take a flier and go with growth, growth, growth, 
but when we are figuring about what we are going to retire on, 
we know it needs to be diversified. So often, unsophisticated 
investors do not do that. I do not see where there is anything 
in your program that is going to make that mandatory.
    Could you go through that thought process with me a little 
bit?

                  RETIREMENT SECURITY--DIVERSIFICATION

    Ms. Combs. Certainly. There have been proposals, and there 
are proposals before Congress, which were considered by the 
task force that the President established to look at this 
issue, to set mandatory caps on the amount of investments in a 
401(k) plan, for instance, that could be invested in a single 
stock.
    The task force rejected that approach. Our view is that 
people should be given the freedom to choose how to manage 
their retirement investments. They should be given the 
information and the tools they need and encouraged to 
diversify.
    But many of these plans that offer employer stock as an 
option, for instance, they are the plans of large employers. 
Most of those employers also offer defined benefit plans, so 
people have that retirement plan, as well.
    We do not know what each individual circumstance is, what 
decisions they are making, or what their spouse's situation may 
be. We did not feel that Washington should set an arbitrary 
restriction prohibiting people from deciding they want to put 
21 percent of their investment into an employer's stock.
    From a practical point of view, it is difficult to 
administer caps. If your stock appreciates in value because the 
market goes up, you are forced to sell stock at a time when you 
may not want to sell. Those were the kinds of factors that we 
took into consideration.
    We absolutely share your concern about lack of 
diversification, and want to educate people and encourage them 
to diversify. But our approach is to make sure people have the 
right to choose to diversify, but not to force diversification 
if they do not believe that is what is in their particular 
interest.
    Mr. Sherwood. I understand, and I am not at all for 
limiting people's ability to make their own decisions, but I 
think you just made your own argument. If it would go up, so it 
would be over the 60 or 50 percent cap, you would be forced to 
sell, and you would be forced to sell in a rising market.
    Things could be worse, you know. It is when it goes to hell 
that we are all worried about because of the people that end up 
with nothing.
    I would respectfully suggest that maybe we ought to rethink 
that position.
    Ms. Combs. We are certainly engaged in this conversation, 
and look forward to working with you on the issue.

                 Mine Safety and Health Administration

    Mr. Sherwood. On another subject, even though I mentioned 
this to the Secretary, Secretary Chao, yesterday, I would like 
to repeat that I am very appreciative of Dave Lauriski coming 
to northeastern Pennsylvania and looking over our bluestone 
mining operations and helping educate the folks there so that 
they knew what was expected and what they were supposed to do. 
I think that is the future as we move forward.
    VPP is a program that I have seen work very well in some 
industries in my district, and I ask you all to remember in 
your tenure in government your private sector experience, and 
to remember what it is like to be on the other side.
    My experience is 30 years in business and 3 years in 
government, so I like to say, I am 10 times more a businessman 
than a politician. But we need--I would just encourage you all 
not to become products of the system, but stay products of your 
independent experience, because I think in government so often 
the regulation that we have sometimes throws the baby out with 
the bath water. We need to help keep these businesses in 
business and employ people so that we have jobs.
    We need to educate them on the best safety techniques, and 
we need to protect our workers, but any time we protect our 
workers by putting the industry or the employer out of 
business, then we have to look at what type of protection we 
did.
    So again, Dave, thanks for coming up and going over all 
those things with us. We appreciate it. I think we are off on 
the right track, and it is going to get better rather than 
worse. I appreciate it. Thank you all for coming.
    Mr. Regula. We appreciate that kind of response. It makes 
our life easier, because we are the lightning rods back home.
    Ms. DeLauro.

                       OSHA and MSHA Enforcement

    Ms. DeLauro. Thank you very much, Mr. Chairman. My 
apologies for being late. I appreciate the opportunity to get a 
chance to talk with you and ask some questions.
    I would like to ask a couple of questions concerning OSHA 
enforcement. In that regard, I would ask for some 
clarification. This is on both OSHA and Mine Safety and Health 
Administration, MSHA.
    The Department's budget document proposes a $700,000 
decrease in funding for Federal OSHA enforcement, from $161.8 
million to $161.1 million, and an overall $2 million cut in 
MSHA's enforcement budget.
    The press release that I have read and the chart that was 
handed out at the Department of Labor press briefing shows an 
increase of $13.3 million in OSHA enforcement in the budget, 
and a $9.8 million increase in the MSHA enforcement budget. 
There is also a version on the Web page now that says--it lists 
a $17 million increase for OSHA enforcement.
    Essentially, what I want to do is to get some idea, Mr. 
Secretary, is there an increase or a decrease proposed for the 
OSHA and MSHA enforcement budgets? Is there an increase or a 
decrease?

                            OSHA Enforcement

    Mr. Henshaw. Let me try to explain that for OSHA, and then 
Dave for MSHA.
    As some of your charts indicate and show, strong, fair, and 
effective enforcement is an underpinning, as I mentioned 
earlier. I don't think you were here.
    Ms. DeLauro. No.
    Mr. Henshaw. Strong, effective, and fair enforcement is an 
underpinning of this agency. We have to maintain that strength 
and effectiveness, making sure we do the job. The job is 
achieving compliance and injury reduction. That is our job and 
the enforcement strategy.
    The number of inspectors that we have--in fact, this year 
we are increasing the number of inspectors by 15, so we will 
have 1,122 inspectors. We are proposing the same amount for 
2003, so we are not proposing to reduce our inspecting force. 
The number of inspectors will remain constant for 2003, which 
is up, by 15 individuals. So we are not altering at all our 
enforcement from that perspective.
    What you are referring to in the reduction in the 
enforcement is a 64 FTE reduction in the overall category of 
enforcement. That is a delayering of management.
    Ms. DeLauro. A what?
    Mr. Henshaw. A delayering of management and clerical 
support.
    Again, and I have heard this before, I am coming from the 
private sector and that is my background. That is who I am. 
That is my experience. We have gone through this in the private 
sector forever as far as retooling, redefining, and focusing 
our resources on where we get the biggest impact.
    That is why we are not messing with our enforcement or the 
number of inspectors, but we are delayering and eliminating 
management that is not necessary. That is where the primary 
reduction in the enforcement is. That is the 64 FTE that is 
being reduced.

                              OSHA Funding

    Ms. DeLauro. But what is the dollar amount? Is it a 
reduction from what we had the last time? Is it an increase in 
dollars? I am just trying to get to the dollar amounts,because 
there are some discrepancies in what the dollar amounts are.
    Mr. Henshaw. The issue is the $13 million increase versus 
the total reduction in the budget. The $13 million is a 
collection of two things: One is an increase in our budget. 
There is an increase in the built-ins, which is pay raises and 
office space. There is about $6.6 million of an increase in the 
pay raise category, as well as in the office rent and a few 
other incidentals.
    There is also an increase of about $6.8 million in other 
programs that we are adding in, and that includes E-tools, 
providing some assistance to small businesses, and improving 
training of our compliance assistance specialists, including 
more compliance or consultation visits. That is an increase of 
$1.5 million. Our training grants are $4 million. Those are the 
increases that we have, which total up to be $13 million.
    Ms. DeLauro. I am going to ask a question about the 
training grants. I would like to get this question answered, if 
the chairman would indulge me for a second, because there seems 
to have been a serious cut in the training grants, from $11.2 
million to $4 million, which is, in and of itself, is a 64 
percent cut. So I don't know how we can talk about the $4 
million as being an increase if it is a decrease.
    Let me just pose a question, because I don't want to delay. 
The chairman is kind in this regard. I want to get a 
clarification again, the Web page shows $17 million. If you 
could just lay out for us, increase, decrease; increased 
inspections; increased inspectors, fewer inspectors--what is 
comprised in this budget as it has to do with enforcement? And 
if you could just document for us what is being spent or not 
spent, what is being increased, decreased, et cetera, that 
would help for me to clarify the figures.

                         OSHA Funding Requests

    Mr. Henshaw. I think the simplest way to understand this is 
that there are increases, program increases and built-in 
increases, which total about $13 million. There are also, to 
offset that, some decreases. That is, the FTE reductions equate 
to a dollar decrease of about $19 million. That brings it down.
    Ms. DeLauro. All I ask is if I could just see that on 
paper, that would be enormously helpful, where we have 
increased and what we have decreased, so we are all working 
from the same set of numbers.
    Mr. Henshaw. Let me provide that to you. I will be glad to 
do that.
    [The information follows:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    Ms. DeLauro. That would be terrific. I will save some time 
here if I could get that from MSHA as well.

                         Susan Harwood Program

    Mr. Chairman, on training grants, there is a bipartisan 
history of supporting workers' health and safety training. That 
has been clear. That is called the Susan Harwood program, and 
it has been a very, very good program. It is the only program, 
as I understand it, directly targeted at providing assistance 
to workers. I could be wrong and would be happy to be 
corrected. This is consistent with your goals of education and 
training, rather than command and control.
    My understanding, again, is that we are proposing to 
eliminate the Susan Harwood program, cut the OSHA training 
funds from $11.2 million to $4 million--as I said, a 64 percent 
cut, the largest cut proposed for the OSHA budget, both in 
relative and real dollar terms.
    What are we doing here? At least $4.7 million of those cuts 
in grants really go to hard-to-reach workers that have high 
injury and fatality rates. So what I want to do is find out, 
are we eliminating the Susan Harwood program? Why are we doing 
that? Why are we dealing with such a severe cut overall of a 
program that, in fact, has been working?
    Mr. Regula. Could you supply that for the record, because I 
think we will be getting to a vote here pretty quickly? Could 
you get a copy directly to the members?
    Mr. Henshaw. I will be glad to, sir.
    Ms. DeLauro. It would be helpful if I had just a brief 
answer, Mr. Chairman. If I could have a brief answer, I would 
like to hear it. Why are we eliminating Susan Harwood?

                         Susan Harwood Program

    Mr. Henshaw. The Susan Harwood program has been around for 
a number of years, and it has been effective. I view the Susan 
Harwood sort of as a pay-to-train.
    Given the wartime budget we are under and given our focus 
around maintaining strong, fair, and effective enforcement and 
compliance assistance, we have to devise another technique of 
getting the biggest bang for our buck, which is the people's 
buck. I understand that.
    What that means is that we have to redefine our training 
process. Instead of pay-to-train, I want to invest in training. 
I want to invest in the training process, so it would be a new 
program that is going to utilize new technology, new delivery 
systems, and reach the hard-to-reach individuals. It is still 
going to be focused on workers. That is what we are, we are 
focused on workers. We are reducing worker injuries and 
illnesses. So this new program is redefining what it is we are 
doing and how we are doing it.
    Under wartime, under the budget we have right now, we have 
to be very effective in what we do. That means redefining the 
whole process. So the new $4 million is a redefinition of our 
training process.
    Ms. DeLauro. It is not a new $4 million, it is a cut from 
$11 to $4, and again, I know the comment is going to be only in 
Washington will an increase be a decrease, but thefact of the 
matter is, going from $11 million to $4 million is a decrease.
    Again, I will go with what the chairman says: Lay it out, 
let us know what is happening, what is this new technology, how 
does the new technology and Web pages get to the hardest-to-
reach workers.
    [The information follows:]

                    New OSHA Training Grant Program

    Over the last decade, workplaces and workforces have changed 
significantly. Small businesses are employing an increasing number of 
workers, and these employees represent myriad cultures, with different 
languages, literacy and educational levels. At the same time, 
technology in the workplace and home has advanced exponentially. The 
OSHA Training Program was designed in the late 1970s and has remained 
substantially the same. The agency believes it is time to reexamine the 
most effective way to utilize its training grant funds in order to 
maximize their impact.
    OSHA is proposing to end the current Susan Harwood Training Grant 
Program and replace it with a new program that addresses the training 
needs of a changing workforce and takes advantage of new technologies 
to deliver training. Rather than merely providing training to targeted, 
but limited, audiences, organizations receiving the new grants will 
create training programs to train employees and small business 
employers in selected occupational safety and health topics. The 
grantees will be able to integrate training delivery into their on-
going operations once the grant period is completed. In addition, these 
short-term grants will fund the development and pilot testing of safety 
and health training materials that will be available through a variety 
of media and technologies, including the Internet. Training materials 
will have broad applicability and allow for easy access and training at 
the convenience of both employers and employees. Grantees will be 
required to track and evaluate the usage of their training program 
during the grant period. Finally, as training materials are developed, 
they can be translated into other languages. Training issues that will 
be emphasized include: ergonomics, homeland security, and issues 
specific to Hispanic and other hard-to-reach workers.

    Mr. Regula. You don't agree with the new math.
    Ms. DeLauro. The new math is fuzzy.
    Mr. Regula. Mrs. Northup.

                      HEALTH INSURANCE FOR WORKERS

    Mrs. Northup. Thank you, Mr. Chairman.
    Speaking about the health of workers, besides the health of 
workers, what is important is the health insurance policies 
that they have access to or do not have access to.
    One of the issues we worry about is the number of growing 
uninsured in this country, and how do we help make sure that 
every American has health insurance? The first thing has to be 
that they have to have access to a health insurance policy. The 
second thing is that it has to be affordable. The third thing 
is, what can we do to expand the number of workers that have 
access to a health care policy.
    I have worried for a number of years on our habit here in 
Washington of adding one mandate on top of another in health 
care policies, so that in the end you have a Cadillac, but if 
the only thing any American could drive would be a Cadillac, 
there would be a lot of Americans that would not have a car. 
The same way with us, if we try to make every insurance policy 
look like a Cadillac, what we are doing is making sure a lot of 
Americans cannot afford the insurance policies.
    On the other hand, we all believe that if you do have an 
insurance policy, it should step up to the plate and pay the 
bill when it is due, and when it is a fair--when it is 
something that is covered by the policy and you need it.
    So I just wondered how you all are balancing those needs 
and what exactly is being done in the Department of Labor in 
terms of ERISA compliance?
    Are you going to make any proposals or be part of any of 
this administration's proposals to reorganize how health 
insurance is made available to employees so that more 
employees, especially those that may be on the entry level or 
in companies that have not offered policies previously, might 
have a better chance to have that coverage?
    Mr. Henshaw. That is Ann's question.

                       ACCESS TO HEALTH INSURANCE

    Ms. Combs. Thank you. The Department is very involved in 
the administration's initiatives on health care, and improving 
access is clearly a very high priority of the President. He 
spoke just last week about his health care plan.
    Our role would be mainly focused in association health 
plans, which is a proposal that the President has encouraged, 
and the House-passed Patients' Bill of Rights included. This 
would include a mechanism for small businesses to band together 
to take advantage of some of the economies of scale that come 
with a larger risk pool and lower administrative costs, and 
more importantly, to be free from State benefit mandates, so 
they could offer affordable health care policies and give 
people access to health insurance. It is a growing concern, and 
it is directly related to the health of the economy.
    The lack of health insurance rises when the economy 
weakens, so that is something that we have been very involved 
in--making sure that people do have access to affordable health 
insurance.
    The administration is also proposing a health insurance tax 
credit, as you know, which again will help people who do not 
have employer-provided health insurance to be able to purchase 
and deal with some of those costs.
    The Department of Labor also is very involved in COBRA and 
HIPAA regulations, access for people who change jobs to be able 
to continue to participate in their former employer's plan, and 
the Health Insurance Portability Act, to make sure that they 
can either opt into their spouse's plan when they lose their 
health coverage, or be able to buy individual health insurance 
without a preexisting condition requirement. So those are all 
programs that we are very involved in.
    Medicare reform is another major piece of the 
administration's proposal that is not within the Departmentof 
Labor's jurisdiction, but we are very supportive of the efforts to 
reform and modernize Medicare and add a prescription drug benefit.
    So we will be very much involved in this debate. The 
Patients' Bill of Rights, obviously, is another issue that 
would expand making sure that people's claims are paid when 
they should be paid, and that the enforcement of people's 
rights to health care is there.
    Mrs. Northup. As you do your work, do you do any analysis 
of mandates that may have been passed that seem to have a 
particularly costly effect on the price of insurance, pushing 
it beyond the ability of individuals to participate? Would you 
anticipate that you would be making any recommendations or----

                        HEALTH BENEFIT MANDATES

    Ms. Combs. We always keep in mind the balance that you have 
to strike so that employers are willing to offer health 
insurance and that employees have access to affordable health 
insurance, either through employment or in the individual 
market. It is tempting to add benefit mandates when there is an 
issue that is very sympathetic and people want to try to make 
sure that everyone has access to the same policy, but I think 
you put your finger on the problem: You can load up a policy, 
which we would all like to have, but then put it out of reach 
of many people.
    They need choice. We ought to have a system where people 
who can avail themselves of those types of benefit policies 
have the option to do that, but that others can also buy a 
policy that will provide basic health care coverage.

                       FLEXIBLE SPENDING ACCOUNTS

    Mrs. Northup. I know my time is up. Let me just say, the 
flexible spending accounts are probably the things that give 
employees the most choice. All these mandates say if you cover 
this, then you have to cover this; if you cover this, then you 
have to cover that.
    Instead, what the employer can do is just go to a 
catastrophic coverage and allow the employee to have a flexible 
spending account.
    There is just one problem with flexible spending accounts: 
You cannot roll them over from year to year. The only way 
somebody can really be prepared if they have a major illness in 
their family and feel like they cannot afford that basic 
deductible for the catastrophic is to be able to roll over the 
flexible spending account from year to year.
    I know that that is a big budget item, but it could be 
phased in in a manner that would not be so, so gaspingly 
difficult for our Committee on the Budget to swallow.
    So I would ask you to please do everything you can to help 
us get there. It will give people more choice, and take away 
from Congress deciding what is in the door and what is not, and 
letting every single patient and employee decide how they want 
to spend their medical dollars.
    Ms. Combs. We will take that under advisement. Thank you.
    Mr. Regula. Mr. Sherwood.

                           WORKER PROTECTION

    Mr. Sherwood. Thank you, Mr. Chairman.
    It occurs to me today that this is the worker protection 
agencies panel, and what do we want to protect workers from? We 
obviously want to protect them from injury, but I would think 
we want to protect them from being unemployed or uninsured, 
or--I am going to use a new word--unretiremented; in other 
words, having no retirement security.
    There are a lot of things we need to help protect our 
workers from, and in the performance of your everyday jobs and 
your strategic thinking, I would ask you to keep in mind the 
other things along with injury; that we need to have stable 
employment, that we need to have insurance, we need to have 
retirement security.
    The legacy cost is a big discussion right now, and it looks 
like that thing is just going to blow up. I don't see any 
solution.
    So we want to regulate in such a way that we promote 
employment, that we promote the economy, and that we promote 
job creation. So often small businesses are the great job 
creators in the economy. The Enrons of the world get all the 
press, but the new jobs are 75 percent created from small 
business.
    I would just like your thoughts on that. You could go as 
far as ESOPs. If in the regulation of an ESOP you put the 
business out of business, then the employees lose their share, 
and that was the great reason to have ESOPs. So I think that 
this is a comprehensive discussion we need to be taking.
    I would be happy to hear from anyone who has any comments 
on my ramblings.
    Mrs. Northup. I thought they were excellent.
    Mr. Henshaw. I thought they were excellent, and they are 
right on the mark.
    Mr. Sherwood. Thank you.
    Mr. Regula. I told the Committee at the beginning last year 
that the Bible says there are two great commandments: love your 
Lord and love your neighbor, and we are the love your neighbor 
committee.
    Mr. Sherwood just reinforced it, but we cannot love our 
neighbor without your help. You really are the peoples' 
representatives, and they have to rely on you to ensure that 
the government is serving them and not the other way around.
    From what I have heard in the testimony this morning, I 
think that is the approach that you are articulating here. You 
are all relatively new in your positions, and you may have some 
different takes on this by the time you get to the Senate 
orwhen you get back here next year, but I think you are out there 
trying to love your neighbors and help them.
    Are there any other questions of either of my colleagues 
here?
    Mrs. Northup. No. Thank you, Mr. Chairman.
    Mr. Regula. I like your experience in the private sector, 
and I hope that, as I said earlier, that you try to get people 
out in the field who have had some experience, whether it is 
steel or mining or whatever, because that gives confidence to 
the employers that you are contacting when they can talk their 
language and give them the confidence that the individual that 
is working with them has some understanding and is not in there 
in kind of an ``I got you'' attitude.
    What is the ``experts in residence'' program? Tell me a 
little bit about that.

                       EXPERTS IN RESIDENCE--PWBA

    Ms. Combs. That is a program at PWBA that we are proposing 
to fund in this budget in order to bring in two experts from 
the private sector. At PWBA, a lot of our regulations, a lot of 
our rules, affect financial services industries. We deal with 
capital markets issues: what kind of products can be made 
available, what kind of transactions can go forward?
    It is a challenge for us, for our staff, to stay up to date 
with what is current and cutting edge in the financial services 
industry. So the thought is to bring in folks on a rotating 
basis to serve for 2 years as an in-house resource. This would 
help us work on prohibited transaction exemptions, advisory 
opinions, and importantly, to train our staff and our 
investigators about how business operates, how financial 
institutions operate, what is the motivation behind different 
sorts of transactions or products, and what products are 
designed to do. We would have a better appreciation for what is 
going on in the marketplace, and could regulate effectively, 
efficiently, and appropriately, without overreaching because we 
do not understand what is going on behind the scenes.
    It would be a new program. We would bring in two people a 
year. They would probably be staggered and rotate through. We 
think it would help us in our training efforts for our own 
people, in our relationships with the private sector, and help 
us regulate, again, fairly and efficiently. We hope we will 
receive the funding to institute it.
    Mr. Regula. When your people contact the private sector 
employers, do they have a little bit of security that if they 
talk candidly with your people, that it is not going to be used 
against them? Do you have a policy on that?
    Ms. Combs. In my agency, I think we have a good history. 
When we are doing a regulation, there are obviously rules under 
the Administrative Procedures Act about things being on the 
record. But people are pretty frank and they are willing to 
come in and talk to us about what the pros and cons are, and 
what the implications are of where we are going.
    I think our staff is interested in learning and trying to 
understand the implications of what they are doing, so I feel 
that we have pretty frank discussions. I am sure, depending on 
the side of the table you are on, your perspective is sometimes 
a little different. I have been on the other side and it can be 
somewhat frustrating when people do not agree with you. But I 
do think there is a sense of openness and an interest in 
getting it right. We operate in that way, and I want to 
encourage that kind of openness.
    Mr. Regula. Mr. Sherwood, did it work that way with 
Bluestone?
    Mr. Sherwood. Yes, very much so.
    Mr. Regula. That is the way it ought to be.
    Mr. Sherwood. Very much so.
    Mr. Regula. I know the members will have questions for the 
record that they want to submit to you, and--one I wanted to 
ask about was the safety of limited-English proficient workers.

                  OSHA AND LIMITED ENGLISH PROFICIENCY

    Obviously, to understand instructions as an employee you 
need to comprehend. Is that a problem? You get a wide variety 
of people in the workforce. Is the inability of workers to 
understand what they are doing----
    Mr. Henshaw. I will speak for the OSHA side, and then Dave, 
I'm sure, will speak to the MSHA side.
    Certainly, we are dealing with not only workers who do not 
have English as their primary language, but we also have 
employers that do not have English as their primary language, 
so clearly we have to make sure that our instructions, our 
guidance, needs to be in both languages.
    We know the incident rates around Hispanic workers have 
increased, certainly in construction, and fatalities have 
increased in the construction community. We need to reach out 
to those communities.
    In fact, tonight I will be meeting with, Hispanic 
contractors to talk about what we can do about reaching out not 
only to the contractors, but also the employees, making sure 
that we have the right instruction. As you mentioned earlier, 
part of noncompliance is not knowing what is compliance, and 
that is the education piece. That is the communication piece. 
We spend a lot of time making sure that our communication 
efforts are geared to the right audience in the right language.

                                  OSHA

    Mr. Regula. If we are building a new building here in town, 
as we are doing with some of the buildings in the Smithsonian--
which of you would have thesafety inspection responsibility in 
your agency for construction? And, of course, you have residences, you 
have manufacturing plants, you have government buildings. Where does 
that responsibility lie?
    Mr. Henshaw. We would have that under the OSHA 
jurisdiction.
    Mr. Regula. So all of the construction, whatever type it 
is, falls under OSHA?
    Mr. Henshaw. Unless it is associated with a mine, we would 
have that jurisdiction.

                                  MSHA

    Mr. Regula. If someone were opening a mine, could they come 
to your Agency and say, can you give us recommendations for 
effective safety procedures based on MSHA experience across the 
Nation?
    Mr. Lauriski. Yes, they can. I would certainly hope they 
would do that.
    That is part of what Congressman Sherwood talked about 
earlier. We had those sorts of situations in northeast 
Pennsylvania, and I think that, through his leadership, we were 
able to provide that type of information. That is a great 
success story, at least as far as I am concerned, for this 
agency to be able to do that.
    But yes, they can come when they are starting a new 
operation and ask for our assistance and we provide that to 
them.
    Mr. Regula. Would that be true in what ESA deals with?
    Ms. McCutchen. Yes.

                       INTERNATIONAL CHILD LABOR

    Mr. Regula. Of course, you are dealing with labor problems 
overseas. Is there a growing reduction in child labor 
internationally?
    Mr. Moorhead. There is a growing reduction in child labor 
internationally. I have just returned from a visit to Pakistan, 
where we signed a $5 million education initiative with the 
Pakistani government. It will be competitively bid through 
private contractors, however, for use in their Punjab province, 
which has the highest incidence of child labor.
    I visited a school, two classrooms, where our money has 
taken children out of the carpet industry and into schools. 
Pakistan has a literacy rate of 37.8 percent. The children who 
work in child labor situations remain illiterate throughout 
their lives. With the education, they gain literacy, which I 
think establishes responsible citizens. So we have done that.

                 BUREAU OF INTERNATIONAL LABOR AFFAIRS

    I would also like to say in the safety effort, thanks to 
the help of OSHA and MSHA, we have cooperated, on a project in 
the Ukraine on mining. Ukraine has some of the most unsafe 
mines around. I was visited by our ambassador to Ukraine, who 
said that the success of our program in the mining industry in 
Ukraine--which is through my agency, but with the assistance of 
MSHA--has actually changed the attitude of the government 
toward the United States. Little things like that have made it 
very helpful.
    We operate in the worker safety and health area abroad, in 
the core labor standards and in the reduction of child labor, 
and we have had successes in all those fields.
    Mr. Regula. Does the rest of the world use your agencies as 
a resource, the governments that want to hopefully improve 
standards in their countries? China is probably a classic 
example.
    Mr. Moorhead. China has notified David, and he can talk 
about that, that they want to come over with a mine program. We 
have a mine program going on with the government of India, and 
they have visited MSHA's academies and what have you. So it is 
a very cooperative thing, and yes, they do do it.
    Mr. Regula. Well, I am pleased with what I have heard this 
morning, and I know that this is going to be an enormous 
challenge to you, and particularly as we get into a more 
competitive world as trade becomes freer.
    Anything further, Mr. Sherwood?
    Mr. Sherwood. No. I just appreciate the exchange.
    Mr. Regula. Thank you all for coming. It has been very 
helpful.
    Mr. Henshaw. Thank you, Mr. Chairman. We appreciate it. 
Thank you.

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                                      Wednesday, February 27, 2002.

                          DEPARTMENT OF LABOR

                               WITNESSES

EMILY STOVER DeROCCO, ASSISTANT SECRETARY, EMPLOYMENT AND TRAINING 
    ADMINISTRATION
FREDERICO JUARBE, JR., ASSISTANT SECRETARY FOR VETERANS' EMPLOYMENT AND 
    TRAINING
    Mr. Regula. We are going to call the meeting to order but 
we are going to recess for 15 minutes because there is a 
conference going on with the Republicans. And so that won't be 
concluded until 10:00. So I will wait until they have a chance 
to get here. So we will be in recess for the next 15 minutes. 
Thank you.
    [Recess.]

                       Introduction of Witnesses

    Mr. Regula. Okay. We will get started. We have one panel 
this morning. We are happy to welcome you. The Assistant 
Secretary DeRocco.
    Ms. DeRocco. Right.
    Mr. Regula. The Assistant Secretary for Veterans 
Employment, Mr. Juarbe. Am I saying it right?
    Mr. Juarbe. Right.
    Mr. Regula. I am sympathetic. I get a quite a variety. But 
there is one thing to be said about it, I run very well in a 
district with a lot of ethnics. So, there are pluses for 
everything. Okay. We are happy to welcome you. And we look 
forward to hearing your testimony, and there may be some 
questions if we get some Members here today. This is an 
important subject, because if you are unemployed that is not a 
pleasant experience. And if we can help with a program of 
education, to give people skills, so they can find a job, it 
has to be a good neighbor thing. So we look forward to hearing 
from you. And Ms. DeRocco I guess you will lead off.

            Opening Statement of Assistant Secretary DeRocco

    Ms. DeRocco. Thank you so much, Mr. Chairman, I appreciate 
the opportunity to appear before you on the Department of 
Labor's fiscal year 2003 budget for the Employment and Training 
Administration. I share your belief that every worker should 
have the opportunity for a fulfilling and financially rewarding 
career. I came to this agency on August 3rd with a background 
in and a vision for the publicly funded workforce investment 
system. I also want to ensure that the resources you entrust to 
our agency will be directed to anticipating and responding 
effectively to economic challenges and to the needs of business 
and the Nation's workforce. To that end, our mission will be to 
provide high quality services through State and local workforce 
investment systems in order to promote pathways to economic 
liberty for individuals and families who will work together to 
achieve the American dream. We can and will carry out our 
mission fully through the President's budget request.
    But we are a Nation at war, and we take the war effort very 
seriously. This means making some choices on how to re-direct 
funding and ending or reducing funding for some programs. 
Still, we believe the funding in our budget represents a 
substantial commitment to America's workers and businesses and 
to the overall goal of economic security. A primary focus of 
the administration's budget will be to bring about much needed 
reform of this Nation's unemployment insurance and employment 
service system and to support reauthorization of the Workforce 
Investment Act and its linkages to TANF.
    Now I would like to briefly highlight for you a few key 
elements of our fiscal year 2003 request. With homeland and 
economic security and responsible spending at the forefront, we 
made what we believe are very prudent choices. The 
administration's request for workforce preparation, employment 
services and unemployment insurance totals $10,200,000,000. We 
are requesting $3,284,000,000 for the Workforce Investment Act 
State formula programs. Even though we expect increases in 
spending this year and next, we estimate that large amounts of 
unexpended formula grant funds will be carried into 2003 from 
the previous years. Our current projection of this carryover is 
more than $1,300,000,000. This carryover, in conjunction with 
our 2003 request, will support service levels that exceed those 
service levels in fiscal year 2002.
    Mr. Regula. If I might interject, I understand that some of 
this carryover is already obligated, or perhaps all of it. Is 
that a fair criticism?

                OBLIGATIONS OF FUNDS VERSUS EXPENDITURES

    Ms. DeRocco. I wouldn't call it a criticism. There is a 
difference between obligations and expenditures. For example, 
Mr. Chairman, when the States receive their State formulafunds, 
and in the adult and youth program, the law requires them to pass 
through to local workforce investment boards 80 percent of those 
dollars immediately. That is an obligation of those dollars. For the 
local workforce investment boards, they in turn, then have the option 
to obligate through service contracts to essentially set a course for 
training, for participants who come through the one-stop career centers 
or they can obligate those funds in individual training accounts.
    It is that issue of how the funds are being obligated that 
we are now about the business of trying to determine more 
deliberately and more fully so that we can address the concerns 
of those who have raised an issue of obligations versus the 
expenditures.
    Mr. Regula. So what you are saying is that even though 
there may be some obligation of funds, it still will be 
available to the point that we don't need extra.
    Ms. DeRocco. If, for example, the local workforce board has 
obligated funds through a contract with the service provider to 
purchase training slots for participants, those training slots 
are precisely the kinds of services we intend the system to 
fulfill over the course of the next years.
    Mr. Regula. So that you will have enough money to meet your 
needs.
    Ms. DeRocco. It is our expectation that we have enough to 
increase the level of service in fiscal year 2003, even with 
the projections we have made in 2002 for a 50 percent increase 
in spending in 2002.
    Mr. Regula. Thank you. Go ahead.

                 Adult Services and Dislocated Workers

    Ms. DeRocco. Basically for our adult services, we are 
requesting $900,000,000, and we expect a carryover of 
$383,000,000 into 2003. And for dislocated workers which are a 
key concern in this economy our request is $1,383,000,000 with 
a carryover of $578,000,000. That is sufficient to assist 
1,100,000 dislocated workers, compared to the 902,000 we 
project or anticipate for that year.

                         Program Consolidations

    In our budget, we have also proposed phasing out several 
programs. I want to mention those to you. Given the cost of 
replicating the youth opportunity grants approach and the 
uncertainty of sustainability beyond Federal funding, we 
propose to finance the 5-year grants for the existing 36 
communities with $44,500,000 in 2003 to complete that program.
    We will transition assistance for youth offenders to the 
mainstream formula funded youth program and to the highly 
successful Job Corps program. And we are not requesting funding 
for the migrant and seasonal farm worker program. The adults 
and youth in this program are eligible for WIA services, and we 
intend to bring the service providers that target that 
constituency into strong connection with the one-stop delivery 
system in the communities serving those constituents.
    And finally, we propose to redirect fees previously used to 
fund H1-B training grants to help us reduce the growing backlog 
of permanent foreign labor certifications, making an estimated 
$137,500,000 available for that initiative. Under the training 
and employment services account, we have requested 
$1,540,000,000 for the Job Corps. This is a $78,000,000 
increase for a highly successful at-risk youth program.
    For State unemployment insurance and employment service 
operations, our request is $3,687,000,000, and we are going to 
focus some increased resources on detecting overpayments and 
addressing issues of fraud in that program.
    Our request provides $5,540,000 for foreign labor 
certification in addition to the H1-B fees redeployed as I 
mentioned earlier, and $113,000,000 for the one-stop career 
centers which are the foundation for the delivery of the 
Workforce Investment Act programs.

                      Trade Adjustment Assistance

    Finally, I want to mention an increase in funding request 
for the trade programs. Mr. Chairman, you and I spoke about 
that yesterday. We requested $461,700,000. There is a 
$46,000,000 increase over the 2002 level for trade adjustment 
assistance and NAFTA transitional adjustment assistance. As you 
know, we are working with Congress to improve and expand that 
program. We believe this budget request fully supports the 
President's goal of revitalizing our economy and creating jobs. 
I appreciate the opportunity to come before you today and would 
be glad to answer any questions.
    Mr. Regula. Thank you, Ms. DeRocco.
    [The prepared statement and biography of Ms. DeRocco 
follow:]

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    Mr. Regula. I think what we will do is have your testimony, 
and then we will go to questions for both of you. Well, before 
you start, we might as well recess because I see there is a 
vote here. And so we will be in recess for whatever amount of 
time it takes me to go over and vote and come back.
    [Recess.]
    Mr. Regula. Okay.

            Opening Statement of Assistant Secretary Juarbe

    Mr. Juarbe. Thank you, Mr. Chairman. I appreciate the 
opportunity to testify for the record on fiscal year 2003 
Department of Labor budget requests for Veterans Employment and 
Training Programs. I have had the privilege to serve America's 
veterans throughout my professional career with the Veterans of 
Foreign Wars and am honored to continue to serve veterans as 
called for by President Bush and Secretary of Labor Chao, 
especially during this very important period in the history of 
our Nation.
    We confront a world profoundly changed by the events of 
September 11. Americans are looking at the men and women of our 
Armed Forces with a renewed sense of respect and pride. Some 
day, many of these men and women will exchange their uniforms 
for civilian attire. Many of them will be looking to the 
government for training, job search and placement assistance to 
help them successfully transition into the civilian economy. At 
the Department of Labor, veterans are among our most important 
constituents. Our Nation's veterans deserve nothing less than 
access to quality services in both employment and training 
opportunities. This administration understands and deeply 
appreciates their patriotism, their dedication and the skills 
and experience they bring to the civilian labor force. That is 
why Secretary of Labor, Elaine Chao, and Secretary of Veterans 
Affairs, Anthony Principi, are joining President Bush to take a 
fresh look at all government programs which affect veterans.

       TRANSFER OF SERVICES TO THE DEPARTMENT OF VETERANS AFFAIRS

    One of the ways we are looking to improve the quality and 
delivery of employment and training programs is proposed in the 
President's fiscal year 2003 budget. It would transfer the 
funding for the disabled veterans outreach program, the local 
veterans employment representatives and the homeless veterans 
reintegration project grants from the Department of Labor to 
the Department of Veterans Affairs. This transfer is part of 
the President's overall strategy to better serve citizens by 
increasing the effectiveness and accountability of all 
government programs. It will reduce duplication of effort and 
strengthen these services to veterans by putting them all under 
the roof of an agency devoted to addressing the needs of 
veterans.
    We intend that this transition be a seamless one. No 
veterans will encounter a gap or reduction in service while 
these changes take place. But no matter how this legislative 
proposal plays out in the coming months, VETS has an important 
mission to carry out for every veteran seeking employment and 
training services. The agency's total budget request for 2003 
remains the same whether administered by the Labor Department 
under current statute or whether some functions are transferred 
to the Department of Veterans Affairs.

                          VETS BUDGET REQUEST

    It is my intention that every member of VETS refocus on our 
critical missions and redouble our efforts to serve America's 
veterans. Helping veterans get good career-building jobs with 
the assistance of our State partners is VETS primary mission. 
We do this through staffing grants for disabled veterans 
outreach programs staff and the local veterans employment 
representatives. And these grants total $159,000,000 within our 
budget request. The way it breaks out the DVOP grant request is 
$81,600,000; the local advance representative grant request is 
$77,200,000; the homeless veterans reintegration project is 
$17,500,000; and the Veterans Workforce Investment Program is 
$7,300,000 for a total request of $210,300,000.
    I have to comment, Mr. Chairman, that compared to my sister 
agency, the Employment Training Administration, this request 
seems to fade in comparison. But I think it merits saying that 
the fact that we are able to serve so many veterans with those 
resources through the partnership that we have with the 
Employment and Training Administration and the State workforce 
agencies, is an indication of the effectiveness and the success 
of that partnership in serving America's veterans seeking 
employment.

                          VETS ACCOUNTABILITY

    To know how we are doing, how we can do better, we have to 
accurately count the number of veterans actually finding 
employment through our services. We haven't done this as well 
as we should. VETS and the Employment and Training 
Administration have worked with States to devise a new, more 
accurate method of collecting and reporting the outcome data. 
This will ensure that these grant dollars are providing the 
best services possible to veterans who seek employment and 
training assistance through the public labor exchange.
    Our other major grant program is to help homeless veterans 
reintegrate into the civilian labor force. I know you share my 
outrage that anyone who has worn the uniform of our country's 
Armed Forces should find him or herself homeless on our 
Nation's streets or in alley ways. Our grant program will 
enable about 9,000 formerly homeless veterans to find 
unsubsidized employment. But just as important as getting a job 
will be the sense of self-sufficiency and self-respect which 
these veterans will regain as they join the mainstream of our 
society.
    Before I conclude, I would like to remind you of an 
important function that VETS performs, but that does notappear 
as a line item in our budget. More than 75,000 Reservists and National 
Guard members have been placed on active duty as part of America's war 
on terrorism. The Uniformed Services Employment and Reemployment Rights 
Act says that we owe these patriots more than just our gratitude. We 
owe them jobs when they return home. VETS is responsible for providing 
technical assistance to employers and individual Reservists and Guard 
members about their rights and responsibilities under the law.
    And we have the legislative mandate to investigate 
complaints when informal resolution cannot be obtained.
    Mr. Chairman, I appreciate this opportunity to give you 
some highlights of the fiscal year 2003 budget request for 
Veterans Employment and Training Service. I look forward to 
working closely with the committee on behalf of America's 
veterans. I will be glad to answer any questions you may have.
    Mr. Regula. Thank you.
    [The prepared statement and biography of Mr. Juarbe 
follow:]

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    Mr. Regula. What new additional services will be available 
to veterans if this transfer is consummated?

                TRANSFER OF VETERANS EMPLOYMENT SERVICES

    Mr. Juarbe. Mr. Chairman, we believe that a seamless 
continuum of coordinated services within the Department of 
Veterans Affairs, working together with the Department of 
Labor, will effectively assist veterans in the readjustment to 
civilian life. And we would expect to eliminate some of the 
duplications such as under the vocational rehabilitation and 
employment programs within the Department of Veterans Affairs. 
They have employment specialists that work together right now 
under a memorandum of understanding with Veterans Employment 
and Training Service. By being housed together within the same 
department, we would be able to maximize our capacity to 
deliver those services in a much more coordinated fashion.
    Mr. Regula. Well, I assume now they are in this one agency, 
they are coordinated. I guess I am missing something here, that 
you now have one agency that is meeting the needs of the 
unemployed, et cetera. What would be different if this, other 
than you, have a new level of bureaucracy? What would be 
different as far as the veteran is concerned in his or her 
opportunities for reeducation?
    Mr. Juarbe. Since the Department of Veterans Affairs serves 
one single constituency veterans and provides assistance to 
them, we believe moving the Department of Labor's veterans 
programs to the VA would make service delivery much more 
expeditious and effective.
    Mr. Regula. You now have one-stop service. I am a veteran, 
I walk in, I want to get a skill. Now I come to one stop, the 
service is delivered to me as a veteran and or otherwise 
through your agency. You work together. If this division is 
consummated then as a veteran, would I have to choose which 
place to go?

         VETERANS EMPLOYMENT SERVICES THROUGH ONE-STOP CENTERS

    Ms. DeRocco. Let me comment on behalf of the one-stop 
career center systems, which is the community-based service 
delivery system for Workforce Investment Act services. There 
are many partners named in the law that are administered by 
other Federal agencies.
    For example, TANF administered from the Health and Human 
Services Department federally and through State Health and 
Human Services departments can use the one-stop service 
delivery system as their point of access for the government 
services. There is nothing to preclude the Veterans 
Administration from becoming a strong partner in the one-stop 
service delivery system making services available to veterans 
through one stops, both in terms of employment and training 
services under the Workforce Investment Act, but also the 
multiple benefit programs under Veterans Administration. So 
that the move to the Veterans Administration would ensure that 
the full array of benefit provisions that VA currently offers, 
as well as a partnership through the community-based one-stop 
career center system for skills development and employment 
opportunities, would continue.
    Mr. Regula. Well, would there be additional services to a 
veteran? I mean, there has to be some reason for doing this. 
Outside of having two doors to go in, one is the employment 
services; the other is the Veterans Employment Services. What 
changes in terms of the veterans' experience or his or her 
ability to acquire a skill?
    Mr. Juarbe. The intent is to provide more effective case 
management of veterans' needs in the entire readjustment 
process.
    Mr. Regula. So you get more, theoretically, more attention 
to on an individual basis, that veteran, than he or she might 
otherwise receive in the career center?
    Mr. Juarbe. That is the intent.
    Mr. Regula. Well, that is interesting. This seems to go 
against the idea of a one-stop service. Because now have you 
two-stop service.
    Ms. DeRocco. I don't believe you do, Mr. Chairman, because 
the Veterans Administration benefit program wouldsimply become 
part of the delivery system through a one-stop. Those staff would be--
our staff, for example, are disabled veterans outreach program, and the 
local veterans employment representatives that are currently State-
staffed delivering these programs are fully apprised and aware of the 
employment and training programs available to veterans, but not 
necessarily tuned in at all to the array of benefits that would 
otherwise be available.
    Mr. Regula. So that veterans may have access to services by 
virtue of being a veteran than he or she would otherwise have.
    Ms. DeRocco. May have additional benefits through the 
Veterans Administration programs that these employment 
training-focused staff don't currently know or are able to 
access. So in reality, there should be a more coordinated 
delivery of services with the merger of the Veterans Employment 
and Training Services with the Veterans Administration benefit 
programs. I think it is a far more coordinated approach.
    Mr. Regula. What do you see the role of business in working 
with what is now one, but might be two agencies?

          ROLE OF BUSINESS IN EMPLOYMENT AND TRAINING SERVICE

    Mr. Juarbe. Well, one of the roles of business is that we 
intend to work very closely with corporate America to market 
the rich pool of untapped talent that veterans offer. That is 
one of the intents that Secretary of Veterans Affairs Principi 
has and a commitment that I have. In fact, we have already 
started working with certain groups to develop an approach to 
corporate America.
    Ms. DeRocco. We have, through the Workforce Investment 
System, identified business as the driver. And the need to 
redirect the Workforce Investment System to be one that is, in 
fact, demand driven. The demand being the business need for 
skills in the current economy. If we have a closer connection 
with businesses in the Workforce Investment System, we are 
going to better understand business needs in the 21st century 
for skills and occupations in demand.
    We will direct the resources that are available through the 
Workforce Investment System to ensure that those are the skills 
we are training for. And that there are, indeed, employment 
opportunities once those skills are achieved.
    That is one of the eight principles we have articulated for 
the Workforce Investment System, to be demand driven, to 
recognize business as our primary customer, and to work far 
more closely with and engage business more fully in the local 
and State workforce investment boards.

                           TRAINING PROVIDERS

    Mr. Regula. Do you contract with, like, a vocational school 
or a technical school to offer training to a client?
    Ms. DeRocco. There are an array of training providers that 
are utilized by the publicly funded workforce system. We now 
are looking to expand the role of community colleges, for 
example, because in many locations, the community and technical 
colleges provide exceptional industry-based, industry faculty 
who can train to workforce skills.
    Mr. Regula. That would be a great opportunity. With the 
veteran, would you work with both returning veterans and or 
those that have been out in the workplace and they are 
unemployed and come back to look for new skills?
    Mr. Juarbe. Yes, we do.
    Mr. Regula. So it would be a combination?

                      TRADE ADJUSTMENT ASSISTANCE

    Trade adjustment assistance, have you sped up the process? 
You know, it is a tough problem, somebody is out of a job 
theoretically because of imports and they have to pay their 
bills. And they have to wait--we had one instance where it took 
about 5 months for the people to get their TAA. In the meantime 
they don't have an income.
    Ms. DeRocco. Absolutely. We know this is a huge management 
problem. We are supposed to deal with the petitions for trade 
adjustment assistance within 60 days. We do indeed have a 
backlog. We are doing everything we can to address that backlog 
and move more quickly, including looking at certain parts of 
the process that we may be able to contract out to get some 
additional resource commitment.
    As you noted in our fiscal year 2003 budget, we have 
requested additional resources so we can deal with it, 
although, hopefully, the backlog will be eliminated long before 
then. But we have had a dramatic increase in cases in the last 
year. We are putting the full power of the Employment and 
Training Administration into addressing that.
    Mr. Regula. So you feel that you will shorten the period of 
time?
    Ms. DeRocco. As you know, the hopes and expectations for 
TAA and NAFTA TAA reauthorization indicate a 45-day turnaround 
on trade petitions. So if the legislation passes, we are going 
to have to find a way to meet the statutory deadline and deal 
with petitions within the time period.

                 JOB PLACEMENT AND RETENTION STATISTICS

    Mr. Regula. Do you have any statistic on what success rate 
you have for those who come to your services, whether veterans 
or otherwise, do they get reemployed?
    Ms. DeRocco. Absolutely. We have a fairly significant 
performance report each quarter which indicates that, for 
virtually all of the performance measures that are laid out for 
adults, youth and dislocated workers, our system is, in fact, 
meeting the performance goals, which are very high, quite 
frankly, in all aspects except the certification requirement 
for training, for certifying the completion of training. That 
is an issue that is more a problem of the system defining and 
standardizing approaches to the certification measurement that 
is to be employed.
    That is a learning experience for us. But in terms of 
employment, in terms of retention, and in terms of earnings 
gains, the goals for the system are being exceeded in virtually 
all counts.
    Mr. Regula. Do you follow up with veterans? I think 
veterans have some preferences in being employed, if I am not 
mistaken. Do you follow up to help the veteran exercise his or 
her rights, statutory rights for employment?
    Mr. Juarbe. Yes. Yes, sir, we do. One of the services we 
provide is with regard to veterans preference within the 
Federal workforce. We are the agency that addresses all of the 
complaints and issues that they may have regarding veterans 
preference.
    Mr. Regula. So you are now part of this agency, but under 
this proposal you would become a separate employee. Are you 
part of the Department of Veterans Affairs or are you part of 
the Labor Department?
    Mr. Juarbe. Veterans Employment and Training Service is an 
agency within the Department of Labor.
    Mr. Regula. So your hat wouldn't change if this difference 
is consummated? You would have the same role, only you would be 
independent?
    Mr. Juarbe. Within the Department of Veterans Affairs. The 
compliance programs for the veterans preference, the Uniformed 
Services Employment/Reemployment Rights Act, and Federal 
contract compliance would remain within the Department of 
Labor. We are in the process of working out the details on 
that, and negotiating the best location within the Department 
of Labor to be able to provide those services to veterans in 
the future..
    Mr. Regula. What success do you have in placement? Do you 
help them try to find jobs once they have finished their 
training program?
    Ms. DeRocco. Absolutely. I just have the entered 
employment, that is how we measure placement; the goal for 
example, for dislocated workers in program year 2000 was a 
placement goal of 71 percent, and the achievement goal was in 
the 75, 76 percent range. So we are, in fact, placing 
dislocated workers post their gaining additional occupational 
skills.

                        ONE-STOP CAREER CENTERS

    Mr. Regula. Do you think the one stop-approach is working 
well?
    Ms. DeRocco. Absolutely I do.
    Mr. Regula. It makes sense to me to have that individual go 
to one place and then get put in the right slot from there on.
    Ms. DeRocco. This has been a big evolutionary job for the 
system to integrate all of these employment and training 
services, but there are great success stories across the 
country; one-stops that are increasing citizen access, 
expanding to a universal population, the kinds of Federal 
assistance that are available.
    Mr. Regula. How many different tracks are now combined in 
the one-stop approach?
    Ms. DeRocco. There are differences in reporting how many 
previous Federal employment and training programs there were. 
There was a point at which I think the GAO spoke to 160 
different programs, and the success in integrating employment 
and training programs in the one-stop has clearly narrowed that 
field. We still have, across the government, something in the 
neighborhood of 60 different programs that we need to continue 
to look at.
    Mr. Regula. 16 or 60?
    Ms. DeRocco. 60 that we need to look at in terms of further 
integration.
    Mr. Regula. It must be confusing to the individual who 
needs the service.
    Ms. DeRocco. I don't think the individual needing the 
service cares what the name of the program is. If they can 
access the assistance in a one-stop, they should be able to. 
Many localities have done a phenomenal job, and States as well.
    Mr. Regula. Ms. DeLauro.

            UNEMPLOYMENT INSURANCE/EMPLOYMENT SERVICE REFORM

    Ms. DeLauro. Thank you, Mr. Chairman. I thought someone was 
whistling here before. I was looking around and I think I will 
stay in all day. Thank you. Apologize for being late.
    What I would like to do is to ask a couple of questions, 
Madam Secretary. These are the same questions I asked of the 
other Secretary, I just want to get your sense of this as well. 
I have been particularly concerned about the administration's 
proposal to phase down the Federal Unemployment Tax Act by 75 
percent in the next 5 years, thereby shifting the 
responsibility for UI and unemployment service administrative 
financing to the States over the next 5 years. That would leave 
the Federal Government with the responsibility for the Federal/
State extended benefits program, and the loan account. It would 
mean that the States would really be dealing with a new annual 
$3,200,000,000 cost in cost in order to do this.
    In addition, a proposal to transfer $9,000,000,000 of 
Federal trust fund money to State trust funds in which the 
distribution would be allocated to the States according to 
their share of the FUTA tax revenue instead of the workload 
need, which the current system requires. There is a second 
round of transfers, again, in 2004, 2005. That is about 
$2,500,000,000 each year. Then after 2007, States would receive 
no Federal money for administrative costs except for small 
States. There willbe an undefined subsidy. In connection with 
that, I have a couple of questions.
    After 2007, how do we expect the States to pay for the 
administration of the employment service and unemployment 
system, given where the States have been on cutting benefits, 
cutting employer taxes, instead of the maintenance of the 
funds? Why wouldn't we expect States to again cut benefits in 
order to shoulder this additional responsibility? You know and 
I know the governors have all been to town here. States are 
experiencing serious shortfalls and are looking for ways in 
which we can address those needs.

            UNEMPLOYMENT INSURANCE/EMPLOYMENT SERVICE REFORM

    Ms. DeLauro. My third question with regard to my overall 
statement is do you envision any ``maintenance of effort'' to 
ensure that the States are going to build new systems to 
continue to support the administrative reforms? My question 
with regard to that is why didn't the Department, the 
administration come in for, a higher appropriation for the 
administrative costs, particularly given where we are on 
unemployment today? There is already a serious problem with 19 
States, exhausting unemployment benefits.
    Anyway, you have the sum and substance of the question. And 
truly I will be very honest with you, I am very concerned about 
what we perceive the Federal role in unemployment insurance is 
going to be.
    Ms. DeRocco. Let me try. There were a lot of questions, and 
I will tick them off, and if I missed anything, come back at 
me.
    Number one, let me say that for many, many years the States 
have viewed the Federal Government as collecting the employer 
payroll taxes, banking them in the Unemployment Trust Fund, and 
using that trust fund to offset other spending instead of 
returning to the States an adequate amount to administer the 
unemployment insurance and employment service program. They 
have called for reform of the program, as have workers and 
employers.
    All stakeholders appear to believe that there is a need to 
reform the unemployment insurance and employment service 
program. Because they have not had an adequate return of 
dollars to the States from the Unemployment Trust Fund account, 
the proposal on the table from the Administration provides to 
the States the opportunity to tax their employers at home and 
keep their dollars at home, and that allows them to make the 
decisions in their State executive and State legislative 
branches on such important issues as the extent to which 
benefits for workers at home should be reviewed and reformed.
    In fact, as we talked to a number of States about the 
proposal to return responsibility for administrative financing 
to the States, most States said that first on their list, in 
terms of what they would do, is look to their benefit program 
and see whether or not at this stage in this economy an 
increased benefit amount and/or expanded coverage, for example, 
was right in their home State as opposed to waiting for the 
Federal Government to decide what was right federally or 
nationally, and it may have a different impact local labor 
market by local labor market.
    On another point that you raised, I do not view this 
proposal as the Federal Government in any way abandoning its 
responsibility. We are not proposing to amend out of the Social 
Security Act or the Federal Unemployment Tax Act the critical 
responsibilities for a nationwide economic safety net of 
programs, such as the timely payment of benefits, fair hearings 
related to benefits, and responsibilities for an economic 
stabilization program State by State. In fact, we are proposing 
to keep the offset credit plan in place, which will be a very 
important incentive for every State to maintain an adequate 
economic safety net program through the unemployment insurance 
and employment services system. Otherwise the State would not 
be in compliance with the Social Security Act provisions, in 
which case the employers would not get the offset credit, and 
there is going to be tremendous pressure within State 
legislatures and executive branches to ensure that there is an 
adequate unemployment insurance and employment service program.
    So I in no way see this as diminishing the level of 
services. In fact, the Reed Act distribution at the front end 
of the proposal for transition, the $9,000,000,000 Reed Act 
proposed distribution, as well as the 2004 and 2005 proposed 
distributions provide the States an array of options. Number 
one, for some States who are having difficulty withtheir 
current solvency level in their trust funds, that will help bolster the 
solvency. For other States, it would be an immediate opportunity for 
them to look at their payment system and make decisions regarding how 
to best serve their workers. And for others, it may mean, over time, an 
employer tax cut.

            UNEMPLOYMENT INSURANCE/EMPLOYMENT SERVICE REFORM

    We looked at the State of New York, and I am sure you know 
this. The New York share out of the first distribution would be 
$568 million. I think that is an important benefit to the 
State. And you know New York employers' current Federal 
unemployment taxes would be cut by $320,000,000, annually. If 
the State decided to tax its employers at exactly the same 
level as the Federal grants they are currently receiving, which 
is about at $208,000,000, you could provide the same level of 
service as today in the State of New York and still have an 
employer net tax savings of $112,000,000.
    If the State chose instead to tax at the current level, 
there would be that much room for additional services to your 
workers. So we see this as a win-win for workers and for 
businesses in each State, and most importantly, it puts in the 
hands of the States their responsibilities to their employers 
and to their workers.
    Ms. DeLauro. I appreciate the information on New York. I 
would love to have the information on Connecticut.
    Ms. DeRocco. I am sorry. I have that, too.
    Ms. DeLauro. I am sure you do.
    Ms. DeRocco. I just talked too fast, listening to all of 
that.
    Ms. DeLauro. I am very interested in the information for 
Connecticut. What has happened here is the issue of taxing 
employers----
    [The information follows:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    Ms. DeRocco. Yes.
    Ms. DeLauro [continuing]. Which has not exactly been a 
direction that the States would like to go in. I mean, where 
there has been a choice between taxing employers or lowering 
benefits, I think lowering benefits has won out. So I have a 
hard time understanding, again given the nature of the current 
system as it stands and, in fact, the States' in some instances 
inability, without support from the Federal Government, to take 
on an added potential $3,200,000,000 annually from which there 
is little relief. It sounds to me what I am hearing on IDEA, 
where we, on a 40 percent commitment we have made, we fall 
short. The localities, the States and localities, are then 
dealing with how they make this up.
    I would feel more comfortable if we had examples of how 
this was working, that it was succeeding, and the States could 
do a better job than the Federal Government so that we have 
basically this kind of wall. We did administrative costs, they 
were dealing with benefits. Then you are going to put them in 
the position of dealing with taxing employers, potentially 
lowering benefits. It seems almost an untenable position for 
the State. It would seem to me that they would move in the 
direction of limiting access to the program, and we would find 
ourselves with a lessening of opportunities for workers to get 
what it is that they need when, through no fault of their own, 
they are out of work.

               13 WEEK EXTENSION OF UNEMPLOYMENT BENEFITS

    I mean, the most incredible thing to me today is that we 
cannot seem to be able to get an extension of unemployment 
benefits for 13 weeks for people--to do something about a 
situation that they did not create. They are in this position, 
and we have got States that are out of money now, and we are, 
quite honestly, in my view, sitting here and fiddling while 
Rome is burning.
    Ms. DeRocco. The Federal Government is fiddling, and many 
States are already enacting extended benefit programs to 
service their workers, and that is precisely what our proposal 
is saying. States are closer to their situation and the needs 
of their workers. Commissioner Cashman would be the first one 
in Connecticut to move forward on behalf of the workers of 
Connecticut with proposals to ensure that this system in the 
State well served both the workers and----
    Ms. DeLauro. The current administrative costs are going to 
States today, as I understand it. What we are proposing here is 
a phaseout. They are looking for us to do something about 
extending those benefits to be able to give them a hand with 
this situation. However, if we are going to be out of the 
business of providing the administrative costs, then they are 
picking up the whole ball of wax.
    Ms. DeRocco. Under current federal law the states have the 
option to have an extended benefits program that is 50 percent 
paid federally and 50 percent paid State. That would not change 
under the proposal. What we are currently addressing in the 
Congress is a 100 percent federally funded extended benefits 
proposal. And we would not be precluded from addressing that in 
the future either, because in the Unemployment Trust Fund we 
are retaining two things. We are retaining a 0.2% FUTA tax 
under the proposal, and that 0.2% would continue to go into the 
Federal Unemployment Trust Fund; and we would continue to have 
the EUCA, or the Extended Unemployment Compensation Account, 
from which the Federal share of the extended benefits could be 
paid.
    So I don't think in the extended benefits program there 
would be a significant deleterious effect from this proposal at 
all. I think there would be the more positive effect of the 
State Governor and State legislature jointly with the help of 
the State labor commissioner determining what is an appropriate 
program benefit level for workers in the State.
    Ms. DeLauro. What is your plan if we turn over the 
administrative costs?
    Mr. Peterson [presiding]. I would remind you I will give 
you another round later. Go ahead and finish this thought.
    Ms. DeLauro. With all due respect, the Chair and I were the 
only two people here just a couple of minutes ago, and he had 
the opportunity to ask several questions, and I was hopeful 
that in the absence of anyone else here at the moment that I 
might also be able to ask an additional question which had to 
do with Youth Opportunity Grants. So I will wrap this one up.
    I would love to know what the mechanism is going to be in 
the event that we run into difficulty with this. What oversight 
capacity will the administrative portion have? What will the 
congressional role be in dealing with this effort if we find 
ourselves in a situation where the States will once again be 
reluctant to tax employers and would be less reluctant to lower 
the benefits for workers, given the way these things usually 
turn out and the pattern in the past?

                        Youth Opportunity Grants

    I would like to just ask my question about Youth 
Opportunity Grants, if I can. We have 15,000,000 young people 
between the ages of 16 and 21 who are not enrolled in schools; 
10,000,000 have a high school diploma or less. The Youth 
Opportunity Grant has been a real major commitment on the part 
of the Department of Labor to serve youth growing up in high 
poverty areas, and it has been a, very worthwhile program. You 
have 36 Youth Opportunity Grant recipients serving young people 
in the poorest communities of this country. In the past there 
has not been sufficient funding to meet the demand.
    My understanding is that the Department's records indicate 
that nearly 200 communities applied for grants. I laud the 
President's increased funding for Job Corps. I happen to think 
Job Corps is a first-rate program. We have a very successful 
effort in New Haven. But this program has now been cut 
substantially, the Youth Opportunity Grant Program, well below 
the authorized level of $250,000,000.
    We have got increases in youth unemployment. We have got a 
decrease in this effort. Not everyone who is eligible for Job 
Corps is eligible for Youth Opportunity Grants. How are we 
going to make up the difference to be able to serve 
disadvantaged youth?
    Ms. DeRocco. We have a very, very strong commitment to 
continued 5-year funding of the existing Youth Opportunity 
Grants to complete that program. With no additional 
competitions in 2002 and redirecting the Rewarding Youth 
Achievement money with the $44,000,000 requested in 2003, we 
can complete that 5-year commitment.
    We also have a very strong need to ensure that our Youth 
Activities Workforce Investment Act system is able to deal with 
the youth who are key to the current Youth Opportunity Grant 
Program. These are youth in urban and rural areas who need 
precisely the kinds of services that the workforce investment 
system youth program is intended to serve. We have significant 
money in the youth activities portion. We have youth councils 
which just really beginning to come on line and beginning to 
leverage the community resources that are necessary to serve 
these at-risk youth. It is our intention to fully support those 
youth councils to try to ensure that they are indeed serving 
that strong community role and bringing all of the resource of 
the community to bear on the at-risk youth. This can also be 
served with the dollars available through the WIA youth 
activities program.
    Ms. DeLauro. If you could kind of lay out for me in this 
proposal how are we going to deal with the youngsters who are 
out there now in these programs with the cutback? What happens? 
Will they be transferred elsewhere? What kind of funding are 
available from other programs? How do we, in fact, try to make 
this a seamless transition so we do not lose all of these 
individuals who have been engaged through the Youth Opportunity 
Grants Program? In addition I would very much like to get ahold 
of the Connecticut data.
    Ms. DeRocco. I'm sorry; I have it here. Can I pass it to 
you?
    Ms. DeLauro. Sure. I will come back and get it.
    Thank you, Mr. Chairman.

                    State Evaluations of Performance

    Mr. Peterson. To continue on her issue, do you evaluate 
States and regions, how many youth are getting an experience 
with this money? Do you evaluate the States? A State gets a 
certain amount of money for youth development.
    Ms. DeRocco. Yes, yes, and they must report their 
performance as well as their financial management of the money.
    Mr. Peterson. Do you manage how any youth are served per 
State, per region and evaluate that?
    Ms. DeRocco. It is the responsibility of the State and 
local workforce investment boards to manage----
    Mr. Peterson. I understand that, but do you evaluate their 
efforts?
    Ms. DeRocco. Yes. In terms of the performance measures, 
they report to the Department of Labor. Yes, we do.
    Mr. Peterson. I think there is a breakdown somewhere. I 
have numerous counties that have had no youth workers since 
this program started, and this is the second year. There is 
nobody in that county, no youth workers in that county that has 
had the experience. I don't know how that happens, but it is 
happening in northwestern Pennsylvania.
    Ms. DeRocco. Youth workers in the One-Stop CareerCenters, 
there are not individuals serving youth?
    Mr. Peterson. Wasn't she just talking about the young 
people that are employed by the communities and given a work 
experience? Is that what I think she was talking about?
    Ms. DeLauro. The Youth Opportunity Grant Program.
    Ms. DeRocco. I think she was talking about the Youth 
Opportunity Grant Program, which is a categorical grant program 
to serve highly at-risk youth in communities. They were 
selected competitively, and there are 36 communities that are 
running that categorical grant program.
    Mr. Peterson. That is a special----
    Ms. DeRocco. That is one thing. Under the Workforce 
Investment Act, your local workforce boards and their service 
delivery system through One-Stops are responsible for expending 
youth activity dollars to benefit the youth in your 
communities.

                Distribution of Funds for Youth Services

    Mr. Peterson. Shouldn't there be some fair distribution of 
those funds that all counties would get somebody served?
    Ms. DeRocco. The local workforce boards should all be 
receiving some of those youth funds under the formula; that is 
correct.
    Mr. Peterson. But if they serve six counties, all six then 
should be being served.
    Ms. DeRocco. That is correct.
    Mr. Peterson. But you do not monitor that?
    Ms. DeRocco. In terms of whether the finances are running 
correctly through the statutory formula to all the local areas 
and whether or not services are being provided, yes.
    Mr. Peterson. Do you look at Pennsylvania and say they 
received X dollars, and here is how many youth were served?
    Ms. DeRocco. Yes, we do that.
    Mr. Peterson. You measure them? Do you have a measurement?
    Ms. DeRocco. They are statewide measurements. They are 
aggregated and reported to us by State. But if there is a 
problem----
    Mr. Peterson. There is a problem.
    Ms. DeRocco. We are very interested in starting with your 
State workforce agency in Pennsylvania, the State department of 
labor and industry, and working with your local workforce 
boards to determine what the problem is and how we might help 
address it either through technical assistance, through 
training, or through some assurance that the level of service 
that is expected is being provided.

                   Workforce Investment Board Funding

    Mr. Peterson. Let's get to the bigger issue. You are 
requesting $3,284,000,000 for workforce investment State 
formula. That funds the local WIBs, right?
    Ms. DeRocco. Correct. There are three funding streams: 
adult, youth, and dislocated worker. And in each instance there 
is a statutory formula that the funds go to the State, and the 
State in turn funds the local WIBs.
    Mr. Peterson. I have heard speakers speak, and I happen to 
agree that we had CETA and then JTPA. Could we develop a system 
that trained less people? And there are those who think we 
have. I would be interested----
    Ms. DeRocco. May I comment on two things? It sounds like 
there may be an issue of service delivery in your district on 
which we would like to work with you and the State to address.
    Number two, we have an opportunity shortly through the 
reauthorization of the Workforce Investment Act, and we would 
be the first to tell you that there are some problems in the 
law in terms of getting service delivery to the level of 
quality and the level of commitment that we would like to see. 
We are now very aggressively determining what those problems 
are with the Workforce Investment Act, where, in fact, there 
are hurdles and challenges to the provision of services as 
envisioned by the Workforce Investment Act, and hoping to work 
with the Congress to make those changes very aggressively.
    Mr. Peterson. Do you rate States on how they have 
implemented it? Do you grade them?
    Ms. DeRocco. No, I wouldn't say we grade them, but we 
certainly work with them in technical assistance and training 
to----
    Mr. Peterson. You do not have a report that lists the 
States and what their accomplishments are?
    Ms. DeRocco. We have performance measures reports, and we 
could provide you with the States. Absolutely.
    Mr. Peterson. I would like to see that.
    [The information submitted is contained on pages 106-115.]

                            TRAINING WORKERS

    Mr. Peterson. How much of that money or what percentage do 
you think should be training people? I mean, I think we are 
teaching people how to dress, how to interview. We are 
polishing them. But if you do not have skills, you are never 
going to get a good job. I just think I have never--and I have 
worked with it--I had 19 years at State, local government. I 
mean, I have been around this issue for a long, long time. I 
have never felt comfortable that we got enough of the money to 
the ground, and I feel less comfortable today than I did under 
JTPA, and I am sorry to say that.
    It may be Pennsylvania's implementation. I am told my 
region is one of the worst performers in the State. But I spoke 
at a statewide conference in Pennsylvania Friday and mentioned 
what I just said, that we found a way to train less people, and 
I got applause from the vocational school directors of 
Pennsylvania that, yes, we are training--I actually come from 
an area that has a unique problem. We do not have community 
colleges, and Pennsylvania has a very weak vocational education 
system, so we do not have very many ways to train people. And 
we are a high-end academic State. We do well there. But this 
whole system assumes that there are schools and teachers and 
classrooms to train people, and that is not always the case. I 
have some limited ones who are in jeopardy financially because 
they are no longer getting dislocated worker money to train 
their workers because they are being polished and shaped and 
not being trained.
    We could lose some of the little infrastructure that we 
have. That is my view--it is happening. So this whole system, I 
have dealt with a lot of bureaucracies, but I have yet to 
figure out this structure. And I have had two or three 
different people explain it to me what the role of the county 
commissioners and their group is that are the fiscal watchdogs. 
They do not think they have any power. I am told they have lots 
of power yesterday a luncheon. The WIB board is huge. They are 
asking me to forget the past and look to the future, but the 
past isn't very good. Is this a common problem or just in some 
States?
    Ms. DeRocco. Let me address that in two ways. One, I think 
part of what you are hearing or experiencing in your district 
is related to an interpretation that some States and some local 
workforce boards took of the Workforce Investment Act, viewing 
it as primarily a statute that required at each step in the 
process putting people to work; i.e., a work first statute.
    The statute is not specific as to being a work first 
statute, but we also, in the period when WIA was rolling out, 
were in the midst of a very high-growth economy, and many 
employers were calling for precisely that. Give us people; as 
long as they have soft skills, we will train them in the skills 
we need. And the system responded in many areas across the 
country by very rapidly putting people to work.
    And I guess we could have a conversation about whether that 
is good or bad in the long run, a system about putting people 
to work. In a high-growth economy we needed to respond to 
employers in that way, but I also agree with you that this 
system needs to become far more a demand-driven system. We need 
to understand what skills businesses need, and the resources we 
have in this system need to be directed to training to those 
skills so that we are indeed finding the training providers 
that will train to those skills and that will position people 
to be put to work in jobs with careers and with livable wages. 
That ultimately is what we want to be about.
    So if your local boards are not being driven by those 
businesses, demanding that skill development is what this is 
all about, identifying what skills they need, then we do need 
to provide whatever technical assistance, training is necessary 
to ensure your local boards have the vision and the opportunity 
to use these resources effectively. In many ways, the Workforce 
Investment Act was written by the Congress as a State and 
locally driven system, and that was an effort to be responsive 
to local labor market needs. In many places it has worked very, 
very well, and they are having incredible success. They are 
training people to skills on demand. They are putting people to 
work and meeting all of their performance measures.
    Obviously in some places we have work to do, and we want to 
be there to help improve the system where it needs to be 
improved.

               WORKFORCE INVESTMENT BOARD SUBCONTRACTING

    Mr. Peterson. One of the areas that I have a problem with 
is the ability to recontract. I mean, every time they 
subcontract, I believe that allows another administrative fee; 
is that correct? Some of the counties we were complaining about 
not getting any service at, I was told they were going to 
subcontract to the intermediate unit, and I now find that the 
intermediate unit has subcontracted with somebody else to do 
that. So now we have two more administrative fees.
    This subcontracting thing is immense. You are three and 
four and five people away from the WIB board sometimes before 
people get served. I don't think that was what Congress 
envisioned. I was on the Education Committee when we passed it.
    Ms. DeRocco. I absolutely agree with you on that score. 
This is one of the issues that we are trying to get into on the 
debate about obligations versus expenditures which is more--
clearer to all of us in the Congress and in the Administration 
that we very much need to know if the money is, in fact, being 
expanded through the Individual TrainingAccounts or to provide 
actual training to individuals who come through the One-Stop Career 
Center system as opposed to being put in contracts for services that 
never turn into expenditures for services, and instead are available to 
keep institutions and staff in place. I agree with you, this is an 
important issue and one we are looking into very definitively now.
    Mr. Peterson. I think you might look at what percentage of 
the dollars are ending up in salaries and what percentage of 
the dollars are ending up in subcontracting fees and salaries. 
I think you are going to find that the potential for the 
majority of this money to give nice salaries to people and fund 
a lot of different facilities and offices and serving a minimum 
of people is my personal opinion of where we are at. I look 
forward to working with you on some positive changes.
    Gentleman from Illinois is recognized.
    Mr. Jackson. Thank you, Mr. Chairman.
    And thank you, Assistant Secretary DeRocco, for your 
testimony.

                WORKFORCE INVESTMENT ACT CARRYOVER FUNDS

    I am deeply disturbed about what the Department of Labor 
proposes to do with the Employment and Training 
Administration's budget. You and the Secretary said in your 
testimony that this is a wartime budget, and you implied that 
some sacrifices need to be made because of the war, yet not 
everyone is making the same sacrifices.
    The budget the President proposes includes $675 billion in 
new tax cuts, and will cost another $343 billion to extend 
current tax cuts. The potential beneficiaries of these tax cuts 
are not being asked to sacrifice. Yet you tell us here today 
that some of the most vulnerable in our population, some of the 
most at risk have to sacrifice.
    According to Illinois Governor George Ryan's department of 
economic security, there does not appear to be any 
underspending of W-I-A, WIA funds in Illinois. A variety of 
issues relating to the transition from JTPA to WIA did 
initially lead to slower expenditure rates with respect to 
fiscal year 2000 WIA appropriations, but nonetheless halfway 
through the 3-year period of expenditure for fiscal year 2000 
funds, over 80 percent of the money in Illinois has been spent; 
not only been obligated, but it has been spent. As for fiscal 
year 2001 WIA funds 6 months into the period, 17 percent of the 
way, over 20 percent of the money has not only been obligated, 
but it has been spent.
    I am concerned that my State will have to apply for these 
national emergency grants which are not necessarily a done 
deal. So I have three questions. I think they essentially all 
have the same underpinning, so I would like to read them all 
and give you an opportunity to respond.

                         YOUTH SERVICE FUNDING

    Considering the recent research and news accounts 
suggesting that youth unemployment has been a major driver of 
the Nation's unemployment rate, how do you explain the 
administration's proposal to dramatically cut Federal programs 
intended to address this particular problem? Youth 
unemployment, central to the Nation's unemployment rate, and 
your testimony and the Secretary's testimony indicate that 
there will be substantial reductions in your budget to address 
this fundamental problem.
    Secondly, in light of the alarming rise in youth 
unemployment, why has the Department determined that the Youth 
Opportunity Program for which nearly 200 communities applied 
and only 36 were funded should be phased out and why other high 
poverty rural and urban communities across the Nation, 
including distressed communities in Chicago and New York City, 
should not be given the opportunity to compete for these 
resources?
    And lastly, how did the Office of Management and Budget 
determine that the Youth Opportunity Program was ineffective, 
considering that most of the sites have been operating just a 
little over a year and the program is intended to provide long-
term intensive opportunities and supports for some of the 
Nation's at-risk youth residing in high poverty areas? Thank 
you, Madam Secretary.
    Ms. DeRocco. Thank you. It is nice to see you.
    I am going to get back to this Illinois report on their 
spending as well as the issue of our funding level for youth 
programs. In fact, let me start there. Our request for youth 
funding, youth WIA funding, is $1,001,000,000. We have 
projected a carryover of funds from 2002 into 2003 of 
$394,000,000. The result of coupling these is allowing us to 
serve 553,000 youth, compared to the 465,000 who are projected 
to participate.
    So--and these figures take into account an expected 50 
percent increase in spending this year and next on youth 
activities. So we are very much expecting to increase 
participation rates, increase our attention through the 
workforce investment system on youth, and still experience a 
carry-in, which, when added to the 2003 request, would allow us 
to serve an additional 100,000 youth through our WIA youth 
activities.
    So I do not view that as a cut. I view that as a commitment 
to increased services through 2002 and 2003.

                WORKFORCE INVESTMENT ACT CARRYOVER FUNDS

    Our reports from Illinois indicate that as of September 30, 
in the three funding stream--adult, youth and dislocated 
worker--compared to their program year 2001 allotments, they 
were carrying 100.6 percent unexpended balance against youth. 
In adults they were carrying 118.9 percent against their 
program year allotment, and for dislocated workers 125.6 
percent.
    So our records submitted by the State of Illinoisindicated 
that they do have substantial unexpended balances that they reported as 
of September 30 for the program year.

                        YOUTH OPPORTUNITY GRANTS

    On the Youth Opportunity Grant issue, that program was 
intended, as I understand it, to be a 5-year commitment to the 
youth opportunity grantees, and we have in this budget ensured 
that we can fulfill the financial commitment to the grantees in 
the 36 communities that currently have Youth Opportunity Grant 
projects. We are learning through this Youth Opportunity Grant 
how to leverage all of the community resources that should and 
are available to at-risk youth in both rural and urban 
settings. And it is that experience that we need to transfer to 
essentially the mainstream Workforce Investment Act programs.
    We have made a commitment as a country that this One-Stop 
Career Center system run by local workforce boards and by youth 
councils targeted to youth activities will bring the resources 
of the community to bear on these at-risk youth of whom you 
speak. We share that commitment. We are learning and we are 
evaluating the Youth Opportunity Grant projects. I have met 
with a number of project sponsors, and they have agreed to work 
with me to transfer that knowledge, that experience, that 
community leveraging of resources to the Workforce Investment 
Act youth councils and youth activities programs. That is how 
we are going to get sustainability and get all communities 
involved in targeting their at-risk youth and bring unemployed 
youth into employment and training and productive lifestyles.
    Mr. Jackson. Thank you.
    Mr. Peterson. Does the gentleman have any further 
questions?
    Mr. Jackson. Not at this time, Mr. Chairman.

               ROLE OF BUSINESSES IN EMPLOYMENT TRAINING

    Mr. Peterson. The Chairman left a question with me that I 
will share linking training to jobs. Does the Department 
encourage States and localities to work with businesses and 
government agencies to identify local workforce needs, for 
example, demands for workers in the health care industry, and 
then train workers for those industries?
    Ms. DeRocco. Absolutely. We are again moving to a demand-
driven system. I have just announced the creation of a business 
outreach and services task force at Employment and Training 
Administration level and seek to work with our State and local 
workforce investment boards that are to be business-led to 
ensure that they have the information about the workforce, 
about the labor market in their areas that can provide the 
strategic approach to the use of these billions of dollars of 
resources we are making available through the Workforce 
Investment Act.
    We are particularly excited about our opportunities in 
moving some workers that were impacted very negatively by the 
events of September 11th and the ripple effects of the economy, 
workers in the hospitality field who are now looking for jobs 
and are dependent upon our workforce investment system. Many of 
those workers have precisely the kinds of skills that the 
health services industry is looking for, customer caring, the 
same skill sets that transform immediately from hospitality to 
health services. And we are working with a number of national 
associations representing both sets of businesses to see if we 
can't create some strong bridges for those workers, new 
employment, new skills development in the health services area, 
which, as you know, is one of the fastest growing sectors of 
our economy.
    This is precisely what this system was supposed to do and 
why it was written as a business-led workforce board system. We 
intend to make that a reality and look for ways through 
reauthorization that we can strengthen that approach. ETA will 
take the lead on that. I am committed to it as one of the 
principals of my administration.
    Mr. Peterson. What do you do when the needs of the 
community is for skilled workers and there are no classrooms?
    Ms. DeRocco. How do we create training providers?

                            TRAINING WORKERS

    Mr. Peterson. See, your system is about assuming--assumes a 
system is there to train. That is not true all over America. We 
are an academic country, and we have sort of lowered the bar on 
skill training and have not equally funded it, in my view.
    Ms. DeRocco. This is a real dilemma that we need to look at 
and work with you on. One proposal that we are looking at that 
comes to mind is a school-at-work distance learning proposal, 
which, for example, allows a distance learning capability, for 
example, from a university or community college that is not in 
your immediate area, right into a workplace so an employer who 
knows that he or she will benefit from increasing the skills of 
their workers would make time available in a facility perhaps 
at lunch or immediately after work or for an hour's break 
during the day where through distance learning we might have a 
school-at-work setting to upgrade the skills. And we could be 
running that through television or through the Internet or 
through other distance learning tools from facilities that are 
not in your immediate district or area.
    This proposal takes on kind of more immediacy having had 
the opportunity to hear the problems in your district. That 
kind of creative solution is one I think we ought to look at 
and look at together.

                       INCUMBENT WORKER TRAINING

    Mr. Peterson. Okay. Can people be--once people get a job, 
you do not help them, right, once they have a job, even though 
they are underemployed?
    Ms. DeRocco. We have incumbent worker training 
opportunities through the Workforce Investment Act. There are 
opportunities to upgrade skills through the WorkforceInvestment 
Act. They are not precluded from participation for--we talk about first 
job, next job, and best job. The system should be there as a service 
provider for individuals who need to continually upgrade their skills.
    Mr. Peterson. I was told yesterday at lunch from the 
gentleman who runs the one in northwestern Pennsylvania that if 
a person is a machinist, but is basic, has not learned the new 
sophisticated skills, that they cannot be retrained. They 
cannot be upgraded. That is prohibited. Not true?
    Ms. DeRocco. I think we have opportunities through the 
Workforce Investment Act to deal with incumbent workers and to 
upgrade skills of current workers.
    Mr. Peterson. Okay. With no further questions, I want to 
thank everybody for their time.
    Ms. DeRocco. We look forward to working with you.

                WORKFORCE INVESTMENT ACT REAUTHORIZATION

    Mr. Peterson. Yes. We have some serious issues, I think. 
When are we going to reauthorize?
    Ms. DeRocco. 2003 is the year for reauthorization, but we 
are hoping because of the linkages to the TANF program that we 
can begin some very serious discussions long before 2003.
    Mr. Peterson. I would like to be a part of those.
    Thank you very much for all of you participating today. 
This hearing is adjourned.

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                                            Tuesday, March 5, 2002.

                        INSPECTOR GENERALS PANEL

                               WITNESSES

GORDON S. HEDDELL, INSPECTOR GENERAL, DEPARTMENT OF LABOR
JANET REHNQUIST, INSPECTOR GENERAL, DEPARTMENT OF HEALTH AND HUMAN 
    SERVICES
LORRAINE LEWIS, INSPECTOR GENERAL, DEPARTMENT OF EDUCATION

                        Introduction of Witness

    Mr. Regula. We will get the hearing started. Happy to 
welcome all of you this afternoon, and we will let each of you 
make your statements, and then we will have questions. I don't 
know if we will have other Members here or not.
    So, Mr. Heddell, would you like to go first, summarize your 
statement?

                           Opening Statement

    Mr. Heddell. Yes, sir. I would be happy to.
    Mr. Chairman and members of the Subcommittee, thank you for 
inviting me to testify on the top three management challenges 
of the Department of Labor. The views I express today are those 
of the Office of Inspector General consistent with its 
independent role to provide oversight of the Department of 
Labor. I will summarize.

                            IG INDEPENDENCE

    Mr. Regula. If I could stop you a minute, do all of you as 
inspectors general, do you have a free hand to go wherever you 
choose?
    Ms. Lewis. Yes, sir.
    Mr. Heddell. Yes, sir.
    Mr. Regula. So there are really no limits, you are the 
watchdog, if you will. Is that a fair characterization?
    Ms. Lewis. Yes.
    Ms. Rehnquist. Watchdog, yes.
    Mr. Regula. As such, you have freedom to probe or look 
anyplace you choose within the Department. I think that is a 
very important element.
    Well, sorry for interrupting.
    Mr. Heddell. That is okay, sir.
    I will summarize my statement and ask that it be entered 
into the record in its entirety.
    Mr. Regula. Without objection.

            TOP THREE CHALLENGES FOR THE DEPARTMENT OF LABOR

    Mr. Heddell. Mr. Chairman, I preface my statement 
acknowledging that effective management and accountability are 
high priorities of the Secretary and her team. Moreover, over 
the years the Department has made great strides in areas where 
other Federal agencies continue to struggle. Nonetheless, the 
Department faces a number of challenges, and consistent with 
your request we have selected three areas that present long-
term challenges to the Department. They are employment and 
training program results and accountability, pension and 
retirement plan protection, and human capital management.

                        EMPLOYMENT AND TRAINING

    In the employment and training area, the Department is 
still challenged in demonstrating that its programs are 
effective and in ensuring accountability over these 
multibillion-dollar investments.

                            PROGRAM RESULTS

    With regard to program results, OIG audits continue to 
document that performance for some programs fall quite short of 
their legislative intent. My full statement contains two recent 
examples where this has been the case.
    In addition to documenting poor performance, our audits 
have illustrated the problems faced by the Department in 
obtaining quality performance data. Our audits continue to 
disclose high error rates in performance data reports to the 
Department by State partners and grantees. Our major concern 
involves the Department's ability to control the quality of the 
data reported below the Federal level where over 90 percent of 
the Department's budget is actually spent.
    Erroneous data skews key performance outcomes, such as 
participant wages, job placement rates and job retention. Such 
outcomes information is key in determining whether a program is 
effectively meeting its established goals and legislative 
intent, and in making informed decisions about often its future 
direction.
    The Department has stated that emphasizing performance 
results is a vital component of an effective grants management 
system. Indeed, the Employment and Training Administration has 
indicated that it has started a data validation project to 
create more precise programming specifications and standards 
for use in validating State data. It is clear that an 
aggressive effort is needed by the Department to address this 
problem.
    In my full statement I also mention our belief that the 
Department's ability to verify and validate program outcomes 
data would be enhanced if the Department had access to a number 
of sources of data.

                          GRANT ACCOUNTABILITY

    In this area, Mr. Chairman, the Department is also 
challenged in managing its grants, which impacts both program 
performance and financial accountability. Over the years the 
OIG has conducted numerous audits that have raised a number of 
concerns. Most recently the Office of Inspector General has 
worked with the Department's largest grantor agency, the 
Employment and Training Administration, to identify weaknesses 
in grant accountability procedures and to recommend a number of 
specific solutions. ETA has indicated that it has established 
internal goals for improving grants management in fiscal year 
2002, and we are encouraged by the Department's efforts in this 
area.

              PROTECTION OF PENSION AND RETIREMENT ASSETS

    Mr. Chairman, a second major challenge for the Department 
is the protection of pension and retirement assets. The pension 
and retirement benefit industry is enormous and continues to 
grow. Currently it encompasses hundreds of thousands of plans 
and employers, millions of employees who have worked all of 
their lives to achieve financial security, and trillions of 
dollars invested in pension plans.
    Because of the magnitude and complexity of the retirement 
system, it is inherently vulnerable to error, mismanagement and 
fraud. Over the past decade the Office of Inspector General has 
largely focused its audit oversight efforts on the enforcement 
strategy used by the Pension and Welfare Benefits 
Administration to protect retirement assets.
    Given the diversification and expansion that continues 
totake place in the pension arena, we believe that the Department faces 
an ongoing challenge to effectively target its enforcement program, to 
strike an appropriate balance between compliance, assistance, and 
enforcement, and to educate employers and employees on the complex 
rules that govern their plans.
    Compounding the challenge faced by the Department in this 
area are weaknesses in the oversight provided through the 
audits that are performed by independent public accountants, 
which I will discuss in my full statement.
    As you know, Mr. Chairman, this OIG has responsibility to 
investigate corruption involving union-sponsored benefit plans, 
and through that work we have also documented the vulnerability 
of pension assets to fraud. Our major concern relative to fraud 
is the multimillion-dollar fraud enterprises created by 
financial and investment service providers who have the 
opportunity and ability to structure commercial financial 
schemes to conceal their criminal activity. Since these 
providers typically render advice to more than one plan, the 
potential for losses to the pension funds rapidly multiplies.

                        Human Capital Management

    Finally, Mr. Chairman, the Department faces challenges 
relative to the management of its human capital, which the 
General Accounting Office has identified as a governmentwide 
problem. The OIG agrees that no management issue facing Federal 
agencies could be more critical to their ability to serve the 
public than having the necessary Federal or contract personnel 
to carry out the mission of the Department.
    Last year the General Accounting Office estimated that by 
2006, about 31 percent of the employees of the agencies that 
comprise 98 percent of the executive branch will be eligible to 
retire. The Department of Labor faces a similar work force 
shortage in the next decade. The Department projects that over 
27 percent of its work force, comprising approximately 4,700 
employees as well as almost 50 percent of its supervisors, are 
eligible to retire in the next 5 years.
    Mr. Chairman, consistent and full utilization of current 
personnel flexibilities and Department of Labor policies will 
be critical to the Department's ability to effectively address 
this challenge. In addition, there are a number of changes that 
would be helpful to Federal agencies like the Department of 
Labor to move more effectively to compete with private industry 
for highly skilled personnel and in retaining qualified 
employees, which I mention in my full statement.
    This concludes the summary of my statement, Mr. Chairman. I 
will be pleased to answer any questions that the committee may 
have.
    Mr. Regula. Thank you. We will reserve. We will finish the 
other two.
    [The prepared statement and biography of Gordon S. Heddell 
follow:]

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                          Results of OIG Work

    Mr. Regula. Ms. Rehnquist.
    Ms. Rehnquist. Good afternoon, Mr. Chairman. I am Janet 
Rehnquist, inspector general of the Department of Health and 
Human Services. Thank you for inviting me to testify today. I 
would like to begin by reporting the results of our efforts in 
fiscal year 2001. Thanks to active support from the Congress, 
the Department, and our many other partners, we reported record 
program savings of $618 million. This includes $16.1 billion in 
savings from our implemented recommendations, $1.5 billion in 
investigative receivables and about $411 million in audit 
disallowances.
    We also excluded over 3,700 abusive or fraudulent 
individuals or entities from doing business with Medicare, 
Medicaid and other Federal and State health care programs. Our 
investigative work led to approximately 400 convictions of 
individuals or entities that engaged in crimes against the 
Department's programs and about that same number of civil 
actions.

                          Two Funding Sources

    As you know, our office has two funding sources. First, we 
receive funding from the Health Care Fraud Abuse Control 
program (HCFAC) program. This program was established by HIPAA 
in 1996. It pays for our Medicare and Medicaid antifraud and 
abuse activities. Second, we receive a discretionary 
appropriation which is used to pay for our oversight of all 
other HHS programs and operations such as food and drug safety, 
welfare reform and the well-being of the elderly and children.
    With the discretionary funds, for example, we worked with 
the Office of Child Support Enforcement and other enforcement 
agencies to recover delinquent child support payments from 
runaway parents.

                         HHS Issues of Concern

    You requested that we identify and discuss the HHS issues 
that we believe are of greatest concern. These issues are 
described in the Department's accountability report, and I 
would like to highlight a few them here.

                              Bioterrorism

    First, circumstances since September 11th have underscored 
the need to respond to future terrorist events including 
bioterrorism and other public health emergencies. Our office is 
currently assessing security controls at CDC, NIH, FDA and 
college and university laboratories. Among other things, we are 
taking a look at how these institutions are handling access to 
select agents by restricted persons. We are assessing the 
capacity and readiness of State and local health departments to 
detect and respond to potential bioterrorism events and deploy 
medical supplies. We are also working with the FDA to improve 
the security of our Nation's food supply, and we are working 
with CDC to evaluate the integrity of the vaccine procurement 
program.

                       Prescription Drug Pricing

    A second top issue for the Department is prescription drug 
pricing. Our work has consistently shown that each yearMedicare 
and Medicaid lose millions in excessive payments for prescription 
drugs. The current reimbursement method is based on the drug's average 
wholesale price. In our reports over the past several years, we have 
shown that using the average wholesale price is a fundamentally flawed 
approach. The average wholesale price reported by drug manufacturers is 
neither average nor wholesale and bears little or no resemblance to the 
actual wholesale prices available to physicians and suppliers who 
participate in the Medicare program.
    Our offices in CMS have been working with Congress to 
develop more realistic Medicare and Medicaid reimbursement 
methods for prescription drugs. Significant progress is being 
made, and we hope a consensus approach will be achieved in the 
near future.

                          Nursing Home Quality

    A third issue I would like to mention is the quality of 
care in our Nation's nursing home facilities. We have several 
studies under way. In one study we are evaluating the role of 
the nursing home medical director. We are also exploring the 
family's experiences, what they have been with nursing home 
care, and we are also developing a study to assess the value of 
the quality assurance committees in nursing homes.

                               Resources

    To place the HHS OIG's overall work plan in context, by law 
only 20 percent of our resources in fiscal year 2003 can be 
used to oversee the non-Medicare and Medicaid programs. For 
example, our current work on bioterrorism, child support 
enforcement and grants management comes out of our 
discretionary funding. As our work in these areas increases, so 
does our need for additional resources.

                           Grants Management

    Another crucial area which I want to devote more attention 
to is the integrity of grants management, especially in the 
public health sector. In view of the rapid increase for public 
funding for public health programs intended for research 
coordinated by the National Institutes of Health, we want to 
ensure that those funds are used as Congress intended.
    In my written testimony I have also listed a number of 
projects our office has in progress or plans to complete in 
fiscal years 2002 and 2003.
    Mr. Chairman, this concludes my testimony, and I would be 
happy to answer any questions.
    Mr. Regula. Thank you.
    [The prepared statement and biography of Janet Rehnquist 
follows:]

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                           Opening Statement

    Ms. Lewis. Mr. Chairman and members of the Subcommittee, 
today I will discuss the top three management challenges facing 
the Department of Education. Of the 11 management challenges we 
identified this year, I will focus on financial management, 
information technology security, and student financial 
assistance programs.

                          Financial Management

    The first challenge is financial management. We have 
included this in our list of management challenges for the past 
3 years. It is on the President's management agenda and is a 
central goal of Secretary Paige's management improvement 
initiatives. His report, the report commissioned by the 
Secretary of his Management Improvement Team, called the 
Blueprint for Management Excellence, is the starting point for 
corrective actions in this area. The Secretary also has 
established an Executive Management Team to lead this effort 
and required all employees to complete training on internal 
controls by April 2002.
    For the second year in a row, the Department has received a 
qualified opinion on all five of its financial statements. The 
audit of 2001 financial statements identified one material 
weakness and three reportable conditions. This is an 
improvement from the 2000 audit.
    In this the next audit cycle, the Department faces three 
critical issues: first, the overall time to prepare and audit 
the Department's financial statements has been shortened by 1 
month. Second, OMB guidance requires interim financial 
statements. Third, the Department will be using a new general 
ledger system to prepare its 2002 financial statements.
    Implementing and using a new system frequently results in 
additional challenges. We have completed audits of the 
Department's implementation of this new system. While the 
Department generally did not agree with deficiencies we 
identified in testing, training, security and development, it 
has planned steps to address shortcomings in the system. Of 
particular importance is the interface between the Department's 
system and that containing critical data from the Student 
Financial Assistance Office.
    Strong internal controls are critical to protecting 
programs and operations of the Department from waste, fraud and 
abuse. Our reports have identified weaknesses in the 
Department's controls over purchase cards, contract payment 
process, and government equipment, for example. Our 
investigations into fraud by Department employees who used 
government credit cards to purchase items for personal use, 
stole government property, and approved false invoices for 
payment further demonstrate the critical need for internal 
controls in the Department.

                    Information Technology Security

    The second challenge is information technology security. IT 
security is a critical component of the Department's 
operations, particularly in light of the mandate to expand 
electronic government set out in the President's management 
agenda. The Department's more than 100 systems must be capable 
of ensuring the availability, confidentiality and integrity of 
the data they contain. Billions of taxpayers' dollars are under 
the stewardship of the Department, and the IT systems that are 
used to administer these funds should be secure from intrusion, 
disruption and loss.
    Our work has identified a number of improvements that are 
necessary for the Department to ensure the security of its 
systems, to comply with the Government Information Security 
Reform Act and to develop disaster recovery plans. The 
Department has concurred with many of our findings and has 
identified corrective actions to improve both areas.

                 Student Financial Assistance Programs

    The third challenge is student financial assistance 
programs. The Department manages student financial aid programs 
that disperse approximately $50,000,000,000 annually and a loan 
portfolio of $170,000,000,000. The GAO has included these 
programs in its high-risk series since 1990, and they are 
included in the President's management agenda. Most of our work 
is focused on these programs, and the majority of our 
investigative efforts relate to fraud perpetrated bythird 
parties on these programs.
    By their very nature student financial assistance programs 
are risky. Our work has led us to recommend that the Department 
increase its monitoring and enforcement activities and to 
continue to strengthen its internal controls over these 
programs.
    A sample of our investigative cases demonstrate some of the 
problems. To date in just one case, 21 of 26 people charged in 
March 2001 have pled guilty to fraudulently obtaining more than 
$2,600,000 in grants, work study and loans. Matching income 
data submitted to the Department to that of the IRS might have 
prevented such fraud. The Department continues to work with IRS 
and OMB to address further legislative changes for this match. 
We recommend Congress pass any such legislation necessary.
    In my long statement I discuss other examples of our fraud 
work in these programs including individuals who fraudulently 
claim to be enrolled in foreign schools to receive Federal 
Family Education Loan Programs funds. While no set of internal 
controls can guarantee that mistakes will not happen or persons 
intent on committing fraud will not succeed, we continue to 
recommend that greater program monitoring and enforcement 
should be done by the Student Financial Assistance Office to 
protect the integrity of the programs.
    We look forward to continuing our work with Congress and 
the Secretary to ensure that the Department's programs and 
operations serve the Nation's students and taxpayers with 
efficiency, effectiveness, and integrity.
    I offer my long statement for the record and am happy to 
answer any questions you may have.
    Mr. Regula. It will be made part of the record.
    [The prepared statement and biography of Lorraine Lewis 
follow:]

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                           PROGRAM EVALUATION

    Mr. Regula. Some questions for all of you. Start with you, 
Mr. Heddell.
    Do you evaluate program results, or do you just monitor it 
for fraud or misuse of money? Do you actually pass judgment on 
a program as to whether or not it is effective?
    Mr. Heddell. Yes, sir, we do. We try to evaluate program 
results to determine whether the investment made in the 
Department of Labor is balanced with a successful program. We 
look at whether a program has achieved its objectives.
    Mr. Regula. How about HHS?
    Ms. Rehnquist. Mr. Chairman, it is something that we have 
talked about a lot, and I can think of one example in the HIV 
funding area where we do--you can get criticized on the one 
hand for just reviewing the programs, but do you really review 
the results? I think in that case our sense was that we in the 
OIG office were not in the best position to evaluate the 
results on the grounds that that was best in this particular 
case left to the communities who could evaluate and conduct 
studies of their own, which we could then review. But they were 
in the best position to evaluate the actual results of how the 
grants performed in a particular study.
    Mr. Regula. How about Education?
    Ms. Lewis. Yes, sir, we do. One of the ways that we try to 
get to that issue is through our data quality work. For 
example, in the gun-free legislation passed back in the mid-
1990s, the idea was the Department was to be receiving 
information coming in from the States on incidents at schools 
involving having a pistol or a gun on the campus. And through 
our work we looked at the quality of the data coming in to 
determine if the Department was achieving the result it 
intended. We found problems in the implementation of the law in 
terms of the definitions that were being promulgated.
    There seemed to be confusion. We looked at seven States. 
There was not uniformity in compliance. So we were able to 
report to the Department that it may not be receiving the type 
of data it intended to receive, and it might want to look, in 
conjunction with Congress, whether it needed to change some 
definitions.

                              BLOCK GRANTS

    Mr. Regula. Well, a lot of what we have goes out in block 
grants to the States. Is there any follow-through on a block 
grant for a given purpose with the States to ensure they are 
using it for that?
    Mr. Heddell. In the case of the Department of Labor, Mr. 
Chairman, let's take the Employment and Training 
Administration, which spends over $9 billion a year. We look at 
selected grants that are issued, and attempt to determine 
whether or not they are meeting their goals.
    Mr. Regula. So have you some control over what the State 
does with that money?
    Mr. Heddell. We do not have direct control over what the 
States do. We try to ensure that the Department of Labor is 
working with the States and is monitoring what the States are 
doing to ensure that they achieve their goals.

                            PERFORMANCE DATA

    A problem that we face with regard to grants is data 
accuracy. Frequently the data that comes back to the Department 
is not reliable, and, therefore, the results are skewed. An 
example is the Welfare-to-Work Competitive Grant Program, where 
the numbers of participants who were reported as having 
unsubsidized full-time and part-time employment was overstated 
by 27 and 43 percent.
    Mr. Regula. By the State.
    Mr. Heddell. The root cause of the overstatement was 
because of the inaccurate data that was provided by grantees to 
the Department. But there is history here, and the history is 
that prior to the Government Performance and Results Act, there 
were no requirements for Departments to emphasize data 
validity. For years data validity wasn't a concern. So 
performance measures, whether they existed or not, couldn't 
really help you determine whether the programs were really 
functioning effectively and achieving their goals.

                   DETECTING WASTE, FRAUD, AND ABUSE

    Mr. Regula. Ms. Rehnquist, we hear a lot about fraud in 
Medicare, Medicaid, and in a lot of other different areas. 
Doesyour Department investigate and follow up on that type of thing?
    Ms. Rehnquist. Oh, yes. In fact, that is the core of what 
we do. We try to prevent and detect waste, fraud and abuse in 
the Medicare program and the Federal part of the Medicaid 
program. We do that with our audit work. We do that with our 
investigative work. We work with the Justice Department on the 
investigative work to bring cases criminally and civilly 
against entities and individuals who commit fraud against the 
health care programs. And our evaluation unit contributes to 
that overall goal through their evaluations of programs to make 
sure that we have detected and defined weaknesses so that we 
can approach them from the front end as well as go after people 
after the fact.

                         STUDENT LOAN PROGRAMS

    Mr. Regula. Would that be a true indication on student 
loans, for example?
    Ms. Lewis. Yes, sir. Most of our investigative resources 
relate to the student loan programs. We identify both recipient 
fraud--individuals who falsify information on the Free 
Application for Federal Student Financial Aid, FAFSA--and we 
also look at institutions. If an institution and the persons 
who run that institution are obligated to pay refunds because 
students have dropped out of the programs and don't do so, we 
will look to follow up if we have gotten a tip on that, or we 
might be in there doing an audit and it doesn't look right, and 
we will refer it to our investigators.

                             TIPS ON FRAUD

    Mr. Regula. You mentioned tips. Do you get leads from 
private individuals that feel that there has been some 
fraudulent action by their neighbor, if you will, or someone 
they know?
    Ms. Lewis. We typically all have a hotline function and 
will get them through e-mails, letters, calls.
    Mr. Regula. Would whistleblowers also be a source?
    Ms. Lewis. Yes, sir.
    Ms. Rehnquist. Big part of it, yes.

                            HUMAN RESOURCES

    Mr. Regula. Sounds to me like you have a big job. The 
Departments all have big budgets and have a lot of different 
programs that are subject to scrutiny by your offices. How many 
people do you have?
    Ms. Lewis. About two hundred eighty persons. About a third 
of our resources are in Washington, and two-thirds are deployed 
in the field.
    Mr. Regula. Ms. Rehnquist?
    Ms. Rehnquist. About 1,520; about 300 here in Washington, 
and the rest are in our regional offices.
    Mr. Heddell. I have 428 employees, Mr. Chairman.

                      80/20 RESOURCE DISTRIBUTION

    Mr. Regula. The 80/20 mix for the HHSIG funding, I talked 
to Mr. Thomas about this, and he said, well, you can just put 
in more money. Now, if we put in more money, does that still go 
80/20, or would it all become part of the 20?
    Ms. Rehnquist. Mr. Chairman, I believe it would all become 
part of the 20. I think that the amount that we get from the 
HCFAC funding for fiscal year 2003 is stipulated as being 
between $150 and $160 million and that amount is determined in 
negotiations between Secretary Thompson and the Attorney 
General, because the Justice Department shares in that HCFAC 
funding.
    The other piece of our budget is the discretionary budget 
that I believe would be subject to flexibility.
    Mr. Regula. Extra money we might put in would go in your 
discretionary.
    Ms. Rehnquist. The discretionary budget, I believe, but I 
am not asking for any additional money.
    Mr. Regula. It is all right if you do. It doesn't mean it 
will happen. Mr. Sherwood.
    Mr. Sherwood. Thank you, Mr. Chairman.
    Welcome, and thank you for appearing before us.

                        AVERAGE WHOLESALE PRICE

    Ms. Rehnquist, you have got my attention with the average 
wholesale price, which is neither average nor wholesale.
    Ms. Rehnquist. That is what our studies have shown, yes.
    Mr. Sherwood. What is the format, I mean, that--what do we 
do about that? In other words, do we pay off a formula based on 
the average wholesale price? Is that correct?
    Ms. Rehnquist. Yes.
    Mr. Sherwood. Most providers deserve a profit, but we find 
that the average wholesale price is neither average nor 
wholesale. What should be done about that?
    Ms. Rehnquist. Well, I think there are some other--I mean, 
I agree with you, first of all, that they are entitled to a 
profit. I think that there are some other indices that are a 
little bit truer to what their actual prices are that we could 
then gauge a certain profit, whether it is 10 percent or 15 
percent, whatever that would be, whatever Congress would decide 
that would be, and go from there. That way at least you would 
have a baseline that is more accurate.
    I think the problem with the average wholesale price is 
that it is just a price catalogue, essentially, that is rolled 
out that doesn't really have any bearing to what they pay. So I 
think if we got true--it could be average sales price, it could 
be average--I have heard of some other indices. I think we 
could come to a consensus.
    My office has worked with CMS, which has worked with GAO, 
which has worked with industry to try to figure out what is 
fair here. I think most people at the table on this particular 
issue agree that average wholesale price really isn't average, 
and that we are overpaying by millions of dollars per year 
compared to what we should be paying. That affects all the 
taxpayers, not just the programs.

                          CHANGING THE SYSTEM

    Mr. Sherwood. I understand. That is why I asked the 
question. But in whose power is to change the system?
    Ms. Rehnquist. I think it is in Congress's power to change 
the system. I think it would have to be done by legislation.
    Mr. Sherwood. But if we make legislation based on 
inaccurate price lists, I mean, that has to be determined 
pretty well.
    Ms. Rehnquist. Yes, it has to be reported by the 
manufacturers. You are right. There is going to be a 
reliability issue or an integrity issue, but I think that 
shouldn't prevent attempting to come up with something that 
would be a better resolution than average wholesale price. They 
could report their sales price, for example.
    Mr. Sherwood. And the average wholesale price as it is 
defined in the current law is something that had meaning when 
that current law was made? If you say it is neither average nor 
wholesale----
    Ms. Rehnquist. I am not exactly sure when--by what regs, 
how long ago that has been in effect. I don't know what the 
derivation of the average wholesale price is. You are probably 
right that at some point it made sense, and it just has gotten 
skewed now.

                          ACHIEVING CONSENSUS

    Mr. Sherwood. When you said significant progress is being 
made, but a consensus approach has not yet been achieved, what 
do you mean by that sentence? Where is the consensus supposed 
to be coming from?
    Ms. Rehnquist. What we would like to do is at least have 
consensus between CMS and our office and probably GAO, which I 
think would be the three entities at least that I can think of 
that would have either oversight responsibility or 
implementation responsibility. I think there is where you would 
like to begin to have a consensus, and then you would try to 
engage the industry and try to reach some kind of a resolution 
and work with Congress and say this is what we have come up 
with, and this is something that we think everybody can live 
with.
    Mr. Sherwood. I guess it is a little hard for me to accept. 
I come from a business background. If you found in business 
that you were paying a percentage of a price list over what it 
wasn't supposed to be, you would change it tomorrow morning, 
you know. Somebody would either be out of a contract, or would 
you have a new supplier, but you would change the arrangement. 
You wouldn't be taken advantage of anymore. I think that is one 
of the reasons government doesn't work very well, because it is 
so ponderous that wedon't get to the bottom of things like 
this, and millions of dollars is millions of dollars.
    I appreciate that you pointed it out. I am just trying to 
probe and see what we do about it.
    Ms. Rehnquist. I hope we can change it, but it is 
complicated because every time you change, for example, a drug 
reimbursement, you are affecting a certain category of 
physician that administers that drug. One reason that their 
reimbursement has been X on the administration of the drug is 
because they get this piece of the drug. There is the ripple 
effect. What I am trying to say is that all the reimbursement 
policies all contemplate the ripple. When you change the 
epicenter of the stone dropping into the water, you change 
everything.

                           OPTIONS FOR REFORM

    Mr. Sherwood. Could we have the inspector general maybe to 
get back with us with some suggestions about what we do with 
it?
    Ms. Rehnquist. I would be happy to follow up with you on 
it. I know the Finance Committee in the Senate is asking us to 
talk about that next week, and I would be happy to follow up 
with you.
    [The information follows:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    Mr. Sherwood. Our health care dollars sure don't go far 
enough. In this scenario we could tighten it up, it would be a 
good deal. Thank you very much.

                 WORKFORCE INVESTMENT ACT PROGRAM FUNDS

    Mr. Heddell, we hear from the Governors that state WIA 
dollars have been obligated and are not available. We hear from 
the Department of Labor that there is significant carryover due 
to a high unexpended balance, and they have used this carryover 
as a justification for the budget request. Does the Office of 
Inspector General have an opinion on this issue? It is a key 
concern from my district where we have experienced several 
waves of layoffs.
    Mr. Heddell. Mr. Sherwood, we have also heard that from a 
variety of sources. From an Inspector General point of view, we 
haven't actually conducted an audit that would enable me to 
provide any kind of an assessment on that. Our concern has 
principally focused on whether or not the grants were awarded 
appropriately, and whether the grants are effective in 
achieving their goals. In terms of the decision of where these 
funds are placed, that is not something that I actually could 
comment on because we haven't looked at it.
    Mr. Sherwood. You know, as is often the case where you try 
to get to the bottom of something, when you talk to the two 
sides, you get different answers. That is one of the hardest 
things for me to pin down in government, where the truth lies. 
In business it seemed to be easier to get to the black and 
white of things. That is why I was probing a little bit.
    Mr. Heddell. I think one of the things that from an 
inspector general's point of view that we are emphasizing very 
strongly is the need for accurate data. With accurate data I 
think the Department will be able to show a better accounting 
of what has happened with those grant funds and where the 
successes are occurring. I think that is a big step. But, you 
know, the Workforce Investment Act became effective in July of 
2000, so it has really only had about 18 months now of active 
implementation. We are at a point now where we can begin to 
look at the program and determine whether or not the funds have 
been used appropriately.
    Mr. Sherwood. Thank you.
    Mr. Regula. We will have time to come back to you. I want 
to go to Mrs. Northup.
    Mrs. Northup. Thank you.

                          NO CHILD LEFT BEHIND

    Let me start with Education. I know that you all are 
quickly working to implement the provisions of no child left 
behind. I would like to start by asking you sort of a series of 
questions about what role your office might play in preventing 
fraud and abuse and inadvertent reporting errors. I will give 
you three questions because you may want to tie some of them 
together: What role might you have ensuring that States and 
local education agencies actually use the money for 
scientifically based reading programs? I don't think there is 
any reading program being used in this country that the people 
using it don't claim it is not research-based; but, of course, 
they are not. And finally, I am concerned specifically about 
fraud in reporting the test scores.

                              DATA QUALITY

    Ms. Lewis. We have identified in the management challenges 
for the Department several issues that we think relate to the 
implementation of No Child Left Behind. We, as with Labor, we 
have identified the issues of data, quality of data. It is 
absolutely imperative for the local education agencies, that 
feed information up to the State education agencies, to have 
data that is reliable, valid, and timely. That information is 
typically bundled together and provided to the Department.
    Mrs. Northup. Does that concern you?
    Ms. Lewis. Yes. We have been doing audit work in that area 
for many, many years now, long before I got to the Inspector 
General's office. We think it is very critical as the 
Department sets out the new performance indicators that relate 
to No Child Left Behind that it insists that there be quality 
data and then follow-up to ensure that the data coming in is 
quality data. We are actually conducting three audits right now 
in conjunction with the General Accounting Office, the State of 
Pennsylvania, and the State of Texas, relating to data in Title 
I of the Elementary and Secondary Act. We got together last 
year and came up with an intergovernmental audit effort, and--
--
    Mrs. Northup. This is not because those two States are 
particularly bad, but just to set up a demonstration project?
    Ms. Lewis. The Comptroller General asked for volunteers, I 
volunteered, as did two States and the city of Philadelphia, to 
look at data issues at the Federal level and at two States' 
level and at the local level. Our work is showing that there 
continue to be data quality issues relating to elementary and 
secondary education.
    Mrs. Northup. It must be the LEAs that ultimately are the 
ones that either pass the correct data or not. The States 
probably don't alter it, do they?
    Ms. Lewis. No, we haven't found that. It is typically a 
lack of data or lack of timely data. Sometimes there are 
oranges and apples that come in, and there isn't a good 
assessment at the State level that there are inconsistencies 
across the LEAs. Timeliness is a very important issue. 
Oftentimes by the time the data gets to the Department to make 
program decisions, it is very, very late.

                           ENFORCEMENT TOOLS

    Mrs. Northup. Let me reiterate my question: Do you haveany 
tools at your disposal with which to enforce the requirement that the 
data be accurate and timely?
    Ms. Lewis. Our tool is the audit tool or the inspection 
tool in terms of identifying the problem. For the Department, 
it has published data quality standards that were designed 
first and foremost for the managers within the Department of 
Education as they assessed the data coming in from the States 
and local entities, to assess them against good data quality 
standards. We have encouraged the Department to better 
publicize those data quality standards and to put the third 
parties on notice that this is the standard they are expected 
to meet.
    Mrs. Northup. What if they just don't? For example, I don't 
know what a fraudulent submission might be, but I am going to 
guess here that you classify more children than necessary as 
having a learning disability so they are rated on a different 
standard--let's say schools, and maybe you can even exempt 
those students out of what your overall rating would be, might 
it be that you contract with the test provider that adjusts the 
scores just a little bit more than they should have? Those are 
things I know of that happen. What do you do if you come across 
that?
    Ms. Lewis. If we believe there is fraud that is taking 
place, criminal activity, then we will investigate it as such, 
go to a U.S. attorney's office and present the case and look to 
see about a prosecution. If it doesn't rise to that level, we 
issue--we look to get very up front with the Department, the 
relevant program office, in the form of an action memo or 
emergency memo and say, you have a problem here. You need to go 
into that State and do some compliance work to see if there is 
a problem. We are----
    Mrs. Northup. Are those a matter of public record?
    Ms. Lewis. Typically our work is very much--on the 
investigative side we do have some restrictions basically from 
the U.S. attorney office as the cases are ongoing, but a lot of 
our work is very public.
    Mrs. Northup. It strikes me within government you can have 
action memos and so forth. Unless you can actually withhold the 
check, or unless it becomes public--a matter of public record, 
and you are sort of held accountable--you are judged by 
ultimately the taxpayers and the voters, then maybe it never 
raises the level of accountability. In the meanwhile you are 
out there giving out numbers of students that are improving and 
so forth.

                       SCIENTIFIC BASED RESEARCH

    Ms. Lewis. Our audit results have been very public. We have 
a very transparent process, frankly, on the audit side. There 
is going to take place negotiated rulemaking related to the 
implementation of No Child Left Behind. I believe the issue, 
two issues, on the table are going to be assessment and 
standards, and I expect the Department engaging in discussions 
with the public, and the State and local education agencies 
will be bringing many of these issues that you have identified 
to their attention as part of the rulemaking process.
    On the scientifically based issue, the law requires 
scientifically based research. I know that Under Secretary 
Hickok and Assistant Secretary Newman recently held a symposium 
where many prominent individuals came to the Department I think 
in early February to discuss that term, how it is used in the 
law, and implementing that as part of the new law. So the 
Department has identified it as an important issue and already 
brought together prominent individuals to start the dialogue.
    Mrs. Northup. I know my time is about up, but do you find 
that there are many districts that don't say they are using 
research-based methods to teach children how to read today?
    Ms. Lewis. I don't think our office, the IG's office, has a 
body of work in that area. I will make sure to get back to you 
if I turn out to be incorrect on that. But that is not 
something that I think we have done a body of work on.
    Mr. Regula. Mr. Sherwood.

                       RESPONDING TO BIOTERRORISM

    Mr. Sherwood. Ms. Rehnquist, are you reviewing whether 
State and local health departments are prepared to detect and 
respond to bioterrorism threats? And are States budgeting 
adequate funds for preparedness, or are they relying solely on 
our Federal Government to provide the funding?
    Ms. Rehnquist. We are conducting a study right now to 
determine the preparedness of State and local entities to 
respond to bioterrorism or any really big major public health 
emergency threat. I think we picked six States. This is an 
ongoing study. We took the State capital, the largest city, and 
then a small town like a tertiary, a smaller town in a rural 
setting, so we could get a mix of the State population and 
figure out were they prepared, what was the current state of 
their readiness, and would they be able to respond effectively 
to either a biothreat or another public health emergency. That 
review is, I believe, ongoing.

                        FUNDING FOR PREPAREDNESS

    Now, with respect to the recent money that has gone to the 
States and the grants to prepare for public health emergencies, 
we are in the process of designing a study that we will be able 
to review right away to make sure that States are going to be 
using that money for bioterrorism preparedness purposes, to 
make sure that they don't figure out some way to divert that 
money to pay for something that is unrelated, pay for their 
public schools or something like that. Any time there is that 
amount of money going out the door, we do worry whether it is 
going to be put to proper use. So we are designing a study to 
see how we can help make sure that happens right now.
    With respect to your third question about are the States 
going to be relying completely on the Federal dollar to assist 
them in their efforts, I don't know the exact answer to that 
yet. I think that some State and local communities are very 
well prepared. I read that San Jose, for example, is. Not that 
anybody can be prepared for anything, but in terms of the 
spectrum of being ready to meet public health emergencies, some 
cities are actually very well prepared right now. But I don't 
know the answer. I hope that once our evaluation is completed 
we will have a better sense of that.
    Mr. Sherwood. My sense of it is that we have to make sure 
we train the right people, because first responders are always 
the first people on the scene. The firemen, whether they are 
paid or volunteer, police, you know, they are there before the 
emergency response teams are called out so often. And in a 
bioterrorism threat, gosh, we would have to make sure that we 
got the right information back immediately.
    I am no expert in this, but I think we have just barely 
scratched the surface on the proper way to respond to some of 
the threats that are out there today. You know, as horrific as 
9/11 was, it was confined to two or three areas in thecountry, 
and it didn't spread. Except the economic impact and all the--it was 
terrible on all the people affected, but there was a containment on 
that. We could have some bioterrorism things. I am afraid we nationally 
might not have thought that through well enough. I think we have to 
rely a great deal on the first responders. Therefore, it is hard to get 
that training down to the level where they all need it.

                 VACCINE AND PHARMACEUTICAL PROCUREMENT

    One other thing that I was interested in, what are you 
looking for in your audit of CDC's vaccine and pharmaceutical 
procurement program? Is it an audit of the stockpile as well as 
the domestic immunization program?
    Ms. Rehnquist. We are going to be doing an evaluation of 
the stockpiles. The kinds of things that we would be looking 
for in that sort of an evaluation are to make sure we have 
enough of them; that we might not be better served by perhaps 
adding a couple more to make sure that they actually can be put 
on pallets and transported to locations within a certain number 
of hours. That is our kind of target time; to make sure that 
there are alternative ways to transport them in the event that 
if trucking isn't possible, can we fly them, or get them on 
trains.
    We are looking to make sure that the supplies that are in 
the stockpile are in the forms that can be used in the event of 
an emergency. In other words, that you have the pills that are 
in the push packs, that they are not just in vats. Some of the 
things that we come across are where you have the supplies, but 
they are not in the right format that can be used. They can't 
be distributed quickly. They can't be effectively given out to 
the people. So those are the things that we would look for in 
an evaluation of the stockpiles.
    Regarding the vaccine procurement, the kinds of things that 
we are looking for are to make sure that the vaccine 
manufacturers are following physical security measures that we 
have asked them to put in place as well as what we call process 
security measures, which would mean more the kinds of things 
like have the people who have been working on these matters had 
background checks. Not is there a guard at the door, but more 
of whether there is integrity to the process by which we are 
developing and manufacturing the vaccines.
    Mr. Sherwood. Thank you very much.
    Mr. Regula. Mrs. Northup.

                     MEDICAID UPPER PAYMENT LIMITS

    Mrs. Northup. I think I am going to move to health now. Let 
me just start by an isolated question. Have we completely 
eliminated the ability of public State-run facilities to be 
able to overcharge through the Medicaid program and then recoup 
a Federal share based on a larger than they actually pay price 
and then use that money that they benefit, the money that comes 
to them in overpayments, on other things? Have we moved that 
back down to 100 percent?
    Ms. Rehnquist. Mrs. Northup, I think we have phased it out. 
I am reluctant to say exactly. I would be happy to get back to 
you in writing, but I thought that certain States were granted 
waivers and then----
    Mrs. Northup. I just can't remember whether we have 
definitively established--you could imagine many of us were, 
you know, actively lobbied by our States. Some of our States 
didn't actually get into the program--didn't sort of adjust 
their own prices in order to gain these windfalls and wanted to 
get in it, and other ones that are already reaping the benefits 
wanted to continue reaping it. I can't remember if we finalized 
that there are not going to be these overpayments in the 
future.
    Ms. Rehnquist. Can I get back to you on that? I think we 
have stopped that. I think there is a phaseout or phasein of a 
period of a certain amount of time, and I am just not sure 
enough to speculate right now.
    [The information follows:]

        Medicaid Upper Payments and Intergovernmental Transfers

    Regulatory action has been taken by CMS that created three 
separate aggregate upper payment limits (one each for private, 
State, and non-State government operated facilities). While 
this action will help reduce the abuses that were found in the 
system, we have made the following recommendations to CMS to 
further strengthen program controls:
    (1) Annually audit the accuracy of the States' upper 
payment limit calculation and enhanced payments.
    (2) Provide States with definitive guidance on calculating 
the upper payment limit so that there is a uniform standard 
applicable to all States. We believe this should include using 
facility-specific upper payment limits that are based on actual 
cost report data.
    (3) Require that, for States to seek Federal financial 
participation (FFP) to match State enhanced payments, they must 
demonstrate that the enhanced payments were actually made 
available to the facilities and the facilities used the funds 
to furnish Medicaid approved services to Medicaid eligible 
beneficiaries.
    (4) Require that the return of Medicaid payments by a 
county or local government to the State be declared a refund of 
those payments and thus be used to offset the FFP generated by 
the original payment.
    (5) Seek authority to eliminate or reduce the transition 
periods included in the revised upper payment limit 
regulations.

                         MENTAL HEALTH CENTERS

    Mrs. Northup. I am also interested in what you all have--
what sort of report you might have or what look you have taken 
at our mental health retardation centers and the distribution 
of those dollars. I also happen to be on the VA-HUD 
Subcommittee, and I have to tell you that the HUD agency over 
the last number of years have been conflicted between whether 
or not their job is housing or services, because an increasing 
number of homeless or soon to be homeless people need mental 
health benefits that they are not getting through the community 
mental health centers.
    And when I look at the amount of money we spend in 
community mental health centers and the trend to serve those 
less profoundly affected by mental health needs rather than 
those more profoundly affected, I am just sort of wondering at 
what point HHS might come in and force these mental health, 
mental retardation centers to identify the most critical needs 
in their community and address those first.
    Ms. Rehnquist. Do you mean like a triage sort of system?
    Mrs. Northup. What I mean is that mental health, mental 
retardation centers are sort of the--I believe they date back 
to like 1964 when we wanted people to live at sort of their 
highest capacity level. And we closed so many of our 
institutions. And then what has sort of evolved is that these 
mental health centers are the billing agents for Medicaid. For 
anyone that needs mental health, mentalretardation centers that 
qualify for Medicaid, they are the billing agent. Now they can contract 
out with other providers; say, if there is a suicide prevention service 
in their community that is run, say, by Children's Hospital, they can 
contract that out.
    The increasing complaint that I hear from around the 
country and certainly in my district is the mental health, 
mental retardation centers, the money that they qualify, say, 
homeless providers in terms of mental health services is 
minimal. And then primarily they keep in house easier to treat 
maladies, like, for example, they may have a weight control or 
a stress control or something. You know, people that, say, come 
to a stress control place, they do show up every Wednesday at 
1:00. So then they bill Medicaid for them, and it is very easy. 
Whereas if you are going to serve someone that has a more 
profound level of mental illness, is homeless or on the verge 
of being homeless, maybe you have to provide much more 
comprehensive services. You might have to go out to where that 
person is and serve them.

                         SERVING THE MOST NEEDY

    So we have this growing gap as we fund mental health 
centers more and more of serving not the most needy and leaving 
behind those that are the most needy.
    Ms. Rehnquist. I know that we have done a lot of studies on 
just the kind of thing that you are talking about and have come 
out very critically of them, as well as have done a lot of 
investigations and prosecutions on mental health and community 
centers that will, in fact, go out and recruit people to come 
there, and they will tell them that it is for an aerobics class 
or something, and they will bill Medicaid for therapy. And so, 
when we see abuses like that, we will go after them to the full 
extent of the law. I guess I am speaking as my former life of a 
Justice Department prosecutor.
    In the OIG we also will investigate and audit places like 
that and do what we can do to oversee those kinds of programs. 
What you just described is the more extreme case.
    Mrs. Northup. But I think what is more widespread is that I 
am at least under the impression that the law says that if they 
are the planning agency for a region of the State--States are 
divided up into regions--they are supposed to identify, first 
of all, the most pressing needs and then make sure those needs 
are serviced. But often, like I said, the most pressing needs 
are not the people that show up at 1:00 on Wednesday every 
week.
    Mrs. Northup. So those are the people that fall between the 
cracks, and, quite frankly, end up at the HUD; you know, at HUD 
spending more and more of their dollars on services that are 
meant for housing, for bricks and mortar. I mean, many of our 
homeless grants now come from HUD, and they don't just provide 
for housing for the homeless, they provide for comprehensive 
services. And I have to tell you, in my district the agencies 
that are the most effective complain loudly that they have to 
have those HUD grants because basically the mental health 
providers that--the planning agency just basically has nothing 
that is adequate.
    I would ask you to pursue that. Like I said, I believe that 
you could look and prosecute the most extreme examples, but the 
widespread lack of services towards those populations that were 
meant to be prioritized has really--is pretty widespread.
    Ms. Rehnquist. I would be happy to get back to you in 
writing and let you know what we are doing and possibly explore 
some things that we could do on that.
    Mrs. Northup. Thank you.
    [The information follows:]

             Care of the Most Vulnerable Mentally Disabled

    The Office of Inspector General is conducting an in-depth 
analysis of four States' community-based mental health systems. 
While this study does not focus on how community mental health 
centers (CMHCs) identify the most critical needs in the 
communities they serve or the extent to which CMHCs conduct 
outreach to homeless individuals, the study will look at how 
these four States utilize Federal funding streams to finance 
mental health services and the strategies they employ for 
moving individuals with mental illness to the most appropriate 
level of care. The study will also highlight the barriers 
States face in organizing and delivering mental health 
services, identify best practices for addressing these 
barriers, and develop a framework for future mental health 
studies that could address issues involving community mental 
health centers and the homeless.
    The OIG performed a nationwide review of 7 States looking 
at safeguards in place to protect vulnerable populations of 
individuals with mental retardation and mental illness. Briefly 
we found that up to 90 percent of these individuals reside in 
facilities, such as group homes, that do not receive Medicare 
or Medicaid funds and, hence, rely solely on various levels of 
protection that are provided by State laws and regulations. 
Also, we found that the Federal Government is at a disadvantage 
in identifying systemic abuse problems for this population 
since it receives incident information from a limited number of 
sources. Based on an in-depth review in one State, the OIG 
found that this State's policies and practices for receiving, 
tracking and investigating allegations of abuse or neglect did 
not provide adequate safeguards. We offered a series of 
recommendations that addressed staff training, reporting 
requirements, data systems, better monitoring, and clear 
guidelines to providers in the community.

                            PENSION SECURITY

    Mr. Regula. Mr. Heddell, as a result of Enron, there is a 
lot of concern about employees being given information about 
their pension plans, and when I think about it, Social Security 
does this routinely. You can find out how much you put in, what 
their benefit will be under certain circumstances, pretty much 
a full information resource that is available at all times.
    Are you taking any steps in that direction? Because I know 
a lot of people have concern now because of Enron as to whether 
or not their pensions have any degree of security.
    Mr. Heddell. Well Mr. Chairman, my office has a huge 
interest in pension security, but we are not involved in Enron. 
I agree that employees need more information and understand 
that the Administration is proposing legislation to this end.
    Mr. Regula. I understand.
    Mr. Heddell. We have an interest from both an audit and an 
investigative perspective. From the standpoint of audit, of 
course, we audit the Pension and Welfare Benefits 
Administration, which administers ERISA, the Employee 
Retirement Income Security Act. We also have, among Offices of 
Inspectors General, the unique responsibility to combat labor 
racketeering, and much of our investigative work is done in the 
pension arena. We therefore have a great interest in that area.
    Mr. Regula. So an individual could contact your agency and 
get at least some advice as to the quality of the programof his 
or her employment?
    Mr. Heddell. If someone were asking about a specific 
pension plan, we would, of course, refer them to the Pension 
and Welfare Benefits Administration. My office audits the work 
that the Pension and Welfare Benefits Administration does. For 
instance, we look to see if they are doing a good job in 
ensuring the procedures that they have in place are being 
followed by plans.
    Mr. Regula. You make sure the company is putting in what 
they are obligated to put in?
    Mr. Heddell. PWBA looks at that, but there are so many 
plans. There are $4 trillion in pension assets out there and 
thousands of benefit plans to look at, so there is no way that 
PWBA can look at every single plan.

                 LIMITED SCOPE AUDITS OF PENSION PLANS

    The concern that we have, Mr. Chairman, and I think it is a 
very significant concern, is that under ERISA, there is a 
provision that exempts from audit those funds that are invested 
in institutions that are regulated by the Federal or State 
governments; for instance, funds that are invested in banks, 
savings and loans, and insurance companies.
    Under the ERISA all large pension plans are required to be 
audited. Many of them are audited by independent public 
accountants. But unfortunately, as I said for those funds that 
are invested in institutions that are regulated by the Federal 
and State governments, auditors basically provide no opinion 
audits.
    In addition to that, when independent public accountants do 
look at those plans, if they detect violations of law, they are 
not required to provide that information directly to the 
Department of Labor Pension and Welfare Benefits 
Administration. So, consequently, you may have auditors out 
there who may know about violations but report them only to the 
company or the plan administrator.

                                 ENRON

    Mr. Regula. That was probably the Andersen case to a 
degree. They had to have some sense that this thing wasn't 
going well.
    Mr. Heddell. Well, I am not sure about Enron's situation. 
As I said, we are not involved in that.
    Mr. Regula. No, I understand.
    Mr. Heddell. But from the total universe of pensions, we 
have considerable concern. As I said, we do a lot of work in 
the pension area. I haven't even mentioned the issue of pension 
fraud. On the one hand I've mentioned audits that don't meet 
professional audit standards. On the other hand, there is the 
issue of fraud. Traditionally, we have seen a fair amount of 
organized crime involvement in pension corruption. Today there 
is a secondary tier of service providers: accountants, 
attorneys and investment experts, who we find perpetrate a 
dramatic amount of fraud in pension plans.
    Mr. Regula. People sort of assume that the government is 
looking out for them. They probably should be doing it 
themselves. But they just make an assumption that if it is a 
pension, there must be some agency of the government 
supervising it.
    Mr. Heddell. I think it would be a mistake, of course, for 
people to rely solely on the government to look out for their 
money. But I can tell you that the Pension and Welfare Benefits 
Administration seems committed to trying to provide protections 
for pension plans. But it is a tremendous job, given the number 
of plans and so, it is important for employees to know their 
plans.
    Mr. Regula. Are you involved with the Pension Guaranty Fund 
at all in your role as IG?
    Mr. Heddell. No, Mr. Chairman.

                            SECURITY AT NIH

    Mr. Regula. Ms. Rehnquist, one of the tough issues at NIH 
is security. We have had a lot of proposals, from a chain link 
fence to closing up the roads that go through there. As I 
understand, the people in Bethesda are not excited about having 
a chain link fence in their neighborhood. What do you think the 
risks are at NIH? And in your role would you suggest that we 
should go forward with something like we are doing across the 
street?
    Ms. Rehnquist. Well, Mr. Chairman, actually it was the 
study out of my office that did recommend the fence, but I 
don't think it was actually a chain link fence. I think they 
have agreed to do a brick and iron fence of some kind.
    Mr. Regula. Same purpose, but more decorative.
    Ms. Rehnquist. Actually that is an effort to accommodate 
some of the concerns of the neighborhood, because NIH has 
always had very strong relations with the neighborhood. They 
have the farmers market, and they have concerts and things like 
that out there.
    But I think that September 11th has really changed all 
that. I think it is a different era. I think it is something 
that needs to be taken very seriously. I think that a lot of 
these select agents are ubiquitous. There need to be 
precautions taken, not just to protect the select agents, but 
also to protect the people who work there.
    That is a Federal Government facility. It really isn't just 
a soccer field with a building there. They do a lot of 
intramural research on the campus. I think it is important that 
NIH has cooperated with us on the studies, and we have talked 
with them how we cannot just have a chain link fence with 
barbed wire on top, but also to recognize that a lot of 
government work goes on at this facility, and it needs to be 
protected and respected.
    Mr. Regula. That would boost the operations budget for 
manpower just to monitor access points and so on. Isn't there a 
public street that goes through there?
    Ms. Rehnquist. Well, I know they have bus routes that go 
through there. I think there are campus bus routes. I think 
they have already worked on rerouting that and reworking some 
of the pathways. There is a Metro station. We have actually 
looked at ways to just build barriers right around some of the 
entrances just to divert, not to close the place down 
completely. But I think that the advantages of having increased 
security far outweigh the risks there.
    Mr. Regula. Could we get a copy of your report?
    Ms. Rehnquist. Actually we would be happy to brief you. It 
is very sensitive. Any time you do a threat assessment report--
it is not classified, I don't believe, right now, but if I 
could, I would be happy to come and show it to you or brief 
your staff or work with you on that. If you still want a copy--
--
    Mr. Regula. It is not issued as a public document?
    Ms. Rehnquist. It is not a public document, no.

                         STUDENT LOAN PROGRAMS

    Mr. Regula. Ms. Lewis, your testimony recommends that the 
Department of Education increase its monitoring and enforcement 
activities and continue to strengthen its internal controls 
over the student financial aid programs. What are you 
specifically suggesting? Are you comfortable that we are not 
being subject to fraud by--because I think alot of the student 
loans are direct government loans.
    Ms. Lewis. There is a direct loan program as well as a 
guaranteed loan program.
    Mr. Regula. I assume that financial institutions monitor 
the guaranteed loans because they have a stake in that.
    Ms. Lewis. There are definitely requirements on the 
guarantee agents and the lenders, as far as their 
responsibility fees, if students go into default, they have 
responsibilities to pursue collection and to try to get the 
students back into the system as quickly as possible.
    There is an oversight office in the student financial 
assistance which is now a performance-based organization. It is 
the case management office. It doesn't have a huge number of 
people in it, but what we have strongly and repeatedly 
encouraged is that there must be a greater use of the tools 
that are available to that office to monitor the issues that 
lead to fraud. There are audits of institutions that come in 
every year. We have recommended the use of those audits to 
identify schools with problems. We have encouraged more on-site 
visits to schools. There is no stronger signal than having 
someone show up to say, let me take a look at your records.
    Mr. Regula. Do you have any evidence that the schools--I 
think they would have a high standard, they are a university or 
college, that they would not want to participate in fraud.
    Ms. Lewis. Typically the fraud that we have identified is 
in the trade schools and the vocational schools and the 
proprietary schools. The great bulk of the cases that we do 
involve those schools.
    Mr. Regula. You can cut them off if you have evidence of 
that; can you not?
    Ms. Lewis. We very much encourage the Student Financial 
Assistance Office, when they have issues that show no 
compliance or lack of compliance with the participation 
agreements, that the eligibility of the program is at stake--
there are some steps that take place first. There is a 
reimbursement system that the school is put on. They must get a 
letter of credit. These are very important tools that the 
Student Financial Assistance Office has available to it, and in 
the appropriate circumstances, we have encouraged greater use 
of those tools.
    Mr. Regula. Mr. Sherwood, anything further?

                               IRS MATCH

    Mr. Sherwood. In that role we would like to be assured that 
we would spent those dollars wisely. Could you outline your 
suggestions of matching income data with the Free Application 
for Federal Student Assistance and the IRS?
    Ms. Lewis. Yes, sir. Back in 1997, the IG's office did a 
match working with the IRS, working with income data on the 
student financial assistance application with income data on 
the tax returns, for example, and we determined that there were 
significant inconsistencies that led us to believe that and 
conclude that there was underreporting on the student financial 
assistance forms. So for the last few years, we have been 
recommending, and the Department has recommended, an automatic 
match. The Higher Education Act Amendments of 1998 added 
authorization language to conduct the match.
    Following implementation of the law, the IRS indicated that 
because the IRS Code itself had not been amended, that the 
language in the Higher Education Act didn't provide all of the 
authorization that would be necessary, and that has led to 
years and years and months and months of dialogue, and the 
Department and the OIG have repeatedly encouraged working out a 
solution to this problem.
    In the President's budget request for 2003, President Bush 
specifically seeks the legislative authority in the Internal 
Revenue Code to authorize such a match, to close the loophole 
that has been out there since 1998. So it would ultimately 
allow for a direct match between the IRS data and the student 
data and an ability to follow up individually to determine if 
that was just an error or was that fraud.

                 WORKFORCE INVESTMENT ACT PROGRAM FUNDS

    Mr. Sherwood. Thank you.
    Mr. Heddell, just to get back to the WIA funding, we were 
there before, and I had discussed this with the Secretary, it 
is clear to me that there is a disparity, at least in 
Pennsylvania, between what the work force boards and the State, 
the Commonwealth of Pennsylvania, say they need and what the 
Department says they have. Those figure don't add. And is this 
a function of definition or inaccurate financial data? How can 
we get better numbers and more accurate data?
    Mr. Heddell. Well, Mr. Sherwood, that is a good question. 
The issue of accuracy is something I work with every day and it 
is a big concern of ours.
    In terms of how the funding arrangement is set up among the 
States, I don't have an answer because it is a new issue and 
not something that my office has yet audited. Therefore I am 
not able to assess that.
    Your question does touch on the issue of the quality of 
performance data, which I think has an impact on perhaps what 
you are talking about. First of all, until just a few years 
ago, there was really no requirement on the Federal departments 
to collect and utilize data, until the Government Performance 
and Results Act came into effect.
    Now there is clearly an emphasis on connecting budget and 
results. I think the Department of Labor--and, specifically, 
the Secretary and the Employment and Training Administration 
are committed to trying to get the most out of the programs. 
Our problem from an IG perspective, is that we can't evaluate 
the programs effectively because, as I said, the data is just 
not reliable.
    In addition, there have to be specific goals. Those goals 
have to be translated down to the State and local boards who 
carry out the programs. Then there has to be follow-up and good 
management by the Department. In this case, the Department not 
only has to have a program for monitoring how the grants are 
being executed, but they also have to literally go out and take 
a look at the results that the States and the localities are 
reporting.
    There also has to be access to critical data that would 
help both the States and the Federal Government to assess 
performance. It is very difficult to get useful information 
such as unemployment insurance wage data and Social Security 
record wage data, which would help us in determining whether 
people are actually getting the jobs that they are being 
trained for, and whether they are keeping them, and whether the 
wages that they are being paid are wages at a level from which 
they can make an honestliving.
    The laws sometimes have the unintended effect of working 
against us. They may have a good purpose, but if we don't have 
access to Social Security wage data and unemployment insurance 
wage data, that makes it much more difficult for entities like 
the Department to get information to evaluate these programs.
    Mr. Sherwood. I understand that the performance data is 
very important, but you are sort of a step ahead of me. I am 
trying to figure out the amount of money that is in the 
programs, because what the budget and the testimony here and 
other ones have told us and what my people at home tell me they 
have don't come together.
    Mr. Heddell. Sir, it is not something that my office has 
looked at, since it is a relatively new issue.
    Mr. Sherwood. I hear you. Thank you.

                          NURSING HOME SURVEYS

    Mrs. Northup. Thank you.
    I have had just an awful lot of the nursing homes in my 
district complaining about the survey process. When we talk to 
Medicare, they explain that it was an attorney general, a 
fairly aggressive attorney general in our State. As we have 
worked with these homes, it seems to me like it breaks down 
into sort of two issues. One is the quality of care, their 
ability to improve their quality of care, and the help that 
they can get and the--from certifying type of agencies.
    You know, they pointed out to me that hospitals, for 
example, have their own certification process--I think 
certification is the right word--and that not only do they have 
to comply with certain guidelines, but they also have someplace 
they can go for expert advice. And how do you address this in a 
better way?
    They feel as though the fact that the certifying agency is 
also the one that is the hammer in their case, the one that 
would be able to take penalizing action against them, that they 
in a sense never get an opportunity to work with an agency that 
has some official capacity both in licensing and improving 
their standards. Let me start there. Is that just in my State, 
or would you say that is fairly widespread?
    Ms. Rehnquist. I have heard that concern expressed before. 
I understand what the nursing home administrators and the 
school nursing facility folks mean because the certification 
agencies are just there for the enforcement piece of it. They 
don't give the up-front compliance, advice, the guidance.
    Mrs. Northup. Sort of somebody that would look over your 
shoulder and say, you really cannot do it that way. This is a 
better way.
    Ms. Rehnquist. OIG has addressed that gap in other 
industries. We are in the process of doing that for the 
pharmaceutical companies right now. We have done that for 
physicians. We have done that for hospitals. So that is one 
possibility. I can understand that.

                       NURSING HOME REIMBURSEMENT

    Mrs. Northup. One other issue is quality of care, the other 
one is billing fraud--or not fraud, sort of how to bill, what 
to bill for. And I think their feeling is that the Federal 
agencies are primarily focused on did you bill for the right 
things, did you bill for the wrong things; and that they have 
looked to the attorney generals to enforce the standards on 
quality, and that some are very aggressive. It is sort of like 
it is them against the world, you know? Here are nursing homes 
that are sort of struggling with changes, whole different 
approaches to billing and so forth, with no partner to sort of 
get them through. And I think they would say, we know that 
there are some people that don't do it right, whether you are 
talking about quality of care or the billing process, but where 
do you go if you are somebody that does it right or wants to do 
it right?
    Ms. Rehnquist. Well, I think that is a good question. I 
think that nursing homes are front and center now in the 
quality of care dialogue that we are having in the health care 
arena. In fact, my office just did a symposium on it. The 
Secretary is very interested in quality of care, and CMS is. I 
am meeting with several nursing home administrator 
representatives on Friday. In fact, it is something that I 
could discuss with them, because I think this is an issue.
    At the same time that I do believe very strongly in 
enforcement, I do see a very significant benefit of having that 
kind of ounce of prevention guidance up front to help.

              SEPARATION OF CERTIFICATION AND ENFORCEMENT

    Mrs. Northup. Like I said, if the certifying were separate 
like it is in hospitals from the enforcement, I think they felt 
like that they would get--enforcement could also----
    Ms. Rehnquist. That is the front line. That is where fraud 
and abuse is fought. While I hate to say it in warlike terms, 
that is the initial place that it happens.
    Mrs. Northup. That is true, but we make the guidelines. 
They enforce them for us. We are the ones that write the rules.
    Well, I think that increasingly we all know that nursing 
homes today handle patients that are less able than ever before 
to advocate--be advocates for themselves, so there is a reason 
for the very strong guidelines. On the other hand, we could put 
ourselves in the position of just making nursing home care less 
available by putting them all out of business. Where is the 
middle ground?
    Ms. Rehnquist. We don't want to do that. I think that we 
have made a lot of progress in having the Federal agencies and 
the States working together to figure out who is doing what 
here, and what is reasonable, and how do we approach this, 
because it is not in anybody's interest to close these places 
down. That is an absolute last resort.
    Mrs. Northup. But if the rules for Indiana and Kentucky are 
exactly the same, but you have a very aggressive attorney 
general in one, and the State is in charge of enforcing, what 
you create is, you know, two very different systems; I mean, 
one set of rules, one payment system, I might point out, and 
then two different people that interpret the rules very 
differently.
    Ms. Rehnquist. No. I understand that.

                 WORKFORCE INVESTMENT ACT PROGRAM FUNDS

    Mr. Regula. Mr. Heddell, I would say that Ohio has the same 
problem as Pennsylvania on this money situation. My question 
would be when would you anticipate that you will have enough 
experience that this can get adjusted? Because I know you only 
have months of enforcing this, but at some point we should be 
able to rationalize the disparity between what the States claim 
and what the Department claims.
    Mr. Heddell. I agree with you, Mr. Chairman. We are 
currently conducting a number of audits in the Workforce 
Investment Program and the various training grant programs that 
theEmployment and Training Administration administers. We 
recently started this work since the program has been in place for 
about 18 months.
    I would like to come back to that funding issue that Mr. 
Sherwood brought up and say that we will be glad to look into 
that and get back to both of you in writing when we complete 
the work.

                       FEDERAL AND STATE FUNDING

    Mr. Regula. Ms. Rehnquist, can we be sure that the Federal 
public health dollars are not used to replace State dollars? 
Particularly, we are beefing up the public health agencies, 
State and then in turn local. Do we have any assurance that as 
we send them more and more dollars that they will not 
substitute it for their own money?
    Ms. Rehnquist. Well, Mr. Chairman, that is something that 
we are drawing up a proposal right now to look at how the 
States are going to be using the money that the Secretary 
really has recently sent to the States in order to fund their 
bioterrorism projects, and to make sure, in addition to our 
concern about having the Federal dollars simply replace State 
contributions to those projects, we want to make sure that they 
are not, that the States are allocating and earmarking that 
money to go for bioterrorism and for use as they were intended. 
And that is a major project. We will probably do that by 
sampling, selecting several different States with 
characteristics, and try to judge their progress as they go 
along and make sure they are doing it the way Congress and the 
Secretary want it done.
    Mr. Regula. Any further questions? We will have some 
questions for the record Members will submit to your respective 
offices.

                             Strategic Plan

    Ms. Lewis. I want to just add, Mr. Chairman, a footnote to 
the earlier discussion about performance indicators. I 
certainly will--I know the Secretary will speak for himself, 
but later this month he will be unveiling his new strategic 
plan for the Department, and the Department is hard at work on 
performance indicators that will flow from that plan and 
working on the quality of data issues. I think that is the 
announcement for the Secretary to make, the substantive content 
of that strategic plan.
    Mr. Regula. Do you feel comfortable in this evaluation 
process under H.R. 1 that we are going to be comparing apples 
to apples, State to State? Because it would not be fair.
    Ms. Lewis. That is the challenge. There are many, many 
challenges in that new law, and it is absolutely critical as 
you are identifying schools for improvement that there be 
consistency in that data, and that there be commonly understood 
terms, and people know what is expected of them.
    Mr. Regula. It sounds like a big order.
    Mr. Sherwood, anything?
    Mr. Sherwood. I am fine. Thank you.
    Mr. Regula. Well, thank you all for coming. We had a 
productive session, and you all have big challenges to keep the 
government on the straight and narrow. I guess we all share it. 
Thank you again. The Committee is adjourned.


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                           W I T N E S S E S

                              ----------                              
                                                                   Page
Chao, Hon. E. L..................................................     1
Combs, Ann.......................................................   117
DeRocco, E. S....................................................   237
Heddell, G. S....................................................   327
Henshaw, John....................................................   117
Juarbe, Frederico, Jr............................................   237
Lauriski, Dave...................................................   117
Lewis, Lorraine..................................................   327
McCutchen, Tammy.................................................   117
Moorhead, Thomas.................................................   117
Rehnquist, Janet.................................................   327


                               I N D E X

                              ----------                              

                          DEPARTMENT OF LABOR

                           Secretary of Labor

                                                                   Page
Adult Education Training Funds...................................    21
Apprenticeship Program...........................................    23
Back to Work Plan................................................     2
Baggage Screeners................................................    81
Biographical Sketch..............................................    13
Bureau of International Labor Affairs (ILAB):
    Budget.......................................................     9
    Budget Cuts..................................................    77
    Education Initiative Funding.................................    78
Bureau of Labor Statistics (BLS).............................10, 17, 75
Civil Rights and Affirmative Action Enforcement..................    92
Child Care and Family Leave......................................    97
Community College Outreach.......................................    25
Cost of Living Adjustments.......................................    56
Department of Labor (DOL):
    Faith-Based Programs.........................................48, 66
    Information Technology Crosscuts.............................    54
    Magazine XXI.................................................    58
    Official Time................................................    64
    State DOLs...................................................65, 66
Effects of September 11..........................................     1
Employment and Training programs.................................     6
Employment Standards Administration (ESA):
    Assistant Secretary Positions................................    55
    Office of Labor Management Standards......................9, 50, 85
Ergonomics:
    Enforcement Actions..........................................    80
    Guidelines...................................................    80
    Plan.........................................................    40
    Standards....................................................    78
    Training.....................................................    81
Enron:
    Investigation................................................    45
    Pensions.....................................................    93
    Reforms......................................................    68
Equal Employment Advisory Council (EEAC).........................    96
Equal Pay Enforcement............................................    88
Family Medical Leave Act.........................................    95
Government Performance and Results Act (GPRA)....................11, 42
Health Care Worker Shortage......................................    63
Homeland Security................................................    51
Introduction of Witness..........................................     1
Job Corps:
    Evaluations......................................25, 26, 29, 30, 34
    Increased Funding..........................................2, 6, 58
    New Job Corps Centers........................................    60
Job Training:
    Programs vs Increased Demand.................................    75
    Youth Training Program Cuts..................................    76
Labor-Management and Disclosure Act:
    Increase in Litigation Referrals.............................    50
    LM2 Internet Disclosure Project..............................    62
Limited English Proficiency (LEP):
    Access to LEP Plans..........................................    83
    Comment Period...............................................26, 28
    DOL Guidance.................................................    82
    Enforcement..................................................    83
    Health Care Professionals....................................    24
    Worker Safety Issues.........................................    42
Literacy Training................................................35, 42
Mine Safety and Health Administration (MSHA).....................    37
Minimum Wage in Northern Marianas................................    18
National Emergency Grants:
    Childcare....................................................    41
    Funding Request..............................................    43
    New York.....................................................    18
    Program......................................................14, 40
New Freedom Initiative........................................4, 41, 44
New Industrial Classification System.............................    56
Occupational Safety and Health Administration (OSHA):
    Budget.......................................................    83
    Response to Anthrax..........................................     2
    Worker Protection Compliance Focus...........................    52
Office of Disability Employment Policy (ODEP):
    Budget.......................................................     9
    Disability Employment and Training...........................    98
    ODEP and the New Freedom Initiative..........................    44
    ODEP and the Olmstead Employment Initiative..................    44
    Policy and Activity Strategies...........................60, 61, 62
    Youth Councils...............................................    44
Office of the 21st Century.......................................10, 40
Office of the Inspector General (OIG)............................ 9, 85
Office of Public Affairs (OPA)...................................53, 54
Pension and Welfare Benefits Administration (PWBA):
    Retirement Security...............................3, 15, 38, 39, 47
President's Management Agenda....................................    11
Regulatory Withdrawal Rationale..................................    53
Secretary Chao's Opening Statement...............................     1
State Administration of Unemployment Insurance:
    State Obligation Data Tracking...............................    70
    Trade Adjustment Assistance..................................    14
    Unemployment Benefit Extension...............................    39
    Unemployment Insurance and Employment Service Reform.....7, 35, 36,
          37, 67, 68, 84
        State Administration of Unemployment Insurance...........    91
    Unemployment Insurance Tax...................................    17
Veteran's Employment and Training Service (VETS)..............4, 10, 15
Worker Conditions in the Garment Industry........................    85
Worker Training:
    New Paradigm for Training Programs...........................    33
    Disabled Worker Programs.....................................    41
    Training for Nurses and Health Care Professionals............    23
Workforce Investment Act (WIA):
    BLS Estimates for WIA Inflationary Costs.....................    75
    Budget Expenditure vs Obligations............................    69
    Carry-Over Funds......................................2, 15, 19, 22
    Distributions................................................    39
    Funds........................................................16, 37
    Impact of Cuts on States.....................................    74
    Management Review............................................72, 73
    Re-authorization.............................................    35
    State Obligation Data........................................70, 71
    State Unexpended Balances....................................    20
    Training.....................................................    21
    Unit Cost Estimates..........................................    74
World Trade Center...............................................    50
Written Statement................................................     5

                    Worker Protection Agencies Panel

Employment Standards Administration:
    Biographical Sketch..........................................   153
    Black Lung Trust Fund Debt Restructuring.....................   204
    Budget Cuts in Worker Protection Programs....................   204
    Compliance Assistance........................................   228
    Energy Employees Occupational Illness Compensation Program...   198
    Employment Standards Administration..........................   119
    Garment Industry Sweatshops..................................   224
    Office of Labor-Management Standards Increase................   197
    Prepared Statement...........................................   148
    Working Conditions in the Garment Industry...................   226
    Worker Protection..........................................118, 185
Pension and Welfare Benefits Administration:
    Access to Health Insurance...................................   184
    Biographical Sketch..........................................   147
    Compliance Assistance........................................   175
    Enron........................................................   168
    Experts in Residence--PWBA...................................   187
    Flexible Spending Accounts...................................   185
    Health Benefit Mandates......................................   185
    Health Insurance for Workers.................................   183
    Pension and Welfare Benefits Administration..................   118
    Pension Plans................................................   167
    Pension Security...........................................173, 174
    Prepared Statement...........................................   138
    Retirement Security..........................................   117
    Retirement Security:
        Diversification..........................................   176
        Plans....................................................   230
        Pensions.................................................   175
    Safeguarding Worker Pensions.................................   206
Occupational Safety and Health Administration:
    Anthrax......................................................   203
    Biographical Sketch..........................................   130
    Compliance Assistance........................................   165
    Ergonomics:
        Standard...............................................218, 231
        Injuries.................................................   219
        Hazards..................................................   219
        Guidelines...............................................   220
        Training.................................................   220
    Funding for OSHA Inspections.................................   234
    Ground Zero Safety Concerns..................................   224
    Homeland Security............................................   222
    Introduction of Witnesses....................................   117
    Joint Opening Statement......................................   117
    Labor Regulations Funding Levels.............................   194
    Non-compliance...............................................   166
    Occupational Safety and Health Administration....120, 165, 170, 188
    Occupational Safety and Health Programs......................   195
    OSHA and MSHA Enforcement....................................   177
    OSHA and Limited English Proficiency.........................   188
    OSHA's Role at the World Trade Center and Pentagon...........   200
    OSHA:
        Cost for Rescue and Recovery Efforts.....................   202
        Enforcement............................................177, 208
        Funding Requests.........................................   179
        FY 2003 Budget Level...................................223, 232
        Plan to Address Ergonomic Injuries.......................   207
        Regulatory Agenda........................................   236
        Standards..............................................198, 223
        Training.................................................   193
    Prepared Statement...........................................   122
    Proposed Rulemaking on Fatal Falls...........................   236
    Proposed Web-Based Training Program........................222, 235
    Protecting American Workers..................................   190
    Susan Harwood Training Program........167, 182, 194, 210, 221, 225,
         234, 236
    State OSHA Compliance........................................   171
    State Worker's Comp Agencies.................................   167
Mine Safety and Health Administration:
    Asbestos Sampling............................................   216
    Biographical Sketch..........................................   137
    Compliance Issues............................................   193
    Diesel Particulate Matter....................................   211
    Hazard Communication Rule....................................   212
    Laboratory Needs for Asbestos Analysis.......................   217
    Mine Safety and Health Administration.......119, 169, 173, 176, 188
    MSHA's Regulatory Agenda.....................................   215
    OSHA and MSHA Enforcement....................................   177
    Prepared Statement...........................................   131
    Preventing Black Lung and Silicosis..........................   213
    Section 46 Training..........................................   197
    Silica Regulation............................................   196
    Single Shift Sampling........................................   215
    Surface Haulage..............................................   196
Bureau of International Affairs:
    Biographical Sketch..........................................   160
    Bureau of International Labor Affairs............120, 169, 189, 190
    Child Labor Education Initiative.............................   190
    Core Worker Rights...........................................   192
    HIV/AIDS Workplace Program...................................   192
    ILAB Funding.................................................   193
    International Child Labor....................................   189
    International Labor Programs.................................   217
    Labor Monitoring Program.....................................   192
    Prepared Statement...........................................   154
    Wage Benefits and Rates......................................   170

          Employment Assistance and Training Activities Panel

Introduction of Witnesses........................................   237
Employment and Training Administration (ETA):
    Adult Services...............................................   239
    Basic Skills for the New Economy.............................   304
    Biographical Sketch..........................................   254
    Budget.......................................................   243
    Certified Nurse Aides........................................   298
    Contracting Out Federal Activities...........................   314
    Data Collection..............................................   291
    DOL Faith-Based Outreach Efforts.............................   305
    Employment and Training Service........270, 271, 281, 285, 286, 315
    Enron........................................................   293
    Extension of Benefits........................................   277
    Foreign Trained Health Care Workers..........................   302
    Funds for Youth Services...................................280, 284
    Government Performance and Results Act (GPRA)................   250
    H-1B Technical Skills Training Program.......................   309
    H-1B Training Program Elimination............................   312
    Health Care Workers..........................................   301
    Hospitality Jobs to Long-Term Care Jobs......................   299
    Jobs Corps Program.........................................307, 321
    Job Corps Evaluation.........................................   318
    Job Corps and Long-Term Care Jobs............................   300
    Management Information Systems...............................   293
    Obligations of Funds vs Expenditures.........................   238
    One-Stop Centers......................................269, 272, 297
    Opening Statement of Assistant Secretary DeRocco.............   237
    Performance Measures.........................................   291
    Performance Measures and WIA Effectiveness...................   303
    Program Consolidations.......................................   239
    Program Terminations.........................................   294
    State Evaluations of Performance.............................   279
    Trade Adjustments.....................................239, 271, 289
    Training for the Unemployed or Underemployed.................   292
    Unemployment Insurance (UI) Burden on States.................   323
    UI/Employment Service Reform................242, 273, 276, 288, 306
    Welfare Plan and Long-Term Jobs..............................   301
    Worker Adjustment and Retraining Notification (WARN).........   293
    Workforce Investment Act (WIA)...............................   320
    WIA Costs During PY 2000.....................................   317
    WIA and Temporary Assistance to Needy Families (TANF)......250, 287
    Workforce Investment Board (WIB)...........................280, 282
    WIA Carryover...............................283, 284, 289, 310, 324
    Written Statement............................................   241
    Young Offenders..............................................   296
    Youth Opportunity Grants...................................278, 285
Veterans' Employment and Training (VETS):
    Accountability...............................................   256
    Assistance Based on Need.....................................   259
    Biographical Sketch..........................................   267
    Budget................................................256, 262, 263
    Counting the Outcomes........................................   259
    DVOP and LVER Grants.........................................   265
    Federal Administration.......................................   265
    Homeless Veterans Reintegration Projects.....................   264
    Job Placement................................................   271
    Opening Statement of Assistant Secretary Juarbe..............   255
    Survey Results...............................................   260
    Technology Impact............................................   258
    Transfer of Services.............................255, 269, 297, 318
    Workforce Investment Program (WIA)...........................   263
    Written Statement............................................   258

            Department of Labor Office of Inspector General

Biography, Gordon S. Heddell, Inspector General..................   339
Block Grants.....................................................   367
Employment and Training..........................................   328
Enron............................................................   382
Grant Accountability.............................................   328
Human Capital Management.........................................   329
Human Resources..................................................   369
IG Independence..................................................   327
Limited Scope Audits of Pension Plans............................   382
Opening Statement................................................   327
Pension Security.................................................   381
Performance Data.................................................   368
Program Evaluation...............................................   367
Program Results..................................................   328
Protection of Pension and Retirement Assets......................   329
Questions Submitted to be Answered for the Record................   390
Top Three Challenges for the Department of Labor.................   328
    Employment and Training......................................   328
        Program Results..........................................   328
        Grant Accountability.....................................   328
    Protection of Pension and Retirement Assets..................   329
    Human Capital Management.....................................   329
Workforce Investment Act Program Funds...........................   374
Workforce Investment Act Program Funds...........................   388
Workforce Investment Act Programs................................   385
Written Testimony................................................   332

  Department of Health and Human Services Office of Inspector General

Accomplishments by OIG in FY 2001..............................340, 343
Approaches To Detect and Correct Problems........................   345
Bioterrorism.....................340, 345, 377, 378, 383, 384, 400, 406
Child Support Enforcement......................................346, 403
Disproportionate Share Payments...........................401, 406, 407
Fraud--Whistleblowers............................................   368
Funding/Resources for OIG............................340, 341, 344, 369
Grants Management................................................   341
HHS Issues of Concern...........................340, 341, 345, 346, 347
Human Resources (FTE)............................................   369
Kentucky--OIG Reports on.........................................   405
Medicaid Upper Payment Limits and State Abuses..346, 378, 379, 401, 402
Medicare+Choice................................................407, 408
Mental Health Centers.....................................379, 380, 381
Nursing Homes........................................341, 386, 387, 388
Prescription Drug Reimbursement and Pricing....341, 345, 369, 370, 371,
     372, 400, 401
Projects Planned or Underway..............................347, 348, 349
Public Health--State and Federal Funding.........................   388
Rehnquist, Janet:
    Biography....................................................   350
    Opening Statement............................................   340
    Written Testimony............................................   343
Results of OIG Work..............................................   340
Ryan White CARE Act Funds........................................   404
Security at HHS Sites and Laboratories....................383, 384, 400
Skilled Nursing Facilities and Consolidated Billing.......346, 402, 403
Temporary Assistance for Needy Families..........................   406
Vaccine and Pharmaceutical Procurement.........................378, 406

          Department of Education Office of Inspector General

Biography:
    Lorraine Lewis, Inspector General............................   366
Data Quality.....................................................   375
Enforcement Tools................................................   375
Financial Management.............................................   351
Human Resources..................................................   369
IG Independence..................................................   327
Information Technology Security..................................   351
Internal Controls................................................   412
IRS Match........................................................   385
No Child Left Behind Programs....................................   412
OIG Work in Kentucky.............................................   413
Opening Statement................................................   351
Prepared Statement...............................................   353
Program Evaluation...............................................   367
Questions Submitted for the Record:
    Representative Anne Northup..................................   413
    Representative David Obey....................................   410
    Representative Ralph Regula..................................   409
Scientific Based Research........................................   376
Strategic Plan...................................................   389
Student Aid Programs.............................................   411
Student Financial Assistance Programs............................   352
Student Loan Programs..........................................368, 384
Tips on Fraud....................................................   368

                                

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